Vol. 151, No. 2 — January 25, 2017

Registration

SOR/2017-1 January 3, 2017

CANADIAN PAYMENTS ACT

Canadian Payments Association By-law No. 1 — General

The Board of Directors of the Canadian Payments Association, pursuant to subsection 18(1) (see footnote a) of the Canadian Payments Act (see footnote b), makes the annexed Canadian Payments Association By-law No. 1 — General.

Ottawa, December 1, 2016

Eileen Mercier
Chairperson of the Board of Directors of the Canadian Payments Association

The Minister of Finance, pursuant to subsection 18(2) (see footnote c) of the Canadian Payments Act (see footnote d), approves the annexed Canadian Payments Association By-law No. 1 — General, made by the Board of Directors of the Canadian Payments Association.

Ottawa, December 23, 2016

William Francis Morneau
Minister of Finance

Canadian Payments Association By-law No. 1 — General

Interpretation

Definitions

1 The following definitions apply in this By-law.

Act means the Canadian Payments Act. (Loi)

Member Advisory Council means the Council established under section 21.4 of the Act. (comité consultatif des membres)

payment service provider means a person who, or an entity that, supports the operation, maintenance and development or enhancement of payment systems that directly or indirectly interface with the national clearing and settlement systems. (fournisseur de services de paiement)

payment system means a system or arrangement for the exchange of messages effecting, ordering, enabling or facilitating the making of payments or transfers of value that are subsequently cleared and settled as payment items through the systems operated by the Association. (système de paiement)

stakeholder means a person who, or an entity that, is a user or a payment service provider or represents the interests of a group of users or payment service providers, but is not a member or entitled to be a member under subsection 4(2) of the Act. (intervenant)

Stakeholder Advisory Council means the Council established under section 21.2 of the Act. (comité consultatif des intervenants)

Members of the Association

Banks and Authorized Foreign Banks

Registration as member

2 (1) The Association must register every bank and every authorized foreign bank as a member.

Information required

(2) Every bank, on the day on which it comes into existence, and every authorized foreign bank, on the effective date of the order permitting it to establish a branch in Canada under subsection 524(1) of the Bank Act, must provide the Association with the following:

• (a) its name and the date on which and method by which it came into existence;
• (b) the date on which it intends to commence operations;
• (c) the address of its head office or another address — including an email address — designated by it as its address for the delivery of notices;
• (d) the name and address of its president or chief executive officer;
• (e) the names and addresses of its directors and senior officers;
• (f) a certified copy of its incorporating instrument or letters patent;
• (g) a certified copy of its by-laws;
• (h) a copy of its audited financial statements for the last five fiscal years, or for all of its fiscal years if it has existed for less than five years;
• (i) its authorization for the Association to contact and to receive information about it from the Office of the Superintendent of Financial Institutions and, in the case of an authorized foreign bank, the regulatory authority in the foreign country in which it was incorporated or formed; and
• (j) its agreement to provide any other information about it that may be required by the Association in connection with the objects, business or affairs of the Association.

Application for Membership

Contents of application

3 Every application for membership in the Association by an applicant that is entitled to be a member under subsection 4(2) of the Act must include the following:

• (a) the applicant’s name and the date on which and method by which it came into existence;
• (b) the address of its head office or another address — including an email address — designated by it as its address for the delivery of notices;
• (c) the name and address of its president or chief executive officer;
• (d) the names and addresses of its directors and senior officers;
• (e) a certified copy of the resolution of its board of directors or executive committee authorizing the application;
• (f) a copy of its audited financial statements for the last five fiscal years, or for all of its fiscal years if the applicant has existed for less than five years;
• (g) a certified copy of its charter, letters patent or incorporating instrument;
• (h) a certified copy of its by-laws; and
• (i) its agreement to provide any other information about it that may be required by the Association in connection with the objects, business or affairs of the Association.

Additional information

4 The applicant must also provide to the Association,

• (a) if it is subject to a regulatory authority, the name of the regulatory authority and the applicant’s authorization for the Association to contact and receive information about the applicant from that regulatory authority;
• (b) if it is a securities dealer, evidence of its membership in one of the organizations referred to in section 2 of the Canadian Payments Association Membership Requirements Regulations and evidence of registration as a securities dealer under provincial laws;
• (c) if it is a qualified corporation, on behalf of its money market mutual fund, a copy of the most recent version of its prospectus, a copy of the prospectus receipt from a securities commission, a copy of its most recently published list of investments and a legal opinion certifying that the applicant meets all of the membership requirements set out in the Act, the regulations and the by-laws;
• (d) if it is a trustee of a qualified trust, a certified copy of its trust agreement, a copy of the most recent version of its prospectus, a copy of the prospectus receipt from a securities commission, a copy of its most recently published list of investments and a legal opinion certifying that the applicant meets all of the membership requirements set out in the Act, the regulations and the by-laws;
• (e) if it is a central, a trust company or a loan company, a declaration setting out that it accepts deposits transferable by order and, if applicable, its confirmation of a clearing arrangement; and
• (f) if it accepts deposits transferable by order, a declaration setting out that it accepts deposits transferable by order, evidence that the deposits made with the applicant are insured or guaranteed under a federal or provincial statute and, if applicable, its confirmation of a clearing arrangement.

Payment of dues

5 The applicant is liable to pay dues to the Association on the day on which its membership commences.

Change in Circumstances

Notification — change in circumstances

6 Every member must notify the Association without delay of any change in circumstances that would affect their entitlement to be a member under subsection 4(2) of the Act.

Suspension of Member’s Rights

Suspension

7 (1) Despite the Canadian Payments Association By-law No. 6 — Compliance, the Board may suspend one or more of the rights of a member if

• (a) the member has failed on more than one occasion to comply with any provision of the Act, the by-laws or the rules;
• (b) a liquidator, a trustee in bankruptcy, a receiver, a receiver-manager or a sequestrator is appointed by an authorized person or a court of competent jurisdiction to take possession of all, or any part of, the member’s assets or undertakings; or
• (c) a member proposes any arrangement or composition with its creditors, invokes any statute in that regard or commits any act of bankruptcy.
  

Notice to member — suspension

(2) The Board must, as soon as feasible, notify the member in writing of its decision to suspend the member’s rights and the reasons for the suspension and, if the Board considers it necessary, must notify at the same time the other members in writing of the suspension.

Review

(3) If the member requests a review within five days after receiving the notice, the Board must review its decision and provide the member with an opportunity to make representations.

Notice to member — review

(4) After the review, the Board must, as soon as feasible, notify the member in writing of its decision and the reasons for it. The Board must notify at the same time the other members in writing of its decision and reasons if

• (a) the members were previously notified of the suspension under subsection (2) and the suspension was terminated; or
• (b) the members were not previously notified of the suspension under subsection (2) and the suspension was confirmed.

Notice to other members

(5) The Board must notify the other members in writing of the suspension if no request for a review is received within the time period specified in subsection (3) and the Board did not previously notify the other members under subsection (2).

Survival of obligation to pay

(6) Despite the suspension of a member’s rights, the member continues to be liable to pay dues and fees to the Association.

Application of By-law No. 6

8 The suspension of a member’s rights under section 7 does not affect the operation of Canadian Payments Association By-law No. 6 — Compliance in respect of the member.

Reinstatement

9 The Board must reinstate the rights of a member that have been suspended under section 7 if the member applies for reinstatement and the reasons for the suspension no longer exist.

Stakeholder Advisory Council

Appointment

Composition — criteria

10 The Stakeholder Advisory Council must include

• (a) at least 12 members who are representative of users, of which number at least two must be representative of consumers, at least one must be representative of the retail sector, at least two must be representative of the federal and provincial governments and at least one must be representative of the treasury and cash management services sector; and
• (b) at least one member who is representative of payment service providers.

Eligibility — criteria

11 Every person appointed to the Stakeholder Advisory Council under subsection 21.2(4) of the Act must

• (a) represent the interests of a particular stakeholder;
• (b) not be a director, officer or employee of a member or of a person entitled to be a member under subsection 4(2) of the Act; and
• (c) not be a director of the Association.
  

Evaluation of nominees

12 (1) In consultation with the Minister of Finance, the Board must evaluate the nomination of every person who is eligible to be appointed to the Council and, in doing so, must

• (a) take into consideration whether the stakeholder whose interests would be represented by the nominee has other established consultative processes for directly articulating that stakeholder’s perspectives to the Association or to any of its working groups or committees;
• (b) give preference to nominees who represent stakeholders whose interests are national in scope;
• (c) with respect to nominees who are representative of users, give preference to those nominees who represent associations, groups, organizations or other entities that represent the interests of a broad constituency or, in the absence of such nominees, to nominees who represent the interests of a prominent corporation within their industry; and
• (d) with respect to nominees who are representative of payment service providers, give preference to nominees who represent associations, groups, organizations or other entities that represent the common interests of the majority of participants in a particular industry or, in the absence of such nominees, to nominees who represent the interests of a prominent corporation within their industry.

Other criteria

(2) If, after each nominee is evaluated in accordance with the requirements of sections 10 and 11 and subsection (1), the number of nominees who are qualified exceeds the number of vacancies on the Council, the Board may consider

• (a) whether the stakeholder whose interests would be represented by the nominee is already adequately represented on the Council;
• (b) the business of the stakeholder whose interests would be represented by the nominee and its degree of reliance on the payment system;
• (c) the level of research and development with regard to payment systems that has been undertaken by the stakeholder whose interests would be represented by the nominee;
• (d) the nominee’s affiliations or experience with international organizations that have an interest relating to payment systems and the extent of those affiliations and that experience; and
• (e) the skills, expertise and experience that the Board considers necessary to permit the Council to carry out its responsibilities effectively.
  

Reappointment

13 (1) Members of the Stakeholder Advisory Council appointed under subsection 21.2(4) of the Act may be reappointed for any number of additional terms.

Elected directors

(2) A member of the Council who is an elected director of the Association must be appointed for a term fixed by the Board and may be reappointed for any number of additional terms.

Removal

14 On the recommendation of the chairperson of the Stakeholder Advisory Council, and after consultation with the Minister of Finance, the Board may remove a Council member, other than an elected director of the Association, from office if the Council member

• (a) has been absent without just cause from three consecutive meetings of the Council;
• (b) represents the interests of a stakeholder that has ceased to exist or is no longer a stakeholder; or
• (c) no longer meets the eligiblity criteria that are set out in the Act or this By-law.
  

Cessation of Membership

When membership ceases

15 A person ceases to be a member of the Stakeholder Advisory Council when

• (a) their term expires;
• (b) they are unable to act due to an extended incapacity or illness;
• (c) they are removed from office under section 14;
• (d) they cease to be an elected director of the Association; or
• (e) they resign, in which case their resignation takes effect on the later of
  • (i) the day on which their resignation is given to the Board, and
  • (ii) the day specified in their resignation.

Vacancy on Council

Elected directors

16 If a vacancy occurs because an elected director of the Association ceases to be a member of the Stakeholder Advisory Council before their term would have expired, and if no other Council member is an elected director, the Board must appoint an elected director to the Council for the remainder of that term.

Other Council members

17 (1) If a vacancy occurs because a member of the Council, other than an elected director of the Association, is removed under paragraph 14(a) or (c) or ceases to be a member under paragraph 15(b) or (e),

• (a) in the case where the vacancy occurs three months or more before the day on which their term would have expired, the stakeholder whose interests were represented by that Council member may nominate a substitute for the remainder of that term; or
• (b) in any other case, the vacancy must not be filled.

No stakeholder

(2) If a vacancy occurs because a member of the Council is removed under paragraph 14(b),

• (a) in the case where the vacancy occurs one year or more before the day on which their term would have expired, the Board may appoint a substitute for the remainder of that term; or
• (b) in any other case, the vacancy must not be filled.

Substitute appointed by Board

(3) If the stakeholder mentioned in paragraph (1)(a) fails to nominate a substitute within the period specified in the notice of vacancy, the Board may appoint a substitute.

Member Advisory Council

Appointment

Maximum number of members

18 (1) The Member Advisory Council must consist of no more than 20 members, of which number no more than two may be elected directors of the Association.

Composition — criteria

(2) The Council must include at least six members who are representative of direct participants, at least two members who are representative of group clearers and at least four members who are representative of indirect participants.

Definitions

(3) The following definitions apply in subsection (2).

direct participant means

• (a) a direct clearer as defined in section 1 of the Canadian Payments Association By-law No. 3 — Payment Items and Automated Clearing Settlement System;
• (b) a participant as defined in section 1 of the By-law No. 7 Respecting the Large Value Transfer System, except a group clearer; or
• (c) a party to any clearing and settlement system, payment system or system or arrangement established or operated by the Association, except the ACSS as defined in section 1 of the Canadian Payments Association By-law No. 3 — Payment Items and Automated Clearing Settlement System or the LVTS as defined in section 1 of the By-law No. 7 Respecting the Large Value Transfer System. (participant direct)

group clearer means a group clearer as defined in section 1 of the Canadian Payments Association By-law No. 3 — Payment Items and Automated Clearing Settlement System. (adhérent-correspondant de groupe)

indirect participant means a member that, in the normal course of business, does not maintain a settlement account at the Bank of Canada. (participant indirect)

Eligibility — criteria

19 (1) Every person appointed to the Member Advisory Council, other an elected director of the Association, must be a director, officer or employee of a member and must represent the interests of that member.

Other criteria

(2) The members of the Council must have, as a group, the skills, expertise and experience that the Board considers necessary to permit the Council to carry out its responsibilities effectively.

Term and reappointment

20 (1) Members of the Member Advisory Council must be appointed for a term of no more than three years and may be reappointed for any number of additional terms.

Elected directors

(2) Despite subsection (1), a member of the Council who is an elected director of the Association must be appointed for a term fixed by the Board and may be reappointed for any number of additional terms.

Removal

21 On the recommendation of the chairperson of the Member Advisory Council, the Board may remove a Council member, other than an elected director of the Association, from office if the Council member

• (a) has been absent without just cause from three consecutive meetings of the Council; or
• (b) no longer meets the eligibility criteria that are set out in the Act or in this By-law.
  

Cessation of Membership

When membership ceases

22 A person ceases to be a member of the Member Advisory Council when

• (a) their term expires;
• (b) they are unable to act due to an extended incapacity or illness;
• (c) they are removed from office under section 21;
• (d) they cease to be an elected director of the Association;
• (e) they cease to be a director, officer or employee of the member whose interests they represent; or
• (f) they resign, in which case their resignation takes effect on the later of
  • (i) the day on which their resignation is given to the Board, and
  • (ii) the day specified in their resignation.

Vacancy on Council

Elected directors

23 If a vacancy occurs because an elected director of the Association ceases to be a member of the Member Advisory Council before their term would have expired, the Board may appoint an elected director to the Council for the remainder of that term.

Other Council members

24 (1) If a vacancy occurs because a member of the Council, other than an elected director of the Association, ceases to be a member under section 22,

• (a) in the case where the vacancy occurs three months or more before the day on which their term would have expired, the member whose interests were represented by that Council member may nominate a substitute for the remainder of that term; or
• (b) in any other case, the vacancy must not be filled.

Substitute appointed by Board

(2) If the member mentioned in paragraph (1)(a) fails to nominate a substitute within the period specified in the notice of vacancy, the Board may appoint a substitute.

Repeal

25 The Canadian Payments Association By-law No. 1 — General (see footnote 1) is repealed.

Coming into Force

Registration

26 This By-law comes into force on the day on which it is registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the By-law.)

Issues

The current Canadian Payments Association (CPA) By-law No. 1 — General will be repealed and replaced by the proposed By-law No. 1 — General to give effect to recent amendments to the Canadian Payments Act.

Background

The CPA is a statutory body created by the Canadian Payments Act with a mandate to establish and operate national systems for the exchange, clearing, and settlement of payments between banks, credit unions, and other CPA members. Two systems operated by the CPA are the Automated Clearing Settlement System (ACSS) and the Large Value Transfer System (LVTS). In addition to operating these systems, the CPA develops, implements and updates the rules and standards that govern the clearing and settlement of payments exchanged in Canada. The Association operates on a not-for-profit basis, with annual operating and capital expenditure budgets prepared by the Board of Directors, funded by dues paid by members.

The Canadian Payments Act was amended by the Economic Action Plan 2014 Act, No. 2. The amendments established a new Member Advisory Council, with a statutory mandate to provide counsel and advice to the Board on the operation of the clearing and settlement systems; the interaction of those systems with other systems involved in the exchange, clearing or settlement or payments; and the development of new technologies. The Member Advisory Council is intended to be a new consultative and engagement forum for the membership of the CPA, providing payments knowledge and expertise, and facilitating effective dialogue between the Council, the Board and CPA management.

CPA By-law No. 1 — General was amended effective August 1, 2015, in order to repeal, and transfer provisions that address the internal administration of the business of the Association under another by-law (CPA By-Law No. 8 — Administration), which represented a new category of by-laws established following the legislative amendments in 2014. Further amendments to CPA By-law No. 1 — General are being made to implement the Member Advisory Council and to make updates and clarifications to other provisions.

Given that By-law No. 1 currently contains several provisions that were already repealed through previous amendments and transferred to By-law No. 8, the current By-law No. 1 would be entirely repealed and replaced by the proposed CPA By-law No. 1 — General.

Objectives

The objectives of the amendments are to

1. give effect to the revised legislation;

2. make minor updates and clarifications; and

3. revise the structure of the By-law.

Description

Amendments are made to include eligibility criteria for membership in the Member Advisory Council (MAC). These provisions include the maximum number of representatives on MAC; the requirement for MAC representatives to have relevant expertise and experience; and a complete set of rules on how MAC representatives are appointed. Amendments are also made to the Stakeholder Advisory Council eligibility criteria. These amendments remedy a potential conflict of interest situation with the new governance structure established by the revised legislation (i.e. an individual who is an independent CPA Board director will not be eligible to serve on the Council as a representative of a stakeholder) and expand on relevant criteria to be used in assessing nominees.

Additional minor and non-substantive amendments are proposed to the Stakeholder Advisory Council provisions and other provisions in By-law No. 1.

The title of the French version of the By-law was also amended to conform to current drafting standards. The English title was not modified.

“One-for-One” Rule

The “One-for-One” Rule does not apply, as the regulatory changes do not impose new costs on businesses.

Small business lens

The small business lens does not apply to this By-law, as there are no costs to small business.

Consultation

The CPA has consulted with its membership through various board-level and management advisory committees. The Stakeholder Advisory Council has been consulted on amendments affecting that Council.

Rationale

Repealing and replacing the By-law is needed to give effect to recent amendments to the Canadian Payments Act and to make a number of minor and non-substantive updates and clarifications.

Implementation, enforcement and service standards

In accordance with subsection 18(2) of the Canadian Payments Act, the By-law changes require approval of the Minister of Finance to come into force. Following ministerial approval, the by-laws must be sent to all CPA members by the President of the CPA. The amendments do not require any new mechanisms to ensure compliance and enforcement. The CPA is responsible for ensuring that its members comply with the by-laws, as applicable.

Contact

Deborah Wilson
Senior Legal Counsel and Principal
Legal and Regulatory Affairs
Canadian Payments Association
Constitution Square, Tower II
350 Albert Street, Suite 800
Ottawa, Ontario
K1R 1A4
Email: dwilson@payments.ca

• Footnote a
  S.C. 2014, c. 39, ss. 342(1) to (4)
• Footnote b
  R.S., c. C-21; S.C. 2001, c. 9, s. 218
• Footnote c
  S.C. 2014, c. 39, s. 342(5)
• Footnote d
  R.S., c. C-21; S.C. 2001, c. 9, s. 218
• Footnote 1
  SOR/2003-174