The Power of Perspectives

The Canadian Bar Association

National Blog

Splitting the roles of the GC and the chief compliance officer?

By Yves Faguy February 19 2013 19 February 2013

    The separation of powers versus the combining of roles between general counsel and the chief compliance officer has become, over the years, the subject of heated debate. Michael W. Peregrine, a partner at the U.S. law firm McDermott Will & Emery, discusses lessons learned from JP Morgan’s $6-billion trading loss last year. The bank’s internal analysis revealed that its risk policy committee hadn’t been made aware (in a timely manner that is) of the full extent of the risks related to bets made by the bank on credit derivatives. Peregrine takes note of one particular recommendation from the report that should be of interest to those responsible for risk oversight practices:

    One of the most direct recommendations in the report relates to the independence of compliance and risk managers. An emerging view is that these managers should now report directly to the chief executive and not to a company’s general counsel. (Last month, JPMorgan said it had changed the chain of command so that its head of global compliance and regulatory management will report directly to the bank’s chief operating officers).
    Moreover, the title and compensation of compliance and risk officers should command the same heft and responsibility of the post. Also proposed is a greater link between executive compensation and satisfaction of the board’s risk reporting standards.

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    Why are securities class action filings dropping?

    By Yves Faguy February 17 2013 17 February 2013

      NERA Economic Consulting reported last week that the number of securities class action cases filed in Canada dropped from 15 in 2011 to nine in 2012. It’s hard to draw comparisons with trends in the U.S., given the much smaller sample size. Nevertheless:

      In previous years, trends in US securities class action filings have tended to be reflected in Canadian filings. For example, last year we noted that the three Canadian filings against Chinese companies with securities listed on North American exchanges—Sino-Forest, Cathay Forest Products, and Zungui Haixi Corporation—reflected one of the trends driving filings in the US. Trends in US filings from 2008 to 2010 relating to options manipulation, Ponzi schemes, and the credit crisis were also reflected to some extent in Canadian filings.

      In 2012, the abatement of these recent trends was evident on both sides of the border. In the US, only four cases filed in 2012 related to the credit crisis (down from a high of 103 in 2008), none of the filed cases involved allegations of a Ponzi scheme, and only 16 cases were filed against Chinese-domiciled companies (down from 37 in 2011).5 In Canada none of the cases filed in 2012 related to any of these trends.

      Dimitri Lascaris and Daniel Bach run through the possible explanations behind the drop, from limited resources on the side of the plaintiffs’ bar to recent court decisions that have “caused some plaintiffs’ firms to become more reluctant to pursue securities class actions.” Ultimately the two authors propose another explanation:

      The reforms to the Securities Act are working. Fresh research in the United States by professors Stephen Choi, of the New York University School of Law, and Adam Pritchard, of the University of Michigan Law School, shows that securities class actions provide at least as much deterrent – if not more – than enforcement actions by the U.S. Securities and Exchange Commission. We believe that the spectre of multimillion-dollar lawsuits, years of litigation and reputational damage to culpable defendants have helped deter stock fraud. We believe that there are fewer filings because there are fewer good cases, and there are fewer good cases because more of Ontario’s public companies are complying with their disclosure obligations. This is precisely what Ontario intended when it modernized the Securities Act in 2005.

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      Insolvency and environmental clean-up costs

      By Yves Faguy February 13 2013 13 February 2013

        After last week’s post on the Indalex case, we caught up recently with Dianne Saxe of Saxe Law Office in Toronto, and asked her to comment on another recent SCC insolvency ruling (from December), in Newfoundland and Labrador v. AbitibiBowater Inc.

        Whereas the Indalex ruling hung on the conflict between insolvency law and pension law, the AbitibiBowater case presented the challenge of deciding whether the government of N&L could force an insolvent AbitibiBowater, which had obtained a stay of proceedings under the Companies’ Creditors Arrangement Act, to pay for an environmental clean-up ordered by the province. The SCC ruled that the province’s environmental claim has to be paid in accordance with federal insolvency law.

        We asked Saxe in this video to explain what the impact of the decision will be for the provinces, taxpayers and companies that are still in operation. And sticking to the theme of who should pay for clean-up costs when polluting companies become insolvent, Saxe also raises a few red flags about the attempt by the Ministry of the Environment in Ontario to force directors of what was formerly Northstar Aerospace (now out of business) to cover clean-up costs related to contamination dating back to before they were appointed.


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        The Indalex ruling explained

        By Yves Faguy February 4 2013 4 February 2013

          Rachel Arbour of Hicks Morley in Toronto answers our questions about the Indalex ruling, handed down by the Supreme Court last week, and what it means for both pensioners and plan sponsors:

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          The royal baby bill: Do the provinces have a say?

          By Yves Faguy January 31 2013 31 January 2013

            There have been some amusing exchanges in the twitterverse over the law introduced in the House of Commons today aimed at changing the royal succession rules to make them compatible with announced changes to those in the UK. The question for many has been whether Canada’s assent is enough to incorporate the new rules into our own laws or whether we need a full-blown constitutional amendment. Scholars will certainly get a kick out of this paper by Anne Twomey of the University of Sidney (hat tip: Philippe Lagassé), who takes us from the pre-Statute of Westminster days, through the abdication crisis of 1936 and up until today. But first here’s some context explaining why both the Gordon Brown and David Cameron governments have treaded carefully with the matter of changing the laws of succession in the first place:

            One of the notable aspects of the debate on this Bill was the confusion about whether all Commonwealth countries would have to be consulted about it, or whether consultation was confined to the 15 other Realms. It was even suggested that all the British overseas territories would have to be consulted, as well as devolved administrations, such as Scotland. There was also confusion about whether mere consultation was required, which could be done by a phone call, or whether the Parliament of each of these polities would have to legislate prior to the United Kingdom Parliament enacting its legislation.

            The problem, Twomey explains, lies in the wording of the Statute of Westminster (more after the jump).

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            A new era of collaboration

            By Robert Brun January 31 2013 31 January 2013

              I had the great pleasure recently of speaking at the swearing-in ceremony of Mr. Justice Richard Wagner of the Supreme Court of Canada. 
              As one might expect, our newest appointee to the top court has impeccable credentials. But what really struck me about his legal career is this: Richard Wagner is a man who does not back down from a challenge. That’s why I wasn’t surprised to read that not long after his swearing-in, he sounded a warning to government and the judiciary about access to justice.
              Justice, he told The Globe and Mail, is quickly becoming beyond the reach of many Canadians. Furthermore, the failure to ensure access to justice can create serious problems for democracy. “What we see is a common problem across the provinces,” he said. “First of all, we should talk to each other.” He is calling for a national summit that would bring together lawmakers and the judiciary from across the country to start a dialogue.
              The CBA identified some of the tough questions that need to be asked when it launched the Envisioning Equal Justice initiative last summer. For example: Can we be innovative to improve access to justice without absolving governments of their role in legal aid? How much pro bono can lawyers reasonably be expected to provide? How can we recognize the different legal needs of low- and middle-income people?
              On April 25-27, the CBA will begin a new era of strategic collaboration with a national access to justice summit in Vancouver. Mr. Justice Thomas Cromwell of the Supreme Court of Canada will deliver the keynote address.
              The time has come for action. Lawyers recognize it. The judiciary recognizes it. Too many people are slipping through the cracks of the justice system.
              We can’t shy away from that challenge.
              Send your comments to

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              Lights, camera, action!

              By Beverley Spencer January 31 2013 31 January 2013

                Lawyers are not exactly famous for being cutting-edge innovators or for quickly adapting to change for that matter. As legal futurist Richard Susskind jokes, there’s a reason you don’t find many lawyers on Twitter: They’re still waiting for it to take off.
                This issue features five examples of practitioners who put paid to the idea that lawyers have trouble adapting, whether it’s to new technology or to a new way of doing business. These experienced entertainment lawyers have witnessed a sea change in the industry and had to adapt their practices accordingly. And they’re thriving.
                The role of lawyers in the entertainment industry was radically redefined as new technology ranging from iPads to e-books revolutionized how the world consumes entertainment. The client base is different, the law is advancing in leaps and bounds and the deals are more complicated than ever.
                Major label deals are being overtaken by a greater variety of creative smaller deals and non-traditional players are entering the field as everyone scrambles for new ways to monetize products. Intellectual property law is barely keeping pace with new developments.
                Some of the changes have made work more efficient — Dean Chenoy of Heenan Blaikie says that 15 years ago, it would have taken him several days to accomplish what he does today in just one. On the other hand, the pace is faster; clients want answers right away — sometimes within the hour.
                Does any of this sound familiar? It should. Not every practice area has seen this much change, but there are common themes that will resonate with most practitioners: technology is redefining both industry and service delivery; client demands are ramping up; and there is no such thing as coasting.
                Fortunately, there are a lot of examples in the profession of how to adapt. And how to thrive at the same time.
                Send your comments to

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                The Supreme Court ruling on unmarried couples

                By Yves Faguy January 28 2013 28 January 2013

                  Admittedly, the Supreme Court’s ruling last week on spousal support for unmarried couples affects Quebecers for the most part. That said, Canadians from other provinces are impacted by the questions surrounding the division of property rights. So here’s a round-up of commentary on the decision.

                  Yves Boisvert, notes that the ruling is a divided one in which the Chief Justice found herself in the middle but leaning on the side of validating the provisions of the Civil Code of Quebec.

                  It would seem, at first blush, that the judges were were split along gender lines: the women came down on one side, the men on the other.

                  In truth, what was really at stake in the Lola case was the very notion of what the role of judges should be. And the majority concluded that it is up to the National Assembly – not judges – to redefine or not [Quebec’s] conjugal regime for unmarried couples. It was the right decision. You simply do not marry one million people without asking them first. It is neither polite nor, from a legal standpoint, promising. [Our translation]

                  Angela Campbell writes that the decision might be better for women than some might think (more after the jump):

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                  The CBA intervenes in McKercher, ctd

                  By Beverley Spencer January 24 2013 24 January 2013

                    As a follow-up to our earlier post, you'll find the CBA's factum here. And if you want to listen in on the hearing, here's a link to the live webcast (accessible until around 11:30).

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                    The CBA intervenes in McKercher before the Supreme Court

                    By Beverley Spencer January 24 2013 24 January 2013

                      The CBA is at the Supreme Court of Canada today advocating for conflict of interest rules that don’t deny Canadians choice of legal representation when there is no need to do so.

                      The association is intervening in the case of CN v. McKercher LLP and Wallace, arguing that the scope of the duty to avoid conflicts of interest does not categorically prohibit acting directly adverse to the immediate interests of a current client.

                      Malcolm Mercer, Eric Block and Brendan Brammall of McCarthy Tétrault LLP acted as counsel for CBA on a pro bono basis. Malcolm Mercer explains the association’s position and the implications of the case for access to justice.

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                      Copyright and "I'm right to nuke you" ethics

                      By Yves Faguy January 21 2013 21 January 2013

                        Plenty has been written in the last week about the death of Aaron Swartz. Predictably, opinions tend to diverge sharply among supporters of content consumers vs. supporters of content owners (was Swartz hero or thief?)

                        But the more nuanced commentators are asking some rather pertinent questions about how our governments go about targeting alleged criminals and how they are prosecuting crimes. Food for thought for legal minds. Here’s Clive Crook in one of his last posts at the Atlantic:

                        By and large, American prosecutors no longer fight their cases at trial. The new dispensation is justice by plea bargain. The more savage the penalties prosecutors can threaten, the more likely the defendant (guilty or innocent) is to speed things along by pleading guilty and accepting a light penalty. According to the Wall Street Journal, Swartz was offered the choice of pleading guilty and going to jail for six to eight months, or else going to trial and taking his chances. The multiple counts and their absurdly savage sentences are best seen, just as the family said, as instruments of intimidation.

                        The prosecutor's bottom line, apparently, was that Swartz had to go to jail. In my conception of criminal justice, the prosecutor's role is to establish guilt, not pass sentence. Juries have already been substantially dispensed with in this country. (By substantially, I mean in 97 percent of cases.) If prosecutors are not only going to rule on guilt unilaterally but also, in effect, pass sentence as well, one wonders why we can't also dispense with judges.

                        Stephen Carter at Bloomberg calls the prosecution of Swartz ridiculous, but argues that the overly zealous lawmakers are the real problem. Drawing inspiration from Douglas Husak, author of the book Overcriminalization, he writes (more after the jump):

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                        Non-status Indians: The impact of Daniels

                        By Yves Faguy January 18 2013 18 January 2013

                          The recent Federal Court decision in Daniels v. Canada will no doubt have a major impact on a number of financial, legislative and political considerations of the federal government in dealing with non-status Indians. And yes, the ruling might yet be appealed before the Supreme Court. But for now it concludes that Métis and non-status Indians are “Indians” within the meaning of Section 91(24). It is worth noting though that the Federal Court did dismiss two other requests by the plaintiffs in Daniels – a declaration that Ottawa owes a fiduciary duty to MNSI as Aboriginal people; and that the feds have a duty to consult and negotiate with MNSI.

                          National contributor Brad Mackay had a chance to catch up with Joe Magnet (still recovering from a bout of laryngitis), who was the lead counsel representing the Congress of Aboriginal Peoples. Brad asked him to explain what was at stake, to tie the ruling to the Idle No More movement and to share his thoughts on what Canada needs to do to fix the legal relationship between Ottawa and Aboriginal people.

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