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Challenges within an Ever Changing Tax & Regulatory LandscapeMike Bean

June 2, 2011

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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?

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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?

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“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

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Impacts of Legislation Changes

• Federal related acts – provincial counterparts

• Industry involvement

• Different interpretations and viewpoints

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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

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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

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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

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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

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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

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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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Our commitment to you CGI provides the best mix of responsive local service at global delivery value.

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