Our investigation into banned advisors has put the spotlight on a number of systemic but easily avoidable regulatory deficiencies. Left unaddressed, these deficiencies could negatively impact investors.

Haven’t read our investigation? Go here.

Here are five key recommendations that have come out of our research:

1. Inform consumers about multiple registrations

Insurance regulators should consider including a disclaimer on their agent lookup landing pages indicating licensed persons may have multiple registrations, and that consumers should consider searching the CSA database, among others, for disciplinary actions.

“We would certainly consider that,” said Ron Fullan, executive director of the Insurance Councils of Saskatchewan, in an email. “I’d have to consider where we’d put it, but we would certainly support consumers being aware of the possibility of multiple licences.” Ontario has also said it would consider adding a disclaimer along these lines. P.E.I. and B.C. wrote that they would consider adding links to CSA, IIROC and the MFDA on their sites.

Other insurance regulators were less open to the idea. “At this time, the ICM [Insurance Council of Manitoba] is not contemplating a broad disclosure to consumers with respect to other licensing bodies,” executive director Erin Pearson said via email. And the Autorité des marchés financiers told us it “is not considering this issue at this time.”

Kelly Morris, a partner at Borden Ladner Gervais in Toronto, says she doesn’t think there’s any legal risk in adding such a disclaimer. “Potentially, the concern would be that then you start having consumers phoning and asking what else they should be checking, and [the regulators] probably don’t want to be engaged in that.”

7

Number of people permanently banned by MFDA, who maintained their insurance licence for at least six months after the ban.

Sources: MFDA enforcement database; provincial insurance regulatory databases.

2. Add disciplinary actions to agent/broker profiles

Not all provincial insurance regulators list their own disciplinary actions in their online agent/broker profiles. We found at least three provincial regulators that don’t currently list this information in profiles, or don’t do so consistently:

  • Insurance Councils of Saskatchewan
  • FSCO (some infractions were listed on agent profiles, others were not)
  • Alberta Insurance Council

Saskatchewan is aware of the importance of having this detail on profile pages. “We are in the midst of a project to re-do our entire database system, with an anticipated implementation by year-end,” says Fullan. “Having the [disciplinary] actions appear on the profile page is one of the upgrades that is included in that project.”

We found that, in general, agent/broker profiles were thin on information that would be relevant to a consumer doing due diligence. For instance, in most cases, there is no indication of how long an agent/broker has been in the insurance industry—useful information for consumers who may want to verify claims of an agent who touts 20 years of experience.

2

Number of people permanently banned by IIROC who maintained their insurance licence for at least six months after the ban.

Sources: IIROC disciplinary case database; provincial insurance regulatory databases.

A natural extension of this idea would be to have MFDA and IIROC disciplinary actions noted in agent/broker profiles on insurance regulator websites. However, there are legitimate hurdles to doing so. Gerald Matier, executive director of the Insurance Council of B.C., explains one of the most important: “[I]f Council has determined that the disciplinary action taken by another regulator does not affect the individual’s suitability to hold an insurance licence, then it is questionable whether Council would have the authority to publish such information on its website.”

3. More MOUs

Currently, the MFDA has information-sharing Memoranda of Understanding (MOUs) with FSCO and the Saskatchewan Life Insurance Council. IIROC has at least a dozen MOUs with Canadian and international regulatory bodies, including FSCO and the Chambre de la sécurité financière, and is “pursuing more” such agreements. (Update: as of June 20, 2016, IIROC has a MOU with the Insurance Council of B.C.)

It’s encouraging to see both IIROC and MFDA are aware of and taking proactive steps to correct the problems discussed in this investigation. We will be examining next year’s data to see if these steps bear fruit.

29

Number of disciplined persons who do not show up in the National Registration Database.

Sources: Both IIROC and MFDA, 2013-2015; not necessarily insurance registered. As of May 26, 2016.

4. Improve accuracy of CSA database

This investigation turned up a lot of hair-raising finds; one of the most egregious is the gaps in CSA’s database.

As of May 2016, there are 51 instances of MFDA or IIROC reps whose full disciplinary records from 2013 to 2015 do not appear on their CSA profile pages.

Sure, CSA has a disclaimer saying it “does not represent or warrant” that the information on its website “is complete, timely, or accurate.” But this is the kind of fine-print liability-dodging the regulators rightly give the industry a hard time for.

Consumers who use the database expect it to be accurate and up to date.

5. A universal identification number for each registered participant

We came across several duplicate names when researching SRO disciplinary actions in the CSA and insurance databases. While the uncertainty this causes could be remedied by cross-checking other identifiers, lingering ambiguity in some cases forced us to exclude the data point altogether. Consumers working with someone registered across multiple jurisdictions could have a hard time doing research on their prospective advisor.

So, we propose a national identification number for each registered or licensed person in the financial industry that will be the same across each regulator. This will also help non-offenders who have the same name as offenders.

In response to this suggestion, CSA said it already has unique identifiers for individual registrants, but “concerns about the security of personal information currently prevent us from publicizing [them]. We are developing a new system that will replace NRD, and which will allow us to overcome some of these issues.”

51

Number of disciplined persons whose penalties are missing from the National Registration Database.

Both IIROC and MFDA; 2013-2015; not necessarily insurance registered. As of May 26, 2016.

The Autorité des marchés financiers can be held up as a model here; it currently allows investors to search for registrants using their NRD numbers, as well as AMF registration numbers. Regulators, therefore, could keep their own numbering system while also publicizing an NRD number where applicable.

What the regulators had to say

These responses have been presented verbatim, with edits for clarity or privacy only. The New Brunswick Financial and Consumer Services Commission and the Financial Services Regulation Division of Newfoundland did not respond to multiple requests for comment. Should we receive responses, we will post them here. (Click on each response to expand.)

Originally published on Advisor.ca
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