Ontario insurance regulators are beginning to pay closer attention to the disciplinary decisions of other regulators pertaining to advisors with insurance licenses, and are considering imposing their own sanctions against these agents in cases in which it is warranted.
At the Independent Financial Brokers of Canada (IFB) fall summit in Toronto on Tuesday, Anatol Monid, director of the market conduct branch at the Financial Services Commission of Ontario (FSCO), said that the life insurance product suitability review conducted by FSCO last year revealed that a high proportion of insurance agents also hold other types of licenses.
Specifically, 46% of the 1,032 life insurance agents surveyed are also licensed to sell mutual funds, 14% are licensed to sell securities, and 12% have a property and casualty insurance license. That’s a considerably higher proportion of agents than FSCO had anticipated, according to Monid.
“One of the key findings that we had from the survey was that one in two agents are dually licensed,” he said. “In the past, we thought it was a small number.”
Having recognized that a substantial proportion of insurance agents are subject to supervision by other regulatory bodies, such as the Ontario Securities Commission (OSC), the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA), Monid said FSCO has begun to monitor the decisions issued by those regulatory bodies more closely.
“We have been receiving a number of notifications from IIROC and the MFDA about life insurance agents who have been sanctioned by securities regulators,” Monid says. “So, we have to look at these cases now.”
Depending on the nature of misconduct that prompted the sanctions against an advisor by other regulators, Monid said that in some cases, FSCO may decide to implement its own disciplinary action, such as revoking or suspending the agent’s insurance license.
“It is possible that a finding by a non-insurance regulator may result in a finding against the agent about honesty and integrity in such a way that if that individual demonstrates a propensity to improper behavior and represents an unacceptable risk to the public, the superintendent will need to look at their suitability to be licensed as a life agent,” he said.
In other words, Monid said: “If you do something wrong in one sector, it may have an implication in the life insurance sector.”
However, Monid emphasized that each case will be carefully considered on its own merits, and an insurance agent’s license will not revoked by FSCO solely based on another regulator’s decision.
“On one hand, when there is an offense or a sanction under the securities regulation, it is important to the Superintendent,” he said. “On the other hand, it does not automatically make you unsuitable to be licensed.”
Monid highlighted recent examples of cases in which FSCO had taken enforcement action following decisions by other regulators. In one case in 2013, an agent who had faced sanctions from the MFDA and the OSC, as a result of breaching the Securities Act, failed to disclose that enforcement activity to FSCO when renewing his or her insurance license. As a result, the agent’s life insurance license was suspended for nine months.
“The superintendent decided that they needed to simultaneously send a strong and meaningful message to the agent, and others in the industry, that the allegations from the other regulators were serious and that any propensity towards that behavior of untrustworthiness, dishonesty or misconduct would not be treated lightly, should similar conduct occur on the life insurance side,” Monid said.