2018 COMPLIANCE MEETING BridgeForce Financial Group March 2018

Financial Services Regulatory Authority (FSRA) Update Agenda Financial Services Regulatory Authority (FSRA) Update Regulation of Financial Planners FSCO Updates Policy Initiatives Licensing and Market Conduct Activities Enforcement Actions BridgeForce Financial Group March 2018

FSRA UPDATE In June 2017, the Ontario Government appointed a three-person Board of Directors of the new FSRA. The Board is supervising the management of FSRA's affairs, including the development of a detailed transition plan. In December, 2017, proposed legislative amendments in Bill 177, Stronger, Fairer Ontario Act (Budget Measures), 2017, received royal assent. The amendments further clarify FSRA’s statutory objects which include: promoting high standards of business conduct; protecting the rights and interests of consumers; and fostering strong, sustainable, competitive and innovative financial services sectors. FSCO continues to operate as usual pending further instruction from the Government. BridgeForce Financial Group March 2018

Regulation of financial planning In its November 14, 2017, Fall Economic Statement, the government indicated that it plans to develop legislation to regulate financial planners in Ontario. The objective is to ensure that consumers have access to high-quality financial planning services that will benefit their long-term financial well-being. The government also plans to take steps to reduce consumer confusion created by the number of titles used in the industry. The use of titles related to financial planning will be restricted. The government will consult with stakeholders to shape the proposed framework.   BridgeForce Financial Group March 2018

FSCO UPDATES Policy Initiatives Licensing and Market Conduct Activities Enforcement Actions BridgeForce Financial Group March 2018

POLICY INITIATIVES BridgeForce Financial Group March 2018

Treating Consumers Fairly (TCF) GUIDELINE  FSCO is in the process of consulting on a Treating Consumers Fairly Guideline which would apply to all licensees/registrants in the financial services sectors it regulates. It is the first time that FSCO will be issuing a multi-sectoral guideline. TCF is about putting the interests of the consumer first at every stage of the product life cycle. To ensure a common understanding between FSCO and licensees, FSCO will further clarify its expectations regarding the fair treatment of consumers. FSCO is also seeking to align with international best practices to strengthen confidence in the financial services sector through measurable and demonstrable outcomes for the consumer. FSCO’s work on the TCF also aligns with that in progress at the Canadian Council of Insurance Regulators (CCIR) level.   BridgeForce Financial Group March 2018

The Guideline will be released in the Summer of 2018. Tcf GUIDELINE (cont’d) The goal is to follow the Insurance Core Principle (ICP) 19: Conduct of Business, which was revised in 2017 by the International Association of Insurance Supervisors (IAIS). ICP 19 emphasizes the importance of insurers and intermediaries having arrangements in place to ensure there are clear roles and responsibilities regarding the fair treatment of consumers throughout the product life cycle.   FSCO met with key associations during the first stage of consultation. It is anticipated that a broader public consultation with opportunity to provide written feedback will take place in the Spring of 2018. The Guideline will be released in the Summer of 2018. BridgeForce Financial Group March 2018

December 2017 – CCIR released the Position Paper CCIR Segregated Funds Working Group Update December 2017 – CCIR released the Position Paper First step in introducing a full-cost disclosure regime for segregated funds. Includes the CCIR’s recommendations and expectations regarding the new disclosures. Recommends that needs-based sales practices be adopted and copies of the rationale for sales advice provided to consumers. Spring/Summer 2018 – expect to publish model account statement. Developed with industry and consumer consultation. In addition to cost disclosure will also include information on guarantees and performance. New requirement to disclose incentives related to travel and accommodations. Not a prescribed form - insurers will have flexibility in layout and look, and will be able to adapt language and terminology to be consistent with the contract and Fund Facts documents. BridgeForce Financial Group March 2018

LICENSING & MARKET CONDUCT ACTIVITIES BridgeForce Financial Group March 2018

Life insurance agent licences issued (Sept 2017 – Feb. 2018) 11624 life insurance agents licensing statistics Life insurance agent licences issued (Sept 2017 – Feb. 2018) 11624 New applications 2958 Average applications per month (493 per month) Licence renewal applications 8666 During this period, an application for a life insurance agent licence was denied due to the failure of the individual to disclose previous disciplinary action taken by another financial services regulator. BridgeForce Financial Group March 2018

On-site examinations began FSCO’s Proactive on-site examination program Year 1 (2015/2016) On-site examinations began Agent selection based on prior complaints & reports of non-compliance 214 on-site examinations completed Year 2 (2016/2017) New, proactive risk factors applied to the selection process for life agents On-site examinations continued 200 on-site examinations completed 22 follow-up desk reviews completed Year 3 (2017/2018) Continued to select agents based on risk profiling assessments New desk review approach began Fall 2017 - Results of desk reviews identified agents for further on-site examinations if required 132 on-site examinations completed 89 desk reviews completed BridgeForce Financial Group March 2018

Licensing observations Selection PROCESS Licensing observations Predominantly selected for: High risk On-site examinations Complaints about agent conduct and/or selling practices / LARF Predominantly selected for: Risk-based approach Medium risk Sanctions by other regulators Desk reviews Dual licences Low risk Prior non-compliance BridgeForce Financial Group March 2018

BridgeForce Financial Group March 2018 SCOPe of on-site examinations LIFE INSURANCE BUSINESS Agent’s selling practices Volume of business LICENSING REQUIREMENTS Completion of Continuing Education (CE) credits Valid Errors and Omissions (E&O) insurance coverage DISCLOSURE REQUIREMENTS Point-of-sale statutory disclosures required when selling an insurance product BEST PRACTICES Industry best practices issued by CLHIA (Canadian Life and Health Insurance Association Inc.) LIFE INSURANCE REPLACEMENT Legislative requirements specific to replacement process COMPLIANCE WITH FINTRAC & PIPEDA Review of life agent’s business policies and procedures BridgeForce Financial Group March 2018

BridgeForce Financial Group March 2018 On-site exams - COMPLIANCE WITH Key legislative requirements: Two-year comparison BridgeForce Financial Group March 2018

FSCO - BridgeForce Financial Group March 2018 On-site exams - Best practices: Two-year comparison FSCO - BridgeForce Financial Group March 2018

BridgeForce Financial Group March 2018 On-site exams - Life agent escalations: 2017/2018 BridgeForce Financial Group March 2018

BridgeForce Financial Group March 2018 On-site exams - Life agentS KEY escalations: two-year comparison BridgeForce Financial Group March 2018

BridgeForce Financial Group March 2018 SCOPe of DESK REVIEWS LIFE INSURANCE AGENT Contact information Industry experience Other business activities PRODUCT SALES Distribution channel Volume of business Types of products of sold DEALING IN MORTGAGES For life agents who may refer mortgage products Types of products referred Referral fees received LICENSING REQUIREMENTS Evidence of completion of Continuing Education (CE) credits Evidence of valid Errors and Omissions (E&O) insurance coverage ATTESTATION Responses are true to the best of life agent’s knowledge Represents current practices of agent’s business . BridgeForce Financial Group March 2018

BridgeForce Financial Group March 2018 Desk reviews – agents COMPLIANCE WITH Key legislative requirements BridgeForce Financial Group March 2018

BridgeForce Financial Group March 2018 DESK reviews - Life agent escalations BridgeForce Financial Group March 2018

FSCO - BridgeForce Financial Group March 2018 FSCO’s Examination of Insurers’ Compliance SystemS Over the last two fiscal years (2016/2017 and 2017/2018), FSCO conducted four examinations of life insurance companies. Focus of examinations Examine policies, practices, controls and reporting in place for the insurer to meet its oversight obligations over agents. Examine commercial practices to ensure Fair Treatment of Consumers (FTC) across distribution channels – involving the institution’s conduct at each stage of the lifecycle of a product, from product design, to the moment product-related obligations arise and through until they expire. In 2018/2019, FSCO expects to continue conducting life agent and life insurer examinations. FSCO - BridgeForce Financial Group March 2018

Top 3 causes of complaint: Complaints submitted against life insurance agents Consumer Complaints : 40 Top 3 causes of complaint: Agent provided misleading statements/recommendations about products so that consumers will buy the products(12). Agent provided products that do not meet the needs of consumers (6). Agent conducted fraudulent or other unsuitable activities. For instance, agent tried to solicit extra funds from clients (4). One file transferred to Regulatory Discipline Officer for further investigation Insurance Company Complaints : 71 Top 3 causes of complaint: Agent conducted fraudulent or other unsuitable activities (39). Agent provided misleading statements/recommendations to consumers about products so that they will buy the products(10). Contractual dispute between insurer and agents with regards to the agent not adhering to the terms of the agreement (2). 33 files transferred to Regulatory Discipline Officer for further investigation BridgeForce Financial Group March 2018

ENFORCEMENT ACTIONS BridgeForce Financial Group March 2018

Enforcement Actions Since September 2017, FSCO has imposed 19 Administrative Monetary Penalties (AMPs) against life insurance agents having an aggregate value of $37,600. The average amount was $1900. The infractions include: Conducting business without being duly licensed; Failing to complete at least 30 hours of continuing education required every two years; Failing to maintain Errors and Omissions insurance coverage; and Furnishing misleading or incomplete information to the superintendent. BridgeForce Financial Group March 2018

Examples of the AMPs issued for certain infractions In September 2017: Enforcement actions (cont’d) Examples of the AMPs issued for certain infractions In September 2017: a life insurance agent was fined $1,750 for providing misleading information to the Superintendent of Financial Services about continuing education credits. the Superintendent of Financial Services issued an Order imposing an administrative monetary penalty of $2,750 to a life insurance agent. The Superintendent determined that the agent failed to have E&O insurance from August 2015 to March 2017, and therefore contravened section 13 of Ontario Regulation 347/04.   BridgeForce Financial Group March 2018

questions? BridgeForce Financial Group March 2018