TD Bank 2014 Annual Report Download - page 69

TD BANK GROUP ANNUAL REPORT 2014 MANAGEMENT’S DISCUSSION AND ANALYSIS 67
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL, THEIR
CLOSE FAMILY MEMBERS AND THEIR RELATED ENTITIES
Key management personnel are those persons having authority and
responsibility for planning, directing, and controlling the activities
of the Bank, directly or indirectly. The Bank considers certain of its
officers and directors and their affiliates to be key management
personnel. The Bank makes loans to its key management personnel,
their close family members, and their related entities on market terms
and conditions with the exception of banking products and services
for key management personnel, which are subject to approved policy
guidelines that govern all employees.
Officer, its former Group President and Chief Executive Officer, two
independent directors of TD, and a former independent director of TD.
The following is a description of significant transactions of the Bank
and its affiliates with TD Ameritrade.
Insured Deposit Account (formerly known as Money Market Deposit
Account) Agreement
The Bank is party to an insured deposit account (IDA) agreement with
TD Ameritrade, pursuant to which the Bank makes available to clients
of TD Ameritrade, IDAs as designated sweep vehicles. TD Ameritrade
provides marketing and support services with respect to the IDA. The
Bank paid fees of $895 million in 2014 (2013 – $821 million; 2012 –
$834 million) to TD Ameritrade for the deposit accounts. The fee paid by
the Bank is based on the average insured deposit balance of $80 billion
in 2014 (2013 – $70 billion; 2012 – $60 billion) with a portion of the fee
tied to the actual yield earned by the Bank on the investments, less the
actual interest paid to clients of TD Ameritrade, with the balance based
on an agreed rate of return. The Bank earns a servicing fee of 25 basis
points on the aggregate average daily balance in the sweep accounts
(subject to adjustment based on a specified formula).
As at October 31, 2014, amounts receivable from TD Ameritrade
were $103 million (October 31, 2013 – $54 million). As at October 31,
2014, amounts payable to TD Ameritrade were $104 million
(October 31, 2013 – $103 million).
(2) TRANSACTIONS WITH SYMCOR INC.
The Bank has one-third ownership in Symcor Inc. (Symcor), a Canadian
provider of business process outsourcing services offering a diverse
portfolio of integrated solutions in item processing, statement process-
ing and production, and cash management services. The Bank accounts
for Symcor’s results using the equity method of accounting. During
fiscal 2014, the Bank paid $122 million (2013 – $128 million; 2012 –
$128 million) for these services. As at October 31, 2014, the amount
payable to Symcor was $10 million (October 31, 2013 – $10 million).
The Bank and two other shareholder banks have also provided a
$100 million unsecured loan facility to Symcor which was undrawn
as at October 31, 2014, and October 31, 2013.
GROUP FINANCIAL CONDITION
Related-Party Transactions
(millions of Canadian dollars) As at
October 31 October 31
2014 2013
Personal loans, including mortgages $ 4 $ 3
Business loans 262 181
Total $ 266 $ 184
In addition, the Bank offers deferred share and other plans to non-
employee directors, executives, and certain other key employees. See
Note 25 to the Consolidated Financial Statements for more details.
In the ordinary course of business, the Bank also provides various
banking services to associated and other related corporations on terms
similar to those offered to non-related parties.
TRANSACTIONS WITH EQUITY-ACCOUNTED INVESTEES
(1) TD AMERITRADE HOLDING CORPORATION
The Bank has significant influence over TD Ameritrade Holding
Corporation (TD Ameritrade) and accounts for its investment in
TD Ameritrade using the equity method. Pursuant to the Stockholders
Agreement in relation to the Bank’s equity investment in TD Ameritrade,
the Bank designated five of twelve members of TD Ameritrade’s Board
of Directors including the Bank’s Group President and Chief Executive
LOANS TO KEY MANAGEMENT PERSONNEL,
THEIR CLOSE FAMILY MEMBERS AND THEIR
RELATED ENTITIES
TABLE 52
As a financial institution, the Bank’s assets and liabilities are substantially
composed of financial instruments. Financial assets of the Bank include,
but are not limited to, cash, interest-bearing deposits, securities, loans,
and derivative instruments; while financial liabilities include, but are
not limited to, deposits, obligations related to securities sold short,
securitization liabilities, obligations related to securities sold under
repurchase agreements, derivative instruments, and subordinated debt.
The Bank uses financial instruments for both trading and non-trad-
ing activities. The Bank typically engages in trading activities by the
purchase and sale of securities to provide liquidity and meet the needs
of clients and, less frequently, by taking trading positions with the
objective of earning a profit. Trading financial instruments include,
but are not limited to, trading securities, trading deposits, and trading
derivatives. Non-trading financial instruments include the majority of
the Bank’s lending portfolio, non-trading securities, hedging deriva-
tives, and financial liabilities. In accordance with accounting standards
related to financial instruments, financial assets or liabilities classified
as trading, loans, and securities designated at fair value through profit
or loss, securities classified as available-for-sale, and all derivatives are
measured at fair value in the Bank’s Consolidated Financial Statements,
with the exception of certain available-for-sale securities recorded at
cost. Financial instruments classified as held-to-maturity, loans and
receivables, and other liabilities are carried at amortized cost using
the effective interest rate method. For details on how fair values of
financial instruments are determined, refer to the “Critical Accounting
Estimates” – Determination of Fair Value section of this document. The
use of financial instruments allows the Bank to earn profits in trading,
interest, and fee income. Financial instruments also create a variety of
risks which the Bank manages with its extensive risk management poli-
cies and procedures. The key risks include interest rate, credit, liquidity,
market, and foreign exchange risks. For a more detailed description on
how the Bank manages its risk, refer to the “Managing Risk” section
of this document.
GROUP FINANCIAL CONDITION
Financial Instruments