Banking

Foreign banks and entities associated with foreign banks that are not authorized under the Bank Act are prohibited from undertaking any business directly or indirectly, in Canada, except in limited circumstances. Furthermore, any prohibited activity carried out by an agent or nominee in Canada on behalf of a foreign bank constitutes an activity of the foreign bank. Therefore, a foreign bank or entities associated with a foreign bank that are not approved under the Bank Act cannot engage local agents to offer or provide products or services to residents of Canada.

A foreign bank and its financial agent are not within the regulatory purview of OSFI if they do not have any physical establishment in Canada andor if their business is not conducted in Canada. From a banking law perspective, there are generally no restrictions on residents of Canada engaging in offshore banking and becoming clients of a foreign bank that is not licensed in Canada, provided the foreign bank conducts business outside of Canada, a practice commonly referred to as "suitcase banking." In order to avoid being seen as conducting business in Canada, the products and services of the foreign bank must be provided outside Canada, with no agent or representative of the foreign bank having a business presence in Canada or traveling to Canada to carry on business.

The Bank Act does not provide guidance on the factors that OSFI may take into account in determining whether a foreign bank or an entity associated with a foreign bank is engaging in or carrying on business in Canada directly or through an agent or nominee. As such, in making its determination, OSFI generally assesses the facts and circumstances of each case to determine whether there is a sufficient connection between the activities of a foreign bank or an entity associated with a foreign bank and Canada. In making that determination. OSFI considers factors comparable to those often considered by judicial bodies in interpreting the concept of “carrying on business in Canada” under other statutes such as the Income Tax Act. For example, the place where agents, employees or technological or other assets of the foreign bank are located is  relevant criteria.

In its Ruling 2008-01, OSFI remarked that under the common law and even the Bank Act, promotional activities alone do not constitute, nor are deemed to constitute, carrying on business” in Canada.

Insurance

A “foreign entity” shall not insure in Canada a risk unless it is authorized by a Ministerial order made under the Insurance Companies Act. OSFI Advisory 2007-01-R1 Insurance in Canada of Risks provides guidance on key indicia to consider in determining, for the purposes of the Insurance Companies Act, whether a foreign entity is insuring in Canada a risk, and how OSFI will apply these indicia to a particular business model. It also provides guidance on  other matters related to foreign insurers in Canada. Ultimately, it is a fact-driven analysis that determines whether or not a foreign insurer is insuring in Canada a risk.

Provincial insurance law generally provides more specific restrictions on the activities of foreign insurers and their agents engaged in insurance business. Even if not subject to  the Insurance Companies Act, a foreign insurer would have to check the provincial licensing requirements in the context of the specific transaction being contemplated. Provincial regulation extends to all companies that do business in a particular province, regardless of whether they are incorporated under federal, provincial or foreign legislation.

For example, the Insurance Act of (Ontario) regulates the business of insurance in Ontario and requires every insurer undertaking insurance in Ontario or carrying on business in Ontario to obtain and hold a license. Even without a business presence in Ontario, a foreign insurer will be deemed to be carrying on business in Ontario within the meaning of the Insurance Act if such insurer, its employees, agents or other representatives market or solicit insurance products in Ontario, issue or deliver a policy of insurance in Ontario or collect or receive premiums in Ontario. Furthermore, a foreign insurer will be deemed to be undertaking insurance in Ontario if it maintains an action or proceeding in Ontario in respect of a contract of insurance.

Provincial insurance regulation also governs the form and content of insurance contracts, business and marketing practices, agent and broker licensing and conduct rules, and the handling of premiums.

Securities and derivatives

Generally, persons who are in the business of dealing in securities or derivatives directed to persons residing in Canada are required to register as a dealer unless an exemption from registration is available. Similarly, persons who are in the business of advising Canadian residents on securities or derivatives are required to register as an adviser unless an exemption from registration is available. Interpretation of Canadian securities laws takes a broad approach to the concepts of “trading,” “securities,” “advising” and “acting in furtherance of a trade,” so most activities involving securities of a company are caught in one way or another, including on a cross-border basis. The concept of a trade is defined broadly and notably includes any act, advertisement, solicitation, conduct or negotiation directly or indirectly in furtherance of a trade.

The issue of whether an entity is in the business of trading is referred to in securities laws as the "business trigger" test. A list of factors that securities regulators will consider when determining whether or not a person or a company’s  activities satisfy the business trigger test is included in the Companion Policy to National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations. These factors include whether the person or company intermediates trades for a business purpose (like a broker), engages in market-making activities, holds itself out to be a dealer, engages in trading activity for remuneration, or actively solicits traders.

Securities Laws also regulate the operation of "marketplaces," which includes exchanges, quotation and trade reporting systems, and alternative trading systems. Particular concepts, definitions and rules apply in the case of marketplaces.

Other financial services

Other provincial financial services statutes that require licensing may apply irrespective of the domicile of the financial services provider if the customer is located within the province or territory of Canada. This is particularly true for consumer financial services.