The Investment Industry Association of Canada (IIAC) is calling for the Canadian Deposit Insurance Corp. (CDIC) to provide IIAC member firms anywhere between two to three years to implement CDIC’s proposed changes to its joint and trust disclosure by-law.
That recommendation was among several the IIAC made last week in a written submission in response to the CDIC’s consultation paper on proposed changes to the by-law.
“Our members believe that CDIC’s targeted April 30, 2020 implementation date is not feasible for the industry,” wrote Jack Rando, managing director with the IIAC in Toronto, in the submission. “We recommend that industry be provided between 24 months and 36 months from the date the by-law is finalized, to complete the extensive work required [by the by-law amendments].
The CDIC issued a consultation paper in July that reviews the by-law governing the reporting and disclosure of trust accounts by trustees, including nominee brokers and professional trustees, to the CDIC and its member institutions. Proposed changes include new requirements for the management of information for trust deposits by member firms. The CDIC has not announced an effective date for the proposed amendments.
The proposed rule changes affecting trust deposits are intended to make protecting beneficiaries and reimbursing them promptly in the event of a bank failure easier for the CDIC.
The IIAC, whose members generally act as nominee brokers for their clients when placing deposits at CDIC member banks and other financial services institutions, indicated in its submission that it “supports the policy rationale for CDIC’s proposed amendments to the by-law.”
However, the IIAC argued that the proposed amendments to the by-law “introduce requirements that entail significant systems and procedural changes” for member firms that act as nominee brokers.
For example, the proposed changes require nominee brokers to provide a unique alphanumeric code for each beneficiary of a deposit to the CDIC member institution at the time the deposit is made and each time a change is made to the deposit in order for that deposit to be eligible for CDIC coverage.
“Creating and assigning the alphanumeric codes to their depositors will be a very complex undertaking,” Rando wrote.
The IIAC also is requesting clarity on several of the CDIC’s proposed changes, including how the terms “nominee broker” and “nominee broker deposits” are defined; how alphanumeric codes and percentage breakdowns for deposits are made through joint accounts at a nominee broker; and how professional trustees’ deposits through nominee brokers will be treated under the new coverage framework.
The proposed amendments to the CDIC joint and trust disclosure by-law are part of broader changes that have been made to the CDIC Act to reflect the results of a review of deposit insurance coverage that was conducted two years ago.
CDIC coverage will be expanding to include term deposits with terms longer than five years and foreign-currency accounts, as well as adding insurance categories for RESPs and RDSPs. No effective date for the expanded coverage has been announced.