Insights Header image
Insights Header image
Insights Header image

Registered Dealers, Advisers and Entities Relying on Registration Exemptions Take Note – Canada adds New Individuals to its Sanctions List

January 2019 Capital Markets Bulletin 2 minute read

On November 29, 2018, Canada amended the Regulations to the Justice for Victims of Corrupt Foreign Officials Act (the “Act”) to add targeted sanctions against 17 Saudi nationals (each, together with the other foreign nationals listed in the Regulations to the Act, a “Sanctioned Individual”) linked to the October 2, 2018 murder of journalist Jamal Khashoggi at the Saudi Arabian consulate in Istanbul, Turkey.

The Act, also known as the “Sergei Magnitsky Law”, named after a lawyer in Moscow who uncovered the largest tax fraud in Russian history and was subsequently detained without a trial and tortured, dying in a Moscow prison in 2009, is meant to provide for sanctions in respect of foreign nationals responsible for gross violations of internationally recognized human rights.

The sanctions effectively freeze any assets linked to Canada or to Canadians that are owned by, or held for the benefit of, a Sanctioned Individual.

The Act allows the Canadian government to place restrictions and prohibitions on Canadians transacting with foreign nationals.  The targeted sanctions prohibit all persons in Canada, or Canadians outside of Canada, from:

  • (in)directly dealing with any property (wherever located) of a Sanctioned Individual;
  • making available any property (wherever located) to a Sanctioned Individual or to a person acting on their behalf;
  • (in)directly entering into or facilitating financial transactions with/for a Sanctioned Individual; and
  • providing or acquiring any services for the benefit, or on the direction, of a Sanctioned Individual.

The Act also places ongoing monitoring obligations on numerous entities conducting business in Canada, including registered Investment Dealers, Mutual Fund Dealers, Exempt Market Dealers and Portfolio Managers under Canadian securities laws; as well as entities relying on exemption(s) with respect to such registration(s) (each, a “Reporting Entity”).

Each Reporting Entity is required to determine, on an ongoing basis, whether it is in possession or in control of any property that it has reason to believe is the property of a Sanctioned Individual and such determinations are required to be reported on a monthly basis. The Canadian Securities Administrators published Staff Notice 31-352 – Monthly Suppression of Terrorism and Canadian Sections Reporting Obligations (the “Notice”) to assist Reporting Entities with their monthly reporting obligations. More information about the Notice can be found in our March, 2018 McMillan Client Alert. Such monthly reports are due to be filed with the Reporting Entity’s principal regulator the 14th day of each month.

We recommend that all registered dealers and advisers (including entities relying on exemption(s) from such registration(s)), update their list of Sanctioned Individuals as the financial, criminal and reputational consequences for the failure to comply can be harsh.

Please contact a member of McMillan’s Investment Management Group if you have any questions with respect to these changes or the reporting obligations noted above.

by Hari Marcovici, Leila Rafi and Michael Burns

a cautionary note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2019

Insights (5 Posts)View More

Featured Insight

Changes to the Competition Act: What Merging Parties Need to Know

The Competition Act's amendments to Canada's merger review regime are significant, and merging parties should take note.

Read More
Jul 24, 2024
Featured Insight

AI Data Centre Development in Alberta

AI is on the rise and data centres are needed. Alberta provides unique opportunities to develop AI data centres and McMillan has the expertise to get it done.

Read More
Jul 24, 2024
Featured Insight

Court of Appeal of Alberta to Reconsider Whether Gross Overriding Royalties Run With The Land

Alberta Court of Appeal has agreed to hear an appeal which could clarify royalty agreement interpretation and when gross overriding royalties can be vested off

Read More
Jul 24, 2024
Featured Insight

(Class) Actions Have Consequences

A party who initiates a class action in BC, arguing that BC is the appropriate jurisdiction, will later have difficulty transferring the proceeding to Ontario.

Read More
Jul 23, 2024
Featured Insight

New Criminal Rate of Interest Comes into Effect January 1, 2025

Commencing January 1, 2025, the criminal rate of interest is changing for certain types of loans.

Read More
Jul 22, 2024