Learn about procedures for processing Retail Debt instruments through The Canadian Depository for Securities Limited (CDS) and about the Client Account Agreement, and about rates and redemption values for unmatured and matured bonds.
The following processes are described:
- General Information
- Each product is identified by a unique ISIN number. Unique ISIN numbers are issued for each product type based on the method of interest payable for each product. For instance, separate ISIN numbers are issued for compound-interest ”C” bonds and regular-interest ”R” bonds.
- Withdrawals for Physical Certificates
- Multiples of $100
- Minimum Par Value for ”R” Bonds is $300
Beginning with the November 2008 series, CSBs and CPBs will no longer be eligible for physical withdrawal from CDS. The product Terms and Conditions were updated to reflect this change. All series issued prior to November 2008 will continue to be eligible for withdrawal.
CSBs and CPBs: Withdrawals from CDS are expected to be rare and the service level to issue a certificate is between six and eight weeks. Furthermore, withdrawals for regular interest ”R” bonds submitted during the closed-loan period (two months prior to the anniversary date) will be rejected on CDSX and returned to the dealer.
The dealer enters a withdrawal transaction on CDSX. The custodian will verify the accuracy of the transaction and process valid withdrawal requests. Certificates will be delivered via Canada Post (regular mail) to the dealer address specified in the Memo field of the Security Withdrawal Notice. Note: The dealer must specify a delivery address in the memo field in order to expedite the delivery of certificates.
- Certificate inscription and distribution occurs on a weekly basis between November 1 and January 31 and biweekly between February 1 and October 31.
- Redemptions must be submitted in multiples of $100 for regular interest “R” bonds.
- Redemptions in multiples of $1 are allowed for “C” bonds in order to support self-directed holdings transferred from The Canada RSP/RIF Plans.
CSBs and CPBs interest will be paid up to the last annual anniversary date. Dealers will enter the par value of the ISIN that their customer wishes to redeem into the redemption tender. If the entry is completed before 7:00 p.m. (ET), the funds for the redemption will be in the dealer’s DCS Funds Account the next business day. If the entry is completed after 7:00 p.m. (ET), the funds will be in the dealer’s DCS Funds Account the second business day.
Daily redemption tender processes: The Bank or its agent will need to release the redeemed security position entered by the dealer the previous business day to the Bank’s S/A account. CDS will automatically set up the withdrawal request for the value of the redeemed securities and the Bank custodian will confirm the withdrawal.
- Reversal of Redemptions
CSBs and CPBs: Dealers will be able to reverse a redemption due to the wrong product or amount being redeemed. This transaction will be allowed up to three months after the date the error occurred. Dealers will be responsible for complying with the three month rule and are responsible for calculating their own Reversal of Redemption interest calculation (see below for calculation and guidelines). Using the reversal of redemption interest calculation plus the redemption value, the dealer will submit a trade through CDSX buying the desired par value of the ISIN back from the Bank of Canada (using CUID BOCE). Funds due to the Bank will be submitted through the CDSX Payment Exchange. Funds must be available by 3 pm otherwise the trade may be rejected. Trades must be received by 12:00 p.m. (noon ET) in order to be settled the same business day.
Reversal of Redemption Interest Calculation = (Redemption Value x applicable CSB/CPB current year interest rate x Number of days since redemption)/365.
Total of Trade should equal = original redemption amount + reversal of redemption interest calculation
The total of the trade can be manual entered under the “Gross Amount” of the CDSX system, please ensure that the par value is also entered in the trade.
Example of Calculations:
CPB 31 “C” par value of $1,000 was redeemed August 12, 2012, mistake was realized August 29, 2012 total days elapsed 17.
Reversal of Redemption Interest calculation = ($1,321.38 x 1.40% x 17)/365 = $0.86
Total trade should total = $1,322.24
CSB 56 “C” par value of $10,000 was redeemed July 13, 2012, mistake was realized September 27, 2012 total days elapsed 76.
Reversal of Redemption Interest calculation = ($13,636.98 x 0.65% x 76)/365 = $18.46
Total trade should total = $13,655.44
CPB 10 “R” par value of $10,000 was redeemed August 16, 2012, mistake was realized September 10, 2012 total days elapsed 25.
Note: That regular CPB interest bonds will be calculated based on their par value due to the nature of the product.
Reversal of Redemption Interest calculation = ($10,000 x 1.80% x 25)/365 = $12.33
Total trade should total = $10,012.33
CSB 82 “R” par value of $5,000 was redeemed June 29, 2012, mistake was realized September 5, 2012 total days elapsed 68.
Reversal of Redemption Interest calculation = ($5,008.12 x 0.65% x 68)/365 = $6.06
Total trade should total = $5,014.18
- Dealers must include the Redemption Date and Redemption Value in the memo field.
- If the Redemption Date is missing, the trade exceeds the three month rule, the daily accrued interest is not calculated correctly or if the Redemption Value is missing the trade will be rejected.
- Hardship Redemptions
- Redemptions must be submitted in multiples of $100 for regular interest “R” bonds.
- Redemptions in multiples of $1 are allowed for “C” bonds in order to support self-directed holdings transferred from the Canada RSP/RIF Plans.
CPBs may be redeemed prior to maturity with interest paid up to the end of the month prior to the date of redemption provided one of the following conditions exists and proper supporting evidence is provided to the dealer:
- The owner has died;
- The redemption is ordered by a court;
- The proceeds of redemption are required by the bond owner to:
- avoid bankruptcy;
- purchase a home further to the Home Buyers Plan of the Government of Canada; or
- pursue education further to the Lifelong Learning Plan of the Government of Canada, for which bonds must be held in a Registered Plan to be eligible for redemption.
- The redemption is for regular income payments from a Registered Retirement Income Fund.
Dealers are responsible for ensuring that hardship redemption requests adhere to the rules outlined above. The dealer will call the Canada Savings Bonds Program Customer Service at 1 800 575-5151 to obtain the redemption factor(s) for the ISIN(s) being redeemed. The factor provided is a monthly factor to the end of the previous month. Using the redemption factor as the price, the dealer will submit a trade through CDSX selling the desired par value of the CPB to the Bank of Canada (using CUID BOCE).
The Bank will confirm the trade upon verifying the factor and the dollar value. Once the trade settles, the position will move to the Bank and will be withdrawn from the system. This trade must be submitted by 12 pm for the settlement to occur on the same day.
- Account Movements
CSBs and CPBs: When a customer chooses to move his/her holdings/portfolio to another dealer, the receiving dealer (dealer taking in the holdings / portfolio) will initiate this trade in CDSX. The second dealer (holdings / portfolio moving from) will confirm the trade details. Once settled, both dealers will update their own customer accounts. The transaction is done on a par basis for $0 cash value and this transaction should be completed in one business day.
- Conversion from Compound to Regular
- Must be in Multiples of $100.
- Minimum Par Value for ”R” bonds is $300.
CSBs and CPBs: This transaction applies to the movement of all products within the same dealer and can occur until maturity of the bond. No funds are involved when this transaction occurs within the initial thirteen (13) month period from the issue date. After thirteen (13) months, the client is owed funds and these will be issued via the CDSX payment exchange.
Dealers will submit a conversion tender event for the ”C” bond they wish to convert to an ”R” bond. As in the case for the redemption event, if the entry is completed before 7:00 p.m. (ET), the funds will be in the dealer’s account the next business day. After 7:00 p.m. (ET), the funds will be deposited the second business day.
- Annual Interest
CSBs and CPBs: Annual interest on regular interest bonds will be calculated once all regular processing has been completed on the evening prior to payment date. Settlement will occur on the anniversary date. Should the anniversary date fall on a week-end settlement will occur on the first business date after the anniversary date.
- Product Maturity
CSBs and CPBs: All maturing products and series will automatically be redeemed on the evening prior to the maturity date. Settlement will occur on the anniversary date. Should the anniversary date fall on a week-end settlement will occur on the first business date after the anniversary date.
- Certificate Deposits
Any unmatured CSB or CPB held in certificated form can be deposited into CDS.
- Deposit to CDS for Transfers from The Canada RSP/RIF Account to Dealer Self-Directed Account
As of 2012, CSB or CPB positions held in The Canada RSP/RIF that are transferred to Self-Directed Plans will be deposited into CDS.
- Dealers are to enter CDSX Deposits using the Bank of Canada BOCF CUID
- Supporting documentation must be sent to the Canada Savings Bonds Program office on the same day the deposit is requested on CDSX.
- To initiate the transfer, Dealers are to set up a CDSX Deposit Notice and send a completed Form T2033 or equivalent along with a copy of the CDSX Deposit Notice to the Canada Savings Bond Program office. It is critical that the Dealer includes a contact name and telephone number on both the CDSX Deposit Notice and T2033 - transfer requests received without contact information will be rejected.
Canada Savings Bonds Program
P.O. Box 2390, Station D
Ottawa, ON K1P 1K8
Courier Delivery Address
Canada Savings Bonds Program
50 O’Connor Street, Suite 201
Ottawa, ON K1P 6L2
- The T2033 request must also include the par values for each individual bond series being transferred to CDS (either on the form or on an attached piece of paper). Transfer requests received with either missing par values and/or incorrect par values will be rejected.
- For holdings in the Canada RSP the par value held per bond series can be determined by the Dealer by looking at a recent account statement, or by calling 1 800 575-5151 and speaking to a CSR who will provide the values.
- If a Dealer calls the 1 800 575-5151 number to confirm the par values held, they will be reminded that the actual par values should be included on the T2033, but that rounded up par values should be included on the CDSX Deposit Notice. For example, if the par value is $1,254.12, the rounded par value is $1,255.00.
- For holdings in The Canada RIF, the Dealer should always call the 1 800 575-5151 number. The Canada Savings Bond Program office will investigate and call back to confirm whether the RIF Annual Minimum Payment (AMP) needs to be released prior to transferring to CDS (this will be done before the actual par values are provided to the Dealer).
The list of ISINS and their corresponding CSB or CPB Compound series (in PDF format) can be referenced or downloaded.
- Each deposit must be in multiples of $1.00. (for example, if the par value of the holding is $1,234.12 then the deposit amount would be rounded to $1,235.00)
- The memo field must contain the following information:
- Transfer from The Canada RSP/RIF to CDS
- The Dealer’s contact name and telephone number
- Client’s name and The Canada RSP/RIF plan number
- Identify supporting documents that will be mailed or faxed to the Canada Savings Bond Program office (T2033 with a copy of the Deposit Notice). Note faxes are only accepted if they include a “Signature guaranteed” stamp and a “Certified True Copy”
- Once the CDSX Deposits and all supporting documents are received, the Canada Saving Bond Program office will verify the accuracy of the transaction and the Custodian will confirm valid requests. Holdings for valid requests will be transferred from the client’s existing Canada RSP/RIF account to CDS within 10 Business Days of receiving complete documentation.
- Linker Series or connector series (any CSB or CPB series with a 500 or 900-series identifier) cannot be transferred from The Canada RSP/RIF to CDS. Any transfer request containing the linker or connector series will be rejected back to the Dealer with instructions to resubmit the request without the connector series holdings. Transfers for linkers or connector series must be done in cash and the Form T2033 or equivalent must be completed : CPS Payroll Bonds (any instrument with a CPS identifier) are not eligible for transfers to CDS, for the reason that a transfer in-kind is contrary to the Terms and Conditions of the Canada Payroll Savings Plan. Transfers for CPS must also be done in cash and the Form T2033 or equivalent must be completed.
Client Account Agreement
The dealer will ensure that clients who hold NC-CDSX bonds are bound by a client account agreement with the authorized sales agent that provides the authorized sales agent with the authority to transact, on behalf of the NC-CDSX bond owner, all possible types of transactions involving NC-CDSX bonds including giving CDS or the Bank of Canada instructions for such transactions, and receiving payments on behalf of the bond owner.
The authorized sales agent will take all steps necessary to enable the Bank of Canada to prove that any instructions regarding NC-CDSX bonds provided on behalf of the NC-CDSX bond owner, and which are acted on by the Bank, form an enforceable agreement between the Bank (acting as the agent of the Government of Canada) and the authorized sales agent (acting as the agent for the NC-CDSX bond owner).
Sales Agent Procedures
The authorized sales agent shall distribute a summary of the terms and conditions of NC-CDSX bonds to each owner of NC-CDSX bonds at the time of purchase or at the time of the CDS Bring-On of certificated Retail Debt products, as the case may be.
The authorized Sales agent shall comply with the terms and conditions of the NC-CDSX bonds, including without limiting the generality of the foregoing, the terms and conditions relating to the sales periods, registration types, interest payments, restrictions on transfer, redemption etc. The authorized sales agent shall enter into such agreements with owners of NC-CDSX bonds, or take such other steps as may be necessary, to ensure that such owners comply with the terms and conditions of NC-CDSX bonds.
The authorized sales agent shall maintain a register of individual owners of NC-CDSX bonds, which register shall contain such information as may be specified from time to time by the Bank of Canada. When requested by the Bank, the authorized sales agent will provide the Bank, as the case may be, with the information contained in such register.
The authorized sales agent shall hold all funds received from the sale of Retail Debt Products in a designated account established solely for the purpose. These proceeds are deemed to be held in trust for the Receiver General for Canada pending settlement with the Bank or its designate.
Closed Loan Period
NC-CDSX bonds will not be subject to a closed loan period. Retail Debt products held in certificated form are subject to a two month closed loan period.
As stated in the current Sales Agent Agreement, the Bank or its designate shall have the right to carry out periodic audits of the records of the authorized sales agent in order to verify that the agent has not contravened the provisions of specific clauses outlined in the Sales Agent Agreement or of any Appendix.