Corporate Restructuring of CDSCorporate Restructuring of CDS

Mark Weseluck – Executive Director, Customer Service and Product Development

ACSDA General Assembly – Panama City

February 22, 2008

Current shareholders

6 Banks TSX IDA

The Canadian Depository for Securities Limited

Securities clearing and depository services

CDS INC.

SEDAR SEDI NRDInformation

dissemination

Previous CDS Structure

Current shareholders

6 Banks TSX IDA

The Canadian Depository for Securities Limited

Holding company

CDS INC.

SEDAR SEDI NRD

CDS Innovations Inc.

Information dissemination

CDS Clearing and Depository Services Inc.

Securities clearing and depository services

New CDS Structure as of November 1, 2006

Corporate Restructuring

Why restructure?– Segregate regulated and unregulated services for

simplification of regulatory and financial reporting

– Mitigate risk spillover between different lines of business

– Provide the organization with the flexibility to establish new services within current or future subsidiaries

Corporate Restructuring Impacts

Corporate restructuring had various internal and external impacts: – Regulatory oversight

– Corporate governance

– Legal considerations

– Financial issues

– Staff considerations

Regulatory Oversight

Regulators advocated clearer separation of core and non-core services to reduce risk spillover

Proposed new structure required approval/non-disapproval from CDS’s three regulators

Formal oversight arrangements in place for regulation of core services

Revised governance structure required as part of restructuring

Corporate Governance

Legal Considerations

Most extensive role in implementing corporate restructuring:– Analysed possible legal structures

– Co-ordinated and effected regulatory, governance, legal and documentation issues

– Reviewed and assigned contracts to reflect new companies

– Re-applied for CDS as member in other depositories

Financial Issues

Cost allocation of shared corporate services among subsidiary companies (direct and indirect costs)

Distribution of surpluses

Cross charging of support between sister companies

Tax considerations

Staff Considerations

All staff employed by CDS Limited– Assigned to subsidiary companies as applicable

Corporate services provided to subsidiaries through service level agreements– Greater planning and co-ordination required for

use of shared services

Opportunities for developing/advancing staff

Lessons Learned

Start as early as possible

Have a dedicated team and manage as a project

Keep regulators informed throughout the process

Keep staff informed about the impact and progress of the project

Don’t underestimate the effort required to advise external parties and effect the legal changes