How “Compliance” FitsHow “Compliance” Fits

Sandra Dolson

Wholesale Compliance Manager

SLF Canada

Environment

Significant misconduct incidents / allegation in financial services (e.g. Earl Jones, Milo Brost)

Regulators have lower risk tolerance……raising the bar on control functions and compliance risk management

Both provincial and federal laws apply to distribution activities

Rule based vs principle based - trend is for less regulation

Sometimes the industry imposes compliance initiatives on itself - the alternative is for regulators to impose it

Once upon a time …..

Compliance is……..

about trust that the public places in you.

what protects this trust

what is looked to by the regulators to prove that we are protecting this trust.

Risk Assessment Checklist

Obligation Risk Control

Privacy Protect client’s information To comply with federal and provincial privacy

laws

Reputational risk Regulatory risk Possible fines

?

AML/ATF To help detect and deter money laundering and the financing of terrorist activities

To comply with AML/ATF regulation

Possible fines and/or imprisonment ?

Managing Conflicts of Interest

Interests of the consumer must be placed ahead of the advisor

Disclosure of conflicts or potential conflicts Product must be suitable for the client’s needs To comply with industry guidelines/standards

Unable to demonstrate appropriate sales practices

Lack of consumer trust Lack of industry compliance

could lead to regulated disclosure

?

Advisor Disclosure

To comply with industry guidelines/standards Must be provided prior to the sales transaction

The consumer must have clear informationabout:

companies you represent and your relationship with the companies

how you are compensated additional compensation you may receive (ie

travel incentives) conflicts of interest consumers right to ask for more info any industry-related license(s) you hold

Lack of consumer trust Lack of industry compliance

could lead to regulated disclosure

Failure to disclose could lead to consequences such as:

- litigation - E&O may not cover you - unsuitable sales conduct

?

Risk Assessment Checklist – con’d

Obligation Risk Control

Product Suitability

To help your client make an informed and confident purchase decision

To comply with industry/company guidelines/standards

Lack of consumer trust and/or confidence

Lack of industry compliance could lead to regulated disclosure

?

Policy Replacement

To comply with provincial regulations Disclose all information needed so client

has a good understanding of the product you are recommending and impact of proposed replacement of original policy

Lack of consumer trust Lack of compliance with

provincial regulation?

Record Keeping Files must be current, correct, complete, consistent & contemporaneous

If there are incorrect notes, all other notes may become questionable

?

Education & Training

C.E. Credits Licensing requirement

License suspension?

E & O Understand your policy Licensing requirement in most provinces Carrier requirement as part of your

contract

Not covered ?

Awareness of Responsibilities

Understand laws, regulations and industry guidelines

Refer to risks in checklist?

Privacy

Obligation Protect your clients’ personal information To comply with federal and provincial privacy laws

Risk Reputational Regulatory Monetary

Control Privacy Policy – Do you provide a copy of your privacy policy to your

clients? Do you provide the carrier’s privacy policy? Internal Policies (i.e. secure communication to clients via e-mail or fax,

phone, office space, laptop security, working from home etc.) Privacy training

Anti-Money Laundering & Anti-Terrorist Financing

Obligation Comply with Proceeds of Crime (Money Laundering) and Terrorist

Financing Act (PCMLTFA)

Risk Imprisonment from 6 months to 5 years Fines from $500,000 to $2,000,000 Administrative monetary penalties, or All three of the above.

Control Compliance Regime as required by AML/ATF Verify the identity of your clients, and keep records Report Suspicious Transactions Risk assessment checklist of compliance regime

Managing Conflicts of Interest

Obligation Protect your clients’ personal information Disclosure of conflicts or potential conflicts Product must be suitable for the client’s needs You must comply with industry guidelines/standards

Risk Unable to demonstrate appropriate sales practices Lack of consumer trust Lack of industry compliance could lead to regulated disclosure

Control The “Approach” – as recommended by CLHIA, Advocis, CAILBA, etc. Determine your client’s needs and objectives

Advisor Disclosure

Obligation You must comply with industry guidelines/standards Must be provided prior to the sales transaction The consumer must have clear information about: - the companies you represent and your relationship with the companies - how you are compensated - additional compensation you may receive (ie travel incentives) - conflicts of interest - consumers right to ask for more info

- any industry-related license(s) you hold

Risk Lack of consumer trust and/or confidence Lack of industry compliance could lead to regulated disclosure

Control The “Approach” – as recommended by CLHIA, Advocis, CAILBA, etc Written documentation of disclosure

Product Suitability

Obligation Disclose all information needed so client has a good understanding of the

product you are recommending and impact of proposed replacement of original policy

Advice should meet the client’s need and situation to help your client make an informed and confident purchase decision

Risk Lack of consumer trust and/or confidence Lack of industry compliance could lead to regulated disclosure

Control Follow ‘The Approach’ as recommended by CLHIA, Advocis, CAILBA, etc. Refer to product information on carrier’s websites

Policy Replacement

Obligation You must comply with the provincial regulation Disclose all information needed so the client has a good understanding

of the product you are recommending and the impact of proposed replacement of original policy

Risk Lack of consumer trust and/or confidence Lack of compliance with the provincial regulation

Control Follow the provincial replacement disclosure requirements Ensure the client needs are met and the client’s best interest come

foremost

Record Keeping

Obligation

Files must be current, correct, complete, consistent & contemporaneous

Risk

If there are incorrect notes, all other notes may become questionable

Control Have a consistent process for documenting your client interactions. Make sure all members of your business use the same method for

documentation

Education & Training

Obligation Continue your education as you work in the industry Licensing requirement

Risk

License suspension

Control attend education sessions regularly to keep current have employees trained so they understand why you have the

practices your business follows

Errors & Omissions Insurance

Obligation Have appropriate coverage for your business Licensing requirement in most provinces Carrier requirement as part of your contract

Risk Not having the coverage when most needed License revoked

Control Understand the policy you have in force As your needs change, ensure you policy is appropriate

Awareness of Responsibilities

Obligation

To Understand laws, regulations and industry guidelines

Risk

Culmination of the previous “Risks” on previous slides

Control Comply with all insurance and other applicable laws, regulations and

industry guidelines including policies and directives established from time to time by a carrier

Become a member of a professional organization (i.e. Advocis)

Control Checklist

Privacy Privacy Policy Privacy training Communicate securely Provided client a copy of your privacy policy Provided a copy of the carrier’s privacy policy Review of privacy practices in your office

Yes □ No □ Yes □ No □ Yes □ No □ Yes □ No □ Yes □ No □ Yes □ No □

AML/ATF Compliance regime Risk assessment of compliance regime Do you understand your obligations?

Yes □ No □ Yes □ No □ Yes □ No □

Managing Conflicts of Interest

Do you follow the “Approach” Yes □ No □

Advisor Disclosure Do you follow the “Approach”? Do you have written documentation of

disclosure?

Yes □ No □ Yes □ No □

Product Suitability Do you follow the “Approach”? Have you provided your client information to

make an informed and confident purchase decision?

Yes □ No □ Yes □ No □ Yes □ No □

Policy Replacement

Do you understand the provincial replacement disclosure regulations?

Have you provided the client a written explanation of the advantages and disadvantages of replacing an existing life insurance policy before starting an application for a new policy?

Yes □ No □

Yes □ No □

Record Keeping Do you have a consistent process for documenting client interactions?

Yes □ No □

Education & Training

Do you attend educational classes to stay current?

Do you understand your provincial CE licensing requirements?

Yes □ No □

Yes □ No □

E & O Do you have E&O coverage? Do you understand your policy? Is it a requirement of your licensing? Is it a requirement of your Carrier contract?

Yes □ No □ Yes □ No □ Yes □ No □

Control Checklist

Do you understand your responsibilities?