Common Trust Funds Regulation

Common Trust Funds Regulation, M.R. 329/87 R The Trustee Act , C.C.S.M. c. T160 Regulation 329/87 R Registered August 31, 1987 bilingual version (HTML) Table of Contents Section 1 Definitions 2 Conditions for establishing fund 3 Management and ownership of assets in fund 4 Units of participation 5 Limitations of participations 6 Admissions and withdrawals of participations 7 Participation register 8 Participation certificates 9 Valuations 10 Distribution of income 11 Investments 12 Accounting records 13 Audit by independent accountant 14 Inspection of records 14.1 Information to be provided to minister on request 15 Administration fees and expenses 16 Publicity 17 Termination of fund 18 Content of notice respecting passing accounts Definitions 1 In this regulation, "Act" means The Trustee Act ; («  Loi  ») "fund" means a common trust fund; (« caisse ») "participant" means any trust or estate, moneys of which are in a fund; (« participant ») "participation" means the interest of any participant in a fund; (« participation ») "security" includes bonds, debentures, guaranteed investment certificates, shares, stocks, warrants, rights to subscribe for or purchase shares of stocks, any title to or interest in the capital assets, property, profits, earnings or royalties of any undertaking or enterprise commonly evidenced by a certificate or other like document. (« valeurs mobilières ») M.R. 141/92; 115/2025 Conditions for establishing fund 2(1) No trust corporation shall establish or operate a fund unless (a) the balance of the fund is not less than $200,000.; and (b) before the fund is established, a plan of operation for the fund is prepared in accordance with this regulation and made available to any trustee who indicates an interest in depositing trust money in the fund. 2(1.1) A trust corporation that maintains or operates a fund shall make the plan of operation for the fund available (a) on request, to an interested person; (b) where the trust corporation or a co-trustee referred to in subsection 76(2) of the Act proposes that trust money be invested in the fund, to the co-trustee; and (c) to a trustee referred to in subsection 76(3) of the Act, where the trustee has indicated an interest in depositing trust money in the fund. 2(2) A trust corporation maintaining or operating a fund shall do so in accordance with the plan of operation, including any amendment to the plan, prepared in respect of the fund. 2(3) The plan of operation shall set forth the manner in which the fund is to be operated and shall, among other things, contain provisions as to (a) the investment powers of the trust company with respect to the fund including the character and kind of investments that may be purchased for the fund; (b) the computation and allocation of income, and the distribution thereof; (c) the allocation of the profits and losses of the fund; (d) the terms and conditions governing admission of trust moneys to and withdrawals of participations from the fund; (e) the original unit of participation; (f) the form of documentation to be issued as evidence of participation; (g) the auditing and settlement of accounts of the trust company with respect to the fund; (h) the basis and method of valuing the assets of the fund; (i) the basis upon which the fund may be terminated; (j) the method by which the plan may be amended; and (k) such other matters as may be necessary to define clearly the rights of participants. 2(4) The plan shall provide that it is subject to the laws of Manitoba pertaining to the operation of common trust funds. 2(5) The plan may provide for the amortization of premiums and discounts upon bonds or other obligations, and for the allocation of profits and losses and the apportionment thereof between principal and income. M.R. 141/92 Management and ownership of assets in fund 3(1) The trust company shall have the exclusive management and control of any fund that it maintains. 3(2) No participant and no person having an interest in any participant shall have or be deemed to have individual ownership in any particular asset in a fund. 3(3) All the assets of a fund shall at all times be considered as assets held in trust by the trust company, and title thereto is vested soley in the trust company as trustee. Units of participation 4(1) A fund shall be divided into units of equal value, and the proportionate interest of each participant shall be expressed by the number of such units allocated to it. 4(2) Upon the establishment of a fund, a trust company shall divide the fund into units of $5. or any multiple of $5., and shall allocate to each participant the number of units proportionate to its original investment in the fund. 4(3) When additional moneys are admitted to the fund, the amount so admitted shall be equal to the value of one or more of the units of the fund, and the number of units shall be increased accordingly. 4(4) Each unit of participation shall have a proportionately equal beneficial interest in the fund, and none shall have priority or preference over any other. Limitations of participations 5(1) No money of any estate or trust shall be admitted to a fund if, as a result, the estate or trust would then have an interest in the fund in excess of 10% of the book value of the assets of the fund. 5(2) In applying the limitation contained in this section, if two or more trusts are created by the same settlor or settlors and as much as 1/2 of the income or principal or both of each trust is payable or applicable to the use of the same person or persons, such trusts shall be considered as one. Admissions and withdrawals of participations 6(1) No trust moneys shall be admitted to and no participation shall be withdrawn from a fund except on the basis of the trust company's valuation of the fund and except as of a valuation date. 6(2) A period not in excess of 14 business days of the trust company following a valuation date may be used to make the computations necessary to determine the value of the fund and of the units thereof. 6(3) When a participation or any part thereof is withdrawn from a fund, the amount withdrawn may, in the discretion of the trust company, be paid in cash or rateably in kind, or partly in cash and partly rateably in kind, but all payments or transfers as of one valuation date shall be made on the same basis. 6(4) No admission of trust moneys to or withdrawal of a participation from a fund shall be permitted if the result would be that less than 40% of the remaining assets of the fund would be composed of cash and readily marketable securities, but nothing herein contained shall be deemed to prohibit a rateable distribution upon all participations. 6(5) Where any security held in a fund has become one that would not be eligible as a new investment of the fund, and that state of ineligibility has continued for a period of six months, no further admissions to or, except for the purposes of this subsection, withdrawals from, the fund shall be permitted until after the security has again become so eligible or has been eliminated from the fund either through sale, distribution in kind or segregation in a liquidation account for the benefit rateably of all trusts and estates then participating in the fund. 6(6) No participation shall be withdrawn from a fund in part only unless the amount so withdrawn is equal to the then value of one or more full units. Participation register 7 A register shall be maintained for each fund, showing with respect to each participant, (a) the date of each admission of trust moneys to the fund, the number of units allotted and the value at which each unit is allotted; (b) the date of each withdrawal, the number of units redeemed, and the amount paid on redemption to the participant; (c) the number of units currently held; and (d) the share in any liquidating account. Participation certificates 8 Participation in a fund may be evidenced by certificates, but no trust company maintaining a fund shall issue any document evidencing a direct or indirect interest therein in any form that purports to be negotiable or assignable. Valuations 9(1) Not less frequently than once during each period of three months, the trust company shall determine the value of each fund that it maintains and of the units of participation thereof. 9(2) In the valuation of the investments of a fund, the following rules shall be observed: (a) securities listed on any stock exchange shall be valued at their closing sale prices on the valuation date, but if no sale of a particular security has been reported for that day, the last published sale price or the average of the last recorded bid and asked prices, whichever is the more recent, shall be used, unless, in the opinion of the trust company, the value thus obtained does not fairly indicate the actual market value, the trust company shall obtain from two members of the stock exchange a written estimate of the value of such security as of the valuation date, and shall use the average of such estimates; (b) securities not listed on any stock exchange, except mortgages, shall be valued as of the valuation date either (i) by taking the average between the bid and asked prices most recently published within the 30 day period preceding the valuation date, or (ii) by taking the weighted average price of all transactions made by two recognized dealers in the securities within the 30 day period preceding the valuation date, or (iii) where a valuation cannot be made pursuant to subclause (i) or (ii), by the method of valuation approved for that purpose by the court; (c) for the purposes of clause (a) or (b), the trust company may rely, as sufficient evidence, upon reports of sale and bid prices and over the counter quotations, published in any newspaper of general circulation in Winnipeg or in any recognized financial journal or report or quotation service or in the records of a stock exchange; (d) in respect of investments in mortgages, the trust company shall from time to time obtain a written appraisal as to the value of each mortgage and of the real estate securing the mortgage, but such appraisal shall be made by a licensed real estate agent or other person, who may be an employee of the trust company, whom the company believes to be qualified to appraise real estate values in the vicinity in which such real estate is situated; and an appraisal may be used only for valuations made within the period of 30 calendar months next following the dates of the appraisal; (e) in respect of a stock where a dividend has been declared but has not been paid and the amount of such dividend has been considered as income under the provisions of the plan of operation of the fund, the amount of such dividend shall be deducted from the price of the stock in determining its value unless such price is an ex-dividend price; (f) an investment purchased and awaiting payment against delivery shall be included for valuation purposes as a security held, and the cash accounts shall be adjusted by the deduction of the purchase price, including brokers' commissions and other expenses of the purchase; (g) an investment sold but not delivered pending receipt of proceeds shall be valued at the net sales price after deducting brokers' commissions and other expenses. M.R. 141/92 Distribution of income 10(1) The income of a fund and the apportionment thereof shall be determined at each valuation date. 10(2) The income shall be distributed to participants not less frequently than quarter-yearly. 10(3) For purposes of distribution to participants, the income may be computed, at the option of the trust company, either on the basis of income accrued or on the basis of income actually received. 10(4) To facilitate the distribution of accrued but uncollected income, the cash principal of a fund may be used to the extent necessary. Investments 11(1) The investments of a fund shall be kept separate from the trust company's own property, and each investment shall be so earmarked in the books of the company as to show clearly the fund to which it belongs, but any moneys of the fund awaiting investment or distribution may be held on deposit in the savings department of the trust company subject to payment thereon by the company of interest computed at the current rate and in the same manner as in the case of ordinary deposits. 11(2) The total investment of a fund in (a) guaranteed investment certificates of any trust company; (b) debentures of any loan company; or (c) bonds of, or guaranteed by, any municipal corporation; shall not exceed in each case 10% of the book value of the fund. 11(3) The total investment of the fund in securities of or guaranteed by any one person, other than the obligations referred to in subsection (2), shall not exceed 5% of the book value of the fund. 11(4) Subsections (2) and (3) do not apply to investments in obligations of or guaranteed by (a) the Government of Canada; or (b) the government of any province of Canada. 11(5) The total number of shares held by a fund in any one class of shares of stock of any one corporation shall not exceed 5% of the number of such shares outstanding and, if the trust company maintains more than one fund, no investment shall be made that would cause the aggregate investment for all the funds in any one class of shares of stock of any one corporation to exceed such limitation. 11(6) Not less than 40% of the value of the assets in a fund shall be maintained in cash and readily marketable securities. 11(7) The fund shall be invested in securities or investments in which a trustee is authorized under The Trustee Act to invest trust moneys and shall not be invested in any other securities or investments. Accounting records 12 A complete set of accounting records shall be maintained for each fund, and such records shall clearly distinguish items of principal from items of income. Audit by independent accountant 13(1) A trust corporation maintaining or operating a fund shall, at least once during each period of 12 months, cause an audit of the fund to be made by an independent accountant. 13(2) The report of the audit shall include a list of the investments comprising each fund at the end of the period covered by the audit, the book value thereof at the end of the period covered by the audit, a statement of purchases, sales and any other investment changes and of revenue and disbursements since the last audit, and appropriate comments as to any investments in default as to payment of principal and interest. 13(3) The reasonable expenses of the audit shall be paid out of the fund and charged to principal and income in such proportion as the trust company considers proper. 13(4) [Repealed] M.R. 141/92 13(5) The trust company shall, without charge, send a copy of the report of audit to any co-trustee of a participant, and shall also without charge, upon request, send a copy of the report to any interested person. M.R. 141/92 Inspection of records 14 The register of participations and all accounting records pertaining to a fund for the period after that covered by the last accounts passed by a court shall be open to inspection during the regular business hours of the trust company on the 8th, 9th and 10th business days of the company next following any valuation date, by any co-trustee or beneficiary of a participant. Information to be provided to minister on request 14.1 A trust corporation shall as soon as practicable provide to the member of the Executive Council charged by the Lieutenant Governor in Council with the administration of The Trustee Act or Part XXIV of The Corporations Act any information requested by the minister respecting a fund maintained or operated by the trust corporation. M.R. 141/92 Administration fees and expenses 15(1) A fund shall be deemed not to be a separate trust fund on which commission or other compensation is allowable, and no trust company maintaining a fund shall make any charge against it for the management thereof nor pay a fee, commission or compensation out of the fund for management but may reimburse itself out of a fund for all actual disbursements made by it in the administration of the fund. 15(2) In any trust or estate that has moneys participating in a fund, the trust company is entitled to the management fee or other compensation to which it would otherwise be entitled in respect of such moneys. Publicity 16 In soliciting business or otherwise a trust company shall not advertise or publicize the earnings realized on a fund or the value of the assets thereof, except as is permitted or required under these regulations. Termination of fund 17(1) A trust company may, upon reasonable notice to the participants, in its discretion terminate and distribute a fund as of any valuation date. 17(2) On the application of an interested person, the court may by order direct the termination and distribution of a fund within such time as shall be specified in the order. M.R. 141/92 Content of notice respecting passing accounts 18(1) A trust corporation serving a notice under subsection 76(8) of the Act, shall include with the notice a statement (a) that accounts respecting the fund are filed in the court for the purpose of passing the accounts; (b) on the nature and purpose of passing accounts, and the effect of the approval of accounts by the court; and (c) that an interested person has the right to appear personally or by counsel at the time accounts are passed in court. 18(2) A trust corporation required to serve a notice under subsection 76(8) of the Act shall, in addition to such direction as the court may give respecting service of the notice, publish the notice, including the statements referred to in subsection (1), in the gazette and in at least one edition of a daily newspaper having general circulation in Manitoba. M.R. 141/92