Distribution
Partner
Reference Guide
A compilation of rules, procedures
and guidelines relating to
distribution compliance and
market conduct.
Table of Contents
Introduction......................................................................................................................................3
Empire Life Distribution Partner Code of Conduct...................................................................4
Responsibilities.................................................................................................................................5
Policyholder Service .......................................................................................................................6
Unsuitable Activities based on CLHIA Guidelines on Sales Conduct ....................................7
Advisor Disclosure.........................................................................................................................10
Privacy ............................................................................................................................................. 11
Anti-Money Laundering & Anti-Terrorist Financing ................................................................12
Product Suitability .........................................................................................................................13
Policy Replacement ......................................................................................................................14
Record Keeping .............................................................................................................................15
Education & Training.....................................................................................................................16
Errors & Omissions Insurance ..................................................................................................... 17
Awareness of Responsibilities .....................................................................................................18
Introduction
This document is a reference guide summarising the rules, procedures and guidelines
that Empire Life distribution partners are required to follow under their Agreement with
Empire Life.
It does not cover any product, underwriting or client policy procedures. These types of
procedures can be found in other documents, such as Advisor, MGA Administrator and
Product Reference Guides.
If you have any questions or concerns regarding anything contained in the document,
please contact a member of your Sales Account Management team and they will review
any of the policies with you.
We hope this guide is useful to you in your dealings with Empire Life and our mutual
clients.
3
Empire Life Distribution Partner Code of Conduct
As an Empire Life Distribution Partner*, I will:
•
Continue to meet professional ethical standards, including acting honestly, with
integrity and fairness. I will not intentionally mislead clients or Empire Life in any way.
•
Understand my clients’ interests to the best of my ability by obtaining, confirming and
documenting information about their needs. I will reasonably ensure that I recommend
products or services that meet those needs.
•
Put my clients’ interests before my own or the interests of others. I will always act in
good faith.
•
Collect enough information about my clients to reasonably determine their identity. I
will also collect enough information about my clients’ intended transactions to feel
certain that they are lawful, and if I have reasonable grounds to suspect the
transaction is unlawful, I will report the situation to the appropriate authorities
(regulators and/or law enforcement).
•
Protect my clients’ personal information, ensure it is only used for the purpose for
which it was collected, and only share with people who need to see it to meet that
purpose.
•
Maintain an appropriate level of education to ensure I am up to date in an everchanging financial marketplace.
•
Tell my clients about any conflicts of interest that may be perceived as creating a bias
on my part. This advice will be given prior to any financial transactions
•
Provide my clients with written disclosure of:
•
•
•
•
the financial companies I do business with;
the nature of my relationship with any company I recommend; and,
how I am compensated including additional compensation or incentives I may
receive.
Provide, at any time, any additional information my clients request.
I agree that my responsibilities are not limited to those above.
* Distribution Partner is defined as any person or entity contracted to sell Empire Life products.
4
Responsibilities
These responsibilities can be found in your Agreement with Empire Life. There are
additional responsibilities outlined in your Agreement which you should also make sure
you are familiar with.
By signing your Agreement with Empire Life, you have accepted responsibility for your
compliance with all relevant legislation and regulations, including but not limited to
fulfilling the following responsibilities:
•
Holding all premiums, deposits or monies received or collected in connection with
an Empire Life policy or application in trust for Empire Life, remitting same to
Empire Life promptly and regularly, and providing a complete and accurate account
of all such monies received as required by Empire Life.
•
Promptly forwarding to Empire Life all Empire Life applications for insurance or
investment fund products obtained and promptly returning to Empire Life all
policies which the applicant may not accept and all policies issued by Empire Life in
respect of which the first premium has not been paid.
•
Not paying premiums, deposits or monies on behalf of an applicant and, where
prohibited by law, not rebating all or any part of the premium.
•
Obtaining and maintaining current any licenses required to fulfill obligations in your
Agreement.
•
Maintaining errors and omissions insurance in a form acceptable to Empire Life and
providing to Empire Life at its request confirmation that such policies are in full
force and effect.
•
Acting at all times in conformity with all regulatory requirements and guidelines,
including privacy and anti money laundering legislation, the Code of Ethics
contained in applicable provincial legislation, and the Empire Life Distributor Code
of Conduct, and in accordance with the professional guidelines as adopted by
insurance regulators, or industry recognized professional organisations.
•
Performing obligations to Empire Life and to its policyholders honestly and in good
faith.
5
Policyholder Service
These are specific obligations regarding service provided to policyholders. This is outlined
in your Agreement with Empire Life.
You will be primarily responsible for the servicing of your clients who become Empire Life
policyholders. You acknowledge that Empire Life is legally obligated to send statements,
invoices and other notices directly to its policyholders.
As permitted by law, Empire Life will provide normal policyholder records and information
to you in order to enable you to service your Empire Life clients.
You will exercise the care, skill and diligence that can reasonably be expected for a life
insurance broker.
In the event of termination of the Agreement or in the event that the policyholder submits
notice terminating you as a registered service of the policyholder’s Empire Life policies,
Empire Life reserves the right to assign or make other arrangements for servicing of any
policy written under your Agreement. As permitted by law, Empire Life will consult with
your General Agent in the event a policyholder submits such notice of termination and
before making alternative servicing arrangements.
Empire Life will continue to pay renewal commissions to you in relation to a policy
provided:
•
The policy remains in force; and
•
Your right to receive compensation in respect of the policy has not been terminated
in accordance with the Termination of Commissions section of your Agreement or
otherwise assigned by you to another person or entity; and
•
Renewal commissions or renewal service fees are payable in relation to the policy;
and
•
Payment is not otherwise excluded by the then in force Agreement, schedules, and
published rules and procedures.
6
Unsuitable Activities based on CLHIA Guidelines on Sales
Conduct
* Reference: Canadian Life and Health Insurance Association (CLHIA) Guideline G8
“Screening Agents for Suitability and Reporting Unsuitable Agents”
This list is not all inclusive, but provides some guidance as to what activities are unsuitable
and reportable to regulators.
Criminal Behaviour
Although there are many other criminal activities, the following are those criminal
activities that relate specifically to the conduct of financial services business.
1. Fraud
Fraud means an intentional deception or misrepresentation which an individual knows to
be false or does not believe to be true and is made knowing that it may be detrimental to
the other party and that it could result in some unauthorised benefit to himself, herself or
some other person.
2. Misappropriation of Funds
Misappropriation of client funds means taking money or other property received from the
client for a specific purpose and fraudulently misapplying it to another purpose.
3. Forgery
Forgery means knowingly making a false document with intent
a) that it should in any way be used or acted upon as genuine, to the prejudice of a person,
or b) that some person should be induced, by the belief that it is genuine, to do or to refrain
from
doing anything.
4. Money Laundering
Money Laundering means the process of transferring property or proceeds of any
property with intent to conceal the true origin and ownership of such property and
knowing that all or a part of that property was obtained or derived directly or indirectly as
a result of a criminal or drug offence.
Contravention of Regulations and Other Unsuitable Actions
1. Licensing Requirements under the Act
Advisors must have a valid licence for every jurisdiction in which they do business. All
terms and conditions attached to a licence must be respected.
2. Privacy or Confidentiality
The privacy/confidentiality of a client must not be breached. Please refer to the section on
Privacy in this document for information on your obligations.
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3. Holding Out
An Advisor must not intentionally mislead the consumer, through business cards,
Stationery, or advertising, in regards to credentials or designations, or the ability to provide
advice or service.
4. Conflict of Interest
Advisors must disclose to a prospective buyer or client all conflicts of interest or potential
conflicts of interest associated with a transaction or recommendation.
5. Tied Selling
It is prohibited to make the purchase of one product conditional on the purchase of
another product.
6. Premium Rebating
Premium rebating occurs if an advisor makes an agreement as to the premium to be paid
for a policy lower than the premium set forth in the policy. In addition, an advisor may not
pay (or offer to pay) a rebate of the whole or part of the premium stipulated by the policy,
or any consideration or thing of value intended to be in the nature of a premium rebate.
Note: some provinces do not prohibit rebating.
7. Replacements
a) Undisclosed and/or systematic replacements
Provincial laws require that specific procedures are followed when
replacements are carried out. In and of themselves, replacements are not
necessarily evidence of unsuitable conduct; however, replacements can be
tolerated only when they are not to the detriment of the client.
b) Twisting
Twisting is the unethical act of persuading a policyholder to drop a policy
solely for the purpose of selling another policy without regard to possible
disadvantages to the policyholder. It can also involve using the values, either
through loans or through the redirection of dividends, of one policy to
purchase another.
c) Churning
Churning occurs when an advisor, exercising control over the volume and
frequency of trades, abuses a customer’s confidence for personal gain by
initiating transactions that are excessive in view of the character of the
account and the client’s personal objectives.
8. Misrepresentation and Disclosure
a) Misleading Statements
Advisors should make every attempt to ensure that, in their sales process or in
advertisements, they do not make misleading statements and that information
which is material to the decision making is fully and accurately disclosed prior
to a purchase being made
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b) Illustrations
Advisors must present information about a product accurately, honestly,
completely and in plain language. All reasonable facts necessary to enable the
clients to make an informed decision about insurance needs and the product
being recommended should be available. Material changes must not be made
to company-provided illustrations, and software must not be manipulated
beyond its defined parameters to create an unreasonable expectation.
c) Incomplete Comparisons
An advisor must not provide any incomplete comparison of any policy with
that of another insurer with the intent to convince a client to lapse or
surrender a policy.
9. Know Your Client Rule/Product-Client Suitability
Advisors should make every attempt to ensure that they have made a diligent and
business-like effort to analyse the client’s needs, objectives and financial circumstances in
order to determine the appropriateness of product recommendations to the client.
10. Misleading Statements, Omissions or Misrepresentation to the Company
The advisor must provide full, complete and accurate information to the insurer. Material
misrepresentation, omissions or misleading statements to the company must not be
made.
11. Coercion and Undue Influence
This can be defined as taking advantage of a client if the agent knows or ought to know
that the client is unable to understand the character, nature, language or effect of the
transaction or proposed transaction.
12. Inducements
An advisor should not make any payment of gift or any offer to pay or give, directly or
indirectly, any money or thing of value as an inducement to convince any prospective
insured to purchase insurance.
13. Competence
Any series of acts by the advisor that would lead to the conclusion or strong suspicion
that the advisor was incompetent in the performance of his/her duties is to be reported.
14. Fronting
Where an advisor holds a licence but chooses to have another advisor, who did not
actually complete the transaction, sign as the agent of record, or where an unlicensed
person arranges the business and has a licensed person sign on their behalf.
15. Other Activities
Other activities such as lack of trustworthiness, commission sharing with unlicensed
individuals, unnecessary delay in delivering policies and trafficking are also considered
unsuitable activities.
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The following topics deal more specifically with Distribution Partner compliance
requirements both regulatory and within the industry. Each section will provide an
overview of your requirements and resources for more information.
Advisor Disclosure
When a customer is considering the purchase of a product, it is important that they are
provided with quality information about the product, how it meets their need, the company
offering the product, and the advisor and the advisor’s business relationships. Advisors are
required to provide a statement of full disclosure to each of their clients when they first
meet with them. For long-term clients, if disclosure hasn’t been made, it is a recommended
best practice that disclosure be provided to those clients at the first opportunity.
Obligation:
To comply with industry regulations, guidelines and standards by providing disclosure in
writing to customers prior to the sales transaction.
Risk of non-compliance:
• Lack of consumer trust and/or confidence
• Lack of industry compliance could lead to regulated disclosure
• Cancellation of carrier contract
• Reportable to regulators
• Increased consumer complaints
Control:
Disclosure Statements must include the following six key disclosure items:
•
•
•
•
•
•
Companies represented
Nature of relationship with companies represented
Method of Compensation, including any additional compensation that may be
received (ie. conferences)
Conflict of interest
Client ability to request more information
Acknowledgement by the client and advisor
When you sign the Advisor Report of the Empire Life application you are acknowledging
that you have provided the client with the appropriate disclosure.
Providing full disclosure statements to clients is a requirement for attending Empire Life
conferences. All qualified attendees will be required to provide a sample copy of what they
are providing to their clients in order to fully qualify. This is required at time of registration
for the conference.
References
• The Compliance section of the Empire Life website has a sample Disclosure
Statement and copies of circulars relating to Advisor Disclosure.
• The Canadian Life and Health Insurance Association (CLHIA) reference document
on Advisor Disclosure (www.clhia.ca/The Industry/Materials for Financial Advisors)
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Privacy
The protection of personal information is an integral part of doing business. Distribution
Partners have a regulatory obligation under either the federal Personal Information
Protection and Electronic Documents Act for advisors writing business in any of the
Maritime provinces, Ontario, Manitoba, Saskatchewan and the three territories or the
applicable provincial privacy legislation in Quebec, Alberta and British Columbia to ensure
they are protecting their clients’ privacy and have a policy and procedures in place they
can provide to clients to confirm their compliance with the applicable Act.
Obligation:
To comply with the applicable Privacy Act and protecting your clients’ personal
information.
Risk of non-compliance:
• Lack of consumer trust and/or confidence
• Licence suspension or revocation
• Cancellation of carrier contract
• Monetary fines by privacy commissioners
Control:
• Creation and implementation of a privacy policy
• Internal policies such as secure communications, laptop security, office security, etc)
• Making your privacy policy and the privacy policy of Empire Life available to clients
• Privacy training: keeping yourself and anyone who works with you up to date on
privacy legislation
Resources:
• Empire Life Privacy Policy found on our website
• Federal Privacy Commissioner (www.priv.gc.ca)
• Commission d’accès à l’information (www.cai.gouv.qc.ca)
• Office of the Information and Privacy Commissioner of Alberta (www.oipc.ab.ca)
• Office of the Information and Privacy Commissioner of British Columbia
(www.oipc.ab.ca)
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Anti-Money Laundering & Anti-Terrorist Financing
Money Laundering is the process used by criminals to disguise the source of monies or
assets derived from criminal activity. The objective is to make it appear as if the money has
come from legitimate sources. While the techniques for laundering fund vary considerably
and are often highly intricate, there are generally three stages in the process:
•
•
•
Placement: involves placing the proceeds of crime in the financial system;
Layering: involves converting the proceeds of crime into another form and creating
complex layers of financial transactions to disguise the audit trail and the source and
ownership of funds; and,
Integration: involves placing the laundered proceeds back in the economy under veil
of legitimacy
Obligation:
To comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
Risk of non-compliance:
• Cancellation of carrier contract
• Revocation of license
• Fines from $500,000 to $2,000,000 or
• Imprisonment from 6 months to 5 years per legislation
Control:
• Creation and implementation policies to comply with the Act. Policies need to
include:
• Compliance regime – appointment of a compliance officer
• Verification of clients
• Record keeping
• Reporting- suspicious transactions, including attempted ones; terrorist
property; and Large Cash Transactions
• Risk assessment
o Third Party Determination
o Politically Exposed Foreign Person
o Business Relationship
Resources:
• Empire Life applications include many of the requirements for verification of clients
• Compliance section of the Empire Life website has copies of circulars relating to
Anti-Money
• Laundering & Anti-Terrorist Financing
• FINTRAC website (www.fintrac-canafe.gc.ca)
• CLHIA AML/ATF Guidance Manual for Advisors (www.clhia.ca/The Industry/Materials
for Financial Advisors)
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Product Suitability
Ensuring what you are selling to the client is appropriate for their needs is crucial for the
client. Determining what products are suitable for clients is your responsibility and needs to
be done thoroughly and carefully by completing a documented needs analysis.
Obligation:
To comply with industry guidelines and standards by ensuring the client has a good
understanding of the product being recommended to them and that the advice provided
meets the client’s needs. It is the regulators’ expectation that needs analysis is completed
for all clients.
Risk of non-compliance:
• Increase consumer complaints
• Lack of consumer trust and/or confidence
• Licence suspension or revocation
• Cancellation of carrier contract
• Reportable to regulators
Control:
• Following the industry standard outlined in “The Approach”
• Fact finding- A preliminary assessment of the client’s circumstances
• Needs assessment- Based on the facts and information obtained from the
client, advisors should identify the client’s life insurance need. This should be
done using a standardized needs analysis form, that is used with all clients.
• Recommendations and advice- Product recommendations and advice should
address the customers need given the circumstances at the time of sale.
• Product Information- The client should be informed about options available
and provided with information about the recommended products.
Resources:
• Compliance section of the Empire Life website has copies of circulars relating to
“The Approach”
• CLHIA “The Approach” reference document (www.clhia.ca/The Industry/Materials for
Financial Advisors)
13
Policy Replacement
The replacement of a policy is an important decision for clients. It is important that they are
provided with the information they need so they have a good understanding of what you
are recommending and the impact of the decision. In general, “replacement” of an existing
life insurance policy occurs when life insurance is purchased and, as a result of the
purchase, one or more existing life insurance contracts are rescinded, lapsed, surrendered,
changed to paid up insurance or extended term insurance, placed under an automatic
premium loan, or changed in any matter to effect a reduction in benefits.
Obligation:
To comply with provincial regulation by completing and reviewing the applicable
replacement requirements. The replacements forms are designed to provide the customer
of life insurance with the basic information that they will require to make an informed
decision when considering the replacement of one life insurance contract with another. It
is important you check your provincial regulatory obligations, as not all provinces are the
same (ie required documentation).
Risk of non-compliance:
• Lack of consumer trust and/or confidence
• Licence suspension or revocation
• Cancellation of carrier contract
• Reportable to regulators
Control:
• Following the applicable provincial replacement disclosure requirements
• Ensure client’s needs are being met and the client’s best interests come first by
completing a current needs analysis and replacement forms early in the process and
before the change application is made..
Resources:
• Applicable provincial regulator websites
• Empire Life website – circulars
• CLHIA Replacement Disclosure Guide (www.clhia.ca/The Industry/Materials for
Financial Advisors)
14
Record Keeping
Record keeping is an important part of your practice. It provides a documented history of
your dealings with the client and is crucial in the event there is a disagreement or complaint
against you.
Obligation:
Files must be current, correct, complete and consistent. Documentation should be
completed concurrently with the meeting/discussion.
Risk of non-compliance:
• Lack of consumer trust and/or confidence if you can’t provide historical information to
clients
• Lack of evidence in the event of a carrier or regulator audit or complaint investigation
• If you have incorrect or incomplete notes, all other notes may become questionable
Control:
• Have a consistent process for documenting your client interactions and make sure
you and all members of your practice use it
• Make sure your files are current, correct, complete and consistent.
• Document meetings and/or discussions concurrent with the event
Resources:
• Industry organizations (Advocis, IFBC) can provide guidance on file maintenance
15
Education & Training
Keeping up to date with your education and industry changes is important to your practice
to ensure you provide your clients with appropriate guidance and information. The industry
is changing constantly so it is important that your education and training is on-going.
Obligation:
Each province specifies its own rules and regilations for life agent Continuing Education
(CE). A licensee should always verify key information with each regulator for the provinces
they are licensed in.
Risk of non-compliance:
• Licence suspension or revocation
• Lack of consumer trust and/or confidence
Control:
• Being a member of an industry organization (ie Advocis, IFBC)
• Regularly attending industry education sessions
• Train employees on your business practices to ensure consistency in your
organization
• Maintain detailed records, with the name of the course provider, the dates of
course of seminar, description of each course or seminar, qualifying hours and
the signature of an authorized representative of the course provided.
Resources:
• Empire Life website has a large amount of information ranging from product to
compliance
• Industry organization websites
• Provincial regulator websites
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Errors & Omissions Insurance
At Empire Life, we feel it is very important and insist that all our advisors have appropriate
Errors & Omissions Insurance (E&O), regardless of whether it is a requirement of your license.
We also strongly encourage our corporate relationships to ensure they have the appropriate
coverage for how their business is structured.
Obligation:
In most provinces, E&O is a requirement of license. It is a contractual requirement for Empire
Life advisors.
Risk of non-compliance:
• Licence suspension or revocation
• Not having the coverage when it is most needed
Control:
• Ensure your policy covers you appropriately at all times
•
•
Understand your policy provisions
Know your renewal date and renew on time
Resources:
• Provincial regulator websites can advise what your required limits are
• Empire Life Agreement
• CLHIA Notice regarding Corporate E&O Insurance (www.clhia.ca/The
Industry/Materials for Financial Advisors)
• Compliance section of the Empire Life website
17
Awareness of Responsibilities
In addition to ensuring you complete education and training requirements, it is important you
know what your contractual responsibilities are with your carriers and under the terms of
your license.
Obligation:
Understand the applicable laws, regulations, industry guidelines and terms of carrier
contracts
Risk of non-compliance:
• Licence suspension or revocation
• Cancellation of carrier contract
• Lack of consumer trust and/or confidence
Control:
• Comply with all applicable laws, regulations, industry guidelines and terms of your
carrier contracts
• Become a member of an industry organization (ie. Advocis, IFBC)
Resources:
• Provincial regulator websites
• Empire Life Agreement
• Industry organization websites
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The Empire Life Insurance Company (Empire Life) offers competitive individual and group life and health
insurance, investment and retirement products to help you build wealth and protect your financial security.
Empire Life is among the top 10 life insurance companies in Canada1 and is rated A (Excellent) by A.M. Best
Company2. Our vision is to be known for simplicity, being easy to do business with and having a personal
touch.
1
2
The Globe and Mail Report on Business, June 2014, based on revenue
As at May 21, 2014
The information in this document is for general information purposes only and is not to be construed as providing legal,
tax, financial or professional advice. The Empire Life Insurance Company assumes no responsibility for any reliance made
on or misuse or omissions of the information contained in this document. Please seek professional advice before
making any decision.
®
Registered trademark of The Empire Life Insurance Company.
™ Trademark of The Empire Life Insurance Company.
Policies are issued by The Empire Life Insurance Company.
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