Copyright 2011, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on Financial Services, March 2011
On June 1, 2011, the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act and the Trust and Loan Companies Act (the Acts) will be amended1 to allow for the use of electronic documents where any notice, document or other information is required to be provided by a federally regulated financial institution (FRFI) pursuant to the applicable Act or the related regulations (Required Notices). The Electronic Documents Regulations2 (the Regulations) for each of the Acts will also be proclaimed into force at the same time, prescribing additional requirements for the provision of Required Notices in an electronic form.
Except for Required Notices to be provided to the Minister of Finance, the Superintendent of Financial Institutions, the Commissioner of the Financial Consumer Agency of Canada or the Bank of Canada, as well as those documents subject to any specific prohibitions in an FRFI's incorporating instruments or bylaws and those statutorily required to be sent by registered mail, these new provisions and regulations will allow FRFIs to satisfy their requirements to create and provide Required Notices by creating and providing such Required Notices in electronic form.
Under the new provisions and regulations, if an electronic format is chosen, as a general matter, all Required Notices will have to be provided in plain language3. Additionally, FRFIs will be required to obtain consent (orally or in writing, in paper or electronic form) to provide Required Notices in electronic form and the recipient of such notices will have to designate an email address (or other system used to generate, send, receive, store or otherwise process an electronic document) for the receipt of the electronic documents.
Prior to obtaining written consent, the FRFI will be required to disclose the following, in writing (in paper or electronic form):
- that consent may be revoked at any time;
- that the recipient is responsible for notifying the FRFI of any changes to the designated information system, including changes to contact information;
- that electronic documents will be retained for a specified period of time; and
- when the consent takes effect.
However, if consent is being provided on a one-time basis, such rules do not apply. Consent provided in writing (in paper or electronic form) must also include the email address (or other information system) designated for receipt of the electronic document, as well as a list (in paper or electronic form) of the Required Notices that are covered by the consent. As a practical matter, an FRFI should ideally include these required disclosures, the list of documents covered and a space to designate the recipient email address on one consent form.
If the consent is provided by a person orally, the FRFI will be required to provide the person, without delay, in paper or electronic form, with all of the information outlined in the previous paragraph.
Required Notices provided in electronic form (as opposed to paper or oral form), including the consent form itself and the information outlined in the previous two paragraphs, must be accessible by the intended recipient and capable of being retained and used for subsequent reference.
Under the Regulations, consent will be revocable in writing (in paper or electronic form) or orally, at any time. Upon revocation, the FRFI will be required to provide the person with a confirmation (in paper or electronic form) specifying when the revocation of consent takes effect. If the confirmation is provided in electronic form, it must also be accessible and capable of being retained by the person for subsequent reference.
The new provisions and regulations will also prescribe requirements for the creation of statutory declarations or affidavits. Under the new provisions, a required statutory declaration or affidavit may be created in an electronic document, provided that the person making the declaration or affidavit and the authorized person before whom the declaration is made, sign it with their "secure electronic signature" (as defined in the Personal Information Protection and Electronic Documents Act).
Any other requirement for a signature in the applicable Act or Regulation will be satisfied in respect of an electronic document if the signature consists of one or more letters, characters, numbers, or other symbols in digital form incorporated in, attached to, or associated with an electronic document, and if the signature results from the application of a technology or process that proves that the signature is unique to the person, that the technology or process is used by the person to incorporate their signature into, attach it to, or associate it with the electronic document, and that the technology or process can be used to identify the person. As a practical matter, this means that, while signature requirements may be satisfied using an electronic signature, the signature process is not as simple as the mere checking of a box. An FRFI should establish a specific signature method that will be unique to each person and incorporate letters, characters, numbers or other symbols, as required by the Regulations.
Alternatively, the Regulations indicate that, in lieu of providing Required Notices electronically to individual customers, such Required Notices may be posted on, or made available through, a generally accessible electronic source, such as an FRFI's website, along with the provision to individual customers, in writing (in paper or electronic form), of a notice of the availability and location of the electronic document. Therefore, with the necessary consent, an FRFI may make a Required Notice available on its customer website and simply notify customers by email (or in writing) of its availability. If a customer has designated the secure (i.e., password-protected) area of an FRFI's website as the information system to which electronic documents should be sent, the posting of a Required Notice to such secure area would satisfy the requirement to provide the Required Notice to the customer, without additional notification being necessary.
As a precaution, when in doubt as to the receipt of an electronic document, the Regulations dictate that an FRFI must mail a paper copy of the electronic document to the intended recipient's recorded address.
Impact on Financial Institutions – Practical
Application of the Regulations
The new electronic document provisions in the Acts and Regulations apply only to the creation and provision of Required Notices. Compliance with the Regulations would not satisfy any other requirements in the Acts or other regulations made under the Acts. For example, if a customer's signature was required on a Required Notice – such as a notice of uninsured deposits4 – the customer must still sign the notice, even though it may now be provided to the customer electronically.
As noted above, when obtaining or confirming consent, FRFIs must disclose that electronic documents will be retained for a specified period. No specific retention requirements have been prescribed in respect of electronic documents. The existing records retention requirements of the FRFI will apply, even if a record is in electronic form. However, FRFIs should ensure that electronic documents are retained in a format that will be accessible by the recipient for the relevant period.
The electronic documents provisions apply to any Required Notice that must be provided by an FRFI. The rules do not apply to communications or instructions made or given by customers or to communications made by an FRFI that are not required by the Acts or Regulations. The provision of communications not required by the Acts or Regulations will be governed by the existing contractual relationship between the FRFI and the customer.
Similarly, the application of the electronic documents provisions is not directly related to particular products. In determining whether to obtain a customer's consent to the receipt of electronic documents, an FRFI should consider whether it must provide that customer with any Required Notice, which may not be dependent on the type of product the customer holds. We expect that most FRFIs will seek consent from all customers to whom a Required Notice must be provided.
FRFIs that plan to take advantage of the Regulations should consider preparing standard form consent documents that can be used from June 1, including a stand-alone form of consent to send to existing customers and a form of confirmation to be sent to customers who provide their consent orally. To obtain consent from new customers going forward, standard consent wording can be added to account agreements and product terms and conditions. A form of confirmation of revocation should also be prepared for customers who request that their consent to receive electronic documents be revoked. Such FRFIs will also have to ensure that they have a process in place to identify customers who have provided the required consent or who have requested that their consent be revoked.
It is important to note that the new provisions and Regulations do not allow for the creation of "electronic-only products" (or products conditional on the customer's acceptance of all Required Notices in electronic form). Because a customer may refuse or revoke consent to the receipt of Required Notices in electronic form at any time, alternative methods for the provision of the Required Notices (for example, in writing) must still be in place.
As a final precaution, FRFIs should also continue to monitor any further changes to the Act or Regulations, and specifically to the list of Required Notices, in order to ensure that an FRFI's standard form of consent is updated accordingly to reflect any new Required Notices or other information to be covered in the consent form. Similarly, an FRFI must continue to update its consent form with the addition of each new product.
1 By way of the proclamation into force of An Act to amend certain Acts in relation to Financial Institutions, S.C. 2005, c. 54, sections 138, 212, 367 and 452.
2 Electronic Documents (Banks and Bank Holding Companies) Regulations, S.O.R./2010-239; Electronic Documents (Cooperative Credit Associations) Regulations, S.O.R./2010-242; Electronic Documents (Insurance and Insurance Holding Companies) Regulations, S.O.R./2010-241.Electronic Documents (Trust and Loan Companies) Regulations, S.O.R./2010-240.
3 Ex. Electronic Documents (Banks and Bank Holding Companies) Regulations, S.O.R./2010-239, s.3: "Notices, documents or other information provided...must be made in a language and presented in a manner that is clear, simple and not misleading."
4 A notice of uninsured deposits must be signed in certain circumstances by a person opening a deposit account at an authorized foreign bank, pursuant to the Notices of Deposit Restrictions (Authorized Foreign Banks) Regulations.
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.