Canadian current business law

In June, 2010, Tony Clement, Canada's Minister of Industry, and James Moore, Minister of Canadian Heritage and Official Languages, announced the introduction of legislation to modernize Canada's Copyright Act.

The bill attempts to update Canada's intellectual property laws to take account of new technologies such digital music and MP3 players, brings Canadian copyright legislation into line with international standards by implementing the World Intellectual Property Organization Internet Treaties, and provides new tools to enable copyright holders to pursue infringers, such as peer-to-peer file sharing websites.

Under the bill, individuals will be permitted to 'format shift,' in other words copy legally acquired music onto devices that they own provided it is for personal use. This includes copying music from CDs onto MP3 players. In addition, individuals will be allowed to 'time shift,' or record internet, radio or television broadcast for viewing or listening at a later date.

According to a summary of the bill, copyright owners would have "stronger legal tools to go after online pirate sites that facilitate copyright infringement" and the legislation clarifies that those who "knowingly facilitate infringement" are liable in Canada. Creators will also have new "making-available rights" to allow them to control how their works are made available online.

The bill introduces a new civil remedy for copyright owners against those who knowingly enable infringement of copyright. This new remedy supplements existing criminal powers to deal with pirate sites with new stronger tools for copyright owners that make liability for enabling of infringement clear. However, the government says that search engines and internet service providers (ISPs) will be unaffected by this provision, "to the extent that they act as true, neutral intermediaries."

In an attempt to tackle online piracy, the bill introduces a 'notice and notice' approach, whereby ISPs will be obliged to pass on a copyright infringement notice issued by a copyright owner to the customer in question. ISPs will be required to keep details of customers accused of copyright infringement on record for use in a possible court action, but will not be compelled to terminate accounts, as has been the approach in other countries.

However, the bill also ensures that Canadians will not face disproportionate penalties for minor infringements of copyright by distinguishing between commercial and non-commercial infringement. Under current law, for commercial and non-commercial infringements, copyright owners can sue for statutory damages ranging from CAD500 (USD480) to CAD20,000 for each work that is infringed. For example, a case involving 50 works would translate into a minimum payment of CAD25,000, and a maximum of CAD1m. The new bill will dramatically reduce an individual's exposure in cases of non-commercial infringement. In such cases, statutory damages will be reduced to a one-time payment of between CAD100 and CAD5000 for all infringements that took place prior to the lawsuit. For commercial infringement, there will be no change from the current law.

In January, 2009, the Canadian Intellectual Property Office (CIPO) launched a consultation on the second package of proposed amendments to the country's Patent Rules. CIPO has been holding official consultation periods to collect public feedback on several proposed amendments to the Patent Rules. This consultation period will end on February 28, 2009.

The amendments proposed in the second package seek to safeguard applicants’ rights in situations where their rights would have lapsed due to a failure to meet certain procedural requirements. The package also improves some operational procedures, by providing more flexibility as to who can pay a fee and reinstate an abandoned application. Finally, the package waives some of the fees related to sequence listings filed electronically, and reduces the required delay to request examination.

The Office also recently announced that its Patent Maintenance Fees Electronic Payment system is now available online. The new electronic system is designed to make paying patent maintenance fees more efficient and accurate for both clients and CIPO employees.

In mid-2008, CIPO unveiled its 2008-09 Business Plan, documenting plans and key activities for 2008-09, guided by the Strategic Plan 2007-2012, entitled 'Moving Forward to Canada’s Advantage'.

The strategic plan outlined five strategic directions adopted by the organization, namely: client services and outreach, the IP administrative framework, international activities, and staff.

This business plan was organized around these five strategic directions. It also included three key enablers deemed "critical to our success," according to CIPO. These were: management and accountability; internal and external communications; and information and technology.

In June 2007, the Canadian Anti-Counterfeiting Network (CACN) applauded a report published by Parliament's Industry, Science and Technology Committee, entitled "Counterfeiting and Piracy are Theft".

CACN went on to urge the federal government to act quickly on the Committee's recommendations for strong measures against counterfeiting and piracy.

"The report boldly and unambiguously reinforces the need for the government to take proactive steps against criminal activities that cause billions of dollars in economic losses, feed money to organized crime, and pose a significant threat to the personal health and safety of Canadians," announced Doug Geralde, Chair of CACN.

The report's recommendations chimed with those made earlier that month in a separate report on counterfeiting and piracy issued by Parliament's Standing Committee on Public Safety and National Security (SECU).

It was also the fourth time in recent years that a Parliamentary committee had unanimously called upon the Government to ratify the WIPO treaties, including previous calls by the Heritage Committee.

Also in June 2007, Amendments to Canada's Patent Rules, the Trade-marks Regulations (1996), the Industrial Design Regulations, the Integrated Circuit Topography Regulations, and the Copyright Regulations, published in the Canada Gazette in mid-May, partially came into force.

The amended regulations were put in place on Saturday June 2, with the exception of sections 4, 5, 6, 8 and 9 of the Regulations amending the Trade-marks Regulations (1996), which will come into force on October 1, 2007.

According to the Canadian Intellectual Property Office (CIPO), the amendments were designed to encourage small entities (i.e. entities employing 50 or fewer employees or a university) to use the patent system, while providing a relief mechanism for those who mistakenly pay fees at the small entity level.

Additional amendments to the Patent Rules, the Trade-marks Regulations (1996), the Industrial Design Regulations, the Integrated Circuit Topography Regulations, and the Copyright Regulations were made to improve the intellectual property regime by simplifying procedures, and reducing processing times and costs.

In October, 2006, the Government of Canada published Industry Canada's Regulations Amending the Patented Medicines (Notice of Compliance) Regulations and Health Canada's Regulations Amending the Food and Drug Regulations in Part II of the Canada Gazette.

These regulations, which came into force on October 5, 2006, will strengthen the economy in the long term by restoring certainty, predictability and balance to Canada's intellectual property framework for pharmaceuticals and bio-pharmaceuticals.

Under Health Canada's Regulations Amending the Food and Drug Regulations, new and innovative drugs will receive a guaranteed minimum period of market exclusivity of eight years - up from the current five years.

This is deemed especially important to Canada's burgeoning biotechnology industry, since biologic drugs often have little patent protection left by the time they are approved for sale due to lengthy development and regulatory review times.

These regulations will also provide a further six months of market exclusivity to innovative drugs that are the subject of pediatric studies, in order to encourage companies to provide more information about the effects these products have on children.

In turn, Industry Canada's Regulations Amending the PM(NOC) Regulations will restore their original policy intent by enabling generic versions of innovative drugs to enter the market immediately following the expiry of relevant patents, while also allowing substantive improvements to innovative drugs to be duly protected.

This will provide greater certainty and predictability for the industry overall, thereby strengthening investment and innovation in Canada.

"These improvements to the intellectual property environment are the product of extensive consultations with the pharmaceutical and biotechnology industry, and respond to the major concerns expressed by each sector of that industry," explained Maxime Bernier, Minister of Industry, continuing:

"These improvements will encourage research into new and innovative drugs, and help to deliver on our government's commitment to provide the right environment for business-driven research and excellence."

"The amendments published today will benefit Canadians by making it easier for lower-cost, generic versions of these drugs to enter the market in a timely fashion," Tony Clement, Minister of Health, added.

It emerged in December, 2006, that Hong Kong and Canada had renewed a memorandum of understanding to bolster co-operation in information and communications technology.

The agreement focused on software applications, products and policy, and information and communications infrastructure and related policy.

Hong Kong's Permanent Secretary for Commerce, Industry & Technology (Communications & Technology) Francis Ho and Canada's Department of Industry Communications Research Centre President, Veena Rawat signed the renewed memorandum at the ITU Telecom World 2006 Hong Kong pavilion this week.

Canada, Hong Kong's first information and communications technology MOU partner, signed the original memorandum in 1998. Both places have extended it twice since then.

According to a statement released by the International Federation of the Phonographic Industry in March, 2006, the "downward spiral" of music sales in Canada resumed in 2005 as illegal file swapping exacted a high toll on the country's artists and music industry.

The new figures came with a warning from the head of the recording industry's international trade body that Canada is being left behind in the fast-growing digital music business that last year topped US$1 billion worldwide.

Net music sales in Canada declined by $23 million, or 4 percent, to $608.7 million in 2005, the Canadian Recording Industry Association (CRIA) reported, going on to reveal that the decline resumes an almost decade-long spiral paralleling the rise of music file swapping on the Internet, and follows a brief respite in 2004, when sales briefly stabilized.

"It's astonishing that a sophisticated nation like Canada has dragged its feet for so long while the rest of the world has adapted its copyright laws to the digital age," observed John Kennedy, IFPI chairman and CEO, continuing: "The digital music world is moving on - Canada must move with it, or its whole music culture will suffer."

In contrast with Canada's situation, worldwide music sales via the Internet and mobile phones tripled year-over-year to US$1.1 billion in 2005 and are expected to continue climbing rapidly, according to a recently released report from IFPI. Digital revenues have leapt from zero to 6 percent of record company revenues globally in the last two years - far greater than in Canada, where digital revenue comprises less than 1 percent of total sales.

IFPI's Digital Music Report 2006 shows that Canada is losing out by not updating its copyright laws to protect intellectual property in the digital environment, as have its major trading partners. The report reveals that in the United Kingdom and Germany, which have implemented digital copyright reform, legal buyers using sites like iTunes and MSN now exceed illegal file-swappers.

By contrast, illegitimate downloads outnumber legal sales by hundreds of times in Canada, which is cited by the OECD as having the largest online piracy rate per capita in the world. The IFPI report further finds that half the people who have cut down on file-swapping in Europe, where most countries have enacted digital copyright laws, have done so out of concern for the legal consequences.

"As legal downloading surges ahead in other parts of the world, Canada is marooned on the sidelines," warned CRIA President Graham Henderson, adding that: "The goal of a vibrant digital marketplace in Canada will remain beyond reach until our legal environment encourages people to buy music instead of passively accepting theft on the Web."

In May, 2010, the Canadian government released details of the proposed Canadian Securities Act, which would establish a Canadian securities regulator. The Act would be introduced as a voluntary regime, enabling provinces and territories to opt in at their choice.

Ottawa noted that, despite the Canadian financial regulatory regime demonstrating its superiority during the financial crisis, Canada remains the only major industrialized country without a national securities regulator. The regulator would oversee the country’s capital markets, the government explained.

The proposed Canadian Securities Act is built on provincial securities regulation and harmonizes existing legislation in the form of a single statute. It is the fruit of the work of the Expert Panel on Securities Regulation (the Hockin Panel) and other reform efforts, and reflects domestic and international best practices. The government explained that the Act in particular will introduce significant regulatory improvements in terms of governance, adjudication, financial stability, and regulatory and criminal enforcement, and provides a wide scope of authority to regulate financial instruments and participants in capital markets.

In a speech to the Canadian Chamber of Commerce in Mexico in August, 2008, Canada's Minister of International Trade Michael M. Fortier spoke of the growing significance of the North American Free Trade Agreement (NAFTA) for bilateral trade between Canada and Mexico.

"Today, Mexico is Canada’s fifth-largest export market - and a growing one, too. In addition, Canada is a key market for Mexico, second only to the US in terms of market share," Fortier observed in his speech.

He noted that more than 2,800 Canadian companies are currently active in Mexico, with over 3,000 others currently working on their first sale, many of which are small and medium-sized businesses.

He went on to added that: "We’ve used NAFTA as a launching pad for a mature and growing bilateral partnership. But it’s up to us to write the next chapter - especially today, when we see the US economy experiencing difficulties.

"Our leaders have set the goal of increasing bilateral trade by 50%, and bilateral investment by 100% between 2005 and 2010. To help reach this goal, our countries are working together through the Canada-Mexico Partnership (CMP).

"Today, NAFTA remains more important than ever. Global competition hasn’t gone away. If anything, it has grown fiercer. It’s up to us to make more out of the NAFTA partnership, and to strengthen our competitiveness as a continent and in our economies at home.

"Since joining the North American free trade partnership, Mexico’s economy has grown dramatically. It has become a close and valued partner of the US and Canada on economic and security matters. And it benefits from an extensive network of free trade agreements with more than 40 countries."

Fortier concluded that "Indeed, our relationship with Mexico provides a great opportunity to demonstrate to the world the advantages of open, transparent and competitive economic cooperation - and the benefits of reaching out to the world to create opportunities for our citizens."

In June 2007, Jim Flaherty, Minister of Finance, announced the publication of final regulations strengthening Canada's safeguards against organized money laundering and terrorist financing.

“Canada’s New Government will be relentless in its efforts to prevent money laundering and terrorist crimes,” Flaherty stated. He added: “We are taking an international leadership role to combat money laundering and terrorist financing by devoting substantial new funding to bolster our analytic, investigative and prosecution resources.”

The updated regulations bring Canada’s anti-money-laundering and anti-terrorist-financing regime in line with new Financial Action Task Force standards. They also follow recommendations made in the 2004 Auditor General’s Report, and in a 2004 Treasury Board–mandated evaluation of the regime.

The regulatory amendments implement new provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, which received Royal Assent in December 2006.

To provide financial institutions and intermediaries with sufficient time to change their systems and train their employees, these regulations were to come into effect on two separate dates. Most of the provisions will come into force on June 23, 2008, while the remainder were effective on June 30, 2007.

Also in June 2007, Mr Flaherty announced that the government is moving forward with proposals to make the country's capital markets more competitive.

At the conclusion of his meeting with provincial and territorial ministers responsible for securities regulation, Flaherty issued the following statement:

“We had a productive meeting, a good exchange of views, and I stressed the importance of creating a Canadian advantage in global capital markets. The objectives are to give enterprises of all sizes better access to capital at more competitive costs, provide investors with increased investment choices and create more jobs for Canadians."

"In particular, I highlighted the advances Canada’s New Government has made since releasing our capital markets plan earlier this year."

The federal government has also reviewed progress made by provinces and territories and the Canadian Securities Administrators to harmonize and streamline securities regulation. Flaherty revealed that all ministers agreed that these steps are constructive and will lead to lower regulatory barriers and reduced costs for issuers and investors.

"This advantage requires a shared commitment to enhance the effectiveness, content and structure of capital markets regulation, in particular by improving enforcement and by favouring proportionate, more principles-based regulation," Flaherty noted.

In February 2007, the Canadian Securities Administrators announced that they were seeking comments on a proposed rule to force all hedge funds to register under a set of national, harmonized guidelines.

The proposed Rule would harmonize registration requirements that exist in various acts, rules, regulations, notices and practices across the CSA jurisdictions into a single national instrument. It would also significantly reduce the number of registration categories for firms and individuals.

The CSA's plans were a delayed response to the spectacular collapse of Portus Alternative Asset Management two years previous.

Under the new CSA plan, hedge fund managers and sales staff would also undergo checks. Canadian hedge fund assets are estimated to top CS$30bn.

In December, 2006, receiver for failed Canadian hedge fund, Portus Alternative Asset Management said it was ready to begin distributions to investors, according to a filing in the Ontario Superior Court.

Last June, KPMG, the receiver, said it estimated that about 85% of funds would be returned, but gave no timescale. KPMG also asked the Court to allow those investors who invested in registered plans (about half of Portus's 26,000 clients) to receive payouts and put the money into a further registered plan with triggering a taxable event.

KPMG said in the summer that about $662.15 million (Canadian) and about $37.2 million (US) of Portus assets have been found and secured in 130 bank and investment accounts in Canada, the Turks and Caicos and the Cayman Islands, out of more than $800m that was collected by Portus. The majority of Portus assets remain tied up in notes issued by France's Société Générale which were purchased for $529m, and mature between 2008 and 2011.

Founder of Portus Boaz Manor - who fled to Israel after Portus collapsed - and co-founder Michael Mendelson have been charged by the Ontario Securities Commission with failing to act in good faith with clients. Mendelson was also charged with unregistered trading and issuing securities without filing a prospectus. The maximum penalties are C$5 million and five years in jail.

In October, 2006, the Investment Dealers Association of Canada (IDA) welcomed the release of the final report of the Task Force to Modernize Securities Legislation in Canada, entitled 'Canada Steps Up'.

On June 27, 2005 the IDA announced the establishment of this independent task force of prominent business leaders, securities lawyers, industry professionals and academics to recommend changes to Canadian securities legislation to achieve a dynamic, fair, efficient and competitive capital market.

The Task Force was asked to undertake comprehensive and expert research, in Canada and internationally, to generate data and analysis to support informed and innovative reform of regulatory content including issues related to investor protection, access to capital, enforcement, governance and regulatory burden. However, its mandate did not include issues of regulatory structure.

“Canada Steps Up provides those charged with ensuring the integrity and competitiveness of Canada’s capital markets with an unprecedented body of original and leading edge research, data and analysis by Canadian and international experts," IDA President and CEO Joe Oliver announced.

He continued: “Our objective in sponsoring the Task Force was to promote informed debate and dialogue. We urge all participants in Canada’s capital markets to participate in constructive discussions about the Task Force recommendations and findings. We also hope that stakeholders in other countries will find the Report valuable.”

January, 2006, saw developments in the Portus affair, which had begun with the hedge fund's sudden collapse in February, 2005, when the Ontario Securities Commission and the Mutual Fund Dealers Association of Canada announced a plan that would require some 55 investment and mutual fund dealers to repay investors all fees received from failed hedge fund Portus in connection with client referrals. The Investment Dealers Association of Canada (IDA) supports the plan, which applies to five of its members.

In total, excluding fees that have already been recovered, about $12 million in fees was paid out of funds invested in Portus to MFDA and IDA Ontario-registered dealers.

The regulators say they have already received indications from 28 dealers, representing more than 80% of fees paid out of funds invested in Portus to MFDA and IDA Ontario-registered dealers, that they are willing to accept the plan. Dealers have been asked to confirm by January 24, 2006 that they intend to comply with the request and repay investors by May 31, 2006 under oversight by the MFDA and the IDA.

This payment will be in addition to the money investors stand to recover from the insolvency proceedings being conducted by KPMG. The firm says that $662.15 million (Canadian) and about $37.2 million (US) have been found and secured in 130 Portus bank and investment accounts in Canada, the Turks and Caicos and the Cayman Islands, out of more than $800m that was collected by Portus. The majority of Portus assets remain tied up in notes issued by France's Société Générale which were purchased for $529m, and mature between 2008 and 2011.

Meanwhile, the net is tightening around Portus founder Boaz Manor, who fled to Israel last February. According to Israeli press reports, Judge Shmuel Baruch of Tel Aviv District Court gave Manor three days in December to deliver more than 100 diamonds worth $11.6m, allegedly bought with Portus funds, to KPMG, or face arrest.

However, after pleas from Manor, who says he doesn't have the stones, the judge held a closed hearing on 26th December at which Manor was questioned by lawyers. Last week Judge Baruch issued a further order, this time giving Manor seven days to produce the diamonds or face gaol.

KPMG says that it has obtained a lien on up to $20.7 million over Manor’s property in Israel, representing $3.1 million that Manor allegedly transferred to his lawyer and $17.6 million missing from Portus's funds. As to the diamonds, they may be in Hong Kong, where Manor's sister-in-law is under court pressure to reveal their whereabouts.

Manor also faces charges brought in Canada by the Ontario Securities Commission, which his Ontario lawyer says he will fight. Lawyer Brian Greenspan said: "He intends, obviously, to defend and respond to the charges and it's always been his intention to appear as required in answer to any charges that are brought against him."

The OSC says it is proceeding expeditiously with the administrative and court proceedings against Manor commenced in October last year. The next appearance with respect to the administrative proceeding commenced against Portus, Boaz Manor, Michael Mendelson, Michael Labanowich and John Ogg is scheduled to take place on January 17, 2006. With respect to the court proceeding against Boaz Manor, the next attendance in provincial court will take place on January 18, 2006.

The RCMP is also investigating the affair and may stand a better chance of attacking Manor under Federal laws - but they were very slow to begin investigations and there has been no news about their progress.

The Law Society of Upper Canada (LSUC) said in February, 2004, that it is examining proposals which would allow Canadian law firms to float on the stock market in order to raise capital.

The LSUC has reportedly asked its regulation committee to look at models which would allow law firms to utilise the capital market to finance themselves.

Such a development is said to have the support of many of the country's large commercial firms, and the discussions will be closely scrutinised by the US and UK legal communities, both of which may see similar reforms in the future.

The proposals stem from a memo sent earlier this year by LSUC treasurer, Frank Marrocco. Writing to senior members of the Society, Mr Marrocco announced that: "I want to look into whether our rules unduly or unreasonably restrict law firms from financing themselves in ways that are available in a modern capital market."

Company Law

The Chairmen of four Canadian securities regulators and the Chairman of the US Securities and Exchange Commission (SEC) in June, 2008, announced a schedule for the completion of a process agreement that would open the way for discussions of a potential US–Canada mutual recognition arrangement.

Canada has a system of securities regulation in which 13 separate provincial and territorial securities regulators administer and enforce highly harmonized laws and regulations.

In order to facilitate discussions between Canada and the United States, and more closely coordinate their systems of securities regulation, the SEC and the Canadian Securities Administrators (CSA) are working on an agreement setting forth the process to be followed in discussing mutual recognition arrangements. The process agreement, once concluded, would open the way for substantive discussions between the CSA and the SEC on the subject of mutual recognition.

Mutual recognition could provide Canadian securities exchanges and certain other Canadian financial service providers with greater freedom to operate in the United States under Canadian regulatory oversight, while US securities markets and certain other US financial service firms could gain greater freedom to operate in Canada under SEC oversight.

In this manner, dual regulation, redundancy, and regulatory overlap could be eliminated.

"The work that we have accomplished with our Canadian regulatory counterparts over many months has brought us to a significant milestone in our ongoing discussions on the subject of mutual recognition," commented SEC Chairman Christopher Cox, going on to add that:

"The process agreement we hope to execute next month will provide an efficient means to focus the US–Canada discussions. That, in turn, could pave the way for an eventual arrangement with our Canadian counterparts that would deepen cooperation among securities regulators in North America and strengthen the regulation of ongoing cross-border securities activity, while reducing the barriers investors face in connection with cross-border investment opportunities."

"The bonds we have strengthened during these months of discussions have already led to closer enforcement and regulatory coordination among US and Canadian securities regulators, and investors are the clear winners," he concluded.

An EU-Canada Summit held in June, 2005, welcomed the considerable strengthening of dialogue between EU and Canadian regulators since the entry into force of the Framework for Regulatory Cooperation and Transparency between Canada and the Commission in December 2004, highlighting progress in a number of industrial sectors.

According to the EC, regulatory cooperation under the Framework will result in better regulations and help to avoid establishing unnecessary barriers to trade. The Summit also noted the development of a model Confidentiality Arrangement to facilitate the exchange of information between regulators during preparation of new legislation for goods, and a draft implementation plan.

The voluntary Framework for Regulatory Cooperation and Transparency of 2004 promotes a more systematic dialogue during the early stages of the development of regulatory proposals for goods. This facilitates work towards preventing and eliminating unnecessary barriers to trade and investment, while ensuring better quality and more effective regulations to achieve public policy objectives.

The Framework additionally outlines specific cooperative steps that Canadian and European regulators are encouraged to follow in bilateral dialogues, including early and regular consultations, data and information exchanges, and sharing of foreseen regulatory approaches.

Dialogue has already started on several sectoral issues, including consumer product safety, radiation emitting devices, toxins, and food labelling. How to overcome different requirements was discussed by regulators from both sites of the Atlantic at the first meeting of the new Regulatory Cooperation Committee, created under the Framework, on 18 May 2005.

According to recently released figures, the EU is Canada’s second largest trade partner after the US (12% of total Canadian imports and 4.8% of total Canadian exports), while Canada features among the top-ten of main EU trading partners. Canada ranks fourth among investors in the EU (after the US, Switzerland and Japan), whereas the EU is the second investor in Canada after the US.

Commission Vice-President Günter Verheugen stated that: “Significant progress in enhancing regulatory cooperation between the EU and Canada has been made in a very short time. Better dialogue results in better regulation, helping both partners cut red tape and leading to more and more advantageous trade between the EU and Canada.”

In December, 2004, the European Union and six other World Trade Organisation members (Brazil, Canada, India, Korea, Japan and Mexico) received authorisation from the WTO to impose retaliatory measures on the United States for failing to bring its legislation into conformity with its international trade obligations. This was a formal step, necessary before retaliatory measures could be imposed.

Under the disputed Byrd amendment, introduced in 2000, overseas firms which sell their products at below cost price in the US can be fined by the government, with the money going to the US firm or firms which initially made the anti-dumping complaint.

The EU and other aggrieved WTO members had argued for several years that such a regime permits illegal subsidies for the industries in question, and was therefore incompatible with WTO rules. The Organisation itself came out in support of this view in 2002, ruling the Byrd amendment illegal.

Compliance Law

In January 2007, Canadian Finance Minister, Jim Flaherty, announced proposals to improve the taxation of financial institutions by better aligning the current tax rules with new accounting standards set out by the Accounting Standards Board that came into effect as of October 1, 2006.

"The proposals I am putting forward will reduce the compliance burden on financial institutions and improve the economic efficiency of the tax system by improving the measurement of income and capital for tax purposes," he explained.

The proposals related to the mark-to-market properties (in particular, specified debt obligations) held by all financial institutions, policy reserves that are deductible by insurance corporations in computing income for tax purposes, and the minimum tax for life insurance corporations resident in Canada. These proposals were designed to be broadly revenue-neutral.

In August, 2006, the Cayman Islands Monetary Authority (CIMA) and the Office of the Superintendent of Financial Institutions Canada (OSFI) signed a memorandum of understanding that will provide a framework for cross border cooperation between the two countries.

The MoU, signed 16 May 2006, establishes a protocol for the sharing of information and protection of information shared, cooperation regarding on-site inspections carried out by one regulator on supervised financial institutions in the other jurisdiction, and ongoing coordination.

OSFI is responsible for regulating and supervising all federally chartered, licensed or registered banks and insurance, trust and loan companies, as well as cooperative credit associations and fraternal benefit societies in Canada.

CIMA General Counsel, Mr Langston Sibblies, noted that the agreement was important since OSFI, as the federal regulator, has jurisdiction in all of Canada's provinces.

"The MoU will allow us to develop cooperative relationships in a structured and clear way and will further enhance supervision of Canadian entities operating here, particularly in the banking sector," he observed.

The MoU is subject to the domestic laws of both jurisdictions, as with other memoranda.

Mr Sibblies continued: "One area of concern for OSFI in negotiating the MoU was the preservation of confidentiality of information that would be provided under the agreement and the assurance that information received would be used for lawful supervisory purposes.

"On examination of our respective legislation we were both satisfied that our laws governing information exchange and deterring financial crime are equivalent. This facilitated the establishment of the MoU."

The Monetary Authority now has bilateral information exchange agreements with eight overseas regulatory authorities, and a multilateral MoU with eight authorities in the Caribbean.

CIMA's Managing Director, Mrs. Cindy Scotland, said this latest agreement underscored the importance Cayman, as a major financial centre, placed on international cooperation.

"The MoU with OSFI again demonstrates our commitment to assist overseas regulators in a manner consistent with Cayman's laws as we pursue our mission of creating a competitive and internationally recognised financial services industry," she stated.

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