Disclosure Requirements – Investment Funds – Canada
Disclosure Category: 2
Clearstream Banking S.A. (“CBL”) may be required, upon request, to disclose the identity and holdings of customers and ultimate beneficial owners in case of holding Canadian investment funds.
Consent
In order to comply with the local legislation, customers with holdings in Canadian investment funds or entering into transactions in the Canadian market must consent and are hereby deemed to consent to the required legal disclosure. Such consent includes the appointment of the requestor (for example, the Fund Manager, Transfer Agent, Regulator) as their attorney-in-fact, under power of attorney, to collect from CBL the required information to be disclosed. Customers who do not grant such authority cannot hold such investment funds or financial instruments in their accounts with CBL.
Disclosure requirements
The Fund and the Registrar are not entitled by law to request disclosure in respect of CBL customers or ultimate beneficial owners.
However, it is likely that the Registrar and the dealer which distributed Units on behalf of the Fund (“Dealer”) will contractually obtain such right to request disclosure in order to satisfy their AML and KYC requirements. At the same time, under Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, there is an obligation on the Dealer to collect beneficial ownership information.
Background and legal basis
In the case of holding Canadian investment funds, CBL is obliged under the following legislation to disclose the identity and holdings of customers, third parties and/or ultimate beneficial owners.
- Proceeds of Crime (Money Laundering) and Terrorist Financing Act (section 11.1)
- Securities law KYC
- Canadian sanctions laws
- FATCA and Canadian Common Reporting Standard (CRS)
Obligation to report threshold crossings
Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (section 11.1), the beneficial ownership information that must be collected relates to the customer and each person who owns or controls 25% or more of the customer.
Sanctions
Subject to changes in Canadian law, sanctions and other consequences may be applied to for non-compliance. Whether a suspicious transaction report is required in circumstances where CBL or CBL customers refuse to provide beneficial ownership information will depend upon the AML policies of the Registrar and Dealer and how the refusal is interpreted. In addition, whether CBL is contractually obligated to collect and report a potential suspicious transaction to the Registrar will depend on the parties’ contractual arrangements.
Disclaimer
The information contained in the Disclosure Requirements is based on the legal opinion obtained by CBL that was issued on 22 May 2019. CBL believes the information to be correct as of that date but disclaims any responsibility as to the accuracy and completeness of the information after that date. In the case of discrepancy between the information provided by CBL and the local laws and regulations, the latter shall prevail. The Disclosure Requirements do not constitute legal advice and customers should seek advice from independent professional counsel.
Customers are responsible for ensuring compliance with the disclosure requirements and agree to indemnify and hold harmless CBL, for any loss, expense, liability, damage or claims, whether direct or indirect, against or incurred by CBL arising out of or resulting from such non-compliance.