The Financial Services Regulatory Authority of Ontario (FSRA) has released an updated report on its work to protect investors from unsuitable agents by investigating cases submitted by insurers.
“Insurance agents are required to treat consumers fairly and in accordance with the Insurance Act and its regulations,” the regulator said in a statement. “Insurance companies must monitor agent conduct and report unsuitable agents to FSRA. They may do so using a Life Agent Reporting Form (LARF).”
FSRA reported that in the past fiscal year from April 1 until March 31, 2021, it received and reviewed 57 LARFs. Of those, 23 (40%) were escalated for further investigation, including 17 that went to the Legal and Enforcement unit and 6 that were advanced to the Regulatory Discipline Officer.
“The escalated files included allegations of pervasive misrepresentation to insurers and clients, misappropriation of client funds, fronting for unlicensed entities, unlicensed activities, and trafficking4 in life insurance,” FSRA said. “FSRA will provide a status update on these LARFs in the next annual LARF report.”
Twenty-eight LARFs, representing nearly half (49%) of the 57 submitted and reviewed, were resolved and closed within the Market Conduct unit. Among those, 19 LARFs, representing a third (33%) of all those submitted last year, led to a Letter of Warning.
Such letters of warning are documented on the agent’s licensing file and given a red flag in the FSRA licensing system, the regulator said. Repeated misconduct in the future will prompt a review of the agent’s file, it added, and could result in potential licensing or enforcement actions. In case an agent applies to renew their active license or reinstate their lapse license, the Letter of Warning will be reviewed and considered a critical factor for the FSRA Licensing unit to make a decision.
Among cases that led to a Letter of Warning from the past fiscal year, FSRA determined that six were licensing violations, including unlicensed activity, solicitation in Quebec while unlicensed in that province, and false reports of continuing education credits.
Another two warning letter cases were categorized as forgery and fraud. One agent claimed total disability payments while he was employed by the same insurer. Meanwhile, the other named his father as the annuitant and beneficiary on a client’s guaranteed investment fund (GIF) application, and replaced the client’s address with his father’s.
Other types of misconduct found and addressed with a letter of warning included:
- Three cases related to Replacements;
- Two cases of undisclosed conflicts of interests; and
- Four cases of other misconduct, including two unsatisfactory advisor practice reviews, one “signature of convenience,” and one breach of the insurer’s code of conduct.
The remaining six LARFs from the 57, FSRA said, resulted in No Action Taken. In all such cases, the regulator said it red flagged the licensing file of the agent concerned; if the agent is actively licensed, FSRA said it continues to monitor enforcement activities taken by other jurisdictions to determine the need for further action. The regulator also reviews the flagged file again when it is time for the agent to renew their license.
“In situations where the agent is no longer licensed, FSRA red flags the file should the agent apply to reinstate his/her licence,” the regulator said. “The flagged file will be reviewed and evaluated in order to determine the approval of the agent’s licence.”
Among the six No Action LARFs, two were determined to be outside of FSRA’s jurisdiction, two were closed as the insurers could not produce supporting documentation, and two were closed as the licensees allowed their license to lapse without seeking renewal.