Annual Report 2017-2018

​Table of contents


Treating Consumers Fairly


FSCO is committed to protecting consumers in all of its regulated sectors. In 2017-18, FSCO placed a strong emphasis on industry compliance with laws and regulations specifically relating to disclosure of risk and responsibility for consumers. FSCO also leveraged the variety of processes, procedures, and tools at its disposal to ensure consumers and pension plan members are treated fairly.


Protecting consumers through enhanced oversight


In today’s complex and inter-connected financial services marketplace, treating consumers fairly is fundamental to the strength and stability of the sectors FSCO regulates. Treating consumers fairly means putting the interests of consumers first so that they can make the most informed financial decisions possible.


This concept is not new and FSCO already expects that its licensees treat consumers fairly. However, in 2017-18, FSCO began developing a Treating Financial Services Consumers Fairly Guideline as a tool to develop a common understanding of what it means to treat consumers fairly throughout a financial product’s life cycle.


In consultation with industry stakeholders, FSCO developed a draft Guideline that aligns with international standards as well as similar national supervisory efforts. The final Guideline is expected to be released in 2018-19.


To ensure a consistent approach to monitoring activities across regulated sectors, FSCO formally enhanced its oversight of the life insurance and service provider sectors by expanding desk reviews.


Desk reviews are examinations that are done over the phone or via email. They are used to maximize FSCO’s resources while at the same time expanding compliance and oversight activities.  


FSCO is analyzing the results from those desk reviews, and expects to share them in 2018-19.


FSCO was aware of consumer concerns about potential mis-selling of financial products and services through credit unions, caisses populaires and banks. To better understand the problem, credit unions and caisses populaires were required to complete a questionnaire. The questionnaire gathered information from all Ontario credit unions and caisses populaires about market conduct principles, policies and procedures, emphasizing sales practices. Not only did the questionnaire provide FSCO with an important tool to identify red flags and monitor sector compliance with the law, but it also provided an opportunity to share key findings and best practices with the sector. FSCO will publish a summary report in 2018-19, allowing organizations to benchmark their own policies and procedures against the industry.





Caisses populaires are an integral part of Ontario’s financial services sector, providing deposit and loan arrangements for members in Francophone communities. These community-focused institutions often provide financial services in underserved areas such as Northern Ontario.


In November 2017, the members of 12 caisses populaires from Northern Ontario voted to amalgamate to form a new singular entity called the Caisse Populaire Alliance Limité. FSCO supported the merger by reviewing, approving and processing the creation of the new entity. FSCO also processed the cancellation of the 12 caisses’ individual licenses.


The merger came into effect on January 1, 2018. By joining forces, the merged network provides Northern Ontarians with more flexibility and choice with 29 locations.



The service provider sector is unique among those FSCO regulates because it relates directly to people’s health. It is important that Ontarians who are injured in car accidents can trust the service providers that treat their injuries and liaise on their behalf with auto insurance companies.


Education is the first step towards compliance, and that is why FSCO held an inaugural market conduct symposium for the service provider sector. The half-day event provided information about the importance of compliance to combat fraud, including proper billing and business practices, strong policies and procedures, and complete record-keeping. Of those who completed a post-event survey, more than 90 per cent found the event informative and relevant, and 84 per cent left with ideas to help improve consumer protection in their organization.


FSCO also met with seven insurers and three service provider stakeholder associations between January and March 2018. This provided an additional opportunity for all parties to share feedback with FSCO about billings, licensing and roles.


While education is important to compliance, FSCO continues to focus on enforcement activities. This year, non-compliant service providers were subject to:


  • 124 licence suspensions – an all-time high
  • 3 licence revocations
  • $24,250 in administrative monetary penalties


This year, FSCO implemented targeted reviews to expand its efforts to proactively monitor pension plans, improve their management and better protect the interests of pension plan members.


Targeted reviews focus on specific regulatory requirements and processes, and provide FSCO with the information needed to ensure that legislated requirements are being followed. In 2017-18, there were two targeted reviews.


The first focused on the Form 7 Non-Remittance reporting process. The second looked at whether termination option statements met legal requirements for statement content and prescribed timelines, including whether the pension entitlements were calculated correctly.


In addition to targeted reviews, FSCO also performs on-site examinations and Tier 1 desk reviews, which are comprehensive pension plan risk assessments. In 2017-18, FSCO undertook 60 on-site pension plan examinations – the most examinations it has ever done in a year – and 59 Tier 1 desk reviews.


“Targeted reviews are important because they allow us to focus on a specific area
to see whether pension plans are complying with the law. The findings then help us
improve our monitoring activities and guide our outreach education to the sector
so that they are better able to continue delivering pension benefits to Ontarians.”


Gino Marandola, Director, Pension Plans Branch


Every two years, principal brokers must renew their licence with FSCO in order to lawfully conduct mortgage brokering activities in Ontario. In order to renew their licence, principal brokers must complete a mandatory continuing education course and ensure that their agents and/or brokers completed their mandatory continuing education course. In 2018, their continuing education requirements increased from five to seven hours. The education requirements also incorporated training on disclosures and ensuring product suitability for borrowers and investors/lenders.


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Protecting consumers through auto insurance regulation


All motorists in Ontario are legally required to have auto insurance coverage. While all auto insurance policies have mandatory third party liability, uninsured automobile, direct compensation-property damage and accident benefits coverages, Ontarians have flexibility to choose to purchase additional or increased benefits and coverages.


FSCO is responsible for ensuring that an insurer’s rate changes are reasonable and justified, and that the rates insurers charge are balanced with their ability to meet their future claims costs.


FSCO also administers the Motor Vehicle Accident Claims Fund (MVACF), which provides compensation to people in auto accidents when no auto insurance exists to cover the claim or where an insurer’s insolvency prevents a response to a claim.


FSCO sets the requirements for the prescriptive rules about rates and risk classification systems that insurers must follow under the Insurance Act and the Automobile Insurance Rate Stabilization Act, 2003. Insurers must file an application to increase or decrease rates with FSCO. FSCO then reviews the application to determine if the proposed rates are reasonable based on actuarial data.


As a part of this process, FSCO also evaluates the company’s rate-setting criteria and underwriting rules. If the application does not meet statutory standards or the data does not support the request, the Superintendent may refuse part or all of the application.


This year, FSCO approved more than 500 requests for rates and risk classification changes. From the review and approval of rates proposed by insurers, FSCO requested amendments that resulted in an estimated $276 million in premium savings for Ontario drivers. The average approved rate change for 2017-2018 was an increase of 3.92 per cent compared with an increase of 2.93 per cent in 2016-2017.


Fiscal year Estimated average approved rate change* Number of approved filings Number of filings amended downwards by Superintendent through rate review/approval process Percent of filings amended downwards by Superintendent through rate review/approval process Estimated premium savings from Superintendent-directed amendments**


17% $169M
2015‑16(3.11%)151 33




17% $225M
2013‑14(5.78%)116 45 39% $335M

*Auto Quarterly Rate Approvals – FSCO Website
**Difference between rate changes as originally filed by insurers and those finally approved by the Superintendent


Filing type 2017-18 2016-17
Non-private passenger auto rate filings8070
Underwriting rule filings53112
Endorsement filings7854
Form filings72114


The cost of claims plays an integral role in determining the insurance rates charged to consumers. FSCO is tracking the following trends – reported anecdotally by insurers – and monitoring their impact on insurance rates:


  • an increase in claims costs related to property damage, due in part to the rising costs of repairing modern technologically advanced vehicles
  • an increase in the number of accidents due to inattentive or distracted driving, which could be driving up the costs associated with direct compensation and collision claims


As of March 2017, Ontario drivers can choose to display an “X” gender option on their driver’s licence to advance gender inclusivity. Gender “X” includes transgender, non-binary, two-spirit and binary people, and people who do not want to disclose their gender identity.


FSCO has allowed insurers to use the simplified filing process to modify rates and risk classification systems to accommodate Ontario drivers who identify as gender “X.” As at March 31, 2018, FSCO approved modified risk classification systems for six insurers to accommodate those who identify as gender “X.”


On April 11, 2017, David Marshall’s report, Fair Benefits Fairly Delivered: A Review of the Auto Insurance System in Ontario, was released. FSCO supported Mr. Marshall’s review by providing data and information about auto insurance regulation, administrative support and regulatory insights. His report included recommendations such as adopting mandatory programs of care for common injuries and introducing independent examination centres at hospitals to provide medical assessments for insurance claims.


The Motor Vehicle Accident Claims Fund (MVACF) is a “payer of last resort,” providing compensation to people in auto accidents when no auto insurance exists to cover the claim or where an insurer’s insolvency prevents a response to a claim. For example, MVACF compensates victims of accidents involving uninsured or unidentified drivers of vehicles, such as a “hit and run.”


When applicable, MVACF makes statutory payments for accident benefits and third-party liability claims. MVACF is responsible for recovering all judgment amounts for third party liability claims paid out on behalf of an uninsured motorist.


Victim claims and claims administration 2017-18 2016-17
New claims544528
Statutory accident benefits claims paid572540
Payments for statutory accident benefits$18.0 million$21.2 million
Third party liability claims paid10689
Payments for third-party liability, bodily injury and property damage$7.3 million$4.3 million


Protecting pension plan members


When a company is under financial distress (filing for creditor protection or bankruptcy), it can cause anxiety and uncertainty for pension plan members. As Ontario’s pension plan regulator, FSCO played an important role during Sears Canada’s insolvency and Stelco’s restructuring and change in ownership.





FSCO is responsible for administering the Pension Benefit Guarantee Fund (PBGF), which guarantees pensions up to $1,500 per month for pensioners in Ontario (in the case of wind-ups on or after May 19, 2017). It is funded through annual assessments paid by pension plan sponsors with covered benefits.



The Sears Canada pension plan was registered in Ontario because the majority of its plan members were employed in the province. When Sears Canada was granted court protection under the Companies’ Creditors Arrangement Act in June 2017, FSCO took quick action to minimize potential losses to plan members.


FSCO selected Morneau Shepell Ltd. through a competitive tendering process to ensure a pension administrator would take over the administration of the pension plan if needed.


In October 2017, the court approved the liquidation of all remaining stores and assets. The Superintendent determined that the Sears Canada pension plan’s wind-up was inevitable. On October 17, 2017, FSCO appointed Morneau Shepell Ltd. to take over the administration of the Sears Canada pension plan.


On March 29, 2018, FSCO issued the final order to wind-up the Sears Canada pension plan effective October 1, 2017.


In late 2014, U.S. Steel Canada Inc. applied for court protection from its creditors. At this time, there were nine registered Stelco pension plans: four smaller plans, three of which had funding surpluses, and five plans with funding deficits of almost $840 million. Had the five plans wound up, many plan members could have seen significant reductions to their pensions. The PBGF could have faced claims of over $450 million.


Throughout the past year, FSCO helped develop and negotiate a solution that revitalized the company under new ownership, saved 2,200 jobs and preserved the pensions and post-retirement health benefits of almost 20,000 pension plan members. On June 30, 2017, the restructuring was complete with approval by the court. The solution included:


  • creating an entity to leverage value from Stelco lands not being used for operations, which provided additional funding to five underfunded pension plans and post-employment benefits
  • introducing legislative and regulatory changes to support the restructuring process, including requiring various funding streams and assets to contribute to the pension plans in order to improve their funded status and enhance the security of benefits to the plan members
  • creating Employee Life and Health trusts to fund health benefit entitlements

On November 15, 2017, FSCO appointed Morneau Shepell Ltd. as the administrator of the five Stelco pension plans, effective January 1, 2018. FSCO managed the complex procurement process for an administrator, using its expertise and agility under tight timelines. Between November 15, 2017 and March 31, 2018, FSCO worked with stakeholders to ensure the smooth transition of pension administrators and to protect plan members against benefit reductions.


This work was recognized with a 2017 Amethyst Award for staff’s work on this initiative. The Amethyst Awards are the Ontario government’s highest recognition for employee excellence.


The 2008 financial crisis highlighted the ongoing issue of balancing defined benefit pension plan funding with enabling businesses to grow and be more competitive, as falling asset values and interest rates combined with increased member longevity to create significant financial challenges for pension plans and pension sponsors. This year, FSCO hosted a forum for the Pension Advisory Committee (PAC) to facilitate discussion around a proposed new funding framework that would address this issue. This forum supported the Ministry of Finance’s initiative to review the funding framework for defined benefit pension plans. 


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Empowering consumers


FSCO recognizes that consumers and pension plan members are more empowered when they are more knowledgeable about their financial situation. In 2017-18, FSCO delivered public education campaigns to promote fraud prevention and address key gaps in financial literacy knowledge, and provided the public with information about scams and other unacceptable behaviour from the sectors it regulates.


FSCO was recognized nationally and internationally by the International Association of Business Communicators (IABC) with five Silver Leaf Awards and five Gold Quill Awards for its 2016 Financial Literacy Month campaign. The campaign provided millennials with information and tips about how to save, shop and apply for a mortgage, and how to work with brokers and agents.


The challenge facing FSCO to educate millennials (25-34 year-olds) about life and health insurance was identified in the 2013 Organisation for Economic Co-operation and Development (OECD) report “Improving Financial Education Effectiveness Through Behavioural Economics.” The report stated that “even with knowledge and adequate information, consumers still act in a way that is not in their own best interest.” Inherent biases, such as the optimism bias, leads people to believe they are invincible to illness and financial hardship. In addition, the peer bias leads to making financial decisions based on what peers do.


The report went on to recommend that financial education needs to address the fact that in addition to information, consumers require tools to help them act in a way that improves their financial well-being.


That is why FSCO’s public education campaign for Financial Literacy Month in November 2017 included a self-awareness quiz on life and health insurance, and YouTube videos produced by peers that millennials follow. FSCO used behavioural insights to help increase the impact of the campaign’s message: that millennials should consider life and health insurance while going through life’s milestone events like having children, getting married and purchasing a home to protect themselves, their loved ones and their investments. The campaign’s social and digital activities had more than 13 million impressions.


In March 2018, FSCO conducted a Fraud Prevention Month campaign providing information about mortgage fraud, and how and where to report it. The campaign also reminded stakeholders in the mortgage brokering sector of their fraud reporting obligations and the best practices to protect consumers.


Why mortgage fraud? While gathering potential topics for the campaign, FSCO found Equifax research where 13 per cent of Canadians said it was okay to tell “little white lies” on their mortgage applications. This, coupled with the new federal “stress test” rules that would affect those renewing mortgages as well as new home buyers, made it appropriate timing to focus on mortgage fraud.


FSCO’s campaign was very successful in educating about consumer rights and responsibilities when obtaining a mortgage. It also covered the simple “red flags” to be aware of and highlighted fraudulent activities such as inflating salary on an application form. The campaign used social media posts and advertising, blog posts, videos, an online quiz and two Twitter chats to direct consumers to content on the FSCO website. The campaign drove almost 35,000 website page views, more than 1,300 video views and more than 3.4 million impressions from two Twitter chats about financial crime.


FSCO maintains information on its website about potential scams relating to the sectors it regulates as a service for consumers. FSCO also issues warning notices about specific entities that FSCO believes may be of concern to consumers and the business community.


In 2017-18, FSCO issued six warning notices to inform consumers and businesses about:


  • two entities not licensed or registered to conduct syndicated mortgage business in Ontario that appeared to solicit syndicated mortgage investments
  • two entities not licensed to conduct mortgage business in Ontario that appeared to solicit mortgage business and related services
  • one entity not licensed to do insurance business in Ontario that appeared to issue false proof of auto insurance to a consumer
  • one scam from an organization that appeared to be soliciting mortgage businesses despite not being licensed to do so in Ontario


Ensuring access to government services


Ontarians expect to experience seamless access to government services, regardless of which organization is responsible for delivering a program or service. Throughout 2017-18, FSCO continued work towards the transition of various responsibilities to other government bodies.


In 2017-18, FSCO supported the Ontario government’s work to post proposed regulatory amendments to the Co-operative Corporations Act. The amendments include the transfer of incorporation to the Ministry of Government and Consumer Services (MGCS), the ministry that is also responsible for the incorporation of all other businesses and not-for-profits in Ontario.


Ontario’s co-ops span a number of sectors, including farming, retail, renewable energy, child care and, mostly, housing. FSCO is responsible for co-op regulation under the Co-operative Corporations Act, including incorporation. Transferring incorporation services to MGCS would consolidate all Ontario business incorporation services in one organization.


Until the regulatory changes come into effect, FSCO continues to regulate and incorporate co-ops in Ontario, and provide support to the government on this initiative.       


In April 2016, FSCO transferred its dispute resolution services activities to the Licence Appeal Tribunal of the Ministry of the Attorney General. FSCO maintained responsibility for mediation, neutral evaluation and arbitration applications received before that date, and continues to be responsible for all files remaining open as of March 31, 2016.


As of March 31, 2018, FSCO had 93 open arbitration files, and continued to use ADR Chambers to help reduce the number of arbitration files.


FSCO also had 78 open appeal files as of March 31, 2018. FSCO continues to accept applications for appeal and variation/revocation of decisions arising out of arbitration applications filed at FSCO prior to April 1, 2016.


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Addressing inquiries and complaints


FSCO responds to public inquiries for information and reviews stakeholder and consumer complaints about the sectors it regulates.


FSCO monitors the types of inquiries and complaints it receives to identify practices that may be harmful to consumers and the marketplace or that may violate legislation, regulations or FSCO’s rules and procedures. Tracking also helps FSCO identify issues or trends where consumer or stakeholder education may be required.


The number and type of inquiries to which FSCO responds each year varies, depending on the social and economic environment and changes to legislative and regulatory requirements.



Inquiries to FSCO's Contact Centre in 2017-18

Inquiries to FSCO's Contact Centre in 2017-18

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FSCO’s contact centre is often consumers’ and stakeholders’ first point of contact with the organization. The contact centre provides information and support by responding to telephone inquiries and correspondence.


For more complex or specific issues related to licensing, market conduct or pensions, FSCO staff work directly with industry to help people get the information they need.



Market Conduct Inquiries in 2017-18

Market Conduct Inquiries in 2017-18

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Pension Inquiries in 2017-18

Pension Inquiries in 2017-18

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In general, market conduct complaints relate to the actions or behaviours of regulated entities. These complaints are an important part of FSCO’s risk-based approach to market conduct oversight.


FSCO reviews complaints that allege non-compliance with legislation or regulations in any of the sectors it regulates. Where there is a contravention, FSCO takes appropriate enforcement action. It is important to note that not all complaints result in a finding of contravention of the law.



Market Conduct Complaints in 2017-18

Market Conduct Complaints in 2017-18

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Pension Complaints in 2017-18

Pension Complaints in 2017-18

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In 2017-18, FSCO saw an increase in the number of pension-related complaints due to member concerns in two particular pension plans. FSCO worked with complainants to address their concerns.


Enforcing the law


FSCO monitors, investigates and, where warranted, takes appropriate enforcement action within its regulated sectors in order to enhance public confidence and protect consumers and pension plan members against non-compliant individuals and businesses, including those that may be conducting unlicensed activities.


FSCO’s monitoring activities include reviewing complaints; analyzing statutory filings, information returns and questionnaires; undertaking compliance audits for continuing education and errors and omissions insurance requirements; and conducting on-site examinations. Depending on review results, FSCO may decide to investigate further.


FSCO also uses this information to assess an entity’s risk level. Depending on the risk level and the sector, a licensee or registrant may be subject to a targeted review, an on-site examination and/or a desk review.


Should there be a finding of non-compliance with legislation and regulation, FSCO generally takes a progressive approach to discipline. Enforcement action and tools can vary based on the contravention, findings, risk factors and any past issues. 


Enforcement actions and tools include:


  • education
  • remediation
  • intervention
  • licence suspension and/or revocation
  • administrative monetary penalties

The following table shows the enforcement actions FSCO took against non-compliant licensees in 2017-18.


Sector Number of caution letters Number of warning letters Number of licence suspensions* Number of licence revocations Number of licence refusal/denials Total administrative monetary penalties ($)
Service providers0112430$24,250
Mortgage brokering43453195$1,201,225
Insurance sector (life insurance agents; property and casualty; life and health)525147$177,006

*Includes interim suspensions


The Motor Vehicle Accident Claims Fund (MVACF), which provides accident benefits and third party liability payments to victims of accidents involving uninsured or unidentified vehicles, also has the ability to take enforcement action against uninsured motorists by suspending driver’s licences for unpaid judgments.


Enforcement actions 2017-18 2016-17
Suspended driver’s licences228210
Repayments processed3,8164,072
Debtors making payments473488
Collection of repayments$968,255.36$1.0 million


Syndicated mortgage investments: protecting consumers


A syndicated mortgage is a mortgage loan that has more than one lender or investor who makes an investment in a mortgage. In Ontario, syndicated mortgage transactions that are governed by the Mortgage Brokerages, Lenders and Administrators Act, 2016 (MBLAA) are under FSCO’s purview.


FSCO considers syndicated mortgage investments (SMIs) to be high risk and notes they may not be suitable for the average lender or investor.


During 2017-18, FSCO registered 47 complaints about syndicated mortgage investments. The following graph shows the number of complaints about syndicated mortgage investments over the past six fiscal years.



Syndicated Mortgage Investment Complaints as at March 31

Syndicated Mortgage Investment Complaints as at March 31

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In January and February 2018, the Superintendent of Financial Services issued orders for $1.1 million in administrative monetary penalties following a complex and detailed investigation by FSCO.


The orders were issued, pursuant to a settlement, against eight parties that were involved with syndicated mortgage investments for real estate development projects in Ontario and elsewhere in Canada for which Fortress Real Developments Inc. was a developer or development consultant. Fortress Real Developments Inc. was not a mortgage brokerage or administrator and was not a party to the settlement or the subject of any of the orders.


The orders also provided that one mortgage brokerage licence and four mortgage broker licences be revoked on consent, requiring them to stop all mortgage brokering business immediately. One additional principal broker also surrendered their broker licence, requiring her to cease all mortgage brokering activities.


The mortgage administrator for these syndicated mortgage investments was Building Development and Mortgages Canada Inc. (BDMC). BDMC voluntarily agreed that its mortgage administration functions for existing syndicated mortgage investments in real estate development projects for which Fortress Real Development Inc. was a developer or development consultant would be managed by a new arms-length administrator. The administrator named to conduct business in BDMC’s name is FAAN Mortgage Administrators Inc.


FSCO also issued two compliance orders and five other licence revocations in 2017-18 related to syndicated mortgage activity.


Getting ready for pension administrator fines


The Administrative Penalties regulation under the Pension Benefits Act (PBA) came into effect on January 1, 2018, giving FSCO the power to impose administrative penalties on persons, including pension plan administrators, who contravene the PBA and its regulations. FSCO expects that administrative penalties will be an effective additional tool to promote compliance in the pension sector.


FSCO is working to develop the policies and procedures to govern how those penalties are assessed and administered.


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