On August 9, 2017, the Government of Ontario released its report on financial services following the Red Tape Challenge. This report contains a number of recommendations and action items relating to Fintech:
- New flexible, innovative provincial financial services regulator – As previously announced, the Government of Ontario is proceeding with its plans to establish a new financial services regulator, the Financial Services Regulatory Authority of Ontario (“FSRA”), which is intended to be a “new, flexible and innovative financial services and pension regulator”, and which will replace existing provincial financial services regulators, including the Financial Services Commission of Ontario (“FSCO”). In the meantime, the report also states that FSCO has created a working group “to ensure that fintech-enabled start-ups and incumbents have a single point of contact for engaging with and accessing the regulator.”
- Regulatory sandbox – The report states that the Ontario Ministry of Finance will take into account the idea of a “regulatory sandbox” as it works to create the new FSRA and put forth this idea to the board of the FSRA for consideration. Many jurisdictions, including the UK and Singapore, have put in place regulatory sandboxes in the context of Fintech regulation, and the report refers specifically to “develop[ing] a pilot program to allow all fintech start-ups a regulatory grace period” as an action item to consider. The Ontario Securities Commission (“OSC”) has already put in place a similar approach by way of OSC LaunchPad.
- Harmonization of financial regulation – The report states that as part of the work establishing the new FSRA, it will keep in mind the feedback received requesting additional efforts in respect of the harmonization of provincial and federal financial services regulation, and also put forth this request to the board of the FSRA for consideration.
- Online resources for financial services regulation – The Ontario Ministry of Finance will work with the OSC and FSCO to review existing online resources with respect to financial services regulation to determine whether these can be improved.
- Simplification of financial services forms and regulations – FSCO has commenced a three year review process to determine whether it can simplify its forms, including mortgage and investor disclosure forms.
In addition, the report contains a number of other recommendations relating specifically to insurance, credit unions, mortgage brokerage and investment advisor requirements, which may impact particular Fintechs, depending on their business model.
For more information about our firm’s Fintech expertise, please see our Fintech group‘s page.
From August 9, 2017 to September 29, 2017, Innovation, Science and Economic Development Canada is holding a public consultation on proposed reforms to the Copyright Board of Canada.
Among its other regulatory functions, the Copyright Board of Canada establishes the amount of tariffs to be paid for copyrighted content in a variety of areas where a copyright collective is tasked with administering those rights. These areas include music streaming, the public performance of music, educational copying, and the retransmission of television signals.
The consultation comes after a lengthy history of stakeholder complaints concerning the decision-making processes of the Board, including lengthy delays in determining the quantum of tariffs and a lack of transparency and predictability in arriving at those tariff decisions. A 2016 Senate Study revealed that the Board took, on average, between 3.5 to 7 years to make a tariff decision, leading to reduced economic activity within Canada’s cultural industries. The government now recognizes that urgent reform is necessary to underpin innovation and to enable access to new and diverse streams of copyright revenue.
The government discussion paper referenced in the consultation process identifies 13 options for reform, broadly categorized into four categories:
- Better enable the Board to deal with matters expeditiously, such as streamlining the Board’s decision-making framework, implementing case management, and empowering the Board to award costs between parties.
- Reduce the number of matters that come before the Board each year, by expanding the existing option for some collective societies to establish individual licensing agreements with prospective users independently of the Board or lengthening the effective time periods of tariffs.
- Prevent the retroactivity of tariffs or limit the impact of retroactivity, by requiring longer lead times in tariff filing or allowing for copyrighted content use and royalty collection pending the approval of a tariff in all cases.
- Clarify the Board’s framework, mandate and decision-making processes, including codifying specific Board procedures, specifying a decision-making criteria for the Board to consider, and harmonizing different tariff-setting regimes.
Given the tremendous growth of Canadian media and technology industries, such reform should be welcome news for copyright holders and users alike. Stakeholder comments and suggestions are invited and should be sent to email@example.com prior to September 29, 2017.
Submissions need not be confined to the specific proposals noted in the discussion paper. The government is willing to consider any other potential solutions that will improve the efficiency and timeliness of the Board’s decision-making process.
Changes to the Board’s funding and structure are outside the scope of the present consultation, as are wider questions about collective management of copyright in general. However, a broader copyright review is anticipated to begin sometime in the fall of 2017.
Tkachuk, D., & Day, J. (2016, November). Copyright Board: A Rationale for Urgent Review. Standing Senate Committee on Banking, Trade and Commerce. Retrieved from https://sencanada.ca/content/sen/committee/421/BANC/Reports/FINALVERSIONCopyright_e.pdf
In July 2017, the Bank of Canada released a discussion paper outlining a framework for the assessment of risks and opportunities for central banks in connection with Fintech. This paper also more generally explores potential implications of Fintech for central banks, given their mandate over monetary policy, the design and distribution of currency and/or financial stability. Continue Reading
The context of de-risking
In the past decade, the financial services sector across the globe has experienced increased regulatory scrutiny, particularly in the areas of financial crimes, anti-money laundering (AML) and anti-terrorist financing (ATF) regulation.
Financial institutions have generally reacted to the new regulatory environment by bolstering their compliance and risk management divisions with increased budgets and headcounts.[i] However, as the price and regulatory risk of banking increases, some financial institutions are assessing the cost-benefit analysis of certain activities and are opting, simply, to exit entire product lines or customer segments. This phenomenon is one aspect of what is known as “de-risking”. Continue Reading
In their decision reported as 2017 FCA 161, the Federal Court of Appeal says s. 27(3) of the Patent Act requires the patent to disclose both the invention, and how to make the invention. Further, that a patent will not lack sufficient disclosure where routine experimentation is required of a skilled person. However, disclosure is insufficient if the specification “necessitates the working out of a problem”.
In this case, the patent did not teach a step necessary to synthesize the claimed compound. The issue was whether this gap could be filled by the common general knowledge of the skilled person or routine experimentation. Continue Reading
On 22 May 2017, the Financial Stability Board (FSB) and the Committee on the Global Financial System (CGFS) released a report entitled “FinTech credit: Market Structure, Business Models and Financial Stability Implications” (the “Report”). The Report aims to provide an accurate picture of the extent and nature of Fintech credit activity by analysing the functioning of Fintech credit markets, including the size, growth, and nature of such activities, and the benefits and risks of Fintech credit platforms. Continue Reading
As a part of its obligations under CETA, Canada plans to introduce patent term restoration for up to two years when research or regulatory delays have consumed part of the 20-year term of a pharmaceutical patent. Patent term restoration will occur via the grant of a so-called certificate of supplementary protection (“CSP”).
On July 15, 2017, the government of Canada published its proposed Certificate of Supplementary Protection Regulations (“CSP Regulations”) which, in conjunction with amendments to the Patent Act, will create the framework for the issuance of CSPs which will be administered by Canada’s Minister of Health. The government announced a 15-day consultation period with the release of the proposed CSP Regulations “to facilitate broader engagement on the proposed regulatory measures”.
The CSP regime will come into force concurrently with section 59 of CETA, which is tentatively expected on or around September 21, 2017. Continue Reading
On July 15, 2017, the Canadian government published (link) its proposed amendments to the NOC Regulations. These amendments will implement sweeping changes to pharmaceutical patent litigation in Canada pursuant to obligations imposed under CETA. There will be a 15-day comment period, after which, the amendments will be published in final form. The finalized amendments are expected to be in force around late September 2017. These revamped NOC Regulations will apply to Notices of Allegation (“NOAs”) served on or after the date the revamped NOC Regulations come into force.
Overall, the revamped NOC Regulations make amendments that were sought after by both sides of the Canadian pharmaceutical industry. For innovators the NOC Regulations provide appeal rights, allow for the early adjudication of additional patent claims and patents not eligble for listing on the Patent Register prior to generic launch, and give effect to patent term restoration. For generics the NOC Regulations limit or prevent follow-on litigation, expand potential section 8 damages and grant expanded standing to sue for impeachment. These and other changes are described in more detail below. Continue Reading
In March 2017, the European Commission (EC) issued a public consultation document on Fintech. Cloud computing is a major area covered by the EC request for comment and requires delicate balancing between innovation and risk minimization. On one hand, cloud is an easily scalable and cost effective way for financial institutions to manage their data storage and processing. However, cloud also presents major banks with increased cybersecurity and compliance risk. The topic of cloud is particularly relevant because certain Fintech enterprises may not be subject to the same regulatory constraints as major financial institutions.
The European Banking Authority (EBA) published its response to the public consultation in June 2017. Continue Reading
Venture Capital firms (or VC’s) often invest in early-stage start-ups with uncertain valuations. The terms of a VC’s investment will often be heavily weighted in favour of the VC and may include downside protection. This means that the VC’s investment will be protected in the event that the valuation of your start-up decreases in subsequent financings. One common method used by VC’s for downside protection is known as a “ratchet” clause. A “ratchet” clause is an anti-dilution clause that works to protect, and in some circumstances can even increase, the VC’s proportionate ownership of your start-up, if the value of your start-up diminishes over time.
A ratchet clause is often included in the terms of the convertible securities (such as preferred shares or convertible debt) that the VC is acquiring in connection with its investment. The clause operates by adjusting the conversion rate of the securities that the VC receives to reflect the issue price per share of subsequent financings.
There are a number of different types of ratchet clauses, including “weighted ratchets”, “half ratchets”, “two-thirds ratchets” and “full ratchets”. A “full ratchet” clause operates by ensuring that the conversion price of the convertible securities held by the VC is adjusted to be the same as the issue price of securities issued in a later financing if the price per share has decreased. A “full ratchet” offers the most downside protection for the VC and is the most dilutive for the start-up. The other types of ratchet clauses provided lesser degrees of downside protection and dilution. Continue Reading