Message from the Chair and Chief Executive Officer
The Financial Services Commission of Ontario (FSCO) regulates insurance companies, agents and adjusters; pension plans; loan and trust companies operating in Ontario; credit unions and caisses populaires; mortgage brokerages, agents, brokers, and administrators; co-operative corporations in Ontario; and service providers who receive direct payment from auto insurers for certain statutory accident benefits. Established under the Financial Services Commission of Ontario Act, 1997 (FSCO Act), FSCO is accountable to the Minister of Finance.
FSCO's legislative mandate is to provide regulatory services that protect the public interest and enhance public confidence in the sectors it regulates. As an organization, FSCO is committed to being a progressive and fair regulator, working with stakeholders to support a strong financial services industry, and protecting the interests of financial services consumers and pension plan members.
FSCO is governed by a five-member commission, consisting of the Superintendent of Financial Services, a chair, two vice-chairs, and the Director of Arbitrations. The chair and the two vice-chairs of the commission are, by virtue of their office, the chair and vice-chairs of the Financial Services Tribunal (Tribunal).
The Tribunal is an expert independent adjudicative tribunal established under the FSCO Act. The Tribunal hears applications and appeals on regulatory decisions made or proposed by the Superintendent.
This is FSCO's 18th Statement of Priorities, and this year marks the launch of FSCO's 2015-18 Strategic Plan. The statement outlines the strategic plan, priorities, and planned initiatives of FSCO and the Tribunal for the coming year, and highlights FSCO's key accomplishments in the previous year.
Chief Executive Officer &
Superintendent of Financial Services (Interim)
Florence A. Holden
Financial Services Commission of Ontario
Financial Services Tribunal
Each year, FSCO releases a Statement of Priorities ("Statement") outlining its proposed activities. Following is this year's Statement, along with highlights of accomplishments from last year.
As an integrated regulator, FSCO undertakes regulatory activities governing the following sectors: insurance industry, pension plans, loan and trust companies, credit unions and caisses populaires, the mortgage brokering sector, health service providers, and co-operative corporations. FSCO uses a consistent and comprehensive risk-based approach to regulating these seven sectors. It gathers market intelligence from the sectors in order to make evidence-based decisions and focus regulatory efforts, thereby delivering regulatory services in an efficient and effective manner.
FSCO's approach to fulfilling its legislated regulatory responsibilities is outlined in greater detail in its Regulatory Framework which is posted on the FSCO website. FSCO also reports back on its core activities through its annual report. In conducting its business, FSCO provides regulatory services to enhance public confidence in the sectors it regulates through a balanced approach to protecting consumer interests and enabling healthy financial services industries.
As a regulatory agency that is accountable to the Minister of Finance, FSCO supports the Ministry of Finance’s objective of promoting a dynamic, innovative and growing economy, and managing the fiscal, financial and related regulatory affairs of the province of Ontario.
On December 9, 2014, the 2014 Annual Report of the Office of the Auditor General of Ontario (OAGO) was tabled in the Legislative Assembly of Ontario. Section 3.03, Financial Services Commission of Ontario —Pension Plan and Financial Service Regulatory Oversight, reported on the findings of an OAGO Value for Money audit and set out nine recommendations. FSCO has developed action plans to respond to the recommendations.
In the 2014 Ontario Budget , the government announced it would be undertaking focused mandate reviews of government agencies. The 2014 Ontario Economic Outlook and Fiscal Review announced a review of FSCO's mandate and on March 3, 2015, the government announced an expert panel to conduct the review of the mandates of both FSCO and the Deposit Insurance Corporation of Ontario. FSCO welcomes the mandate review and is ready to work with the government to ensure that its activities and services are aligned with the needs of Ontarians.
FSCO's Core Activities
FSCO advises the government on existing or potential risks and policy issues in its regulated sectors. Policy development results from collaboration and consultations with stakeholders and the public.
FSCO plays an important role in coordinating regulatory efforts at a national level. Canadian regulators work together to coordinate activities, share information where necessary, proactively identify emerging trends and risks, look for harmonized approaches, reach consensus around solutions for common problems, and provide solutions and guidance on regulatory matters applicable to multiple jurisdictions across the country.
Coordination minimizes unnecessary duplication, potential delays related to regulatory processes, and regulatory costs through joint projects and resource sharing. FSCO works closely with other regulators, as needed, in order to achieve its legislative mandate.
Licensing and Registration
By law, individuals and businesses require licences or registrations from FSCO in order to conduct certain activities within the regulated sectors. Licensing ensures that only qualified and suitable licensees conduct business. Similarly, pension plans must be registered with FSCO. Licensing and registration allow for supervision of the regulated sectors in order to protect and pension plan members.
Filings and Applications
Once licensed or registered, regulated entities are required, by law, to submit information to FSCO on a regular basis. Certain transactions in the regulated sectors require FSCO's approval, and regulated entities must follow filing and application procedures to obtain approval. FSCO's ability to request information is an effective regulatory tool. The information FSCO gathers at both the entity and aggregate (systemic) levels is used to develop proactive supervisory strategies, including monitoring and compliance activities.
Monitoring and Compliance
Monitoring and compliance are important ongoing supervisory activities. FSCO assesses whether regulated entities follow the law through compliance reviews. In addition to addressing specific cases of non-compliance, FSCO focuses on monitoring the degree of compliance in the regulated sectors as a whole. FSCO takes a risk-based approach to regulation and uses monitoring to track the overall potential negative impact that non-compliance can have on regulatory outcomes.
Enforcement and Intervention
FSCO influences conduct in the regulated sectors through different strategies including, for example, education, partnering with stakeholders, compliance reviews, targeted examinations, intervention, and ultimately enforcement. FSCO employs appropriate enforcement action for entities that fail to comply with the law.
Alignment with Internationally Recognized Core Principles of Supervision
The International Association of Insurance Supervisors and the International Organisation of Pension Supervisors have published core principles for the effective supervision of the insurance and pension sectors. These core principles prescribe the essential elements of a supervisory regime that provide an adequate level of protection for policyholders and pension plan beneficiaries, and promote a financially sound insurance and pension sector. FSCO works to align its regulatory activities with these internationally recognized core principles.
Administration of Special Purpose Funds and Dispute Resolution Services
FSCO's legislative responsibilities also include administering:
- The Motor Vehicle Accident Claims Fund, which is a special purpose fund used to pay claims involving automobile accidents with uninsured motorists, and hit-and-run accidents where no insurance is available. The fund provides compensation to people injured in automobile accidents when no automobile insurance exists to respond to the claim.
- The Pension Benefits Guarantee Fund, which provides protection to Ontario members and beneficiaries of privately sponsored single-employer defined benefit pension plans in the event of plan sponsor insolvency.
- Dispute Resolution Services which mediates and arbitrates disputes between claimants and insurance companies with respect to statutory accident benefits. Following a review of the dispute resolution system, the Ontario government passed legislation that will move dispute resolution services from FSCO to the Ministry of the Attorney General's (MAG) Licence Appeal Tribunal.
FSCO's Strategic Plan
FSCO is guided by its 2015-18 strategic plan and works to implement a vision of being an effective regulatory supervisor that protects the public interest in the financial services marketplace. The plan positions FSCO to remain efficient, effective, and adaptive to changes in the regulatory landscape. In order to deliver on this vision, FSCO will be guided by the following three over-arching goals:
- Be risk-based, proactive, evidence-based, balanced, transparent, service-oriented, and collaborative in its work;
- Further a coordinated national approach to regulatory issues; and
- Be a recognized thought leader in regulatory policy.
In 2015-16, FSCO will focus on eight priority areas:
- Ensure financial services industry compliance with laws and regulations;
- Provide adequate disclosure of information to enable informed decisions by consumers and pension plan members;
- Raise awareness of FSCO's actions in the financial services marketplace;
- Meet or exceed internal performance standards;
- Create common and integrated processes enabled by integrated technology solutions;
- Enhance the collection, use, and sharing of market intelligence;
- Be an agile and adaptable organization; and
- Influence the development of provincial, national, and international regulatory policy.
The 2015 Statement of Priorities provides a snapshot of FSCO objectives over the coming year. FSCO recognizes that the financial services sector is a dynamic and fast-paced environment; in addition to this year's priorities, FSCO will also be prepared to address emerging regulatory needs as they arise.
Ensure financial services industry compliance with laws and regulations
In the 2015 Ontario Budget , the government committed to strengthening the financial services sector, protecting investors and consumers, and bolstering the stability and efficiency of financial markets. This is achieved through periodic reviews of legislation and regulations, and proactive regulatory improvements that help ensure industry compliance in an evolving marketplace. In the next year, FSCO will be working with the Ministry of Finance to support the implementation of regulatory initiatives and ensure financial services industry compliance.
In 2015-16, FSCO will continue to assist the Ministry of Finance five-year statutory review of the Credit Unions and Caisses Populaires Act, 1994, and will support the implementation of recommendations from the five-year review of the Mortgage Brokerages, Lenders and Administrators Act, 2006.
In addition, FSCO will advise and support the Ministry of Finance, as required, on the implementation of pension initiatives such as proposed legislation to allow Pooled Registered Pension Plans, and a new framework for converting or transferring an existing single employer pension plan to a jointly sponsored pension plan.
FSCO will be a key driver in the implementation of the auto insurance reforms announced in the 2015 Ontario Budget aimed at reducing costs and enhancing consumer protection in the auto insurance system. Over the next year, FSCO will work with industry and other system stakeholders to facilitate effective and timely implementation of reform measures.
FSCO is also providing support to the Ministry of Finance and the Ministry of the Attorney General in the work to transfer the dispute resolution system to the Licence Appeal Tribunal, as set out in the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014.
In 2014, the government amended the Insurance Act to require that long-term disability benefits are to be paid under an insurance contract that is undertaken by a licensed insurer.
Finally, FSCO and Canada's other insurance regulators are working with the Canadian Insurance Services Regulatory Organizations (CISRO) on a harmonized effort to ensure that life insurance agents are financially literate and well-prepared to comply with regulatory laws and regulations. FSCO and other regulators are combining two life insurance agent qualification programs into one standardized qualification program to be implemented across Canada, in January 2016.
FSCO will ensure that it delivers the necessary regulatory activities in support of these initiatives, so that regulated entities understand their obligations under the law and are able to comply with them.
Provide adequate disclosure of information to enable informed decisions by consumers and pension plan members
In the financial services industries, it is important that regulated entities provide consumers and pension plan members with access to accurate, relevant, and timely information, so that they are able to make informed decisions about their financial services. FSCO works to support this goal by providing guidance on how regulated entities should provide services to consumers and pension plan members; and by providing consumers and pension plan members with information on the financial services marketplace.
In 2012, FSCO procured consulting services of scientists and medical experts to develop an evidence-based protocol for minor injuries. The new protocol may form the basis of a new Superintendent Minor Injury Guideline and Minor Injury Treatment Protocol. This protocol was among the initiatives referenced in the 2015 Ontario Budget to ensure that insurance coverages reflect the most relevant scientific and medical knowledge on identifying and treating injuries from auto accidents. The protocol could be used by health care providers and insurers when treating minor injuries resulting from automobile accidents, and to ensure that there is an extensive continuum of care based on current scientific and medical evidence. In January 2015, FSCO received the report from the consultants; it is now being reviewed and translated, and will be consulted on later this year.
As consumers and pension plan members increasingly deal with complex products and services, there is also a need to enhance awareness about the financial marketplace. In 2015, FSCO will continue to distribute consumer protection and fraud prevention information, and will also provide enhanced information to pension plan members about their plans and their plan performance.
Raise awareness of FSCO's actions in the financial services marketplace
FSCO works to inform stakeholders and consumers about its actions in the regulated sectors and marketplace. FSCO's communication of its regulatory activities and functions supports compliance and consumer protection and education; and it benefits financial services consumers, pension plan members, and regulated entities.
In December 2014, FSCO began to licence and regulate health service providers that receive direct payment from auto insurers for specified statutory accident benefits. The new regulatory regime was launched to protect consumers from fraudulent billing practices in the sector and is a component of the government's auto insurance cost and rate reduction strategy. As the sector enters its first year as a regulated area, FSCO will continue to ensure compliance with the law through pro-active communications outreach and supervisory practices.
FSCO will also continue to issue bulletins and news releases to keep stakeholders and consumers up-to-date on its actions, and meet with stakeholders to update them on regulatory developments. The level of awareness of these activities will promote compliance and increased consumer protection in the regulated sectors.
Meet or exceed internal performance standards
FSCO measures success in relation to meeting its overarching mandate of providing regulatory services that protect the public interest and enhance public confidence in the regulated sectors. FSCO's key performance measures include industry compliance levels, consumer and licensee satisfaction, consumer complaint resolutions, and adherence to all FSCO and Ontario Public Service standards. FSCO is examining its key performance measures and will align them with the 2015-18 strategic plan priorities, and establish a framework that ensures FSCO meets or exceeds them.
Create common and integrated processes enabled by integrated technology solutions
To efficiently deliver regulatory activities, FSCO is working on introducing common and integrated processes across the organization. FSCO has concluded an Enterprise Business Architecture Project, from which a capital investment strategy will be advanced to build the technology solutions and establish these processes. In 2014, FSCO's Enterprise Development Project prototyped an automated business solution, including business-wide common components for the service provider regulatory regime. The implementation of these integrated processes and platforms will support more complete data gathering, enhanced information analysis, better internal controls, and improved risk assessments to help bolster consumer protection.
In a separate initiative, FSCO is working with regulators across Canada and the Mortgage Broker Regulators' Council of Canada to introduce a common database to share information on disciplinary decisions and regulatory actions taken against licensed mortgage brokers across Canada. The database will enhance information sharing and coordination among regulators, and allow FSCO to use the information in order to assess cross-jurisdictional activity that poses risks in the Ontario marketplace.
Enhance the collection, use, and sharing of market intelligence
To be a responsive supervisory regulator, it is important for FSCO to have the information it needs to understand changes in how the regulated sectors function and how consumers and pension plan members are treated. FSCO collects market intelligence, and uses this information to identify areas that need greater regulatory focus.
FSCO is working to put in place data-sharing agreements with industry organizations and other regulators, and to leverage the appropriate forums for information collection and sharing. FSCO will use the data to support its regulatory decision making, the identification and monitoring of trends and risks in the marketplace, and the provision of specific recommendations to government on regulatory approaches.
Be an agile and adaptable organization
As an integrated regulator, it is important for FSCO to have the organizational capacity to be flexible and forward-looking in delivering financial services regulation in a changing environment. To do so, FSCO will focus on building internal capacity by implementing a professional staff development program, promoting skill and knowledge transfer, developing succession management plans, and delivering effective staff engagement strategies. This focus on staff development will position FSCO to better provide expert regulatory services that keep pace with an evolving marketplace.
Influence the development of provincial, national, and international regulatory policy
FSCO is part of a broader regulatory environment that includes other federal and provincial regulators, as well as industry and consumer stakeholders from Ontario and around the world. FSCO prioritizes cooperation among regulators, and will continue to play a leadership role in regulatory coordination. FSCO will work with other regulators to promote national approaches and regulatory harmonization where appropriate, share information across jurisdictions, and provide solutions and guidance on regulatory matters across Canada.
As part of this effort, FSCO is a member and host of the following national organizations that promote regulatory coordination and harmonization among provincial authorities responsible for regulating pensions, insurance, and mortgage brokering:
- Canadian Association of Pension Supervisory Authorities (CAPSA);
- Canadian Council of Insurance Regulators (CCIR);
- General Insurance Statistical Agency (GISA); and the
- Mortgage Broker Regulators' Council of Canada (MBRCC).
FSCO is also a member of the Canadian Automobile Insurance Rate Regulators Association (CARR) and the Canadian Insurance Services Regulatory Organizations (CISRO).
These organizations facilitate cooperation among regulators, enhance information sharing, and conduct joint regulatory initiatives. Their work helps ensure consumers benefit from similar levels of protection across Canada, and reduces the regulatory burden for industry participants that are active across provinces.
FSCO will work with other pension regulators through CAPSA to continue efforts to have the CAPSA multi-lateral agreement adopted and implemented by jurisdictions other than Quebec and Ontario, which have already adopted and implemented the agreement. FSCO will also work with other regulators through CAPSA to review pension plan governance guidelines, alternative plan designs, and longevity risk transfer products.
Through CCIR, FSCO will work with Canada's other insurance regulators to implement the international standards for market conduct supervision that were developed by the International Association of Insurance Supervisors.
Through CCIR's committee on E-Commerce, FSCO will address issues arising from the growing use of technology, for example, electronic "pink" cards, telematics, claims handling, underwriting and data collection.
FSCO will also work with CCIR to examine the travel insurance industry, assess regulatory arbitrage in segregated funds, and review property insurance policy wording related to natural disaster coverage for consumers.
In the area of auto insurance, FSCO and GISA will continue to improve the harmonized collection and reporting of accurate, timely and relevant data and to support regulators in monitoring and responding to the evolving marketplace.
Through the MBRCC, FSCO will collaborate with other mortgage broker regulators to develop national licensing course standards to ensure that competency requirements are implemented consistently across the provinces.
FSCO will also support the MBRCC in the development of a disciplinary database, and the MBRCC's work related to product suitability.
These and other initiatives allow FSCO and other regulators to keep apprised of regulatory and industry developments, and to develop and influence harmonization efforts that improve regulation across the country.
Highlights from 2014-15
FSCO's Initiatives in the Past Year
FSCO launched a licensing regime for health service providers in the auto insurance sector
On December 1, 2014, FSCO launched a licensing system for health service providers providing treatment and assessment services to injured auto insurance claimants. By December 1, 2014, FSCO had processed applications for almost 95 per cent of the top 1200 facilities by market share in the industry. In early 2015, FSCO started on-site compliance examinations of health service providers, who were selected on a random and targeted basis.
Auto Insurance Three-Year Review finalized
FSCO has finalized and transmitted to the Minister of Finance the report on mandatory, three-year review of Ontario's automobile insurance system. The report was the culmination of in-depth analysis, as well as consumer and stakeholder consultation on the subject of ensuring a stable, sustainable and competitive automobile insurance system. The report will be published on FSCO’s website after it is tabled in the legislature.
Usage-based automobile insurance rating plans approved
To date, FSCO has approved usage-based auto insurance programs for 12 insurers representing approximately 35.7 per cent of the Ontario private passenger automobile market. FSCO is continuing to work with several other insurers that have expressed interest in introducing usage-based programs in the near future.
Automobile Insurance Bodily Injury Claim Study completed
The 2014 Automobile Insurance Third Party Liability Bodily Injury Closed Claim Study in Ontario was published on FSCO's website on October 3, 2014. The study analyzed closed claims from selected insurers and gathered data on factors contributing to cost changes. The analysis will help FSCO to evaluate the potential impact of any future changes in the automobile insurance system on bodily injury (tort) claims.
FSCO continued to distribute fraud prevention information via social media
FSCO and the Toronto Police Services continued to host #fraudchat, a weekly Twitter chat on topics related to financial crime and fraud prevention. The program gives people regular access to a police officer and a representative from a financial services regulator to ask questions about scams and fraud prevention.
Mortgage Brokerages, Lenders and Administrators Act, 2006 Review completed
Since the Ministry of Finance's appointee completed a review in early 2014 of the Mortgage Brokerages, Lenders and Administrators Act, 2006, FSCO has worked with the Ministry of Finance to implement a number of recommendations from the review – including reviewing mortgage broker standards of practice to better combat fraud, and raising education standards for brokers and agents.
MBRCC completed national initiatives
FSCO, working together with the other members of MBRCC, has identified common competency and curriculum requirements for mortgage agent and broker licensing courses. These requirements are a first step in the harmonization of licensing courses across jurisdictions. The MBRCC also launched an online tool that provides guidance on licensing requirements that may apply in multi-jurisdictional mortgage brokering transactions.
MBRCC published standardized consumer protection materials for consumers across the country
FSCO worked with the MBRCC to publish Know Your Mortgage Risks & Responsibilities, which educates consumers about the risks and responsibilities associated with a mortgage commitment. The information applies to mortgage consumers across the country.
Life Insurance and Mortgage Broker Product Suitability Reviews completed
FSCO completed product suitability reviews to study ways in which life insurance agents and mortgage brokers and agents make product recommendations and assess the financial literacy of their clients. FSCO's research informed an MBRCC report on the review, which helps regulators across the country better understand mortgage broker activities related to product transactions.
Communication outreach to pension stakeholders undertaken
As a part of FSCO's communication outreach to pension stakeholders, FSCO hosted thirteen meetings with its pension advisory committees and four stakeholder consultation meetings. FSCO also provided guidance to its stakeholders on eight new pension policy positions via the FSCO website.
Risk-based regulatory framework implemented in supervision of pension plans
FSCO continues to implement its risk-based regulation framework in the supervision of pension plans. FSCO completed a pilot program with 141 pension plans to develop a process for conducting the first level of risk assessments.
2014 Report on the Funding of Defined Benefit Plans published
The 2014 Report on the Funding of Defined Benefit Plans in Ontario was published on FSCO's website. The report provides pension stakeholders with up-to-date funding, investment, and actuarial information related to defined benefit pension plans registered in Ontario.
Pension Oversight Section launched
FSCO created a new Pension Oversight Section which will be responsible for risk analysis, data integrity & intelligence, and quality assurance and control of the information received through statutory filings. The section will ensure efficient and effective delivery of pension regulatory services to the industry, and its focus will be on modernizing service delivery through business automation solutions in order to optimize FSCO's deliverables to internal and external pension stakeholders.
Financial Services Tribunal Priorities
The Financial Services Tribunal is an expert adjudicative tribunal established under the FSCO Act. It is comprised of members appointed to the Tribunal on a part-time basis. The Tribunal is charged with hearing applications and appeals from certain decisions made or proposed by the Superintendent, or other authorized persons or entities, under a range of Ontario statutes governing financial services matters including the:
- Credit Unions and Caisses Populaires Act, 1994
- Insurance Act
- Loan and Trust Corporations Act
- Mortgage Brokerages, Lenders and Administrators Act, 2006
- Pension Benefits Act
The Tribunal has exclusive jurisdiction to determine all questions of fact or law that arise in any proceeding before it; and the authority to create rules for the practices and procedures to be observed. In order to ensure that it is equipped to do so, the Tribunal is focusing on maintaining an expert pool of members, consulting with stakeholders on improvements on its practices and procedures, and updating the practices and procedures as needed. The Tribunal's 2015 priorities are as follows:
Maintain a pool of qualified members to adjudicate hearings
The Tribunal will continue to appoint and train a pool of qualified members, in order to ensure that the appropriate expertise is available to hear Tribunal matters. The scope of matters qualifying for an application or appeal to the Tribunal continues to expand, resulting in an increasingly diverse workload for the Tribunal. The Tribunal Chair will work with the Ministry of Finance and the Public Appointments Secretariat towards the appointment of additional qualified members that will hear Tribunal matters.
To keep pace with legislative changes to the insurance agent and adjuster disciplinary process, the Tribunal will also train its members on the new process for these disciplinary matters. In addition, the Tribunal has established an adjudication training program that is provided to new appointees.
Expand dialogue with members of the legal profession
The Tribunal will continue consultations with the Tribunal's Legal Advisory Committee on matters affecting hearing practices and procedures as necessary, and will receive annual input from the Committee Chair.
Update Tribunal practices and procedures
The Tribunal will review rules, practices and procedures that require revisions as a result of the changes to the insurance agent and adjuster disciplinary process. The Tribunal will also continue to publish annual performance results that measure how well it meets its service standards and will review and revise its performance and service standards as required.
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