Private mortgage deals often move fast, rely on relationships, and lean on professionals to make transactions feel safe. A recent Law Society of British Columbia discipline decision is a reminder that comfort and credibility are not substitutes for controls—especially when a lawyer is involved in moving funds and documenting transactions. In Law Society of BC v. Soon, the hearing panel found professional misconduct where a lawyer used his firm trust account as a conduit for substantial loan-related funds that were not directly tied to legal services, acted despite serious conflicts involving lending companies he controlled, and kept trust records that were not readily traceable without forensic reconstruction. The practical takeaway for private lenders, mortgage brokers/administrators, and counsel is straightforward: if custody of funds, conflict disclosure, and accounting aren’t clear, documented, and auditable, “running it through a lawyer” can amplify—rather than reduce—risk. What the tribunal decided (high level) The Law Society issued an amended citation alleging eight categories of misconduct spanning roughly 2015–2020. The panel concluded the Law Society proved professional misconduct on each allegation, including: Misuse of trust: receiving and disbursing trust funds in circumstances where the funds were not directly related to legal services. Conflicts of interest: acting for clients in lending transactions while the lawyer had a direct or indirect financial interest in lending companies involved, including situations that effectively put the lawyer on both sides of the deal. Trust accounting failures: hundreds of deposits, withdrawals, and inter-ledger transfers recorded in a way that was not chronological, not easily traceable, and not supported by the required source/client/transfer documentation. Notably, the panel emphasized that even without proof of client loss or bad faith, the conduct was still a “marked departure” from what is expected of lawyers—particularly given the public importance of trust accounts and conflict rules. Why this matters to private mortgage lenders (not just lawyers) Private lenders and mortgage administrators often rely on lawyers for two things: (1) clean documentation, and (2) confidence that money is handled properly. This decision is a reminder that the appearance of structure—funds moving through a law firm trust account, documents prepared by counsel, long-standing relationships—can mask weak internal controls. From an industry standpoint, the risks fall into three buckets: Custody risk: Where exactly is the money held, and under what rules? Conflict risk: Is anyone advising you while having a financial stake in the deal? Traceability risk: If something goes wrong, can you reconstruct what happened quickly and conclusively? Key lessons (with practical implications) 1) A law firm trust account is not a general-purpose escrow for a lending business The panel treated it as serious misconduct to use trust for funds not tied to legal services. In the decision, the lawyer used trust as a conduit for ongoing lending cash flows and other non-legal transactions, including reallocations intended to cover shortfalls elsewhere. Industry lesson: “Put it through my trust account” should not be treated as a default operational model for a private lending program. If counsel is acting as true closing escrow for a discrete transaction, that’s one thing. If trust is being used as a standing bank account for the lending business, that is a red flag. Control to adopt: Maintain lender/investor funds in a dedicated operating or custodial structure designed for the business (and compliant with applicable mortgage administration rules), and limit counsel trust usage to transaction-specific legal closings with written directions and prompt payout. 2) Conflicts aren’t solved by familiarity, sophistication, or verbal understandings The panel repeatedly returned to the same theme: conflicts rules exist to protect clients and public confidence, and they require meaningful disclosure and informed consent—typically documented. In Soon, the lawyer’s interest in the lending companies created a clear conflict problem, especially where the lawyer also acted for borrowers or co-lenders. Industry lesson: Even when the borrower is experienced, even when “everyone knows” the relationships, and even when deals have historically performed, undisclosed conflicts can undermine the integrity of the transaction and create significant downstream risk (regulatory, reputational, and potentially civil). Control to adopt: Make conflict checks and conflict disclosures an operational requirement, not an afterthought. Where a lawyer, broker, or administrator has a financial interest in a lender entity or in a transaction, require: written disclosure of the interest, written informed consent where appropriate, and in many cases, separate independent counsel. 3) “Blanket authority” to deploy investor funds is high risk without hard guardrails In the decision, one lender client allegedly gave broad authority to the lawyer to use its funds in lending transactions, with limited oversight. That structure—combined with undisclosed co-lending and limited reporting—created a setting where losses and reallocations could occur without timely transparency. Industry lesson: If your model involves discretionary deployment of investor funds, your documents must be built for accountability: approvals, reporting, limits, and auditability. Control to adopt: Add clear contractual controls around: investment mandate and prohibited transactions (including related-party/co-lending limits), approval thresholds (what must be pre-approved), default/loss reporting timelines, investor statements and reconciliation standards, and audit/inspection rights. 4) Recordkeeping failures are not “technical”—they are the mechanism that allows problems to grow The panel found the trust records were so unclear that investigators had to reconstruct activity through forensic cross-referencing of handwritten notes, bank journals, deposit slips, cheques, and other documents. Transfers between client ledgers lacked required explanations and approvals; deposit sources were misrecorded; and client identification was inconsistent. Industry lesson: In private lending, recordkeeping is not clerical. It is the control surface for fraud prevention, dispute resolution, regulatory compliance, and investor confidence. Control to adopt: Require a system where every dollar can be traced from: investor source → loan advance → borrower repayment → distribution with clear identifiers (loan ID/file ID), dates, payor/payee, purpose codes, and authorization records—no bundling, no “catch-up” allocations, no unexplained inter-file transfers. Red flags private lenders should watch for Use this as a quick screen when onboarding or reviewing a lawyer, broker, or administrator involved in your deals: Trust account used for ongoing business cash flow (not just closings). “It will look more legitimate if Read more
Bill C-15 (Budget Implementation Act) received Royal Assent on March 26, 2026, and includes a new Stablecoin Act establishing a federal, Bank of Canada–supervised regime for fiat-backed stablecoins used for payments (and as a store of value). The legislation is not fully in force yet; detailed regulations and the official in-force date are still to be finalized, with implementation expected in 2027.
What’s in the framework:
Bank of Canada supervision plus registration: issuers must register and comply with ongoing oversight and reporting.
1:1 reserves: full backing by high-quality liquid assets in the referenced currency, held with appropriate safeguards (including custody expectations).
At-par redemption: a clear policy enabling holders to redeem at face value in the referenced fiat currency.
No yield: the Act prohibits interest/yield paid to stablecoin holders.
Scope: targets fiat-backed stablecoins used across provinces or internationally, while generally excluding closed-loop systems.
Timeline / what to watch:
Now (post–Mar 26, 2026): enabling work begins; industry engagement ramps up.
2026: draft regulations expected from the Department of Finance, typically published in the Canada Gazette for consultation.
Anticipated 2027: in-force date and transitional runway for issuers and market participants.
This also appears designed to complement Canada’s broader payments oversight architecture, including the Retail Payment Activities Act (RPAA), bringing more wallet providers and payment service providers into federal supervision.