2016 CAIRP Forum OSB Debtor Compliance Program Overview Building a prosperous and innovative Canada

OSB’s Role and Responsibilities In combination with the work conducted by Licensed Insolvency Trustees (LITs), the Office of the Superintendent of Bankruptcy (OSB) contributes to ensuring that debtors who file a bankruptcy or proposal under the Bankruptcy and Insolvency Act (BIA) comply with their obligations. OSB’s activities within the debtor compliance program include: monitoring debtor compliance; examining bankrupts under oath; chairing the first meeting of creditors; referring matters to LITs; conducting civil interventions; conducting criminal investigations. 2

OSB – LIT Co-operation LITs play a pivotal role in the early detection and identification of potential non-compliance and bankruptcy offences. Collaboration and communication between LITs and OSB are key to ensure: potential non-compliance is detected; and offences are addressed in a timely manner with maximum results. OSB reviews and addresses referrals from LITs on a priority basis to ensure timely action. 3

Detection / Identification of Non-Compliance OSB identifies possible non-compliance and criminal offences mainly through review of: 1.Referrals from trustees through the Debtor Compliance Referral Program (DCRP); 2.Trend analysis and risk sampling; and 3.Complaints. Efforts are ongoing within the OSB to ensure debtor compliance activities are effective OSB is reviewing files identified from various tools and channels 4

Debtor Compliance Referrals by LITs Process Licensed Insolvency Trustees refer a file to OSB through E-Filing Collaboration between OSB and LITs to identify debtor misconduct and application of corrective measures Benefits LITs in-depth knowledge of files Relevant referrals enhance LIT credibility in eyes of creditors OSB debtor compliance activities may: Uncover additional assets and properties; and Provide additional evidence to support civil actions (by LITs or OSB) against non-compliant debtors. 5

Civil Interventions LIT involvement in files normally obviates the need for OSB intervention. OSB intervenes pursuant to the BIA in a number of circumstances including: opposing a bankrupt’s discharge; filing a report with the Court at the hearing into a bankrupt’s discharge; and intervening in the approval or review of a proposal in Court. 6

Civil Intervention Trends DCRP criteria trends: Inappropriate delivery / disclosure and behaviour are the two leading categories followed by inappropriate disposition of assets and lack of co-operation Debtor examinations focus on: the debtor’s conduct before and during bankruptcy; the causes of the insolvency; and the disposition of the debtor’s property. 7

Civil Intervention Trends (cont.) Most common basis for OSB intervention under s. 173(1) [Facts for which discharge may be refused, suspended or granted conditionally]: bankrupt brought on, or contributed to, bankruptcy; assets of the bankrupt are not of value equal to 50 cents on the dollar on the amount of the bankrupt’s unsecured liabilities; bankrupt failed to perform duties imposed by the Act or the court; bankrupt committed any offence under the Act or any other statute in connection; and bankrupt failed to account satisfactorily for any loss of assets or deficiency of assets. 8

Criminal Investigations Consequences Determined on a case-by-case basis Misconduct or fraud may lead to: Bankruptcy offences investigation by OSB’s Special Investigation Units (SIU) or the RCMP Special Investigation Units SIUs investigate and enforce provisions relating to offences under the Bankruptcy and Insolvency Act and the Criminal Code in relation to bankruptcy and insolvency matters. Comprised of former RCMP officers 9

Special Investigation Orders OSB can issue an investigation order (referring a matter for investigation to the SIU) when it has grounds to believe that an offence has been committed under the BIA or the Criminal Code. Upon completion of investigation, specific factors may lead to the recommendation of charges, for example: the dollar value of the alleged offence a reasonable expectation that evidence will be available to support the charges the seriousness of the attack on the public interest or the integrity of the bankruptcy and insolvency system 10

Special Investigation Orders (cont.) OSB works with Public Prosecution to determine whether charges will be laid. Common offences under s.198(1) [Bankruptcy Offences]: making fraudulent disposition of property; refusing or neglects to answer fully and truthfully; making a false entry or knowingly making a material omission in statements; and obtaining credit or property by false representation. 11

RCMP Investigations RCMP may investigate the following: Credit card abuse; Transfer of funds overseas; Company / director of company refuses to give access to company records or books relating to the now-defunct company or fails to disclose an asset or transfer of shares relating to a business; Bankrupt fraudulently disposes of, or conceals, property or funds prior to, or after, the date of bankruptcy; Bankrupt grossly fails to cooperate or to perform duties of a bankrupt; Bankrupt involved in other crimes. 12

Program Highlights Annually, the OSB: Receives on average 300 complaints against debtors from various sources, the majority of which come from creditors; Receives on average 240 referrals from trustee through the DCRP program; Reviews up to 3,000 to 4,000 estates and conducts up to 1,500 debtor examinations; Undertakes up to 200 civil interventions; and Issues up to 70 special investigation orders, many of which result in criminal charges. 13

Moving Forward in OSB is analyzing its detection and identification activities to maximize results. OSB is also exploring the use of external data and related analytics to support its efforts in strengthening program effectiveness. Success of our efforts to identify and address debtor non- compliance and offences is dependent on the LIT community’s support. Collaboration and communication between OSB and LITs are paramount to overall success. 14