1. 2018 COMPLIANCE MEETING
BridgeForce Financial Group March 2018

2. 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

3. 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

4. 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

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

6. POLICY INITIATIVES
BridgeForce Financial Group March 2018

7. 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

8. 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

9. 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

10. LICENSING & MARKET CONDUCT ACTIVITIES
BridgeForce Financial Group March 2018

11. Life insurance agent licences issued (Sept 2017 – Feb. 2018) 11624
life insurance agents licensing statistics
Life insurance agent licences issued (Sept 2017 – Feb. 2018)
New applications
Average applications per month (493 per month)
Licence renewal applications
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

12. 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 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

13. 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

14. 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

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

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

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

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

19. 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

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

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

22. 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

23. 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

24. ENFORCEMENT ACTIONS
BridgeForce Financial Group March 2018

25. 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

26. 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

27. questions?
BridgeForce Financial Group March 2018