The Supreme Court of Canada has made compliance with ambiguous regulations tougher than ever, by ruling that honest efforts to understand the law (however confusing) are not enough. In La Souveraine, Compagnie d'assurance générale v. Autorité des marchés financiers, Sovereign General (SG) was an Alberta insurance company registered with the Quebec Autorité des marchés financiers ("AMF") to sell insurance products. It was convicted of 56 counts of offering such products through an unregistered broker, each count with a minimum fine of $10,000.
Before the charges were laid, SG had given AMF a written explanation of why SG believed the broker did not require registration. The AMF did not respond, leading SG to believe that its explanation had been accepted. Then the 56 charges arrived, bearing a minimum $560,000 fine. The AMF punished SG much more severely than the offending broker, a Quebec resident. The Supreme Court of Canada upheld all the convictions, despite some sympathy for SG's mistake:
 ...[SG] also argues..that this Court should ...recognize reasonable mistake of law in the vast mosaic of regulatory offences. More specifically, it asks that this defence be made available in cases in which reasonable ignorance of or honest confusion about the applicable law is closely tied to improper conduct on the part of a regulatory body. It thus argues that the competent authority set a "trap" by acting unfairly toward it. ...
 This Court has held many a time that the fact that a defendant has exercised due diligence to find out and verify the nature of the applicable law is not a defence ...
 It should nonetheless be noted that if the rule that ignorantia juris non excusat — ignorance of the law excuses no one — were absolute, this could seriously hinder the application of another cardinal rule of our criminal justice system: there can be no punishment without fault. The overlap between these rules is all the more significant given the current simultaneous proliferation of regulatory measures and penal statutes. Indeed, several authors have pointed out that it is now impossible for citizens to have comprehensive knowledge of every law...
 ... conflicts ... inevitably result from the constantly expanding presence of regulatory measures. Such measures play an essential role in the implementation of public policy. The rule that ignorance of the law is not a valid defence supports the state's duty in this regard. For this reason alone, it needs to be enforced.
 At the same time, the rise in the number of statutes coupled with their growing complexity increases the risk that a citizen will be punished in circumstances in which ignorance of the law might nevertheless be understandable....
 The regulator at issue in the instant case, the AMF, is not required by law to reply to those to whom the law applies or to inform them about their rights and obligations. As a result, it was not reasonable in this case for the appellant to view the AMF's silence as a confirmation of its interpretation of that law. This being said, the AMF's attitude is of some concern. Nevertheless, although its attitude does not reflect the greater transparency a regulator is normally expected to show, and as unfortunate as that might be, that attitude cannot be equated with improper conduct or bad faith on its part.
 Furthermore, even if the AMF's conduct were so vexatious as to justify accepting a new exception to the rule with respect to ignorance of the law, which I cannot find to be the case here, I am of the opinion that the steps taken by the appellant to avoid breaking the law do not meet the requirements for the due diligence defence. The appellant relied solely on the legal advice of professionals acting for a third party, Flanders, in Manitoba. A reasonable person would at least have sought an independent opinion from a member of the Barreau du Québec, preferably one who specializes in insurance law. Thus, the appellant in this case has not shown that it took all reasonable steps to avoid breaking the law."
Why shouldn't regulators have to explain what they mean, and provide an opportunity to comply, before resorting to the sledgehammer of prosecution? Writing to regulators has long been a reasonable and appropriate way of seeking clarification of vague and ambiguous legal requirements, for environmental lawyers among others. If the courts give no effect to such letters, regulated entities may have to choose among three unattractive options:
- keeping quiet, and hoping not to get caught;
- taking the most conservative possible approach, and never doing anything that has not been specifically permitted, in writing, or
- applying expensively to a court for a declaration interpreting the vague provision.
The judges were also concerned about AMF's heavy -handedness, in laying 56 charges, each with a minimum $10,000 fine, when one would surely have been sufficient, and a fairer response to SG's honest efforts to understand the law. Three of the judges would have collapsed the 56 counts into a single charge; the others decided not to intervene because the issue had not been fully argued in the courts below.
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