Already smarting from restrictions imposed by the National Do Not Call List, many in the financial services industry are concerned that a federal anti-spam initiative could deal a body blow to advisors\u2019 networking activities, including the use of referrals and social websites such as Facebook.
Quietly introduced in April, the legislation, formally known as Bill C-27, is now attracting greater scrutiny and there are growing demands for change. Commentators say that the legislation is overzealous in its attempt to curtail the global flood of spam hitting Canadian inboxes and will end up squashing vital domestic marketing activity at the same time.
\u201cThere have to be some serious modifications to the legislation,\u201d says Peter Tzanetakis, vice president of regulatory affairs for Advocis<\/b>. \u201cEqual weight should be given to reducing spam [vs] business considerations, in order to facilitate the use of modern technology as a means of conducting business. It\u2019s really a matter of economic policy.\u201d
If a goal of the proposed legislation is to promote legitimate e-commerce, as the government states, he adds, that objective is seriously at risk, given the bill\u2019s current form.
A review of the proposed legislation by senior e-commerce lawyers with McCarthy T\u00e9trault LLP<\/b> highlights potentially serious problems and concludes that it uses \u201coverly broad language\u201d that could \u201ccircumscribe legitimate business-to-business marketing.\u201d
The lawyers\u2019 note states that the bill, as currently drafted, will \u201cprohibit the formation of new business relationships over the Internet or through email.\u201d
Welcome to the brave new world of regulating rapidly changing communication technologies. With consumers and businesses flooded with unwanted emails and computer-generated telephone calls, the government stepped in last year to begin the task of stemming the tide.
Its first attempt at regulation \u2014 the DNCL \u2014 was hailed as badly needed relief for consumers inundated by a telephone marketing onslaught, often from foreign sources. That attempt, which established a voluntary \u201cdo not call\u201d registry, is now widely viewed as impractical, with many individuals who placed their names on the list complaining that the volume of calls has increased rather than the opposite.
It now appears that the government is giving serious consideration to regulating telemarketing under the new act \u2014 essentially, by treating it as spam. Thus, instead of a voluntary system of registration, all calls of a certain character would be prohibited, unless there is express consent. If that step is taken, the legislation creating the DNCL will be repealed.
In general, Bill C-27 proposes a system under which a wide range of \u201ccommercial electronic\u201d messages are prohibited; these include text, sound, voice or image (such as cellphone text messages) sent to an electronic address with the goal of encouraging participation in a commercial activity.
The bill then sets out a number of specific exceptions to this general rule, including either pre-existing relationships (business or non-business), or circumstances in which there is express or implied consent.
The bill includes a variety of definitions, such as what amounts to an existing business relationship. Typically, that appears to be some aspect of ordinary business dealings within the past 18 months. If such a relationship does not exist, the sender must obtain express consent to send the electronic communication, including supplying detailed information such as the purpose of the message, the identity of the sender and contact information for the sender.
While introducing Bill C-27, the government said that the bill was designed to \u201cprotect consumers and businesses from the most dangerous and damaging forms of spam\u201d \u2014 singling out obvious issues such as phishing, identity theft and online fraud.
There is virtually no disagreement on the need to curtail these activities and to impose penalties that will have a deterrent effect.
It\u2019s also obvious that the Internet is only going to become more significant, in terms of economic activity. Government documents say that online commerce now represents about $60.7 billion in Canadian sales, and that about 80% of global Internet traffic is spam.
But the Investment Funds Institute of Canada<\/b>, much like Advocis, says that Bill C-27 overreaches. \u201cIt\u2019s a very heavy-handed piece of legislation,\u201d says Jon Cockerline, IFIC\u2019s director of policy. \u201cWe think it has some valid objectives, but it is going too far.\u201d
Cockerline suggests, for instance, that unwanted email messages that have been individually addressed and drafted with particular individuals in mind do not fall into the same category as those sent out in bulk \u201cblasts\u201d that indiscriminately target a group, such as those who live in a particular postal code.
@page_break@Indeed, the McCarthy T\u00e9trault commentary on Bill C-27 notes that other countries that have already legislated in this area specify that prohibited spam must include an element of fraud or deceit. International legislation also typically targets messages gathered by automated means and sent in bulk, while the Canadian bill does not.
Furthermore, the lawyers\u2019 commentary notes that the requirement to obtain express consent to send an otherwise prohibited email is \u201cstringent.\u201d It also points out what appears to be a Catch-22: \u201cIt is not possible to seek consent electronically, because such a request itself would be a prohibited electronic message.\u201d
Many advisors and others who deal with investors are also concerned that the legislation will put a serious crimp in their efforts to use social groups and websites to pursue business, says Neil Taylor, vice president of marketing with Investors Group Inc. <\/b> in Winnipeg. Most of these groups have their own rules about what is appropriate to discuss during group activities, he adds, and that approach has worked well in the past.
\u201cCanadians are worldwide leaders in using social-networking websites,\u201d Taylor says. Although the legislation takes some steps to recognize these kinds of relationships, he notes, it specifically needs to recognize the central importance of social websites \u2014 now and in the future \u2014 as well as other more traditional social groups, such as Rotary clubs, when it comes to making business connections: \u201cWe think it\u2019s really important that [exceptions for] those established social-networking relationships be included in the legislation.\u201d
Both IFIC and Advocis, in their submissions to the standing committee on industry, science and technology, have focused on a variety of specific commercial communications they say are normal commercial practice, are essential for building business and which they say are likely to be prohibited by the new bill.
These include referrals, the lifeblood of many advisors\u2019 practices. Tzanetakis says that Advocis has strongly recommended that the legislation contain a specific exemption for business referrals. Otherwise, he says, it\u2019s quite possible that advisors who try to follow up a referral with an email \u2014 without the express consent of the potential client, which could be time-consuming and impractical to obtain \u2014 will be caught by the legislation.
\u201cPotential clients demand instant communication and access to professionals,\u201d Tzanetakis says. \u201c[Bill C-27] imposes a lot of restrictions and limits the type of legitimate business activities that currently are undertaken by advisors\u201d \u2014 as well as many other types of professionals following up on referrals.
IFIC\u2019s submission has also recommended that an exception for \u201clegitimate marketing initiatives\u201d be added to the bill, including those from one business to another. Businesses that do not wish to receive such messages, IFIC suggests, can post this information on their websites.
In addition, IFIC has expressed deep reservations about the penalties contained in Bill C-27. These include significant consequences, such as fines of up to $1 million for individuals found to have violated the legislation, and up to $10 million for companies.
These penalties can be imposed without a formal trial (they would be enforced by the CRTC) and can extend to officers, directors and agents of a company: defences include the exercise of due diligence to prevent a violation.
There is also an unusual provision in Bill C-27 that allows private individuals to launch a court action for certain offences. The fines in those cases are limited to $200 for each violation, not to exceed $1 million for violations on any particular day.
Ultimately, the biggest concern, critics of the bill say, is that ordinary marketing activities carried out by financial advisors will turn into a minefield of business-stifling roadblocks.
\u201cOur members are extremely concerned that the current draft [of Bill C-27] is much too broad. It captures a whole host of legitimate business practices and seems to intrude on the current business practices that they have relied on for many, many years,\u201d Tzanetakis says.
\u201cWe would love to see some of the modifications that would clarify some of those issues and allow legitimate business communications to continue in Canada.\u201d
Bill C-27 received second reading in May and was referred to the House of Commons standing committee; the committee is currently hearing submissions. The committee\u2019s email address is:
INDU@parl.gc.ca. <\/i>\tIE<\/b>
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