Empire Life expands digital applications to seg funds

Insurance regulators are moving forward with changes to the regulatory framework for segregated funds, including new disclosure requirements similar to those facing mutual funds and other investment products.

The Canadian Council of Insurance Regulators (CCIR) announced on Tuesday that it would publish a position paper this autumn outlining its specific recommendations and expectations pertaining to seg funds.

The recommendations will address issues such as the delivery of the Fund Facts document for subsequent seg fund transactions, risk classification methodology, oversight of sales, needs-based selling practices, updating of client records and know-your-product due diligence requirements.

The CCIR then plans to publish a prototype disclosure document, identifying the minimum required disclosure related to performance, fees and charges. That document is expected to be released this coming winter, following consumer opinion testing.

“Ensuring that customers have the information needed to understand not only how their segregated funds are performing, but also their full costs is of the utmost importance to us,” said Anatol Monid, chairman of the CCIR’s seg funds working group, in a statement.

In May 2016, the CCIR’s seg funds working group published an issues paper inviting feedback on the current regulatory framework and disclosure practices and the need for changes in this area.

The insurance regulators’ focus on seg funds follows the implementation of the second phase of the client relationship model (a.k.a. CRM2) in the investment industry, which has expanded the disclosure that investors receive pertaining to the cost and performance of their investments significantly. That has created a gap in disclosure between mutual funds and seg funds, which is one concern that the CCIR raised in its 2016 issues paper.

The CCIR says it expects its work in this area “to result in significant changes in the regulation of segregated funds; changes that are intended to ensure customers better understand the costs and performance of their segregated fund investments.”

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