The Office of Superintendent of Financial Institutions has ruled that foreign banks selling their debt to Canadian securities dealers are not carrying on business in Canada under the Bank Act.

OSFI says that foreign banks that are active issuers of debt instruments such as certificates of deposits, commercial paper and term notes to fund their own, or their affiliates’, banking business have requested its view on whether their proposals to sell debt instruments to a number of dealers (the Notes Program) would be subject to the Act.

To carry out the notes program, the issuers would enter into one or more agreements with one or more dealers as well as a payment agency agreement with a Canadian financial institution.

OSFI concluded that an issuer that would establish such a notes program would not be engaging in or carrying on business in Canada, nor would it be doing so through a nominee or agent.

“To avoid investor confusion, it is expected that appropriate measures will be taken to ensure that the note holders are aware that the notes are not issued in the course of the regulated Canadian operations of the Issuer, and are not deposits insured by the Canada Deposit Insurance Corporation,” it says.