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© CGI GROUP INC. All rights reserved
_experience the commitment TM
Challenges within an Ever Changing Tax & Regulatory LandscapeMike Bean
June 2, 2011
2
Agenda
• Introductions and session objectives
• Regulatory landscape overview
• Impact and how to assess the impact
• So what does this mean to upcoming implementations and releases?
3
Session Objectives
After this interactive session, you should have a basic understanding of…
• The general tax and regulatory industry landscape
• How CGI’s strategic product overview is impacted by both industry trends and changes to tax and regulatory requirements
• What processes have we enabled to assist with the lift
• Potential impacts to the system and day-day operations
Regulations – where to start?
4
“Doing the right thing is easy. It's knowing what the
right thing is that's the difficult part.“ (President, Lyndon Johnson)
From a speech by Freddie Hospedales March 2011 ICRF (International Centre for
Financial Regulation)
Issue in addressing continued growth of tax and regulatory changes impacting both internal and external clients within B&I
Canada Tax System
• Governed by House of Commons and Senate
• Federal Level – enacts legislation across the nation
• Regional Level - 10 Provinces and 3 Territories – each with their own government and defined constitutional powers including taxation
• Key Players within the Federal Tax system
• Minister of Finance (link to parliament)
• Department of Finance - Drafts tax legislation and develops tax policies
• CRA - Administers and enforces all federal tax legislation
• Department of Justice - Handles litigation
• OSFI – Independent government agency on the supervision of FIs
• CDIC / FCAC / Bank of Canada
• CDIC / CSA / IIROC / MFDA
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Parliamentary Process
• Executive Branch responsible for directing government and implementing policy and legislation
• Royal Assent is received enacting all Federal and Provincial legislation into law
• Federal and Provincial cabinets form key committees concerned with social and economic development
• Federal (House of Commons and Senate)
• Federal budgets – example of changes/impacts
• Provincial (legislative assembly)
• Provincial budgets – examples of changes/impacts
Enacting Legislation
• House of Commons and Senate prior to becoming law
• Impacts of the process:• Mandatory system changes / effective dates or timelines
• Administrative requirements / training / documentation
• Coming info force legislation – Distinction
• Interpretation Act – provisions governing the coming into force legislation
• “A bill becomes law after it has been passed by both Houses in the same form, but the Act comes into force either when it receives Royal Assent, if no date of commencement is provided for in the Act, or on the date provided for in the Act. Accordingly, an Act may come into force on one or more dates specified in the Act itself or fixed by an order of the Governor in Council”
• Bill receiving Royal Assent, becomes law and comes into force either on that date or at a date provided for within the Act or specified by an order of the Governor in Council
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How Does Canada’s Tax System Work?
Federal Legislation
Federal Voluntary Commitments
Provincial Legislation
Industry Regulators
Industry Associations and Foundations
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Federal Legislation
• Drives out different levels of compliance and adherence
• Works its way to association who try and influence or direct decisions or directions of the government
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Federal Voluntary Commitments
• Voluntary commitments as to code of conduct –generally non-legislated but may assist FIs remain competitive (commitments to influence or control behavior, for their client benefit or the FI’s benefit)
• Conduct for credit and debit card services
• Time periods for cheque holds
• Online payments
• Guidelines for transfers of registered accounts
• Consumer protection around ecommerce
• Unsolicited services
• others
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Industry – the acronym page
BOC CBA CCMA CDIC CDCC CDS CESR
CICA CIPF CLHIA CPA CRA CSA DTCC
EMDA FASB FATF FINRA FINTRAC GIPS ICAC
IFIC IIAC IIAF IIROC IOSCO IRS MFDA
MLSE MRQ NASAA OCC OSFI SEC SIFMA
SWIFT TSE ….
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Regulatory Bodies – method of approaching
Legislation
Other
Providers
CRA Canada Revenue Agency BOC Bank of Canada
MRQ Revenue Quebec CICA Canadian Institute of Chartered Accountants
CSA Canadian Securities Administrators (provincial securities regulators) CDS Clearing and Depository Services
HRSDC Human Resources Skills Development Canada (CESG,RDSP) CDIC Canadian Deposit Insurance Corporation
IRS Internal Revenue Service DTCC Depository Trust and Clearing Corporation
CPA Canadian Payments Association
Direct Market
Regulators CBA Canadian Bankers Association
IIROC Investment Industry Regulatory Organization of Canada CDCC Canadian Derivatives Clearing Corporation
MFDA Mutual Funds Dealers Association OCC Options Clearing Corporation
OSFI Office of the Superintendant of Financial Institutions CIPF Canadian Investor Protection Fund
TSE ME Canadian Exchanges
Cdn Utilities
and
Associations SEC US Securities and Exchange Commission
IFIC Investment Fund Institute of Canada SWIFT Society for Worldwide Interbank Financial Telecommunication
FundSERV Canada / GICserv SIFMA Securities Industry and Financial Markets Association
IIAC Investment Industry Association of Canada FATF Financial Action Task Force (AML/ATF)
ICAC Investment Counsel Association of Canada FINTRAC Financial Transactions Report Analysis Centre of Canada
AIMR US Association for Investment Management and Research IIAF International Investment Funds Association
EMDA Exempt Market Dealers Association of Canada IOSCO International Organization of Securities Commission
CCMA Canadian Capital Markets Association CESR Committee of European Securities Regulators
NASAA The North American Securities Administrators Association
FASB US Financial Accounting Standards Board
FINRA Financial Industry Regulatory Authority
Confidential
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• Receive electronic alerts and newsletters from a number of regulatory bodies and associations
• Currently monitoring (but not limited to)• Legislators – e.g. CRA, MRQ, CSA, HRSDC, IRS• Direct Market Regulators – e.g. IIROC, MFDA, OSFI, SEC• Associations – e.g. IFIC, IIAC, CFA-GIPS, CCMA, CLHIA• Other Providers– e.g. CICA, BOC, CDS, CDIC, ASB, SWIFT, FINRA
• Maintains a list of current issues and impacts to each product line
• Works with B & I product teams to ensure appropriate actions are taken to address these new requirements
Regulatory Changes & Technology Impacts
13Confidential
14
Impacts of Legislation Changes
• Federal related acts – provincial counterparts
• Industry involvement
• Different interpretations and viewpoints
15
Confidential
Current position in regards to tax & regulatory changes in the financial industry
• Continued increased growth of tax and regulatory changes
• Facilitated the need to re-establish the central B&I Tax and Regulatory committee (participants from e-Settlement, MSuite, IFS and Banking, Treasury and Integrated Wealth)
• Creation of a proactive service (single channel) between CGI and a partnership with a legal firm (McCarthy Tetrault)
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Addressing Regulation Changes
• Engage services provided by McCarthy Tetrault within the following business areas:
• Securities regulation
• Privacy
• Tax
• Pension / Tax
• Money Laundering
• Reduce the amount of redundant work and efforts currently associated with obtaining tax and regulatory updates/changes across each application within B&I –develop single touch point with CGI.
• Provision of a proactive approach to tax, reg and compliance changes.
• Provide current B&I client base structured approach to managing tax and reg changes
Confidential
17
Confidential
B&I Tax and Reg Compliance Committee Mission Statement
The mission of the B&I Tax and Reg committee is to provide a centralized internal source of tax and regulatory information which can be adapted to the different applications and lines of business, ensuring timely receipt of updates, directional changes, and understanding of new requirements.
Looking to achieve the ultimate goals of being proactive within the industry; visible to our clients as being front and centre and fully understanding processes around tax and regulatory changes.
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Confidential
Objectives of Committee
• Impacts of Policy, Legislation, Regulatory and Tax changes applicable to CGI’s B&I individual Intellectual Property
• Representation and / or participation on established (and newly created) legislative bodies and key utilities where applicable
• Update channel for information
• Education
• Reduce the amount of redundant work
• Provision of a proactive approach to tax, reg and compliance changes
• Provide current B&I client base structured approach to managing tax and reg changes
19
Confidential
Governance Model Overview
• The governance model, initially applicable only to the structure within Banking & Investment Services, will focus upon the following components:
• Stakeholders – identification and management of
• Responsibilities of stakeholders and participants
• Assessment of impacts of policy, legislation, regulatory and tax changes
• Channel for internal correspondence and distribution of information (stakeholders and participants)
• Source for client correspondence (impacts, visibility and directional focus)
• Education of internal participants and members
• Representation and / or participation on established (and newly created) legislative bodies and key utilities where applicable
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Confidential
Identified potential benefits to both CGI and our clients from such a partnership…
• Accredited validation of interpretations and/or issues
• Opening a channel for tax and regulatory change methodology and administration
• Reduction of redundant efforts/costs and overlaps across the different BU’s
• Opportunity to establish the industry benchmark
• Delivery of concise information to be utilized within each group for development initiatives
• Validity of interpretation
• Communication and Education
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Confidential
Partnership Provisions
• Delivery of concise information to be utilized within each group for development initiatives
• Overview of issue of change
• Requirements summary – high level – each IP will design specific functionality
• IP or application impact
• Responsibility of CGI / Client to be clearly defined
• Timeline as to change
• Validity of interpretation • Required guidance (expectations in addressing the issues)
• Legal and / or accounting firm interpretation of summaries
• Communication and Education • Internal management
• Client communication summaries where applicable
• Update information for general education purposes
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Regulatory Changes & Technology Impacts
Market Volatility and
Political EnvironmentVarious NIs and Acts
Integration, Accessibility
Analytics and Risk MgmtAll Financial Institutions
CLIENT
CGI
McCarthy
Traditional Industry Benchmark
Regulatory
Market Place
Technology /
Process
Traditional
Confidential
The Puzzle or Challenge?
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Requirements
Summary
Requirements
DeliveryValidity Opinion
Advice
ReferenceAccess to Info
IP/APP/Project
Responsibility
Mandatory
Optional
TimelinesCompliance
ConsultationIssue
SummaryTerminology
The Opportunity
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Requirements
Summary
Requirements
Delivery
Validity
Opinion
Advice
ReferenceAccess to Info
IP/APP/Project
Responsibility
Mandatory
Optional
Timelines
Compliance Consultation Issue
Summary
Terminology
25
25
Assessment of Change
• Net new and existing tax/ reg changes
• Application documentation requirements
• Form changes – analysis
• Tax remittance processing and reporting updates
• New product initiatives
• The industry as a whole continues to pursue the integration of wealth management services and with that comes the increasing necessity to address, understand, implement and maintain tax, regulatory, risk and compliance provisions
Confidential
26
26
Augmenting Current Tax and Reg Process
• Tax and regulatory updates and changes must be considered, analyzed and evaluated based upon impacts to the following;
• Impacts of Policy, Legislation, Privacy, Regulatory and Tax changes applicable to CGI’s B&I MSuite, PrimeSuite, Treasury, Banking Services, e-Settlement
• Representation and / or participation on established (and newly created) legislative bodies and key utilities where applicable.
• Dashboard for internal stakeholders
• Internal correspondence and distribution of information for educational purposes
• Project/engagement specific questions
Confidential
27
Industry Hot Topics
• GST/HST
• IFRS reporting
• GIPS
• FATCA
• Continued fallout from the financial crisis of 2008/9
• OSFI Plan and Priorities for 2011-2014
• Addressing external risks
• Risks emanating from regulatory reform
• Addressing internal risks
Confidential
Impact Moving Forward
• Involvement in Industry committees
• Interaction with different regulatory bodies
• Communicate anticipated changes (including items open for comment period)
• Education as to process
Confidential
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_experience the commitment TM
Our commitment to you CGI provides the best mix of responsive local service at global delivery value.
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