July 18, 2011

Lawyers must disclose commissions in investor immigrant matters

July 18, 2011

Editor’s note:

On January 1, 2013, the Professional Conduct Handbook was replaced by the Code of Professional Conduct for British Columbia. Where references are made to the Handbook in this advisory, please replace as follows:

Chapter 9, rule 7 with Chapter 3, rule 3.6-1 of the new Code
Rule 8 with rule 3.6-1, commentary [2] of the new Code
Chapter 7 with Chapter 3, rule 3.4 of the new Code

Immigrants to Canada under the “Investor Category” are required to make substantial interest-free loans to the government. Those loans are usually financed and/or facilitated through Canadian financial institutions. The financial institutions will pay significant commissions to the lawyers who act for the investor immigrants.

The Law Society has become aware that some lawyers do not fully disclose to their clients receipt of these commissions or their amounts, contrary to the ethical obligations set out in the Professional Conduct Handbook.

Chapter 9, Rule 7 of the Handbook states that a lawyer must fully disclose to the client any fee that is being charged or accepted. Rule 8 states that a lawyer must not take any commission without making full disclosure to the client and obtaining the client’s consent.

It is important for lawyers who act for immigrant investors to fully comply with these provisions. It is not sufficient to merely inform the client in the retainer agreement that the financial institution will pay a commission. The client must be advised of details of the commission, and such disclosure should be in writing. The client can then consider the ramifications and provide informed consent.

The Ethics Committee recently considered what lawyers should do if the amount of commission is not known at the time the client signs the initial retainer agreement. The Committee gave the opinion that, “Rule 8 requires the lawyer to give a bona fide estimate of the amount of the commission to the client before the precise amount is known, and to advise the client about the precise amount when the lawyer knows the amount.”

Lawyers practising in this area should also consider the provisions of Chapter 7 of the Professional Conduct Handbook regarding conflicts of interest between lawyer and client.

The Law Society will investigate any complaints made about the receipt of such commissions, and disciplinary action may follow if full disclosure has not been made and consent obtained.

For more information, contact a Practice Advisor.