The practice of law is under duress. Legal service innovations driven by digitalization and globalization are propelling seismic change. So too is the emergence of the sharing economy model which has taken the world by storm. Novel ways of delivering new products and services are seemingly materializing daily to satisfy increasingly demanding and fickle consumers. The rapidly evolving landscape is putting a strain on traditional business models, while governments and regulatory authorities are scrambling to keep up with the dizzying pace of change. But with change comes challenges – and opportunities – for legal service providers and legal protection insurers alike, all of which was explored at a conference held in Montreal recently by the International Association of Legal Protection (RIAD).
Financial services
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Quebec financial watchdog warns consumers over P2P insurance
Stung by criticism that it has at times acted too late to stop unsound practices, Quebec’s financial watchdog recently warned consumers to be wary of peer-to-peer insurance offerings even though the digital sharing platform has yet to make a formal entrance in Canadian soil. -
Ruling clarifies circumstances under which securities can be ordered
Tobacco companies suffered a second legal setback in less than a month after the Quebec Court of Appeal ordered two cigarette makers to set aside nearly $1 billion in security, the largest ever in the province’s history, to ensure that money is available to pay victims who won a landmark $15.5 billion class action lawsuit earlier this year.In a ruling that clarifies the exceptional circumstances under which securities can be ordered, the appeal court ordered Imperial Tobacco Canada Ltd. to pay $758 million in seven quarterly instalments and Rothmans, Benson & Hedges Inc. $226 million in six quarterly instalments, beginning in December until next year. If the tobacco manufacturers are successful in having the $15.5 billion judgement overturned on appeal, the security will be returned to them. If not, it will be available for distribution to victims who launched the class action suit. (A motion for security was not sought against JTI-MacDonald Corp. because one of the lawyers became ill).
Tags: tobacco class action -
Controversial report calls for overhaul of Quebec insurance and mutual fund regulatory framework
A controversial report by the Quebec Ministry of Finance that asserts that the current system governing the distribution of financial products and services in the province needs to be reviewed because it risks becoming inadequate and out-dated has been criticized as being unnecessarily alarmist by financial and legal experts.The long-awaited report recommends wholesale changes to the regulatory framework for insurance and mutual funds. Besides boosting consumer protection coverage in the event of fraud, the report proposes a flexible legal framework to enable insurers to offer products online. It also recommends establishing a legislative framework aimed at individuals who are not insurance professionals but who sell insurance products such as travel insurance and vehicle rental insurance. More contentiously, the report calls into question its “cumbersome” oversight system and the existence of two regulatory bodies.
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Quebec appeal court imposes duty to investigate on business seeking input tax credits
Less than a year after the Federal Court of Appeal held that a supplier’s delinquent fiscal conduct is irrelevant to an input tax credit claim, the Quebec Court of Appeal has muddied the legal waters with a controversial decision that affirmed that Quebec business are expected as part of an effort to impede tax evasion to conduct due diligence on suppliers in order to be able to obtain input tax credits.In a highly-awaited ruling that startled tax professionals, the appeal court held that business are required to do more than simply confirm the validity of a supplier’s GST/HST registration number and confirm that invoices conform to the current legislation and regulations to qualify for input tax credit (ITC) claims. Business have the added duty to authenticate invoices used to claim ITCs originate from the person that actually performed the service, held the appeal court.
“This is a very important ruling for the business and tax world because in a way it can change the way businesses operate in Quebec,” remarked Alexandre Dufresne, a tax lawyer and managing partner of Spiegel Sohmer in Montreal. “It’s unfortunate but you hear more and more people saying I am going to bring my operations in other jurisdictions because the administrative burden is just too heavy in Quebec. It’s reached that point.”
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Securities class actions harder to launch after Supreme Court ruling
A ruling by the Supreme Court of Canada that dismissed a proposed securities class action against a Montreal pharmaceutical company will likely make it more difficult for investors to launch these kinds of lawsuits in the future, say class action and securities lawyers.In a ruling that marked the first time the nation’s highest court examined a case involving secondary securities market liability regimes, the SCC held that in order for plaintiffs to be able to proceed with a securities class action they must provide courts with “sufficient evidence” to show a “realistic chance” of success.
Tags: Securities class actions -
Quebec regulates virtual currency ATMs and trading platforms
In a move that caught the business and legal community by surprise, Quebec became the first jurisdiction in Canada to regulate the digital currency sector by requiring businesses that operate virtual currency automated teller machines or trading platforms to obtain a licence to operate in the province.
But the recently published amendments to the Policy Statement of the Money Services Businesses Act (Act) by Quebec’s financial watchdog has drawn criticism from industry observers who assert that it is brimming with ambiguities and risks hindering the burgeoning digital currency industry.
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OSFI exchanges with insurers and financial institutions not confidential
The Quebec Court of Appeal upheld a lower court ruling that could have a chilling effect on the flow and quality of confidential information financial institutions disclose to regulatory authorities, and even potentially undermine the “safety and soundness” of Canada’s financial system, according to business lawyers.In a majority decision in line with two Ontario Superior Court decisions, the Quebec Court of Appeal held that documents and exchanges between federally regulated firms such as banks and insurance companies with the Office of the Superintendent of Financial Institutions (OSFI) are protected by statutory confidentiality provisions imposed by Regulations under the Insurance Companies Act, with some exceptions. While the regulations were enacted to limit the communication of supervisory information, the appeal court found that sections 2 and 3 of the Regulations did not create an absolute prohibition on disclosure and could be subject to production in civil proceedings.
Categories: Business, Class actions, Corporate law, Financial services, Quebec, Quebec Court of Appeal, Rulings -
Five insurance companies to pay $4.1 million to a bailiff’s firm
The Quebec Court of Appeal ordered five insurance companies to pay approximately $4.1 million to a bailiff’s firm after it refused to cover its losses and legal fees in a case that clarifies when professional indemnity claims can be triggered and reiterates yet again the principle that lawyers should not have two masters.
In a dense and complex 30-page ruling dealing with an insurance claim arising out a “very complicated and very unusual underlying facts,” the Quebec Court of Appeal maintained its trend of broadly interpreting claims and professional liability insurance policies in favour of claimants, according to insurance lawyer experts.
“In the most general way, this ruling is part of a trend that gives rights to the insured,” observed Valérie Lemaire, an insurance lawyer with Langlois Kronström Desjardins LLP in Montreal. “Is it to the detriment of insurers? I don’t think so. Insurers are being asked to analyze its policies in the most liberal fashion possible. It invites insures to be very transparent with its insured.”
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BMO ordered to pay nearly $27 million to a Quebec company
The Bank of Montreal has been ordered by the Quebec Court of Appeal to pay a Quebec enterprise a staggering $26.8 million, including interest and costs, for acting in bad faith, the second time in less than a year that Canada’s fourth largest bank was on the losing end of a multi-million dollar lawsuit in Quebec.
The ruling, the latest in a recent series of judgments that clearly signals that the Quebec Court of Appeal has jettisoned restraint when awarding damages against organizations that act in bad faith, has sharply divided Quebec’s legal community, with some calling it a wake-up call for financial institutions while others grumble that the ruling makes for bad law.
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Bitcoin’s promise lies under the hood
When Jillian Friedman completed her articling at McMillan LLP at the end of last year, the young Montreal lawyer attended by fortuitous happenstance a presentation at a networking event on Bitcoins, a controversial and extremely volatile virtual currency that exists only digitally, as computer code. Friedman, unshaken by the scandals and sordid headlines that has rocked the nascent Internet currency over the past year, was hooked, enticed by the notion of becoming a crypto-currency legal expert.
She is on her way. Heeding the advice of her mentors, Friedman is cultivating a clientele of bitcoin startups, a sector that allows her to share her knowledge and brief legal experience in financial services and general commercial law to an industry pushing for mainstream recognition. She has since become one of a handful of Canadian lawyers who has accepted payments in bitcoins, though she does not hold it in trust. “I would love for the legal community in Canada to understand that bitcoin is not some sketchy digital currency that is used to launder money – it is much more than that,” said Friedman, who is counsel to Bitcoin Embassy, a Montreal non-profit profit corporation founded to promote the adoption of Bitcoin and related crypto-technologies.
Categories: Business, Features, Financial services, Intellectual property, Legal Practice Management -
Risk management advisors must be registered with the provincial securities regulator, says court
Independent risk management advisors must be registered with the provincial securities regulator in order to carry on advisory activities related to insurance product offerings, following a precedent-setting ruling by the Court of Quebec that is being hailed as a victory for Quebec consumers by insurance and legal experts.
Up until the ruling Quebec consumers had no recourse against risk management advisors because they operated outside the scope of An Act respecting the distribution of financial products and services (Act) thanks to a loophole in the law.
“This ruling sheds light on what has been considered to be a grey zone,” noted Sylvain Théberge, a spokesman with the Autorité des marchés financiers (AMF), the regulatory and oversight body for Québec’s financial sector. “It’s not because you are an unregistered risk management advisor that the repercussions of the advice being offered will have less of an impact than a consultant who is duly registered. The ruling clearly states that by the very nature of their work these consultants must be duly registered.”
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More fallout from Norshield financial scandal
Nearly eight years after a high-flying hedge fund with ostensibly $1-billion in assets collapsed under the weight of a flurry of investor redemptions, the fallout from the Norshield Financial Group financial debacle continues unabated.
Quebec Superior Court recently certified a $159-million class action against the Royal Bank of Canada, less than four months after yet another financial planner was fined $225,000 by the Court of Quebec after being found guilty of 60 of the 62 charges laid against him by the provincial securities regulator in connection with the illegal distribution of products related to Norshield. So far, ten representatives have been found guilty, incurring fines totalling $628,500. Only one case remains outstanding.
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Canada’s tough stance on dirty money
New anti-money laundering regulations introduced to demonstrate Canada’s tough stance on dirty money to international authorities will require reporting entities to spend more money, resources, and time to be in compliance, according to experts.
Published in mid-February in its final form in the Canada Gazette, the amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Act) are meant to address several key failings identified by the Financial Action Task Force (FATF), an international body established in 1989 that sets standards for anti-money laundering (AML) and anti-terrorist financing (ATF) activities. In 2008, FATF found that Canada, a founding member, was “non-compliant” on preventative measures such as customer identification and due diligence to combat money laundering.
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Ruling limits powers of Quebec securities regulator to impose gag orders
Days before the former head of Canada’s largest engineering firm was formally charged with fraud, SNC-Lavalin Group Inc. won a key legal battle against the provincial securities regulator who unsuccessfully tried to keep details of an investigation it was conducting into the scandal-ridden engineering powerhouse from the firm’s audit committee and external auditors.
In a ruling that limits the powers of the Quebec securities regulator to impose gag orders, the Quebec Court of Appeal clarified the procedures the Autorité des marchés financiers must follow when issuing non-disclosure orders. The appeal court also upheld a decision by a specialized tribunal that oversees the securities watchdog, which allowed an SNC-Lavalin executive under investigation to provide details to the company’s audit committee and its external auditors Deloitte & Touche.
“The Quebec Court of Appeal seems to have given the AMF a lot of latitude to use its discretionary powers but if it becomes excessive it will place limits,” observed Yves Robillard, a Montreal securities lawyer with Miller Thomson LLP. (more…)
