IFIC Guidance for Use of the IFIC Pre-Authorized Chequing (PAC) Agreement and its Terms and Conditions Background The Canadian Payments Association s (CPA) Rule H1 with respect to Pre-Authorized Debits or Pre- Authorized Contributions (PACs) went into effect in June 2008. Although implemented June 2008, the CPA provided a grace period until February 28, 2010 for companies to comply with these regulations. To accommodate the new rules, an IFIC Working Group was organized and a template incorporating the mandatory elements was developed. The guidance is provided to assist Dealers and Fund Companies in the completion and use of the IFIC Pre-Authorized Chequing Agreement (the PAC Agreement or the pre-authorized debits agreement ) or its Terms and Conditions. Use of the IFIC PAC Agreement 1. The PAC Agreement is only required for new PAC set-up requests received on February 28, 2010 or later. If a request is received before this date, it may be accepted, even if it is not CPAcompliant. If a request is received after this date on a non-compliant form, some Fund Companies may reject the request. 2. The IFIC template was designed to be used in several different methods: 1. Fund Company or Dealer adopts as is in its entirety, and simply inserts own logo. IFIC logo and form version number are to remain on bottom left hand of the page. The fields of the PAC Agreement can be populated electronically if downloaded from IFIC s website. 2. Fund Company or Dealer incorporates the Terms and Conditions in their own form, including the IFIC logo and version code IFIC/PAD-DEC2009. The IFIC logo and form version number (IFIC/PAD-DEC2009) must be displayed on the bottom left of the document. By using the IFIC logo and form version number, the Fund Company or Dealer warrant that the Terms and Conditions are identical in all respects with the form available on IFIC s website at www.ific.ca. 3. The Terms and Conditions may be incorporated on the back of a Fund Company s or Dealer s existing form, provided that the IFIC logo and form version number are on the front of the document, in the bottom left hand corner. If a Fund Company or Dealer chooses to take this approach, the following language must appear above the signature line: "By signing this form, you confirm that you have read and agreed to the Terms and Conditions indicated on the back of this agreement." a) The IFIC logo and form version number may not be used on any reproduction of the CPA Pre-authorized Debit Rule H1 Terms and Conditions which is not identical in all respects with the Terms and Conditions available on IFIC s website. The only exception is the Dealer can insert the Terms and Conditions in their entirety into their order entry form. Some Fund Companies may reject Pre-authorized Contribution requests that do not have the Terms and Conditions and logo present. December 7, 2009 Page 1 of 4
b) By use of the IFIC logo and form version number, the Fund Company or Dealer agrees that the Terms and Conditions are identical in all respects with the form available on IFIC s website and that the disclosure language is above the signature line. Some Fund Companies may reject pre-authorized debit instructions which are not identical in form and content with the current IFIC PAC Agreement. 4. Terms and Conditions language Terms and Conditions By signing this form, you hereby waive any pre notification requirements as specified by sections 15(a) and (b) of the Canadian Payments Association Rule H1 with respect to pre authorized debits. You authorize the Fund Company/Companies indicated in this agreement to debit the bank account provided for the amount(s) and in the frequencies instructed. If additional space is required a separate sheet may be attached. If this is for your own personal investment, your debit will be considered a Personal Pre authorized Debit (PAD) by Canadian Payments Association definition. If this is for business purposes, it will be considered a Business PAD. Monies transferred between CPA members will be considered a Funds Transfer PAD. You have certain recourse rights if a debit does not comply with this agreement. For example, you have the right to receive reimbursement for any debit that is not authorized or is not consistent with this pre authorized debit agreement. To obtain more information on your recourse rights, you may contact your financial institution or visit www.cdnpay.ca. You confirm that all persons whose signatures are required to authorize transactions in the bank account provided have signed this agreement. You may change these instructions or cancel this plan at any time, provided that the relevant Fund Company receives at least 10 business days notice by phone or by mail. Please consult each individual Fund Company to see if this may be reduced or waived. Contact information for the Fund Companies may be found at http://www.fundserv.com/english/code/fund_active.shtml. To obtain a copy of a cancellation form or for more information regarding your right to cancel a pre authorized debit agreement, please consult with your financial institution or visit the Canadian Payments Association website at www.cdnpay.ca. You agree to release the financial institution of all liability if the revocation is not respected, except in the case of gross negligence by the financial institution. The specified Fund Company is authorized to accept changes to this agreement from my registered dealer or my financial advisor in accordance with the policies of that company, in accordance with the disclosure and authorization requirements of the CPA. You agree that the information in this form will be shared with the financial institution, insofar as the disclosure of this information is directly related to and necessary for the proper application of the rules applicable for pre authorized debits. You acknowledge and agree that you are fully liable for any charges incurred if the debits cannot be made due to insufficient funds or any other reason for which you may be held accountable. You have requested this application form and all other documents relating hereto to be in English. Vous avez exigé que ce formulaire et tous les documents y afférant soient rédigés en anglais 5. Sample IFIC logo from LAF agreement to be used to identify PAC compliant forms (for reference only) IFIC/PAD DEC2009 December 7, 2009 Page 2 of 4
IFIC Guidance: Canadian Payments Association Pre-authorized Debits Rule H1 IFIC is providing interpretive guidance on the Canadian Payments Association (CPA) Rule H1 as it pertains to pre-authorized debits paper requests. This Guidance does not consider electronic requests. This Guidance is not to be construed as legal opinion. Each firm should consult with its Legal counsel with respect to the implementation of the Rule. 1. Any Fund Company that is not a CPA member, but has a Financial Institution (FI) that completes debits on its behalf (i.e. a bank), needs to contact the FI to see if signed Letters of Undertaking are required. Regardless, the FI will have to approve the pre-authorized debits form that the Fund Company will be accepting. 2. Any pre-authorized debit request received before February 28, 2010 may be accepted in any currently acceptable format. Requests received after February 27, 2010 must comply with the new CPA rule. Any forms that do not comply by the use and agreement of the IFIC logo and form version code may be rejected by a Fund Company. 3. Mandatory elements: Date and Signature Joint bank account owners are required to sign the debit request. A Fund Company s debit agreement may indicate that the investor has agreed that all required signatures have been affixed to the agreement. Authority to Debit Account A direct statement indicating that the client is authorizing the debit. Pre-authorized debit (PAD) category (personal, business or funds transfer): Personal investments are considered Personal PADs; investments done for business purposes are considered Business PADs; Fund transfer PADs are electronic transfers between two CPA members. - CPA originally suggested check boxes on form, however it does allow for the categories to be defined for the investor. Amount and timing Standard as per current industry practices. Cancellation information The amount of notification lead time required by the Fund Company to cancel a debit must be specified in the agreement, may not exceed 30 days and must indicate that a sample cancellation form is available on the CPA website and from Financial Institutions. The manner by which the Fund Company will accept cancellation instructions (i.e. by phone or in writing) should also be identified. Payee contact information CPA originally indicated that a company s contact information be presented on the form. FundSERV has allowed the leverage of a website (http://www.fundserv.com/english/code/fund_active.shtml) where all FundSERV network participant Fund Companies may house a url link to their own website, where contact information can be obtained. Please contact FundSERV to have your company s name added to the site or updated. It is the responsibility of the Fund Company to ensure that the FundSERV website contains up-to-date website information. Recourse/Re-imbursement statement (mandatory CPA language, must be verbatim): You [or I/we, depending on the context] have certain recourse rights if any debit does not comply with this agreement. For example, you [I/we] have the right to receive reimbursement for any debit that is not authorized or is not consistent with this PAC Agreement. To obtain more information on your {my/our] recourse December 7, 2009 Page 3 of 4
rights, you [I/we] may contact your [my/our] financial institution or visit www.cdnpay.ca. 4. Leverage of existing documents (prospectus, application etc.) While the rule has indicated that the elements are mandatory, it allows for the inclusion of them in other already existing formats, such as in a Fund Company s application or in its Simplified Prospectus. 5. Instructions received from third party (i.e. nominee or intermediaries) to debit client s account CPA currently indicates that the agreement to debit must be between the Fund Company doing the debiting and the end investor, which suggests that Fund Companies would need to obtain the client s signature in addition to that of the nominee/intermediary. A Fund Company may offer to nominees and intermediaries an agreement whereby nominee/dealer agree that they put all relevant documents into the hands of investors. 6. Pre-Notification Requirements the Rule H1 stipulates various circumstances in which a client must be provided with written pre-notification that a debit of his/her bank account will be occurring. The standard pre-notification period is 10 calendar days. This requirement may be waived, provided that the waiver statement is included in the agreement and is highlighted by being in bold or italics. Example: By signing this form, you hereby waive any pre-notification requirements as specified by sections 15(a) and (b) of the Canadian Payments Association Rule H1 with respect to pre-authorized debits. 7. NSF The Rule explicitly states that a re-presented PAC must be for the same amount as the original (i.e. no fees or penalties may be added) and may only be re-presented once, within 30 days of the original debit attempt. 8. Change of Payee name If a firm debiting an investor s account changes its name, it must provide written notification of at least 10 days before the next debit occurs. A Fund Company s legal counsel should be consulted as to the business risk associated with not providing the notification (i.e. if the Fund Company s name was changing from ABC Funds Inc. to ABC Investments Inc). 9. Notice of Changes A Fund Company is required to update the account number or transit number for a pre-authorized debit when they receive Notice of Change from their bank, provided that this does not require a change of the actual bank. 10. Electronic Funds Transfer (EFT) errors If a Fund Company has credited an incorrect client s account, time frames or methods for error correction remain unchanged. 11. Set interval v. sporadic debits Set interval debits are debits that occur at specific, set or predictable dates, whereas sporadic debits occur occasionally, irregularly, periodically etc. Example, a monthly PAC set up for $100 or a $100 PAC specifically requested to be run January, April, May then November are considered set interval debits. Sporadic means there is no predefined dates when the debit will occur. There are different pre-notification requirements for each. Refer to #6 of this guidance for further details. 12. When do we need to obtain a new PAC agreement? Generally, a new PAC agreement will not be required if investors wish to reduce their PAC or change the banking information, even if the PAC began prior to February 28, 2010. CPA suggests any changes in banking instructions be in writing. A Fund Company should review with internal counsel when it will require a new agreement. December 7, 2009 Page 4 of 4
Logo Here Pre-authorized Chequing Agreement (not applicable for Locked-in RSP, LIRA, RIF, LlF, LRIF, PRIF, RLIF or RLSP account types) Part 1: Investor Information New Account (A completed investment application is required) Existing Account First Name Last Name or Corporation or Trust Name Joint First Name (if applicable) Joint Last Name (if applicable) Part 2: Investment Information Frequency please choose one (please refer to the Fund Companies for their specific available frequencies): weekly every two weeks* monthly every two months quarterly every four months semi-annually annually other: Start Date: (YYYY/MM/DD) *Second monthly date: (DD) Fund Company Fund Code Fund Name Account Number Sales Charge Front end (%) Other Percentage (%) Amount ($) Part 3: Banking Information Totals Name of Financial Institution Transit Number Bank Code Account Number Please attach an imprinted void cheque Address Part 4: Terms and Conditions By signing this form, you hereby waive any pre-notification requirements as specified by sections 15(a) and (b) of the Canadian Payments Association Rule H1 with regards to pre-authorized debits. You authorize the Fund Company/Companies indicated in this agreement to debit the bank account provided for the amount(s) and in the frequencies instructed. If additional space is required a separate sheet may be attached. If this is for your own personal investment, your debit will be considered a Personal Pre-authorized Debit (PAD) by Canadian Payments Association definition. If this is for business purposes, it will be considered a Business PAD. Monies transferred between CPA members will be considered a Funds Transfer PAD. You have certain recourse rights if a debit does not comply with this agreement. For example, you have the right to receive reimbursement for any debit that is not authorized or is not consistent with this pre-authorized debit agreement. To obtain more information on your recourse rights, you may contact your financial institution or visit www.cdnpay.ca. You confirm that all persons whose signatures are required to authorize transactions in the bank account provided have signed this agreement. You may change these instructions or cancel this plan at any time, provided that the relevant Fund Company receives at least 10 business days notice by phone or by mail. Please consult each individual Fund Company to see if this may be reduced or waived. Contact information for the Fund Companies may be found at http://www.fundserv.com/english/code/fund_active.shtml. To obtain a copy of a cancellation form or for more information regarding your right to cancel a pre-authorized debit agreement, please consult with your financial institution or visit the Canadian Payments Association website at www.cdnpay.ca. You agree to release the financial institution of all liability if the revocation is not respected, except in the case of gross negligence by the financial institution. The specified Fund Company is authorized to accept changes to this agreement from my registered dealer or my financial advisor in accordance with the policies of that company, in accordance with the disclosure and authorization requirements of the CPA. You agree that the information in this form will be shared with the financial institution, insofar as the disclosure of this information is directly related to and necessary for the proper application of the rules applicable for pre-authorized debits. You acknowledge and agree that you are fully liable for any charges incurred if the debits cannot be made due to insufficient funds or any other reason for which you may be held accountable. You have requested this application form and all other documents relating hereto to be in English. Vous avez exigé que ce formulaire et tous les documents y afférant soient rédigés en anglais. Applicant Signature Date Representative Signature Date Joint Applicant Signature (if applicable) Date Dealer Name Dealer/Rep Code IFIC/PAD DEC 2009 Dealer Authorization Date