The Company will carry out a review of misconduct whenever it becomes aware of a potential breach of the Company’s Code of Conduct, policies & procedures, contractual agreements with the Company, provincial rules and regulations, and the laws, rules, regulations, and standards of any other governing regulatory bodies.

The Company may become aware of a potential breach through a variety of sources including, but not limited to: client complaints, communication from regulatory bodies, Advisor reviews, third parties, or an Advisor or staff member. As a result, the Company has an obligation to report to suppliers and/or provincial regulators where a reasonable belief exists that an agent under contract has been involved in any incident of serious misconduct or negligence or is believed to have engaged in a pattern of misconduct or negligence.  

Rationale

•  Reporting unsuitable producers helps to protect the integrity of the insurance Industry;
• Reporting unsuitable producers is a statutory duty of insurers and MGAs;
• Reporting unsuitable producers using methods not equivalent to the industry standard helps to provide the Company and their contracted carriers with evidence of due diligence.

Definitions

Misconduct - wrongful, improper, or unlawful conduct motivated by premeditated or intentional purpose or by obstinate indifference to the consequences of one’s acts.

Negligence - conduct which falls below the standard of care established by law for the protection of others against unreasonable risks of loss or harm. Negligence and misconduct can occur in any kind of business in which the business offers a service and owes a duty of care or fiduciary responsibility to its clients or customers The Company’s employees may encounter situations in which they suspect misconduct or negligence has occurred. This may be revealed in the course of scrubbing an application or being involved in or privy to an Advisor’s documentation or conversations.

Examples

• failure to comply with regulations governing the conduct of their client’s affairs;
• not delivering an inforce policy to a client;
• dishonesty or any abuse of the trust placed in them;
• high-risk investments that appear to be unsuitable to a client’s investment goals noted on their KYC;
• frequent or unauthorized trades in an account, a practice known as “churning”;
• trading, transferring or switching funds in order to generate new commission ;
• incurring unwarranted charge backs to the client;
• charging excessively high fees or commissions on front end investments (> 2%);
• replacement insurance applications that don’t appear to be justified;
• taking cash from a client to purchase a bank draft;
• signatures frequently not witnessed;
• advising or making product recommendations to clients that are clearly beyond the Advisor’s level of understanding, licensing or competency;
• lack of transparency and full disclosure;
• evidence that a client (or staff) are not treated with fairness, dignity, and respect without discrimination;
• not upholding confidentiality obligations and/or misuse of any client information;
• greater focus on commissions generated by a sale than the suitability of the product for the client;
• frequent disregard of requests to provide information to satisfy outstanding requirements on business that has been placed; and
• any event of fraud, dishonest act, negligence or violation of any law, or willful misconduct perpetrated against a client, a staff member or the Company.

Misconduct Documentation Process

A file is opened and logged into the system;

1. A preliminary assessment is made by the Compliance Officer as to the seriousness of the matter;
   
   
2. The Compliance Officer will promptly inform the Chief Compliance Officer (CCO) of new files opened where there are grounds to believe that there has been a substantial breach of the Company and/or regulatory requirements, or where the matter is sufficiently complex to require a more extensive review;
   
   
3. The Compliance Officer assigned to the matter will determine if there is evidence of a contravention of the rules or regulations;
   
   
4. If there is evidence of a violation for which a warning letter is suitable, the Compliance Officer will confirm the facts with the individual(s), issue a standard form of warning letter in consultation with the Compliance Officer and CCO, and close the file;
   
   
5. If there is evidence of a serious violation that is likely to result in a more stringent disciplinary action than a warning letter, the Compliance Officer will confirm the facts with the individual(s). The Compliance Officer, CCO, and the President (or his delegate) will meet to discuss the case and review the facts and circumstances surrounding the alleged breach. If it is deemed necessary, and with the approval of the President, the individual(s) under review may be suspended for a period pending completion of the investigation. In certain extraordinary circumstances, immediate termination of (an) individual(s) may be necessary;
   
   
6. An analysis and recommendation report is prepared containing the following:
   • summary of facts;
   • description of the alleged breaches;
   • review of the individual(s) comments;
   • assessment of potential exposure to the Company;
   • recommendations.
   
   
7. The investigation report will be forwarded with a recommendation to senior management for a decision;
   
   
8. Disciplinary actions (if any) are assessed based on the nature of the violation, any aggravating factors, and any mitigating factors;
   
   
9. A letter of notification is prepared (if disciplinary action is required) setting out any fines, suspensions, or other disciplinary measures to be imposed. This is recorded in Head Office Compliance files and a hard copy will be included in the individual’s registration file;
   
   
10. A letter of notification is sent to the individual(s) and copied to his/her branch manager, the CCO, and regulatory bodies if required. Senior management will decide if the matter should be reported to a regulatory body over and above any mandatory reporting requirements; and
    
    
11. The file is then closed when the individual(s) provide the Compliance Department with an appropriate response, and complied with any disciplinary action. response, and complied with any disciplinary action.