Canada: Bill 141: The Most Significant Changes For Quebec's Financial Sector In Decades

On October 5, 2017, Quebec Minister of Finance, Mr. Carlos Leitão (Minister), tabled in the National Assembly Bill 141 (Bill) which will have significant effects on all institutions and intermediaries active in Quebec's financial sector. For a number of years, our institutions have been governed by a legislative framework, several components of which are outdated.

Some of our laws have not been revised significantly in over 30 years, such as the Act respecting trust companies and savings companies. Others, such as the Act respecting the distribution of financial products and services, are less than 20 years old, but the evolution of distribution channels and technological methods, particularly the Internet, make it critical that they be modernized in order to keep up with the considerable developments in this industry. Others, such as the Act respecting financial services cooperatives, which now governs Desjardins Group, or the Act respecting insurance, must also be updated in order that the financial institutions that they govern have all the necessary tools to develop in a highly competitive environment as well as a governance framework compliant with best practices. Finally, other significant laws in the financial sector, such as the Securities Act and the Derivatives Act, although they are regularly updated, are also amended to enhance their scope.

Several laws, specifically those governing Quebec financial institutions (financial services cooperatives, trust companies, savings companies and insurance companies) were rejuvenated in terms of the operating rules of the organizations that they govern. The Bill also entails a very large number of amendments to other related provisions in the financial sector, such as the Civil Code of Quebec and the Real Estate Brokerage Act. In total, more than 60 laws have been amended or replaced by this Bill covering some 500 pages.

Overview of the proposed legislative amendments

Below are certain highlights from the Bill.

The Insurers Act

The Bill is creating the Insurers Act, to replace the Act respecting insurance. This new law proposes more modern supervision of the activities of authorized Quebec insurers. It includes rules related to sound management practices that must be adopted by an insurer with the objective of maintaining adequate assets to meet its liabilities and adequate capital to ensure its sustainability. In particular, it provides that an insurer must adopt a formal investment policy approved by its board of directors. The rules of governance applicable to insurers are confirmed and reinforced, notably by the obligation to have in place an audit committee and an ethics committee comprised of a majority of independent directors. The audit committee is responsible for reviewing the financial statements before they are submitted to the board of directors. The ethics committee is responsible for adopting and applying rules of ethics concerning in particular the conduct of directors and officers of the insurer and the oversight of relationships with interested persons.

The role of supervising and controlling the insurer's activities is assigned to the Autorité des marchés financiers (AMF), which is also responsible for issuing guidelines in order to guide the insurer in interpreting the law. The AMF's authorization is required to carry on insurer activities in Quebec and only insurers that have at least $5,000,000 in capital may obtain such authorization. An insurer must furthermore prepare an annual statement of the position of its affairs to the AMF. The AMF may decide to review and potentially revoke or suspend its authorization to carry on activities.

Act respecting financial services cooperatives

The Bill amends the Act respecting financial services cooperatives in order to add in particular a chapter concerning Desjardins Group, by replacing the Act respecting the Mouvement Desjardins. Guy Cormier, president and chief executive officer of Desjardins Group, said that he was satisfied with the Bill, which makes, in his opinion, [translation] "Quebec's legislative framework one of the most modern in the world1."

The objective of the changes is to adapt to the new rules introduced internationally following the 2008 financial crisis, by reinforcing, for example, the powers of intervention of the security fund intended to protect creditors. The Bill also specifies a financial services cooperative's conditions of control and provides rules regarding capital shares and investment shares of financial services cooperatives.

Act respecting trust companies and savings companies

The Act respecting trust companies and savings companies will be replaced by a new act bearing the same name. This new act introduces a modern framework regarding trust companies and savings companies that is equivalent to the one set out in the previously discussed Insurers Act.

Act respecting the distribution of financial products and services

Of all the acts amended by the Bill, the Act respecting the distribution of financial products and services (ADFPS) is arguably the one that draws the most media attention. In fact, with very few amendments, the Bill introduces major changes to this act that are likely to have a significant impact on the insurance industry.

First and foremost, the Bill addresses a measure already announced by the Minister at the time of his March 2016 budget, that is, to abolish the Chambre de la sécurité financière and the Chambre de l'assurance de dommages. These two non-governmental self-regulatory organizations responsible for providing discipline and supervision of insurance representatives were regulated by the ADFPS, but were until now, autonomous.

Some criticized the former governance structure for creating confusion for the consumer as a result of a certain overlapping between responsibilities of these two organizations and those of the AMF. Supporters of the one-stop shop won their case because the two bodies will now be replaced by the AMF, which will oversee their responsibilities. The staff of the two organizations will be absorbed by the latter to conserve their expertise.

Among the amendments made to the ADFPS, some are intended to give effect to mortgage brokers' attachment to the AMF, as discussed below, with respect to the Real Estate Brokerage Act. Others amend the rules related to the ownership of the insurance brokerage firm.

The Bill does not amend per se the proportion of shares conferring a voting right that an insurer or another financial institution may hold in a broker, currently 20%, but the changes proposed to several relevant definitions are likely to have an impact on the activities of financial institutions in this industry. For example, prohibitions have been amended to consider the fact that certain distribution methods no longer require the intervention of a broker and that they will also apply to general insurance brokerage firms even if they offer products without the intermediary of a natural person. Also, during its March 2017 budget, the Minister announced that he would consider separately the issue of the usefulness of maintaining the 20% limit. It is therefore still possible that this limit will be subject to further amendments.

The Bill also introduces some examples of easing intended to facilitate the distribution of certain products by the Internet. These are not big changes but rather several adjustments made in various areas. For example, a firm is recognized for being able to offer products and services in a discipline without the intermediary of a natural person once he employs a representative who can practice in this discipline. The terms of the information and documents to provide in this case will be specified later by regulation. However, the amendments made to the distribution without a representative arrangement will require the distributor to act through the intermediary of a natural person. Certain choices have therefore been made between the possibilities offered by the technology and the framework and supervision of the activities in question.

Finally, there are also certain other amendments related to the Internet such as a new provision ensuring that a legal person who, without acting as a firm, earns a commission or other payment based on the sale of financial products or the provision of financial services must be registered with the AMF. From the time of registration, it is, for purposes of the application of the ADFPS, considered to be acting as a firm within the discipline in which its products and services are offered.

Real Estate Brokerage Act

This act, whereby the Organisme d'autoréglementation du courtage immobilier du Québec (OACIQ) governs both real estate brokers and mortgage brokers, will be stripped of the responsibilities relating to mortgage brokers, of which the supervision will be entrusted to the AMF and that will now be covered by the ADFPS. This operational reorganization is accompanied by a readjustment in the governance of the OACIQ, in which the Minister will appoint several directors and will stipulate contracts and forms related to brokerage transactions.

Furthermore, because real estate transactions have significantly changed in the age of technological advancements, the OACIQ had brought to the courts several claims in recent years through which it was attempting to have acknowledged as brokerage subject to the act certain activities in support of the purchasers, tenants, sellers or lessors. The proposed amendments in the act entail in this regard a revised definition of what constitutes a real estate brokerage contract, but it requires, for a person to be subject to the act, that a party to a contract be "asked to act as its intermediary in dealing with interested persons" (purchasers, vendors, lessors or tenants). The various services offered to individuals intent on transacting without an intermediary will now be required to pass this updated test.

Deposit Insurance Act

The Bill introduces many amendments to the Deposit Insurance Act, now called the Deposit Institutions and Deposit Protection Act. It provides in particular for the adoption, by any authorized deposit institution, of sound commercial practices, prudent management measures, appropriate governance practices as well as an investment policy and ethical rules. The board of directors of a deposit institution must be comprised of a minimum of seven members and include an audit committee and an ethics committee.

Act respecting the Autorité des marchés financiers

The Act respecting the Autorité des marchés financiers that becomes the Act respecting the regulation of the financial sector will include provisions concerning persons who disclose to the AMF any information likely to demonstrate that a failure to comply with an act the administration of which is entrusted to the AMF has been committed, is about to be committed or that a person has been asked to commit such a violation. The act now relieves professionals (with the exception of notaries and lawyers) of their obligation to professional secrecy and will permit them to denounce the dealings of their clients in spite of their professional obligations.

Like other notable amendments, there is the establishment of a "Comité consultatif des consommateurs de produits et utilisateurs de services financiers" whose mission would be to communicate consumer opinion to the AMF. In addition, the Act will provide for changes concerning the institution, jurisdiction, procedure, members and business conduct of the Financial Markets Administrative Tribunal. The powers of the Financial Markets Administrative Tribunal will be broadened and adapted as a result of the abolishment of the Chambre de la sécurité financière and the Chambre de l'assurance de dommages.

Civil Code of Quebec – funeral insurance

For more than 40 years, the insurance contract through which a person, for a premium, undertakes to pay the funeral expenses directly to a funeral home following a person's death, has been prohibited in Quebec. The historical reasons that have led to this prohibition have long since passed, but while insurers offer products of this nature everywhere else in Canada and in most industrialized countries, it was not possible to do so in Quebec where only trust deposit products authorized by the Act respecting prearranged funeral services and sepultures are available for the consumer wishing to provide for their funeral expenses.

With the proposed changes, an insurer will be allowed to make a payment to the funeral home, following the insured's death, to cover the costs of the goods or services stipulated in a prearranged funeral services contract or the associated prepurchased sepulture contract. This new change will provide more flexibility both to consumers and funeral companies in the planning of these arrangements.

Automobile Insurance Act

The Bill aims to broaden certain terms specifying how the AMF is to communicate information concerning the automobile driving experience of insured persons to an authorized insurer making such a request, only for purposes of classification and risk rating, when an automobile insurance policy is obtained or renewed. Under the new Automobile Insurance Act, the AMF could also sanction with a fine any authorized insurer who fails to submit a copy of the rates manual or to provide any justification on one or more elements of the rates manual following a request by the AMF.

Money-Services Businesses Act

Certain amendments have been proposed to the Money-Services Businesses Act that will enable the AMF to obtain from the Sûreté du Québec more regularly and, at the latest, every three years, new security clearance reports on the holders of business licences of any money-services business in order to determine if there are grounds for suspending or revoking these licences.

Derivatives Act and Securities Act

Common amendments to these two Acts

The proposed amendments to the Derivatives Act (DA) and to the Securities Act (SA) stipulate more detailed indications with respect to the processing of complaints filed by clients of dealers and advisors. In addition, in both cases, a freeze order, unless otherwise provided in the order, will be in effect for 12 months instead of 120 days, except if revoked or amended by the Financial Services Administrative Tribunal. The amendments proposed to the DA and to the SA also provide that the Financial Services Administrative Tribunal must, in certain circumstances, approve the terms of administration and distribution, by the AMF, of amounts remitted to it during the execution of an order of the Tribunal because of a failure to comply with the act which resulted in a loss for other persons.

Amendments to the DA

Among the amendments proposed specifically to the DA, it is provided that derivatives trading platforms will be added between regulated entities that must be recognized to carry on their activities in Quebec. Another amendment to be noted is the proposed scope of the AMF's power to inspect the affairs of a person to verify compliance with the provisions applicable to the person with respect to over-the-counter derivatives under the DA.

Amendments to the SA

Several amendments have been proposed to the SA. For example, the fact of prescribing restrictions on sharing the commissions received by a mutual fund dealer or a scholarship plan dealer, in a manner similar to the restrictions prescribed for a firm in accordance with the ADFPS. It should be pointed out that distributions of securities made by Quebec issuers outside of Quebec contrary to section 12 of the SA will be subject to higher fines and every person who makes a distribution of securities in contravention of section 12 of the SA could be liable to imprisonment. Finally, it is proposed that the request for authorization of an action for damages in the case of civil liability in a secondary market, filed in accordance with the SA, suspends prescription of this action.

Conclusion

At the time of drafting, the Minister announced that the Bill would be subject to specific consultations, but the details and dates of these consultations are not yet known.

Footnote

1. Press release dated October 5, 2017 entitled "Desjardins Group applauds introduction of bill to reform Quebec's financial sector, online: https://blogues.desjardins.com/press_release/2017/10/desjardins-group-applauds-introduction-of-bill-to-reform-quebecs-financial-sector.php.


About Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global law firm. We provide the world's pre-eminent corporations and financial institutions with a full business law service. We have more than 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.

For more information about Norton Rose Fulbright, see nortonrosefulbright.com/legal-notices.

Law around the world
nortonrosefulbright.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions