Annual Report 2014-2015

Table of Contents


Message from the Chair and the Chief Executive Officer


We are pleased to present the 2014-15 Annual Report of the Financial Services Commission of Ontario (FSCO) which reports on FSCO’s activities over the 12 months ending March 31, 2015.


Ontarians entrust significant financial security to the sectors regulated by FSCO. Insurance is a $43 billion a year business and supports Ontario families and businesses in managing risk. Ontario’s pension plans generate retirement income through assets valued at just over $522 billion and have over four million members including retirees. Ontario’s deposit-taking institutions also contribute to the province’s economic well-being. Credit unions and caisses populaires alone hold assets totalling more than $43.5 billion and provide savings, loans and other financial services to millions of Ontarians.


The financial services sector is crucial to the health of both the provincial and national economies. Since the financial crisis of 2008, ensuring that financial services regulatory frameworks effectively foster a strong sector and protect the interests of the public has become a worldwide priority.


At the same time, financial services participants and the products they market are rapidly evolving. Multi-jurisdictional entities, product innovation and the trend towards consolidation among market players are resulting in new risks and complexities. Financial services firms and intermediaries are now increasingly active in multiple product lines, blurring the lines that once delineated the various financial services industries.


Pension plans, the once-perceived unbending pillars of the sector, are changing too. Today, they represent increasingly large pools of capital and are steadily expanding the asset classes in which they invest.


Understandably, consumers and pension plan beneficiaries are responding to the change by demanding more of their financial services intermediaries, and more from regulators to safeguard their interests and marketplace integrity.


Against the backdrop of these progressions, FSCO remains committed to continually examining its systems and processes to ensure they efficiently and effectively support FSCO’s Regulatory Framework by adequately capturing and assessing emergent risks that may impact consumers.

Auto Insurance

During the year, the Ontario government continued to focus on its cost- and rate-reduction strategy that aims to improve the affordability of auto insurance coverage for Ontario drivers. In the fiscal year, the Superintendent of Financial Services exercised authority conferred to him by the 2013 Budget Bill and required 95 percent of insurers to refile their auto insurance rates.

Regulating Service Providers

A key government strategy to help reduce auto insurance rates and eliminate fraud is the licensing and regulation of health care facilities that provide medical and rehabilitation services to injured auto accident benefit claimants.


In 2013, new legislation assigned FSCO the responsibility to license health service providers that invoice automobile insurers through the Health Claims for Auto Insurance system, and to regulate their business and billing practices.


In the months leading up to its launch, FSCO built up a great deal of awareness of the new regime in the health service provider community. By the December 1, 2014 launch date, FSCO had processed licence applications for almost 95 percent of the top 1,200 facilities by market share in the industry. By fiscal year end, more than 98 percent of the entire market was licensed and FSCO had begun regulatory exercises for the sector such as site compliance examinations and annual information return reviews. 


Dispute Resolution Services

In early 2014, the Honourable J. Douglas Cunningham, Q.C., delivered his report, Ontario Automobile Insurance Dispute Resolution System Review [New Window], to the Minister of Finance. The report included a recommendation to establish a new dispute resolution system as a public sector tribunal. Later in the year, the government passed legislative amendments in response to the report, including transferring FSCO’s dispute resolution services system to the Ministry of the Attorney General’s Licence Appeal Tribunal.


In 2014-15, FSCO devoted significant resources to preparations for the transfer of the system which is scheduled to take place in 2016. In the interim, it continued to use an external service provider to assist with the remaining backlog.

Disciplinary Framework for Insurance Agents and Adjusters

The Fighting Fraud and Reducing Automobile Insurance Rates Act [New Window] brought about the implementation of a new disciplinary model for insurance agents and adjusters in Ontario. Since January 2015, the Financial Services Tribunal decides all enforcement actions for agents and adjusters. This simplifies the previous process where, depending on the nature of the matter, agents and adjusters could also be subject to enforcement review and recommendations of the Advisory Board. This new model also aligns agent disciplinary hearings with FSCO’s other sectors.

Regulatory Approach for Pension Plans

After three successful pilot projects in 2014, FSCO moved to full implementation of the Risk-Based Regulation Framework for pension plans, adopting the appropriate structure, processes and measures to put the approach into full motion.


In 2014-15, FSCO completed Improving Pension Regulatory Services, a multi-year project that responded to recommendations of the 2008 Ontario Expert Commission on Pensions to strengthen our regulatory services for pension stakeholders. FSCO designed, tested and implemented a host of improvement initiatives in four areas:


  • Stakeholder engagement and outreach
  • Defined benefit application processing
  • Inquiries and complaints handling
  • Risk-based regulation

During the year, FSCO expanded self-service electronic filing for pension plan administrators and their agents through the Pension Services Portal on FSCO’s website. FSCO added numerous user options, for example, uploading supporting documentation, amending applications, and report customization for pension plans not registered with FSCO.


As well, in 2014-15, FSCO began issuing Investment Guidance Notes, setting out its expectations of plan administrators relating to investment of pension plan assets and the administrator’s investment-related obligations under the PBA and Regulation. FSCO posts the Guidance Notes for public consultation before finalizing.

Fostering National Regulatory Coordination

FSCO strives to play a leadership role in the development of national regulatory standards by working collaboratively with other regulatory bodies across the country.


This year, working together with other members of the Mortgage Broker Regulators’ Council of Canada (MBRCC), FSCO prepared competency and curriculum requirements for mortgage agent and broker licensing courses. The requirements are the first step in the harmonization of licensing courses across jurisdictions.


The MBRCC also launched an online tool [New Window] that helps to identify licensing requirements that apply in multi-jurisdictional mortgage brokering transactions.


FSCO worked with the MBRCC to publish Know Your Mortgage Risks & Responsibilities [New Window], which educates consumers about the risks and responsibilities associated with a mortgage commitment. The information applies to mortgage consumers across the country.


During the year, FSCO played a lead role to update and standardize across Canada the entry level qualification program for new life insurance agents. The updated program is scheduled for implementation in January 2016.


Throughout 2014-15, FSCO continued to support and make contributions to the work of other national groups including the Canadian Association of Pension Supervisory Authorities, the Canadian Council of Insurance Regulators, and the Joint Forum of Financial Market Regulators.

Auditor General

The 2014 Annual Report of the Auditor General of Ontario [New Window] made several recommendations directed toward FSCO on improving pension plan and financial services regulatory oversight. FSCO is addressing all the recommendations with particular focus on matters directly related to its authority.


The report asked FSCO to devise strategies to curb the underfunding of defined-benefit Ontario pension plans as well as the financial exposure risk of Pension Benefits Guarantee Fund (PBGF). To this end, FSCO is analysing pension plan funding trends to predict the rate of underfunding over the next few years and to develop mitigating strategies.


As well, FSCO is putting measures in place to improve the financial statements of the PBGF so as to better illustrate the plan’s exposure.


The report also suggested FSCO enhance its system for licensing life insurance agents. In response, FSCO is implementing a new system to improve data control and generate more early-warnings. FSCO recently implemented an arrangement with the Mutual Fund Dealers Association to share information about dually-licensed registrants. As well, FSCO will be piloting the verification of errors and ommissions insurance coverage and continuing education credits at on-site examinations for agents.


FSCO is also addressing the Auditor General’s recommendations on complaints handling through new processes that will monitor timelines and report outcomes of investigations.

Mandate Review

In reference to a 2014 Ontario Budget [New Window] commitment to review all government agencies, the Ontario Ministry of Finance, on March 3, 2015, announced the appointment of an expert panel to conduct the review of FSCO, the Financial Services Tribunal and the Deposit Insurance Corporation of Ontario (DICO).


The panel intends to consult broadly with the financial services sectors regulated by FSCO and DICO, and intends to publish a consultation paper for public comment on the issues being examined. FSCO will be working with the panel to advise on FSCO’s regulatory activities.


The government anticipates receiving the final report and recommendations of the expert panel by early 2016.

Serving the Best Interests of Ontarians

FSCO has worked hard to establish relationships with Ontario consumers and pension plan beneficiaries. The interaction helps FSCO deliver on its mandate to protect the public interest and enhance confidence in the sectors we regulate.


FSCO also values its relationships with industry stakeholders. Their input on projects and initiatives is always worthwhile.


On behalf of the commission members, we wish to recognize the strategic guidance of FSCO’s executive committee, the solid leadership of management, and the expertise and dedication of employees in delivering FSCO’s regulatory services. Indeed, this report provides a mere snapshot of the scope and depth of their efforts to serve Ontarians.


JFlorence A. HoldenChair, Financial Services Commission of Ontario (Acting)Chair, Financial Services Tribunal (Acting)

Florence A. Holden

Financial Services Commission of Ontario (Acting),
Financial Services Tribunal (Acting)

Brian Mills,Chief Executive Officer and Superintendent of Financial Services (InterimFinancial Services Commission of Ontario 

Brian Mills
Chief Executive Officer and
Superintendent of Financial Services (Interim)

Financial Services Commission of Ontario


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