2017 COMPLIANCE MEETING
BridgeForce Financial Group
Heather Driver
May 16, 2017
Windsor
Agenda
Government Reviews Related to
Financial Services
FSCO’s Statement of Priorities
FSCO’s Licensing and Market
Conduct Activities
Global Regulatory Cooperation
FSCO Enforcement Action
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Government Reviews
related to Financial
Services
FSCO - BridgeForce Financial Group
The financial services
sector is critical to Ontario’s
economic prosperity. In
2015, it accounted for
390,000 jobs across the
province, generating
almost 10 per cent of
Ontario’s GDP. The sector
helps finance new
investment and economic
activity across other sectors
of Ontario’s economy.
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Financial Services Regulatory Authority

Enabling legislation for the FSRA was passed in December 2016.

A Secretariat has been established at MOF to oversee the transition; the Government expects to
appoint FSRA Board members this spring.

The Government will continue to consult with stakeholders and review recommendations from the
expert advisory panel that recommended the creation of FSRA.

FSCO continues to operate as usual pending further instruction from the Government.
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May 2017
Expert Committee to Consider Financial Advisory
and Financial Planning Policy Alternatives
 The Expert Committee was mandated to provide advice and
recommendations to the Ontario government regarding whether
and to what extent financial planning and the giving of financial
advice should be regulated in Ontario and the appropriate scope
of such regulation.
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May 2017
Spring Budget Announcement on Regulation
of Financial Planning

The Government is considering the Expert Committee’s recommendations in the context of other
initiatives in Ontario’s financial services regulatory system.

It intends to work with its regulatory partners to close the gaps in regulatory oversight and specified
proficiency requirements for Financial Planners.

This will include working with regulators to restrict the use of titles related to financial planning and
responding to the report’s recommendation to develop a central registry of persons providing
financial planning and advisory services.

The Government also fully supports the report’s recommendation to actively encourage financial
literacy in Ontario.

The Government welcomes the report’s support for a universal statutory best interest duty to improve
consumer protection.
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May 2017
FSCO’s Statement of
Priorities
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FSCO's legislative
mandate is to provide
regulatory services
that protect the
public interest and
enhance public
confidence in the
sectors it regulates.
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2017/2018 Statement of Priorities
•
Treating consumers fairly means putting the interests of consumers and beneficiaries first. It means taking the time to
understand their needs and putting in the extra effort to make sure they understand the risks and their responsibilities.
•
FSCO expects this concept be at the core of the business and governance practices of all regulated entities.

•
This year, FSCO will place a strong emphasis on industry compliance with laws and regulations specifically
relating to disclosure of risk and responsibility for consumers.
FSCO also recognizes the need to empower consumers and pension plan beneficiaries so they have the information
they need to make decisions about their financial futures.

FSCO has expanded its capacity to develop public education campaigns aimed at increasing financial literacy
and helping Ontarians detect, reject and report fraud.
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May 2017
2017/2018 Statement of Priorities
•
FSCO recognizes the need to balance moving quickly enough to support product and service innovation, with taking
the time to ensure consumer interests are protected and legislative and regulatory requirements are met.
•
We have established a Fintech working group to work with industry in understanding, identifying and mitigating risks
to consumer that might arise from new technologies.
•
We also continue to monitor that regulated entities have policies and procedures in place to address cyber security
issues.
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May 2017
Licensing and Market
Conduct Activities
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Regulating the conduct of
financial institutions and
intermediaries’ towards their
clients – with whom they provide
financial products and services.
In the life insurance sector- FSCO
oversees about 70 life insurance
companies and 44,000 life
insurance agents who sell life
and health insurance products
and services to Ontario
consumers.
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Life Licence Qualification Program (LLQP)
 Updated and harmonized LLQP was adopted by all Canadian provinces and territories as of
January 1, 2016
 LLQP continues to meet qualifications for a licence (O. Reg. 347/04, s. 4): course +
examination
 Four exam modules each 75 minutes in length, 20-30 questions per module
 List of acceptable courses posted on FSCO’s website
 Ontario’s examination administrator is Durham College
 Ongoing update and review of the examination to ensure it remains valid.
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March 2016
New Requirement to Name Insurer(s)

Effective December 1, 2016, all licensed agents in Ontario must use FSCO’s Licensing Link to report the
name of every Ontario licensed life insurer the agent represents, has a contract with and/or on whose
behalf the agent sells insurance products.

This will:
 provide FSCO with more market intelligence;
 make it easier for insurers to fulfill their oversight obligations with agents; and
 help ensure agents maintain their E&O insurance.
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May 2017
Keeping FSCO’s Agent Errors and Omissions
(E&O) Insurance Records Up-to-date
STATUTORY OBLIGATION
 Effective June 2015, annual updating of E&O
policy number and insurer
 Failure to respond can result in enforcement
action (fine, suspension, revocation)
 Failure to update FSCO’s E&O records will
lead to a public notice on FSCO’s website
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On-line Licence Renewal Reminders
 Full on-line renewal reminders
 Keep your contact information and email
addresses current with FSCO
 STATUTORY OBLIGATION (O. Reg.
347/04, s. 5.1)
 Failure to do so can lead to enforcement
action (fine, suspension, revocation)
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Life Insurance Agent Compliance
Examinations
 Assess Adherence to Product
Suitability Industry Best Practices
 Compliance with the Insurance Act
and other relevant legislation
 Errors & Omissions Insurance and
Continuing Education requirements
 Statutory written disclosures
 FINTRAC (AML/CTF) and Privacy
Protection Laws
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 One Day Offsite Examinations
 Fact Finding Questions
 Sampling of policyholder files to
validate responses to questions
 Individual Findings Report within
30 days
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Life Insurance Agent Compliance
Examinations
 In 2015/2016 and 2016/2017, FSCO conducted approximately 200 life insurance agent
examinations in each year
 In 2016/2017, the risk selection process of life agents was enhanced over the prior year
by applying specific risk criteria applicable to the industry to risk rate the population of
licensed agents. High and medium risk rated agents were selected for an on-site
examination.
 200 on-site examinations  61 recommendations for regulatory action
 22 follow-up desk reviews  5 recommendations for regulatory action
 In 2016/2017, FSCO saw an increase in the number of recommendations made for
regulatory action over the previous year due to the change in the agent selection
process. As a result, the compliance rate for the 2016/2017 examinations decreased in
comparison to 2015/2016.
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Life Insurance Agent Compliance
Examinations Findings
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Life Insurance Agent Best Practice
Examinations Findings
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Life Insurance Agent Compliance
Examinations- Regulatory Action
Disclose in writing the name of insurers the agent represents
Disclose in writing the names of all providers of financial products or services that the agent
represents to purchasers of financial products or services other than insurance
Continuing education credits
Replacement of life insurance
Errors and Omissions Insurance
Failed to notify FSCO of change in agents contact details
Misleading statements in the solicitation of insurance
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Insurer’s Compliance System
Regulation 347/04 Agent
Section 12.(1) Every insurer that authorizes one or more agents to act on behalf of the insurer shall
establish and maintain a system that is reasonably designed to ensure that each agent complies
with the Act, the regulations and the agent’s licence.
(2) The system referred to in subsection (1) must screen each agent for suitability to carry on
business as an agent.
(3) An insurer shall report to the Superintendent if it has reasonable grounds to believe that an
agent who acts on behalf of the insurer is not suitable to carry on business as an agent.
 Sponsoring Insurer – first two years or contractual relationship
 Primary Insurer – will be the FSCO’s compliance contact non-sponsored agents
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May 2017
FSCO Examinations of Insurers’ Compliance
System
 In 2016/2017 FSCO conducted two examination of life insurance
companies, the findings of these examinations are still under review
 The examinations focused on the policies, practices, controls and
reporting in place for the insurer to meet its oversight obligations over
agents
 FSCO expects to target more insurer examinations in 2017/2018 to assess
their agent oversight systems as well as assess the fair treatment of
consumers across the organization.
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Global Regulatory
Cooperation
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FSCO is committed to
fostering cooperation,
promoting communication
and information exchange
and facilitating enhanced
coordination to improve its
use of regulatory resources,
and better protect
consumers.
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FSCO works with other Regulators

Achieving harmonization across jurisdictions and sectors.
 E.g., as part of CCIR, FSCO has been working since 1999 with securities regulators on aligning securities and
insurance regulation to protect consumers:
-
Jointly developed Point of Sale (POS) disclosure documents and delivery process for both mutual funds and segregated
funds (implemented for segregated funds before mutual funds).
-
Revised industry guidelines for IVICs to ensure equivalent consumer protection for both types of fund.
-
2015-present – leading CCIR Segregated Funds Working Group to identify and address differences in regulation arising
from implementation of the Client Relationship Model 2 (CRM2) in the securities industry.
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May 2017
Conventional Segregated Funds and Mutual
Funds Features
Segregated
funds
Mutual
Funds
Insurer
Client
Professional portfolio management


Diversification among asset classes and management styles


Grow a portfolio while diversifying risk


Liquidity: easy access to your money through daily price valuations


Potential creditor protection for registered accounts


Potential creditor protection for non-registered accounts

A guarantee of the principal (or a specified percentage) at
maturity

A guarantee of the principal (or a specified percentage) at death

Lock in market growth using resets

Features
Fund “ownership”
Product disclosures
FSCO - BridgeForce Financial Group
POS
POS +
May 2017
Post-Sale (2016)
Information Exchange and Cooperation

E.g., Canadian Council of Insurance Regulators (CCIR) Memorandum of Understanding for cooperative
market conduct supervision.
 Sets out protocols for regulators to effectively work together and forms basis of a national market conduct
supervisory framework.

February 2017 - launched the harmonized annual statement on market conduct
 Consistent, national source of data
 Identify trends and risks across Canada
 Deadline to file was May 1, 2017

Cooperative Supervisory Activities
 Conduct cooperative and coordinated supervisory activities each year
 2016 CCIR conducted two thematic reviews and two insurer specific reviews
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May 2017
FSCO Enforcement Action
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Enforcement activities may
result in suspension,
termination, or revocation
of an entity’s licence or
registration. Enforcement
activities usually involve a
collaborative effort across
different areas within FSCO,
particularly in cases where
FSCO decides to prosecute.
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Enforcement Action
Since November 2016, FSCO has:
 Ordered four Administrative Monetary Penalties for agents (average amount
$4,300)
 Ordered the revocation of four agents’ life insurance licences
 Ordered suspensions on two agents’ life insurance licences
 Denied six agents’ applications for life insurance licensing
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May 2017
Key Enforcement Decisions
 Financial Services Tribunal (FST) case law with respect to Life Insurance Agents:
 “Life insurance agents have voluntarily chosen to participate in a business that requires a licence and
involves regulation. They agree to subject themselves to a regulatory regime.” (2015 ONFST 18 Molenda)
 Confirmed that agents must respond to inquiries made on behalf of the Superintendent of Financial Services
on a timely basis
 “It is not open to the agent or any licensed insurance agent, to plead ignorance of the clear terms of the
Insurance Act (Act) and the Regulations made pursuant to the Act. Not knowing the requirements of the
governing legislation is simply no excuse.”
 FST concluded that an AMP was only inappropriate in situations that are “unique and difficult
circumstances”. These are considered exceptional circumstances and are not expected to be a common
occurrence
 Penalties assessed at the FST reflect an amount that combines the individual’s wrongful gain (specific
deterrence) plus an amount to promote general deterrence
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May 2017
Time for questions
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