Last week (May 8 to be exact) the federal government published draft regulations relating to the use of electronic documents by federally regulated financial institutions. These regulations are part of a process that began in 2005 to harmonize and modernize legislation governing banks, insurance companies, trust companies and cooperatives.

The new regulations set out the general requirements that such institutions must meet in order to use electronic documents when dealing with stakeholders. You can find links to the draft regulations and a regulatory impact analysis at the end of this post.

Here’s the Coles Notes summary:

• electronic documents related to securities transfers are excluded;
• electronic documents must be in clear and simple language that is not misleading
• a requirement to provide a document may be satisfied by making the document available through a generally accessible electronic source (such as a website) and giving notice (whether paper or electronic) to the person to whom the document must be provided, unless there’s a requirement under the legislation to deliver to a specific place, in which case the website mechanism won’t work;
• consent to receive electronic documents can be obtained from addressees in writing (paper or electronic) or orally, but, unless it’s just a one time consent, they must be notified in writing (paper or electronic) regarding:
  • when their consent  is effective,
  • that they can revoke their consent,
  • that they are responsible for updating the address to which electronic documents are delivered, and
  • that the sender will only retain electronic documents for a specified period, following which it becomes the responsibility of the recipient to retain a copy
• the notification or consent above, if in electronic form, must be provided in a form that can be retained by the recipient for future reference
• consent must include address designated for receipt and a list of notices covered by the consent and, if consent is provided orally, the sender must confirm such information, as well as that in the original notice, in writing (paper or electronic)
• consent can be revoked in writing (paper or electronic) or orally
• revocation must be confirmed in writing and when it takes effect and, if provided in electronic form, must be accessible and capable of being retained for future reference
• an electronic document is considered provided to someone when it:
  • leaves an information system in the control of the sender, or
  • when it is posted or made available through the secure website of the sender (no reference to a notice needing to be sent to them)
• an electronic document is considered received by someone when it:
  • enters the information system designated by them
  • it is posted or made available through the secure website of the sender, or
  • the recipient receives the notice mentioned in the third bullet above (i.e. when posting to a website, the notice alerting the recipient that it’s available)
• electronic signatures must consist of letters, characters, numbers or symbols in digital form incorporated, attached or associated with an electronic document

Not quite clear to me why the provision on sending doesn’t refer to the alert notice being sent. Nor is it clear to me what the reference to “secure” websites means. But apart from those nits, one of the good things about these new regulations is that they expressly provide for a mechanism that permits the delivery of electronic documents by posting to a website, combined with the delivery of a notice (which can of course be much shorter) that the electronic documents are available. In contrast, other acts, such as the Ontario Consumer Protection Act and its associated regulations do not expressly permit such a mechanism when it comes to delivery of “internet agreements” – for example, s. 33(3) of the regulations indicate that an internet agreement is considered delivered by:

1. Transmitting it in a manner that ensures that the consumer is able to retain, print and access it for future reference, such as sending it by e-mail to an e-mail address that the consumer has given the supplier for providing information related to the agreement.

2. Transmitting it by fax to the fax number that the consumer has given the supplier for providing information related to the agreement.

3. Mailing or delivering it to an address that the consumer has given the supplier for providing information related to the agreement.

4. Providing it to the consumer in any other manner that allows the supplier to prove that the consumer has received it.

Similarly, the equivalence rules in the Ontario Electronic Commerce Act specifically exclude the posting of information to a website as satisfying a legal requirement to provide information or a document in writing:

10. (1) For the purposes of sections 6, 7 and 8, electronic information or an electronic document is not provided to a person if it is merely made available for access by the person, for example on a website.

Same

(2) For greater certainty, the following are examples of actions that constitute providing electronic information or an electronic document to a person, if section 6, 7 or 8 is otherwise complied with:

1. Sending the electronic information or electronic document to the person by electronic mail.

2. Displaying it to the person in the course of a transaction that is being conducted electronically.

Though in both cases there is some room either to argue that a web-based posting could satisfy the requirements of either act (e.g. posting to a website plus sending a notice of availability would not be “merely” making the information available on a website), it’s certainly not as expressly permitted as in the new draft regulations.

Of course, the regulations should be read in connection with the corresponding provisions (Bank Act – scroll down to Part XVIII, Insurance Companies Act – scroll down to Part XX, Trust and Loan Companies Act – scroll down to Part XIV.1, Cooperative Credit Associations Act – scroll down to Part XVII.1) in each act relating to the use of electronic documents.

Links to draft regulations: Regulatory Impact Analysis; Bank Regulations; Insurance Company Regulations; Trust and Loan Companies Regulations; Cooperative Credit Associations Regulations