No. G- 10/06
- General

Monitoring and enforcement report - including prosecution and hearing decisions - July 1 to September 30, 2006

The Financial Services Commission of Ontario's (FSCO) Monitoring and Enforcement Bulletin reports on its prosecution activities, the decisions arising out of the hearings under FSCO legislation and other regulatory activities that help ensure consumer confidence in the financial services sectors regulated by FSCO - insurance, credit unions/caisses populaires, loan and trusts, co-operative corporations and mortgage brokers.  FSCO also regulates pensions; its monitoring and enforcement report on this sector appears separately in FSCO's online Pension Bulletin at www.fsco.gov.on.ca. 

The Financial Services Tribunal (FST), an independent adjudicative body, hears appeals or reviews proposed or intended decisions of the Superintendent of Financial Services (Superintendent), who makes the majority of first line regulatory decisions.  These appeals or reviews are conducted at the request of an affected party.  In its hearings, the FST determines all questions of fact or law.  As well, the FST has authority to make rules for the practice and procedure to be observed in a proceeding before it, and to order a party to a proceeding before it to pay the costs of another party or the FST's costs of the proceeding.

The Superintendent administers and enforces the Financial Services Commission of Ontario Act, 1997 (FSCO Act), and other Acts that confer powers or assign duties to the Superintendent.  Under the FSCO Act, the Superintendent may delegate the exercise of any power or the performance of any duty conferred on or assigned to the Superintendent.  The Executive Director of the Licensing and Market Conduct Division (the Director) has been delegated the authority by the Superintendent to render licensing decisions.

The Dispute Resolution Services Branch of the Automobile Insurance Division provides mediation, neutral evaluation, arbitration and appeal services as fair, cost-effective and timely alternatives to the court system.  An arbitrator may decide at the conclusion of an arbitration hearing involving insurers and statutory accident benefits claimants, to impose penalties under the Insurance Act. 

The Insurance Act authorizes arbitrators and appeal adjudicators to make two types of enforcement orders that are reported in this Bulletin.  First, under section 282(10), a special award may be made against an insurer that has unreasonably withheld or delayed the payment of benefits.  Second, under section 282(11.2) a representative may be ordered to pay expenses personally in certain situations.

ACTIONS OF THE FINANCIAL SERVICES COMMISSION OF ONTARIO AND

THE FINANCIAL SERVICES TRIBUNAL

Monitoring Activities

FSCO undertakes a number of monitoring activities as part of its regulatory functions.  It conducts police background checks on prospective agents and paralegals and reviews complaints against agents, paralegals, health care providers, insurance companies, and other financial services sectors.  In addition, FSCO audits life agent renewal applications to ensure they meet Continuing Education (CE) and Errors & Omissions insurance (E&O) requirements. Paralegals are also subject to E&O audits.

These checks, reviews and audits are the first step in the enforcement process.  A significant number of matters are resolved at this first step.

Police Checks

During the period, a total of 1,698 police checks on the background of existing and prospective agents and paralegals were made with the Canadian Police Information Centre.

Complaints and Reviews

Cases may be closed for a variety of reasons.  The most common are: the issue raised is outside FSCO's jurisdiction; there is insufficient evidence to substantiate a complaint; or the complaint is unfounded. 

Audits

FSCO initiated 689 audits of life agents during the third quarter to ensure they met their Errors and Omissions (E&O) insurance requirements.

Investigation Activities 

As a follow up to its regular monitoring activities - police background checks, the reviews of complaints received and audits of compliance with CE requirements and E&O compliance -  FSCO may decide that some matters need to be investigated.  An investigation is the second step in the enforcement process.  It is used where prosecution or administrative action may be contemplated.

Cases may be closed if there is insufficient evidence to support the allegations, or if the allegations are unfounded.  The result of the individual court cases and hearings are reported in the period when the decisions are rendered.  The names of individuals subject to Superintendent's Orders or who have surrendered their licences are recorded on the date they occur.

Administrative Sanctions

Letters of Warning

During the period 139 Letters of Warning were issued to life agents, all of whom were late in applying for licence renewal.  In addition, one Letter of Warning was issued to a paralegal.  Letters of Warning do not require formal investigations and are not included in the preceding statistics.

Letters of Censure

There was one Letter of Censure in addition to five Letters of Censure that resulted from formal investigations.

Minutes of Settlement and Superintendent's Orders

Prosecutions

Hearings

An Advisory Board established under the Insurance Act assists in determining the granting or refusal of a new licence or the possible revocation or suspension of an existing licence for insurance agents and adjusters.  The Board considers evidence presented by the applicant or agent, as well as that put forward by counsel for FSCO, and then makes a recommendation to the Superintendent.

There were two Advisory Board hearings for life agents and adjusters for the third quarter.

Regulatory Actions and Related Hearings

Under the Insurance Act, if the Superintendent intends to make an Order, a notice must first be given to those who may be affected and an opportunity for a hearing must be provided.  Where there is a request for a hearing, the FST will hear the matter and decide whether or not the proposed Order should be made.  Where there is no request for a hearing, the Superintendent may make the Order set out in the notice.

Where the Superintendent is of the opinion that the interests of the public may be prejudiced or adversely affected by any delay in the issuance of a permanent order, the Superintendent, without prior notice, may make an interim or temporary order which shall take effect immediately on its making, and which shall become permanent on the 15th day after its making unless within that time the person requests a hearing before the FST.

There were no regulatory actions and related hearings for this quarter.

12-Month Enforcement Action and Monitoring Activities Summary

Over the past 12 months, FSCO took 150 enforcement actions.  The chart below details the types of activities taken.

In addition to enforcement actions, FSCO conducts ongoing enforcement monitoring throughout the year.  Over the past 12 months, there have been 18,023 instances of enforcement monitoring. The chart below details the types of monitoring that were undertaken.

Dispute Resolution Decisions

The Dispute Resolution Services Branch provides mediation, neutral evaluation, arbitration and appeal services as fair, cost-effective and timely alternatives to the court system.  An arbitrator may decide, at the conclusion of an arbitration hearing involving insurers and statutory accident benefits claimants, to impose penalties under the Insurance Act.  Under section 282(10), a special award may be made against an insurer that has unreasonably withheld or delayed the payment of benefits.  Under section 282(11.2), a representative can be ordered to pay expenses personally in certain situations.  Appeals are to the Director of Arbitrations, and can be heard by the Director or his Delegate.

Financial Services Tribunal (FST) Decisions

For the full text of previous Decisions/Orders, please visit FSCO's website: www.fsco.gov.on.ca, or visit the FST's website: www.fstontario.ca.

December 21, 2006

ISSN 1481-1499