1. Compliance Overview for Independent Financial Brokers
Presented by Susan Allemang
IFB Toronto Fall Summit
November 4, 2014

2. Sometimes being surprised is a good thing.

3. Other times – not so much…
Surprise, Mom!

4. You’ve been selected for a compliance audit!
Hello George,
You’ve been selected for a compliance audit!
Surprised maybe – but you don’t want to be unprepared.

5. Regulatory focus on fair treatment of customers = compliant practices
INSURANCE – Regulatory audit, Insurers auditing MGA practices = MGAs auditing individual broker practices
SECURITIES – Dealer/regulatory audit of advisor files – KYC, risk profiles
REGULATORY AUDITS – e.g., FINTRAC; Client complaints
E&O claims – document client meetings
The CCIR examined the role of the Managing General Agencies Distribution Channel in the Life Insurance Industry.
Insurers must have in place effective systems and controls whenever they use the services of an MGA. Resulted in 4 principles.
Principle Four – Active Oversight
An insurer proactively manages MGA contracts once in place to ensure compliance with contract conditions.
Recommendation is based on good corporate governance and the CCIR’s position that insurers are accountable to regulators for their relationships with MGAs.

6. Compliance in context Global partnerships
Focus of financial regulators to protect the integrity of financial markets and ensure the fair treatment of customers – develop globally accepted requirements for effective supervision of each financial sector to prevent/address gaps in regulation
Detecting money laundering & combatting financing of terrorism – FINTRAC
Canada participates with other countries on international securities/insurance associations. International associations audit the practices of member countries and make recommendations to address regulatory gaps.
e.g., International Organization of Securities Commissions (IOSCO) – OSC Chair is Vice-Chair of the IOSCO Board & Chair of Committee on Retail Investors; OSC & Quebec participate on Committee on Regulation of Market Intermediaries, International Association of Insurance Supervisors (IAIS) – Julien Reid, AMF, Chair of Market Conduct Working Group

7. Consumer Protection
FSCO’s legislative mandate – to protect the public interest and enhance public confidence in the sectors it regulates
OSC - to provide protection to investors from unfair, improper or fraudulent practices and to foster fair and efficient capital markets and confidence in capital markets

8. Managing client expectations
“All the money I took in, I put into stocks. The first day of October made me feel like I was rich…
…I figured I could pay my debts any time, and I just let them ride…
…On that day of October 29, (1929) they told me I needed more cash to cover up. I couldn’t get it. I was wiped out that day.”
Excerpt from George Mehales, South Carolina WPA Life Histories interview, December 1938
American Life Histories, American Memory, Library of Congress
Not much has changed. Your job is an important one. You want your clients to prosper but you know that markets can be temperamental and cyclical. Understand your client’s expectations and keep them realistic. If they want aggressive returns and have a low risk tolerance they need to know that. E&O claims experience show that the advisor and client often have very different versions of what was discussed and what they were comfortable with in terms of risk. Then the KYC doesn’t reflect this. Taking notes and keeping them in files is important especially when disputes can happen years down the line.

9. Proof of compliance & suitability of advice
If it ain’t documented, you can’t prove it!
You are the professional – courts and regulators will side with your client if you can’t support your position with documented evidence.

10. Fintrac – AML policies & procedures Privacy plan
A compliant practice
Fintrac – AML policies & procedures
Privacy plan
Do not call/do not procedures
Disclosure documentation
Life insurance replacement & written analysis
So, what are the components of a compliant practice? There are 5 main ones to be sure you’ve included.
Disclosure: Written conflict of interest/fee disclosure, Written and updated KYC/needs assessment, product suitability
We’ll move briefly through each one. There isn’t time to review each one in detail – every one of these topics has been the subject of a one hour presentation on its own, but I will give you links to more information all the way along so you’ll know where to go to find more details if you need to.
Also, in the interests of time, I’d ask that you hold your questions to the end of the presentation to make sure we cover each point. If we don’t get to your question, either write it down on your business card and give it to me at the end or write it on the satisfaction survey in your program and I can deal with it after the event. A copy of my presentation slides will be posted to the IFB website, in the Toronto Summit section, shortly. If I receive enough questions, I’d be happy to add a Q&A slide to this presentation for anyone to refer to.
So without further ado, let’s get started.

11. Anti-money laundering/
terrorist financing policies & procedures

12. Anti-money laundering/terrorist financing policies & procedures
Compliance with FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) requirements:
Compliance Regime
Knowledge of what a suspicious transaction is, and how to report it
Legislation in place since July 2000 to deter & detect movement of illegal funds into Canada’s financial system
The objective is to deter and detect movement of illegal funds into Canada’s legitimate financial system; Legislation first became effective July 2000 – created FINTRAC and compliance obligations, including for life insurance. Since 2008 FinTrac has been able to assess Administrative Monetary Penalties for non-compliance.

13. Who needs a compliance regime?
Mortgage brokers, Real estate agents/developers/brokers
Accountants
Banks, trust companies, loan companies, money service businesses, securities dealers, life insurance companies, independent life insurance brokers
Casinos
Precious metal dealers/jewelers
Exempt – reinsurance, property & casualty insurance

14. MGAs and agencies must have and maintain a compliance regime
What this means to you
If you are an independent life insurance broker, you need a compliance regime!
MGAs and agencies must have and maintain a compliance regime
Life insurance companies are responsible for the compliance regime for their employees/career agents & that they comply with the reporting, record keeping, client identification requirements
Mutual fund/securities dealers are responsible for employees/approved persons for these transactions ONLY
If you are dual-licensed, say for mutual funds and life insurance, you need to have a compliance regime for the life part of your business.
You are on the front-line, the gatekeeper – seeing the client most often face to face and checking the client’s identity.

15. Why does this matter?
FinTrac can audit your business (many life insurance brokers across Canada were audited from the fall of 2011 to May 2012)
If your business is selected, it is mandatory to complete a Compliance Assessment Report
MGAs and insurers audit whether you have a compliance regime in place and know your obligations
Financial penalties

16. Questrade Inc. securities dealer in Toronto fined $346,140 for 9 violations
Failure to report a suspicious transaction
Incomplete compliance policies and procedures, failure to develop a written ongoing compliance training program and failure to take special measures for high risk activities
Inadequate practices of ascertaining client identity and confirming the existence of an entity other than a corporation, failure to enter into an agreement or arrangement with an agent or mandatary for the purposes of ascertaining identity, and incomplete record keeping
Failure to take reasonable measures to determine whether a person is a politically exposed foreign person.
I have chosen to only 4 of the violations because they are all related to having a compliance regime and reporting suspicious transactions.

17. Homelife Effect Realty Inc
Homelife Effect Realty Inc., a real estate broker in Hamilton, penalized $27,000 for committing four violations.
Failure to appoint a person to be responsible for the implementation of a compliance program
Failure to develop and apply written compliance policies and procedures that are kept up to date and, in the case of an entity, are approved by a senior officer
Failure to assess and document the risk referred to in subsection 9.6(2) of the Act, taking into consideration prescribed factors
Failure of a person or entity that has employees, agents or other persons authorized to act on their behalf to develop and maintain a written ongoing compliance training program for those employees, agents or persons
Again, I show this example because Homelife failed to have the steps of a compliance regime. And, no – I didn’t find any publicized examples from the life insurance industry on the FinTrac website. So, clearly you all are doing a great job!

18. What to expect in a FINTRAC audit
A FINTRAC compliance examination will assess whether a reporting entity is meeting its obligations under the legislation. Areas of review can include:
Is a compliance regime in place?
Is there reporting of all required transactions?
Have proper client identification measures been implemented?
Are you meeting your record keeping requirements?
Is proper ID of third party ownership being determined, where required?

19. There are 5 components to a FINTRAC Compliance Regime
Where do I start?
There are 5 components to a FINTRAC Compliance Regime
All 5 steps must be included, although the level of detail may vary for each step depending on the size of your office
For example, a large dealer or insurance company or bank is going to have a great deal of detail in their procedures to detect unusual or suspicious transactions or identify high risk individuals. In a small office, the level of detail will be much less. The legislation is risk-based in that it allows for some variation in the level of detail based on risk of financial activity. Generally, traditional life insurance products are considered to be low risk. However, policies with an investment component are higher risk.

20. Appoint a compliance officer
The 5 Steps
Appoint a compliance officer
Have a written Policies and Procedures manual
Assess the risk of money laundering and terrorist financing to your business
Document your training program (unless you are a sole proprietor)
Update and re-evaluate at least every 2 years
IFB has broker tip sheet to help you understand the AML requirements. You can get a copy at the IFB booth.

21. Appoint a compliance officer, in writing.
Step 1
Appoint a compliance officer, in writing.

22. Step 1: Appoint a compliance officer
Document who it is in writing.
CO is responsible for implementing your compliance regime and must know and understand their responsibilities.
If you are a sole proprietor, you will be the compliance officer. If it’s a family business or you have other employees/associates one of them could be appointed. You cannot use the insurance company’s compliance officer. Some MGAs may permit you to name their Compliance Officer but you would need their permission. In any case, make sure the person appointed understands their responsibility and is familiar with all the steps of the compliance regime.

23. Develop written policies and procedures.
Step 2
Develop written policies and procedures.

24. Step 2: Written policies and procedures
Your compliance policies and procedures will be less detailed than those of a larger insurance agency or life insurance company.
*BUT*
Your policies and procedures have to be in writing and be kept up to date, regardless of whether you are a small business, an individual or an entity.
As I mentioned earlier your compliance policies and procedures will be less detailed than those of a larger insurance agency or life insurance company or bank BUT they still must reflect your business activities, and be in writing.

25. CLHIA Guidance Manual for Life Insurance Brokers
CLHIA developed a guide for life insurance brokers that can meet the requirement for a written P&P manual.
Links are on IFB’s website ( the CLHIA website ( and individual insurance company websites.
Caution: FINTRAC expects it to be customized to reflect your business, as required, not just the last page signed and dated.

26. Step 3
Assess and document the risks of money laundering and terrorist financing in your business, and
Take measures to mitigate potentially high risk situations.

27. Step 3: Risk factors
Document the following factors in your risk assessment:
The products and services you offer and how you deliver them.
The geographic locations where you conduct your activities and the geographic locations of your clients.
Any other relevant factors related to your business.
Your clients and the business relationships you have with them.

28. Step 3: Risk factors

29. Step 3: Risk factors
A helpful resource for your risk assessment:
Good information and suggestions to help you assess your business risks in Guideline 4, Appendices 1, 2, and 3.

30. Step 4
Implement and document an ongoing compliance training program for you
and your staff.
Good news – today’s session counts as a FinTrac training session! Mark it down. Anytime you and your staff or associates attend a training session write it on your FinTrac training page, sign and date it. Even reviewing the P&P manual, updating it can count.

31. Step 4: Training program
Training Program for Sole Proprietors:
If you are a sole proprietor (not a corporation) with no employees, agents or other individuals authorized to act on your behalf, you are not required to have a training program in place for yourself.
However, your policies and procedures must be in place, updated and will have to be reviewed every two years to test their effectiveness.

32. Step 5
Review and test your program at least every 2 years.

33. Step 5: Review and test
Review and test the effectiveness of your policies and procedures, your risk assessment and your training program.
Modify and update your existing policies and procedures-implement new ones if required.
Sign and date the review as proof.
Read FINTRAC Guidance on Conducting a Review (Guideline 4, Section 8 “Review Every 2 Years”)

34. Compliance regime checklist
Has a compliance officer been appointed?
Are policies and procedures in place?
Are appropriate measures in place to identify, document, and mitigate risks related to money laundering and terrorist financing?
Is a training program established?
Is there a periodic review of the compliance regime?
Are the reporting requirements being met?
Are client identification requirements being met?
Are the appropriate records being kept?
FINTRAC Guideline 4 has additional guidance on how to implement a compliance regime.

35. Compliance assessment report
You can find a copy of the Assessment report on the FinTrac website. If you are not confident that you have all the pieces in place, download it and try completing it. Caution: It’s for your internal use only. Never submit a completed form to FinTrac unless FinTrac asks you to!

36. Privacy: It’s more than a client consent form

37. Federal and Provincial legislation
Federal Personal Information Protection and Electronic Documents Act (PIPEDA) is the default unless a province has “substantially similar” legislation
Substantially similar legislation (PIPA) exists in BC, Albert, and Quebec
If you are licensed in BC, Alberta or Quebec, go to their provincial privacy websites to ensure your PIPEDA processes are compliant. In BC, for example, there’s a slightly different definition of personal information.

38. YOU are required to protect your client’s personal information.
A 4-step privacy plan
YOU are required to protect your client’s personal information.
Written Privacy Policy and client consent
Documented privacy breach procedure
Training – keep up to date on changes to legislation
Commitment to follow the 10 privacy principles
You are required by legislation to protect your client’s personal information. There are 4 steps to this plan. Make sure you have more than just a signed privacy consent form from your clients. Some of these steps may be

39. What is personal information?
Information that can be used to identify an individual.
Name, gender, birth date, race, marital status, medical and financial information, contact information (address, , phone number, etc.)
Info in paper files, electronically, video or voice recording

40. Who is your Privacy Officer?
Every organization has to have someone who is responsible for implementing & maintaining the privacy plan.
In a small organization, that person is probably You. In a larger business, you may want to assign responsibility to one of the management team, or to a management committee.
Bottom line – “someone has to be accountable to your customers, so they know where to go to ask questions, get access to their customer records, or resolve any complaints they may have about their privacy”.
Source: Privacy Commissioner of Canada’s website:

41. Privacy policy and client consent form
Commitment to protecting your client’s personal information
You will only use it for the purpose stated
You will only retain the information for as long as needed
You have obtained the client’s consent
You will take steps to safeguard their information including destroying it
Client can access their information to verify it
Client is informed about complaint mechanisms
Notice that consent cannot be withdrawn in certain circumstances – legal, regulatory
These are the typical points you will cover in your client consent form. Your client must sign it and both of you should retain copies of the signed form. IFB members can get a sample or template consent form on the IFB website. There is also detailed instructions and tips.

42. Update your privacy consent form
Include permission to share information with 3rd parties – MGAs, other professionals, etc.
Any 3rd party must also adhere to privacy principles – if you are a MGA, you need a privacy plan
Tip: Add consent to contact client by telephone and to cover off CASL/Do Not Call
It’s a good idea to regularly look at the privacy consent form you are using to see if it needs updating. For example, do you have your client’s permission to share their information as required with parties other than yourself? If you do deal with 3rd parties, like a MGA, you should be sure that that MGA has a privacy policy to protect your client’s information. And, if you haven’t updated your form, it’s a good idea to include permission to contact the client by various means, like telephone, cell phone, , etc to cover off the CASL and Do Not Call rules. More on those in a few minutes, but getting your client to sign off on such an updated consent form gives you express consent which is preferable by far.

43. Privacy in action: Client consent is not enough
Ensure your client’s records are secure whether in files in the office, on your computer, phone– including installing virus/malware software
Encrypt your electronic files especially if client information is on laptop or other portable device
Stronger passwords: Take a sentence, mix in a few upper case letters and a number – for example, “There is no place like home,” would become “tiNOplh62.”
Shred/destroy records in a secure manner when no longer required
Purchase privacy breach insurance – IFB E&O has cheap add on $50/year
So. You have signed client consents on file. Are you done? No. You need to be able to demonstrate that you took steps to ensure your client’s personal information was safe. One of the best technological protections for data on portable storage media and devices encrypted data inaccessible to most third parties, even if the device, like laptop or usb key, falls into the wrong hands
Encryption has been strongly endorsed by privacy commissioners across Canada, and is generally considered to the required standard of protection for personal information stored on portable devices. 
Ontario Information and Privacy Commissioner (for health information) has suggested that the loss or theft of a device containing encrypted personal information would not generally be considered to be a loss or theft of personal information.

44. High Profile Data Breaches
April: 900 social insurance numbers were stolen from the Canada Revenue Agency’s website by a hacker exploiting the Heartbleed bug
September: 56 million Home Depot customers in Canada and the U.S. were affected by a data breach from malicious software designed to steal credit card information.
It seems to be a regular occurrence that we hear of data breaches and lost or hacked personal information. “cybercrime store” website suggests stolen credit card information recently put up for sale came from Home Depot.
Class action suit filed in Canada.

45. Privacy breach procedure
Don’t wait until it happens! Know what to do and train other employees who deal with client files:
Contain the breach
Assess the extent of the breach and risk to clients
Inform the client if there’s potential for harm
Document what steps you took and who you notified (if needed)
In my research for this presentation, I came across a prediction from one cyber specialist that we will see less of these massive data breaches and more hacking of personal computers and home offices, because small businesses and homeowners are less able to respond quickly to shut them down. Lacking the IT resources of a Target or Home Depot.

46. Resources for more information
Office of the Privacy Commissioner of Canada:
Securing Personal Information: A Self-Assessment Tool for Organizations
Build a Privacy Plan for your business
Key Steps for Organizations in Responding to Privacy Breaches
IFB (for members): updated template Privacy Policy/Client Consent form
Excellent resources for you to take a look at and test out your level of compliance.

47. Do Not
Call/

48. Do not call
Do Not Call Registry: in place since 2008 – Update: phone numbers are now permanently registered until removed by individual
Independent life insurance brokers are “telemarketers” – requires registering on CRTC website and paying monthly/yearly subscription to access list of numbers registered on DNC List
Exemptions: calls to existing clients, business to business calls, service calls, calls made up to 18 months after end of business relationship, 6 months if referral
Here we go – the ever popular DNC list.

49. Do not Email: Canada’s Anti-Spam Law (CASL)
Free webinar available for IFB members (1 hour CE)
Consent required after July 1st, 2014 for new clients – must be implied or express – Express is better
3 year transition – allows you to send s until July 1,2017 to existing clients – after that you will need express consent
Anyone can withdraw consent at any time – you have to respect that unless there’s a legal/contractual obligation that prevents them from withdrawing consent
Adrienne Liu, BLG in depth CASL presentation yesterday so this will briefly touch on the main points.

50. Don’t be fooled by the name!
CASL does not just apply to spam!
Applies to ANY electronic message with a commercial intent.
Includes sales or promotional information you to prospective clients.
Business to consumers and business to business

51. Consent – express or implied
Compliance with CASL is rooted in consent.
Consent can be implied or express but after July 1st CEMs cannot be sent without the consent of the recipient.

52. Transition rule for existing clients
Implied consent:
Transition rule for existing clients
3 year transition period to help businesses adjust:
Implied consent under the transition rule allows you to send CEMs until July 1, 2017 to existing customers, unless they ask you not to.
And you were already communicating with them electronically prior to July 1, 2014.

53. Two year rule and referrals
Implied consent:
Two year rule and referrals
Existing business relationship - you can send a CEM to the recipient up to 2 years from the date of your last business transaction. Then it expires.
Referrals - Someone approaches you for information about your services. You have up to 6 months to contact them. Then consent expires.

54. Proof of consent lies with you – get consent in writing
Complaints
Proof of consent lies with you – get consent in writing
If oral – keep recording or follow up with to get proof
Express consent may be valid under CASL if client had signed Privacy Consent form before July 1st – check the wording
Better – ask clients to sign a revised Privacy Consent or additional consent spelling out they consent to you contacting them by phone, electronic mail
Follow up would be something like, “when we talked on the phone yesterday, you indicated you’d have no problem with me communicating with you by . As there are new rules in Canada now to control unwanted spam or s, please verify by return that you agree to me sending you s. You can of course change your mind at any time”…

55. Express consent – the gold standard
Express consent is not time-limited. Permission remains in place unless the recipient withdraws it.
Requires recipient to opt-in, not opt-out, to qualify. Person must provide explicit verbal or written permission to you to contact them.
Why do we call it the gold standard? Because it’s not time limited. That’s why so many organizations sent you s around July 1st even though you may have had a relationship with them already. No one wants to do all the tracking required to keep scrubbing lists where there is only implied consent – which expires. Having said that, there is nothing to prevent you from relying on the implied consent feature where it suits your purposes and the size of your client base.

56. UNSUBSCRIBE FEATURE- allow opting out at any time
The big three
IDENTIFYING INFORMATION – who you are, contact information
UNSUBSCRIBE FEATURE- allow opting out at any time
CONSENT- express or implied
On every after July 1st to avoid complaints.

57. Business hassle or opportunity?
Look at who you and why
Get express consent – good time to contact clients and prospects to remind them of your value
Make sure your s, texts contain the prescribed “identifying information” and an unsubscribe feature
Update your privacy consents

58. More information
Government of Canada Fight Spam website:
CRTC: – Q&A section covering common questions
IFB website – Member Compliance Tools section
IFB Broker Tip sheet at IFB booth

59. Disclosure

60. “The more you explain it, the more I don’t understand it”
Transparency is the goal, disclosure is the tool
“The more you explain it, the more I don’t understand it”
- Mark Twain
Point of Sale Disclosure: Fund Facts - an easy-to-read document that highlights key information about the fund, such as a description of the fund, its performance, risks and costs.
Currently produced for mutual funds & segregated funds. Will be expanded to ETFs.
Investor research shows people absorb information more easily if its in a comparable format (like comparing 2 fund facts for different mutual funds) side by side. Also, graphic information is easier to understand than large areas of text.
Expect consultation paper on FF for ETFs by year-end.

61. Advisor disclosure
BIG focus of securities and insurance regulators – do clients understand who they are dealing with, for what services and the cost of those services?

62. Life/health insurance – Disclosure Ontario
Companies you represent
Compensation – how compensated, additional compensation – bonuses, travel
Conflicts of interest - Reasonable person test:
Would your advice or product offered have been different if the situation or incentive giving rise to the potential conflict of interest did not exist?
Would it appear to a reasonable, informed third party looking at all the facts that you acted in the best interest of your client?
Consumer’s right to ask for additional information
Client complaint mechanisms
FSCO: Disclosure of conflicts of interest must be reassessed every time you make a recommendation or transaction, not just at account opening. Reflects that circumstances may change over time. Examples of COIs include loan arrangements, other occupations

63. Provincial requirements vary
Some provinces have specific legal requirements
Ontario: since 2004, disclosure must be in writing – FSCO study – 90% advisors disclose conflicts of interest but only 50% do so in writing!
BC, Manitoba, Alberta & Quebec all have legal requirements – check the provincial regulator websites if you’re licensed in other provinces

64. Mutual fund disclosure
CRM1: disclosure of relationship of client and advisor/firm, conflicts of interest and enhanced (more) suitability reviews
CRM2: enhanced account statements, book cost, market value
Attempts to address imbalance of information – recognizing that financial products can be complex and hard for the ‘average’ investor to understand
Suitability reviews look at investments in the portfolio and investment decisions measured against the client’s investment objectives and risk tolerance. It also provides the advisor opportunity to help make sure the client is more aware of these financial decisions to try and bridge the gap in knowledge or knowledge barrier presented by complex written materials, like prospectuses.

65. Mutual fund disclosure: Keep evidence in client files!
Conflicts of interest – disclose any conflict or potential conflict of interest that arises between the interests of the Dealer or Approved Person and the interests of the client (e.g. OBAs)
Relationship disclosure – written disclosure about the nature of the relationship between the Dealer firm and the client on account opening
Referral arrangements – written disclosure of referral arrangements must be made to the client before the party receiving the referral either opens an account for the client or provides services to the client
Transaction fees and charges – prior to the acceptance of any order in respect of a transaction in a client account, inform the client of the nature of compensation
written disclosure must be provided in all cases where there is a reasonable likelihood that a client would consider the conflict important when entering into a proposed transaction.” The notice says this would include a situation where a rep refers a client to a company in which the rep has an ownership interest for tax preparation services.  Outside business activities – must be approved.
Relationship disclosure document (RDD):
The nature of the advisory relationship
The products and services offered
Procedures regarding the receipt and handling of client cash and cheques
Obligation to ensure that each order accepted or recommendation made for any account of a client is suitable for the client and suitability review of the investments in the client’s account
Definition of the various terms for the Know-Your-Client (“KYC”) information collected and how this information will be used in assessing investments in the account
The content and frequency of reporting for the account
The nature of the compensation that may be paid and where client can get more specific information.
“In some cases, general disclosure to clients at one point in the relationship may be enough. In other cases, ongoing disclosure, or disclosure specifically related to the timing of a transaction, may be required,” it says. 

66. Replacing
Life Insurance Contracts

67. What to watch for -
Most common reason for claims being denied by insurers is non-disclosure to client – make sure you have a record proving the disclosure happened
Cancellation of old policy before purchase of new policy confirmed – could result in client left without insurance and advisor responsible

68. The LIRD & written explanation
Life Insurance Replacement Declaration (LIRD) standardized form – 11 questions
Plus:
Written explanation of reasons for replacement to be provided to client: i) how the existing policy doesn’t address client needs ii) why the replacement policy is better and, iii) any risks associated with replacing the insurance (e.g. suicide provision restarted)
You and the client have to sign the LIRD that you have provided the client with written explanation of the advantages and disadvantages of replacing the policy.

69. replacement disclosure
Reference document on
replacement disclosure
Guidance on preparing the written explanation – jointly prepared by CLHIA, CAILBA, IFB and Advocis –– covers individual and group
Quebec introduced a slightly different replacement form “Notice of Replacement of Insurance of Persons Contract” – must be used for any replacement after October 21, 2014
Guidance document available on websites. Updated August 2014 to include guidance on Quebec’s form.

70. Different provincial legal requirements
Ontario/NFLD: LIRD & written explanation to client, new insurer – existing insurer gets LIRD only
BC, Alberta, Sask, NS, NB, PEI: LIRD & written explanation to client
Manitoba: LIRD & written explanation to client, new insurer LIRD only
Note: Insurance companies may require you to provide the LIRD or both documents with the application for replacement
Guidance document available on websites. Updated August 2014 to include guidance on Quebec’s form.

71. For the future

72. On the horizon – life insurance
FSCO new computer system – “the required tools to effectively regulate in an increasingly challenging financial services marketplace”
FSCO - Focus on product suitability and advice – next phase of survey
LLQP national harmonized program – roll out January 1st, 2016
CCIR - segregated funds review & assess potential for regulatory arbitrage

73. On the horizon – securities
CRM2 – fee disclosure/performance on statements for mutual funds and securities investors – July 2015/16
CSA/OSC research on whether embedded fees/commissions influence advice
CSA/OSC response to “Best Interest” (aka fiduciary duty) for mutual fund advice
CE for MFDA advisors – consultation expected early 2015
Ontario Ministry of Finance: review merits of more tailored regulation of financial planners

74. Thank you!
Thank you for your attention. And, I hope the presentation has provided you with the tools you need to check your own policies and procedures to make sure you’ve covered off what you need to have and maintain a compliant practice. Don’t wait til you find you’ve been chosen for an audit! Copies of the slides will be posted to the IFB website in the Toronto Summit section shortly for your reference.