Law 312 - Banking, Payment & Transfer Systems

Course Description

Banking, Payment & Transfer Systems (Law 312) examines the law governing a variety of payment and transfer systems including those furnished under the statutory regimes of the federal Bills of Exchange Act (BEA) (which pertains to the transfer of payment rights in bills of exchange, promissory notes and cheques) and the provincial Securities Transfer Act (STA) (which pertains to the transfer of rights in financial assets including share certificates, bearer bonds, and electronically held securities). Beyond these two statutes, students learn about the basic features of the bank-customer relationship and explore numerous other modern holding systems and payment mechanisms, gaining familiarity with the general infrastructure and processes underlying such systems and mechanisms. The course is divided into four parts. Part 4, not detailed herein, is a mandatory independent research project. Details of the first three substantive parts are set out below.  

Part 1 introduces the relationship between a depository bank and its customer, and focuses on the deposit account as an indispensable item of commerce and unique form of personal property in the modern age. The depository bank’s right of set-off, against its customer’s deposit account, is a key form of payment mechanism for depository institutions. Set-off also plays a key role in the operation of clearing and settlement systems for payments and transfers. On this topic, a general overview of Canada’s statutory and regulatory environment is undertaken, including a basic description of the Lynx high-value payment system (in Part 1C). Lynx was officially launched in September 2021, replacing the Large Value Transfer System (LVTS). Whereas the LVTS exhibited a deferred-settlement feature supported by a collective collateralization scheme, Lynx is a gross real-time settlement system. Each business day, Lynx processes payments worth approximately CDN$400 Billion. This figure is up considerably from approximately CDN$200 Billion processed daily through the LVTS in 2016.

Part 2 investigates the law of negotiable instruments set out in the BEA. The BEA is a late nineteenth century codification of the common law and the law merchant as it then existed. While modern electronic payment systems have displaced negotiable instruments in most consumer transactions, negotiable instruments continue to be used in a variety of commercial contexts. In 2020, nearly 7.8 Billion cheques and other payment items worth almost CDN$7.2 Trillion were processed through Canada’s ACSS, the workings of which are examined in Part 2 in the context of indirect cheque presentment. 

Part 3 explores the STA, a modern provincial statute which governs the transfer of both tangible and intangible financial assets. The law governing securities transfer systems has evolved to keep pace with modern technological advances. For negotiable financial assets with a tangible existence (like certificated securities), the STA substantially replicates the traditional approach of the BEA. The STA, however, has significantly broader application and scope since it also applies to intangible financial assets held in an indirect holding system. The STA, which took force in Saskatchewan in 2007, largely emulates UCC Article 8, and aims, among other things, to create greater uniformity across the highly integrated international financial markets.

Class Prize Winners

Marcus Kostick, 2021-22; Mark Hagen, 2019-20; Robert Emes, 2018-19; Adam Unick, 2017-18