Revised Statutes of Newfoundland 1990 Chapter I-22

(b) "investment contract" means a contract, agreement, certificate, instrument or writing containing an undertaking by an issuer to pay to the holder, or to his or her assignee or personal representative or other person, a stated or determinable maturity value in cash or its equivalent on a fixed or determinable date and containing optional settlement, cash surrender or loan values before or after maturity, the consideration for which consists of payments made or to be made to the issuer in instalments or periodically or of a single sum, according to a plan fixed by the contract, whether or not the holder is or may be entitled to share in the profits or earnings of, or to receive additional credits or sums from, the issuer, but does not include a policy of insurance to which the Insurance Companies Act applies;

(c) "issuer" means a company which offers for sale, sells, makes or enters into investment contracts of its own issue but does not include an insurer or company to which the Insurance Companies Act applies;

(d) "licence" means a licence issued under this Act;

(e) "minister" means the Minister of Justice;

(f) "prescribed" means prescribed by this Act or the regulations;

(g) "qualified assets" means

(i) cash,

(ii) 1st mortgages on improved real estate and 1st mortgages made under the Dominion Housing Act, 1935 (Canada) or the National Housing Act, 1954 (Canada) or a former National Housing Act (Canada),

(iii) bonds, debentures, stocks and other securities of the classes authorized under the Canadian and British Insurance Companies Act (Canada) for the investment of the funds of companies registered under that Act,

(iv) real property acquired by foreclosure or in satisfaction of a debt and held for a period of less than 7 years, and

(v) other investments or securities that may be designated by the regulations;

(h) "salesperson" means a person employed, appointed or authorized by an insurer to sell investment contracts; and

(i) "superintendent" means the Superintendent of Insurance.

RSN1970 c184 s2; 1973 No39 Sch C;
1975-76 No58 s4; 1981 c4 Sch C; 1981 c85 s8;
1984 c41 Sch C; 1989 c19 Sch B

3. (1) A person shall not issue for sale, offer for sale or sell an investment contract in the province unless a copy of the form of the contract has been filed with the superintendent.

(2) The superintendent shall accept for filing a copy of the form of an investment contract tendered for filing unless the superintendent considers the sale of investment contracts in the province in that form would be inequitable or tend to work a fraud upon the purchasers or be against the public interest.

RSN1970 c184 s3

4. (1) A person shall not issue an investment contract for sale in the province without 1st having obtained a licence.

(2) A person other than a company shall not be licensed as an issuer.

RSN1970 c184 s4

5. (1) An issuer wishing to obtain a licence to issue investment contracts for sale in the province shall apply in writing to the superintendent in the form that the superintendent may prescribe and the application shall be accompanied by the fee that may be prescribed.

(2) In addition to the other information that the superintendent may require, an issuer applying for a licence shall file with the superintendent

(a) a certified copy of the Act, letters patent or other instrument of incorporation, certificate of incorporation and memorandum and articles of association of the issuer;

(b) a certified list of the names and addresses of the executive officers of the issuer;

(c) a certified copy of the balance sheet of the issuer as at the close of its last completed fiscal year and its auditors report on it; and

(d) copies of all forms of investment contracts proposed to be issued by the issuer for sale in the province.

RSN1970 c184 s5

6. (1) An issuer shall not be licensed unless

(a) its unimpaired paid-in capital, paid-in surplus and earned surplus, or 1 or more of them, amount in total to $200,000 or a lesser amount but in any case not less than $100,000, as the superintendent may approve;

(b) arrangements satisfactory to the superintendent have been made for the deposit with a trust company, chartered bank or other suitable depositary within Canada of qualified assets totalling in amount, when valued in accordance with section 23, not less at any time than the amount for which the issuer, under the terms of its investment contracts, is liable as of that time to pay in cash to the holders of all its investment contracts then outstanding, or totalling a lesser amount that the superintendent may consider appropriate in the circumstances; and

(2) In the case of an issuer which maintains with a trust company, chartered bank or other suitable depositary outside the province but within Canada a deposit of qualified assets in the total amount specified in paragraph (1)(b) or other deposit satisfactory to the superintendent, no further deposit shall be required.

RSN1970 c184 s6; 1986 c12 Sch; 1987 c38 Sch B

7. (1) Upon written notice to the superintendent by an issuer that the issuer has employed, appointed or authorized a person to sell investment contracts in the province issued by the issuer and upon application by that person in a form that the superintendent may consider necessary and upon payment of a fee that may be prescribed, the superintendent shall, where the superintendent is satisfied that the applicant is a suitable person to receive a licence and intends to hold himself or herself out publicly and in good faith as a salesperson, issue to the applicant a licence.

(2) The licence issued under subsection (1) shall state in substance that the holder is, during the period of the licence, authorized to carry on in the province the business of a salesperson, but where the superintendent is of the opinion that the applicant is not a suitable person to receive a licence, the superintendent may refuse to issue a licence to the applicant.

(3) Where an issuer terminates the employment, appointment or authorization of a salesperson or a salesperson resigns the issuer shall immediately give to the superintendent written notice of the termination in a form that the superintendent may prescribe and

(a) the licence issued to that salesperson is revoked; and

(b) the salesperson shall immediately surrender the licence to the superintendent for revocation.

(4) A licence which has been revoked under subsection (3) may subsequently be restored subject to the approval of the superintendent and upon payment of a fee that may be prescribed.

(5) A person shall not offer for sale or sell an investment contract in the province without first

(a) having obtained a licence; or

(b) being registered with the superintendent as an executive officer of a licensed issuer.

RSN1970 c184 s7

8. Unless the superintendent considers it appropriate,

(a) a person who is licensed as an agent or subagent under the Life and Accident Insurance Agents Licensing Act may not be licensed as a salesperson; and

(b) a salesperson who is licensed under this Act may not hold a licence as agent or subagent under the Life and Accident Insurance Agents Licensing Act.

RSN1970 c184 s8

9. An applicant for a licence shall state in the application an address for service in the province and a notice served under this Act or the regulations is sufficiently served if delivered or sent by prepaid registered mail to that address.

RSN1970 c184 s9

10. (1) A licence shall be in a form that the superintendent considers appropriate and is valid for a period that the superintendent prescribes in the licence and may be renewed by the superintendent for a further period or until a further time that he or she considers appropriate.

(2) A licence may be issued subject to the limitations and conditions that the superintendent may attach to or inscribe or print on the licence.

RSN1970 c184 s10

11. The superintendent may refuse to issue, renew or restore a licence without stating or assigning a reason for his or her refusal.

RSN1970 c184 s11

12. (1) The superintendent may suspend or revoke a licence where, in the superintendent's opinion,

(a) in the case of an issuer,

(i) it has been guilty of misrepresentation, fraud, deceit or dishonesty,

(ii) it has made a material misstatement in the application for a licence,

(iii) it has violated this Act or the regulations,

(iv) it has acted contrary to or violated a limitation or condition attached to, inscribed or printed on the licence or to which the licence is subject,

(v) it has, without first having obtained the written approval of the superintendent, employed, appointed or authorized a person to act as salesperson on its behalf whose application for a licence as a salesperson has been refused or whose licence has been suspended or revoked and has not been restored,

(vi) the sale of investment contracts issued by the issuer is inequitable or tends to work a fraud upon the purchasers or is against the public interest,

(vii) from the statements and reports filed with the superintendent or from an inspection or valuation, the issuer will be unable to provide for the payment of investment contracts at maturity, or

(viii) for another reason not specified in this paragraph, it should not be permitted to continue to hold a licence; and

(b) in the case of a salesperson,

(i) the salesperson has been guilty of misrepresentation, fraud, deceit or dishonesty,

(ii) the salesperson has made a material misstatement in the application for a licence,

(iii) the salesperson has violated this Act or the regulations,

(iv) the salesperson has acted contrary to or violated a limitation or condition attached to, inscribed or printed on the licence or to which the licence is subject,

(v) the salesperson has unreasonably failed to pay over to the issuer entitled to it money collected by the salesperson in respect of investment contracts sold by the salesperson on behalf of the issuer, or

(vi) the salesperson has otherwise demonstrated his or her incompetency or untrustworthiness to transact the business of salesperson for which a licence was issued to the salesperson, because of anything done or omitted to be done in or about that business.

(2) Where a licence is suspended or revoked under subsection (1), the superintendent may

(a) restore the licence, where the issuer or salesperson subsequently, to the satisfaction of the superintendent, makes good the deficiency or remedies the default on account of which the licence was suspended or revoked; or

(b) issue a modified, limited or conditional licence as the superintendent considers necessary for the protection of persons in the province purchasing investment contracts from the issuer or salesperson.

RSN1970 c184 s12

13. A person whose licence has been suspended or revoked under section 12 and an applicant for a licence or renewal of licence whose application has been refused under section 11 may appeal against the suspension, revocation or refusal to the minister who may confirm or overrule the suspension, revocation or refusal.

RSN1970 c184 s13

14. (1) An issuer shall at all times

(a) maintain reserves for the payment of its outstanding investment contracts that, together with all future payments to be received by the issuer on those investment contracts or the portions of future payments still to be applied to reserves, and with accumulations of interest at an assumed rate not to exceed a rate approved by the superintendent, will attain the face or maturity value specified in the contracts when due or the amount payable in accordance with the terms of the contract; or

(b) maintain reserves of a lesser amount that the superintendent may consider appropriate in the circumstances.

(2) The reserves required under subsection (1) shall at no time be less than the amount for which the issuer, under the terms of its investment contracts, is liable to pay in cash to the holders of all its investment contracts then outstanding.

RSN1970 c184 s14

15. An issuer shall not issue investment contracts for sale in the province unless the total value of the qualified assets of the issuer when valued in accordance with section 23 is at least equal to the sum of

(a) the liabilities of the issuer, including the minimum reserves required by section 14; and

(b) the minimum unimpaired paid-in capital, paid-in surplus and earned surplus required by paragraph 6(1)(a),

and unless the issuer maintains the deposit of qualified assets specified in paragraph 6(1)(b).

RSN1970 c184 s15

16. An issuer may invest its funds only in or on the security of investments in which or on the security of which a company registered under the Canadian and British Insurance Companies Act (Canada) may invest or lend its funds and only subject to the limitations and restrictions that apply to a company registered under that Act.

RSN1970 c184 s16

17. All investments and deposits of the funds of an issuer shall be made in its corporate name and a director or other officer of the issuer and a member of a committee having an authority in the investment or disposition of the funds of the issuer shall not, directly or indirectly, accept, or be the beneficiary of, a fee, brokerage, commission, gift or other consideration for or on account of a loan, deposit, purchase, sale, payment or exchange made by or on behalf of the issuer or be pecuniarily interested in that loan, deposit, purchase, sale, payment or exchange as borrower, principal, co-principal, agent or beneficiary, except that, where that person is the holder of an investment contract, that person is entitled to all the benefits accruing under the terms of his or her contract.

RSN1970 c184 s17

18. (1) Notwithstanding section 16, a licensed issuer may acquire and hold for its own use and benefit real property as is necessary for the transaction of its business and may acquire or hold or construct a building larger than is required for the transaction of its business and may lease a part of that building not so required.

(2) Notwithstanding section 16, a licensed issuer may acquire and hold real property mortgaged in good faith to it by way of security and real property acquired by it by foreclosure or in satisfaction of a debt and may sell, mortgage, lease or otherwise dispose of that real property, but the issuer shall sell real property acquired by foreclosure or in satisfaction of a debt within 7 years after it has been so acquired.

RSN1970 c184 s18

19. (1) Not later than 30 days after the expiration of each quarterly period ending on March 31, June 30, September 30 and December 31, an issuer shall file with the superintendent a statement, certified to by its auditor, showing

(a) the amount on the last day of the quarterly period required by section 14 to be maintained as reserves by the issuer on all outstanding investment contracts;

(b) all qualified assets on deposit on the last day of the quarterly period last ended with a trust company, chartered bank or other depositary within Canada approved by the superintendent and the value, when valued in accordance with section 23, of those qualified assets as at that date; and

(2) Not later than 90 days after the end of its fiscal year an issuer shall file with the superintendent

(a) a balance sheet and profit and loss statement for the fiscal year then ended, certified by 2 of its directors and reported on by its auditor; and

(b) other financial statements that the superintendent may require.

(3) The market value of all securities at the date of the statement filed under subsection (2) shall be noted on the balance sheet.

(4) The auditor of an issuer shall be a person or firm acceptable to the superintendent.

RSN1970 c184 s19

20. (1) The superintendent may at any time make or direct to be made an inspection of the books, documents and records of an issuer and of a salesperson.

(2) Upon an inspection made under subsection (1) the superintendent or the superintendent's authorized representative shall be given free access to all books of account, cash, securities, documents, bank accounts, vouchers, correspondence and records of every description of the issuer or salesperson and a person shall not withhold or destroy, conceal or refuse to provide any information or thing reasonably required by the superintendent or his or her representative for the purposes of the inspection.

RSN1970 c184 s20

21. The superintendent may at any time require an issuer or salesperson to submit for review circulars, pamphlets, brochures, specimen contracts, prospectuses, application forms or other documents used or prepared for use by the issuer or salesperson in connection with the sale of investment contracts in the province.

RSN1970 c184 s21

22. (1) An issuer shall notify the superintendent in writing of

(a) a change in its address for service;

(b) a change in its executive officers; and

(2) A salesperson shall notify the superintendent in writing of

(a) a change in his or her address for service; and

(b) the commencement and termination of his or her employment, appointment or authorization by an issuer.

RSN1970 c184 s22

23. In a statement or balance sheet to be filed with the superintendent under this Act, an issuer may value

(a) its cash in the amount of the cash in lawful money of Canada;

(b) 1st mortgages held by it in the amount of the balance of the principal sum secured by the mortgages together with all unpaid interest accrued, except that where a mortgage has been acquired at a discount, the valuation shall be reduced

(i) by the unearned portion of the discount computed as being the proportion which bears the same ratio to the total discount as the amount of the mortgage at the date of valuation bears to the amount of the mortgage at the time it was acquired by the issuer, or

(ii) on another basis that may be acceptable to the superintendent;

(c) bonds, debentures and other evidences of indebtedness which it holds and which have a fixed term and rate of interest and which are not in default as to principal or interest and which in the opinion of the minister are amply secured,

(i) where purchased at par, at the par value, or

(ii) where purchased above or below par, on the basis of the purchase price adjusted so as to bring the value to par at maturity and so as to yield in the meantime the effective rate of interest at which the purchase was made,

but the purchase price shall in no case be taken at a higher figure than the actual market value at the time of purchase;

(d) bonds, debentures and other evidences of indebtedness which it holds and which have a fixed term and rate of interest and which are in default as to principal or interest or which in the opinion of the superintendent are not amply secured, at the market value at the date of the statement;

(e) stocks which it holds at the book value not in excess of the cost to the issuer and in total not in excess of the total market value at the date of the statement; and

(f) other securities which it holds at the book value but not in excess of the total market value at the date of the statement, except that

(i) where assets consist of securities whose market values are unduly depressed and in respect of which companies registered under the Canadian and British Insurance Companies Act (Canada) have been authorized to use values in excess of those market values, those assets may, with the approval of the superintendent, be valued as authorized under that Act, and

(ii) where it appears to the superintendent that the amount secured by mortgage on real estate, together with interest due and accrued on the mortgage, is greater than the value of the real estate or the real estate is not sufficient for the loan and interest, the superintendent may procure an appraisal of the real estate, and where from the appraised value it appears that the real estate is not adequate security for the loan and interest, the loan or mortgage shall be valued at an amount not to exceed the appraised value.

RSN1970 c184 s23

24. The superintendent may extend the time for the filing of a statement, balance sheet or other document under this Act.

RSN1970 c184 s24

25. Nothing in this Act shall prevent the sale of an investment contract by or on behalf of the holder of the contract where that sale is not made in the course of continued and successive transactions of similar character or by a person whose usual business is the issuance or sale of investment contracts.

RSN1970 c184 s25

26. For the purpose of carrying out this Act the superintendent may address inquiries to an issuer or salesperson with regard to their respective activities in relation to the sale of investment contracts in the province and the issuer or salesperson so addressed shall make prompt and full reply in writing to these inquiries.

RSN1970 c184 s26

27. The Lieutenant-Governor in Council may make regulations

(a) designating investments or securities as qualified assets within the meaning of this Act;

(b) prescribing fees to be paid for the issue, renewal or restoration of licences; and

RSN1970 c184 s27

28. Notwithstanding the Securities Act, that Act and regulations made under that Act do not apply to an investment contract, issuer or salesperson.

RSN1970 c184 s28

29. (1) A company which fails to comply with this Act or the regulations or the provisions of a licence or of a condition to which a licence is subject or which is attached to or inscribed or printed on the licensee is guilty of an offence and is liable on summary conviction to a fine of not more than $2,000.

(2) A person other than a company who fails to comply with this Act or of the regulations or the provisions of a licence or of a condition to which a licence is subject or which is attached to or inscribed or printed on the licence is guilty of an offence and liable on summary conviction to a fine of not more than $1,000 or in default of payment to imprisonment for a term not more than 6 months or to both a fine and imprisonment.

RSN1970 c184 s29