A normal person’s day-to-day activities involve several financial services – from buying a product, paying bills, to getting the best deals on an online shop. With a person’s every move, the laws on financial services regulation are there to protect consumers and keep businesses on the line.
What financial services are regulated in Canada?
Financial services are a broad term that covers many transactions between financial institutions and their consumers. It can even include transactions between two individuals, when one acts for a specific financial institution. In simpler terms, both parties benefit for different reasons in a financial transaction. While the financial institution gets additional value for the services it provides, the consumer (generally a borrower) gets capital or property for a purpose.
In Canada, financial services regulation covers the following transactions:
- personal or business loan or credit
- mortgage of real or personal property
- investments and securities
- insurance services
Banks are one of the prevailing institutions that provide financial services to the public. To have an idea of how banks are regulated globally, watch this video:
If you’re from Moncton or Fredericton and want to know how your province’s financial services regulation works, reach out to the Lexpert-ranked best banking lawyers in New Brunswick.
Sources of financial services regulation
Here are examples of some important laws related to the regulation of financial services:
- Bank Act
- Canada’s Anti-Spam Legislation (CASL)
- Financial Institutions Act (FIA)
- Personal Information Protection and Electronic Documents Act (PIPEDA)
- Personal Property Security Act (PPSA)
- Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA)
- Retail Payment Activities Act (RPAA)
The list above does not include the provincial and territorial laws (e.g., consumer protection laws), and other laws which apply to specific financial transactions. These statutes are also in addition to the common law principles and doctrines that apply to the common law provinces.
What are Canada’s financial services regulations and laws?
The different financial services regulations and laws outline:
- the parties it has jurisdiction over
- the transactions that it regulates
- offences along with its corresponding penalties
Some laws regulate not the specific financial service itself, but how it’s carried out or its other aspects.
Below is a brief discussion of how these laws apply to the regulation of financial services in Canada.
Regulation of personal or business loan or credit
Since loans and credit transactions are entered by most people, it is one of the commonly regulated financial services. It’s governed not only by federal laws, but also by laws of the different provinces and territories, including regulations enacted by regulatory bodies. Credit card transactions, lines of credit, even simple loans — all these are governed by Canada’s laws on financial services regulation.
Obligations of financial institutions for loans and credits
Financial services regulation states that there must be express consent when a person (or an entity) borrows money from a financial institution. This consent is preferably shown in a written document; if the loan is agreed verbally, a written document must be signed at once.
All relevant information about the loan must be given to the borrower. For instance, a loan agreement must show the following details:
- amount to be borrowed
- deductions to the borrowed amount
- interest rate
- term of the loan
- modes of payment
Laws on security interests and mortgages
The requirement by financial services regulations that there be a proper disclosure of information also applies to mortgages and loans that create security interests. In addition, there are more rules when it comes to mortgages involving real properties, and the creation of security interests or charges on either real or personal properties.
Specific to personal properties are the provincial and territorial statutes commonly called the PPSA. These laws set up how a security interest over personal property is created (i.e., attachment and perfection). It also provides for the registration process of security interests with the proper provincial or territorial authority.
Protecting Canadian investments and securities
Investments, securities, and other financial instruments are governed by provincial and territorial laws (e.g., Ontario’s Securities Act). Similarly, each province or territory has its own securities regulator in the absence of a federal securities regulator.
As part of Canada’s financial services regulation, financial institutions must be aware of these laws, especially when they deal with or issue securities. Some rules that these regulations establish are the following:
- registration of dealers and advisers of securities with the regulatory authority
- imposition of continuous and timely disclosure obligations to reporting issuers
- issuance of a prospectus when securities are issued, subject to some exceptions
Regulating insurance companies and their clients
The regulation of federally incorporated or registered insurance companies falls under the Insurance Companies Act. In addition to the Act, the financial services offered by these companies are regulated by many other statutes and regulations, such as the provincial and territorial consumer protection laws.
Insurance companies are bound by these rules under financial services regulation:
- registration of insurance companies, including their agents or brokers
- ensuring that insurance contracts provide the insured with the necessary information
- remedies of the insured when disputes arise against their insurance company, and the other way around
- protection of the insured’s interests when their insurance company becomes insolvent or bankrupt
Who regulates financial services in Canada?
There are several bodies empowered by law to regulated financial services and financial institutions in Canada. At the federal level, these bodies oversee federal financial institutions but may sometimes overlap with provincial or territorial regulators.
Below are the major regulating authorities for financial services and transactions in Canada:
- Financial Consumer Agency of Canada (FCAC)
- Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
- Office of the Superintendent of Financial Institutions (OSFI)
- provincial and territorial securities and insurance regulator
Want to know more about Canada’s financial services regulation? Reach out to the best banking lawyers in Canada as ranked by Lexpert.