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Monitoring and Enforcement Report - Including Prosecution and Hearing Decisions - for Fourth Quarter, 2000

 

Bulletin

No. G-02/01
 
- General

The Financial Services Commission of Ontario's (FSCO) Monitoring and Enforcement bulletins report on its prosecution activities, the decisions arising out of the hearings it conducts, and other regulatory activities that help ensure consumer confidence in the financial services sectors that FSCO regulates -- insurance, credit unions/caisses populaires, loan and trusts, co-operatives and mortgage brokers. FSCO also regulates pensions; its monitoring and enforcement reports on this sector appear separately in FSCO's Pension Bulletins.

The FST, an independent adjudicative body, hears all appeals or reviews of proposed or intended decisions of the Superintendent of Financial Services (Superintendent), who makes the majority of first line regulatory decisions. These appeals or reviews are conducted at the request of one of the affected parties. In hearing appeals or reviews of these decisions, the FST determines all questions of fact or law. As well, the FST has authority to make rules for the practice and procedure to be observed in a proceeding before it, and to order a party to a proceeding before it to pay the costs of another party or the FST's costs of the proceeding.

The Superintendent of Financial Services (Superintendent), FSCO, administers and enforces the Financial Services Commission of Ontario Act, 1997 (FSCO Act), and other Acts that confer powers or assign duties to the Superintendent. Under the FSCO Act, the Superintendent may delegate the exercise of any power or the performance of any duty conferred on or assigned to the Superintendent.

The Director of the Licensing and Enforcement Division (the Director) has been delegated the authority by the Superintendent to render licensing decisions.

The Dispute Resolution Group provides mediation, neutral evaluation, arbitration and appeal services as fair, cost-effective and timely alternatives to the court system. An arbitrator may decide at the conclusion of an arbitration hearing involving insurers and statutory accident benefits claimants, to impose penalties under the Insurance Act. Under section 282(10), a special award may be made against an insurer that has unreasonably withheld or delayed the payment of benefits.

Under section 282(11.2), an assessment award may be made against an insured person if the arbitration is frivolous or vexatious, or an abuse of process.

 

Actions of the Financial Services Commission of Ontario and the Financial Services Tribunal

Results of Monitoring Activities -- First Step in the Enforcement Process

Re Agents and Adjusters

FSCO undertakes a number of monitoring activities as part of its regulatory functions. It conducts police background checks on prospective agents, and also reviews complaints against agents made
by other agents, insurers and policyholders. In addition, FSCO audits approximately 10 per cent of all life agent renewal applications to ensure they meet continuing education (CE) requirements.

These checks, reviews and audits are the first step in the enforcement process. Most matters are resolved at this first step.

During the fourth quarter of 2000, the FSCO undertook the following:

  • Police Checks
    A total of 1,228 police checks on the background of prospective agents were made with the Canadian Police Information Centre.

  • Complaints and Reviews
    FSCO received 40 complaints about the conduct of agents for the fourth quarter
    October 1, 2000, to December 31, 2000. The subjects of the complaints included fraud, forgeries, misrepresentation and agent misconduct.

Overview of Complaints

Complaints in progress, from end of third quarter 2000
43
Plus: Complaints received during fourth quarter, 2000
40
Less: Complaints in progress at end of fourth quarter, 2000
36
Total number of Complaint reviews completed during fourth
quarter, 2000

47
- -

Disposition of Complaint Reviews

Cases forwarded for potential enforcement
23
Cases resolved
16
Licences surrendered
0
Cases closed
8
Total
47

Cases may be closed for a variety of reasons. The most common are: the issue raised is outside FSCO's jurisdiction; there is insufficient evidence to substantiate a complaint; or the complaint is unfounded.

  • Audits
    FSCO initiated 207 audits of life agents during the fourth quarter to ensure they met their CE requirements. As a result of the audits, three cases required enforcement action to be initiated.

Investigations -- Second Step in the Enforcement Process

As a follow up to its regular monitoring activities – police background checks on prospective agents, the reviews of complaints received against agents, and audits of agents' compliance with CE requirements – FSCO may decide that some matters need to be investigated. An investigation is the second step in the enforcement process. It is used where prosecution or Advisory Board hearings may be contemplated.

During the fourth quarter of 2000, FSCO undertook the following:

  • Investigations initiated
    A total of 39 cases were forwarded to Investigations. Of that total, 34 cases related to agents and adjusters, one related to mortgage brokers, three related to loan and trust corporations, and one related to insurance companies.

Source of investigations

  • Agents:

    Complaints about agent conduct
    1
    Allegations of unsuitability of agents
    20
    Doing business without a licence in force
    10
    Continuing education audits
    3
    Total
    34
    -
    -
    -
    -

  • Mortage Brokers:

    Complaints about mortgage broker conduct
    1
    Total
    1
    -
    -

  • Loan and Trust Companies:

    Doing business without a licence in force
    3
    Total
    3
    -
    -

  • Insurance Companies:

    Complaints about insurance company conduct
    1
    Total
    1
    -
    -
    Grand Total
    39

Outcome of investigations

  • A total of 61 cases were completed:

    Charges laid in Provincial Offences court
    9
    Advisory Board Hearings held
    5
    Sponsorship of agent withdrawn
    4
    Superintendent's Orders issued
    16
    Letters of Censure issued
    9
    Licence Surrendered
    1
    Cease and Desist Orders issued
    1
    Closed files (no enforcement action warranted)
    16
    -
    -
    Total
    61

Cases may be closed if there is insufficient evidence to support the allegations, or if the allegations are unfounded. The results of the individual court cases and the Advisory Board hearings are reported in the quarter when the decisions are rendered. The names of individuals subject to Superintendent's Orders or who have surrendered their licences are listed when they occur.

  • Letters of Warning

    During the fourth quarter, 249 Letters of Warning were issued to life agents who were late in applying for licence renewal. Letters of Warning do not require formal investigations and are not included in the preceding statistics.


  • Letters of Censure

    In addition to the nine Letters of Censure issued as a result of formal investigations, five Letters of Censure were issued to life agents who did not provide full disclosure of information on their licence applications.

  • Surrendered Licences

    The details surrounding the surrender of a licence, indicated in the investigations statistics, are as follows:
Robert G. Foley The agent surrendered his licence following allegations of failing to forward several clients' premium monies and policy application documentation to an insurer.

Minutes of Settlement and Superintendent's Orders

During the fourth quarter, 14 agents and 2 corporate agencies entered into Minutes of Settlement for non-compliance with legislated requirements, and of these, nine consented to orders revoking their licences.

Violette Gerges By an order, dated December 4, 2000, this Level I agent's licence was revoked. Ms. Gerges failed to complete the required continuing education hours and also made a material misstatement in her continuing education declaration.
Jose E. Gomes By an order, dated October 12, 2000, this Level II agent's licence was suspended for a period of 30 days. The agent had failed to complete the required continuing education hours and also made a material misstatement in his renewal application. Mr. Gomes has since completed the required continuing education hours.
Michael T. Kennelly By an order, dated August 22, 2000, this Level II agent's licence would have expired on December 15, 2000, unless conditions specified in Minutes of Settlement related to continuing education were met. Conditions were met.
(This order was inadvertently omitted from the FSCO monitoring and enforcement bulletin covering the third quarter of 2000.)
Mario Lepage By an order, dated December 11, 2000, this Level II agent's licence was revoked. The agent admitted to submitting applications for life insurance without the clients' consent, and bearing witness to falsified signatures.
Scott Mallender By an order, dated October 6, 2000, this Level II agent's licence was suspended for a period of 30 days. The agent had failed to complete therequired continuing education hours and also made a material misstatement in his renewal application. Mr. Mallender has since completed the required continuing education hours.
Jason M. Nelligan By an order, dated October 10, 2000, this Level II agent's licence was revoked. The agent, in his capacity as a real estate agent, admitted to preparing a false pay stub for a client and submitting that document to a mortgage broker for the purposes of arranging mortgage financing. This conduct has rendered Mr. Nelligan unsuitable as an insurance agent.
Ian D. Peer By an order, dated October 27, 2000, this Level II agent's licence would have expired on November 14, 2000, unless conditions specified in Minutes of Settlement related to continuing education were met. Conditions were met.
Donald J. Prior By an order, dated October 26, 2000, this Level II agent's licence was revoked. The agent admitted to inappropriate sales practices and rebating, placing his own interests ahead of those of his clients.
Frank T. Sawada By an order, dated November 3, 2000, this Level II agent's licence will expire on June 3, 2001, unless conditions specified in Minutes of Settlement related to continuing education are met.
Franklin M. Spearn By an order, dated October 19, 2000, this Level II agent's licence was suspended for a period of 15 days. The agent had failed to complete the required continuing education hours and also made a material misstatement in his renewal application. Mr. Spearn has since completed the required continuing education hours.
Nazamadeen By an order, dated October 26, 2000, this Level II agent's licence was Sukhram revoked. The agent placed over 100 insurance policies through his agency and signed as witness to these applications even though not present when the applications were made out. He also submitted an application for insurance without the policyholders' consent; failed to follow proper replacement procedures; failed to honour an agreement made with an insurer regarding commission payments; and admitted that his business practices needed improvement.
Naz Sukhram By an order, dated October 30, 2000, this corporate life insurance Financial Services agency's licence was revoked further to the revocation of the Level II life Inc. insurance agent's licence of Nazamadeen Sukhram.
David A. Wahl By an order, dated November 22, 2000, this Level I agent's licence was suspended for a period of 30 days. The agent had failed to complete the required continuing education hours and also made a material misstatement in his renewal application. Mr. Wahl has now completed the required continuing education hours.
Shirley J. Wall By an order, dated November 17, 2000, this Level II agent's licence was revoked. The agent was convicted on charges under the Securities Act which included making misrepresentations to investors, and trading in limited partnerships without registration. This conviction demonstrated the agent did not meet the suitability standard required of all agents.
Warren L. Wall By an order, dated November 17, 2000, this Level II agent's licence was revoked. The agent was convicted on charges under the Securities Act which included making misrepresentations to investors, and trading in limited partnerships without registration. This conviction demonstrated the agent did not meet the suitability standard required of all agents.
Dual Financial By an order, dated November 17, 2000, this corporate agency's licence Group Inc. was revoked further to the revocation of the life insurance agent licences of Shirley J. Wall and Warren L. Wall.

Accommodation for Disability

C. I. As an accommodation for a serious illness, this Level II agent's licence was renewed. By an order, dated December 21, 2000, the agent was given until October 21, 2002, to complete the continuing education requirement, failing which the licence will expire.

Prosecutions

Insurance

Charge: Working as an agent while unlicensed
Against: Robert J. Young (London), Level I agent, currently sponsored by NN Life Insurance Company of Canada
Verdict: Guilty

On December 21, 2000, in London provincial court, Robert J. Young pleaded guilty and was convicted of practising as an insurance agent for approximately two years after his licence with Co-operators Life Insurance Company had expired. He was fined $5,000 and is currently licensed.

Charge: Working as an agent while unlicensed
Against: Graham Wardrop (Oakville), Level II agent
Verdict: Guilty

On December 7, 2000, in Oakville provincial court, Graham Wardrop pleaded guilty and was convicted of practising as an insurance agent after his licence had expired. He was fined $150 and is currently licensed.

Charge: Working as an agent while unlicensed
Against: Ronald J. Stewart (Lakefield), Level II agent
Verdict: Guilty

On December 7, 2000, in Peterborough provincial court, Ronald J. Stewart pleaded guilty and was convicted of practising as an insurance agent after his licence had expired. He was fined $400 and is currently licensed.

Charge: Working as an agent while unlicensed
Against: Steven J. Watt (Kingston), Level II agent
Verdict: Guilty

On December 4, 2000, in Kingston provincial court, Steven J. Watt pleaded guilty and was convicted of practising as an insurance agent after his licence had expired. He was fined $500 and is currently licensed.

Charge: Working as an agent while unlicensed
Against: Guennadi G. Vykhodtsev (Thornhill), former Level I agent
Verdict: Guilty

On October 13, 2000, in Toronto provincial court, Guennadi G. Vykhodtsev pleaded guilty and was convicted of practising as an insurance agent after his licence had expired. He was fined $1,500 and remains unlicensed.

Charge: Working as an agent while unlicensed
Against: Richard P. Somenzi (Mississauga), Level II agent
Verdict: Guilty

On October 13, 2000, in Toronto provincial court, Richard P. Somenzi pleaded guilty and was convicted of practising as an insurance agent after his licence had expired. He was fined $2,500 and is currently licensed.

Charge: Working as an agent while unlicensed
Against: David R. Ledo (Etobicoke), Level I agent currently sponsored by AIG Life Insurance Company of Canada
Verdict: Guilty

On October 13, 2000, in Toronto provincial court, David Ledo pleaded guilty and was convicted of practising as an insurance agent after his licence had expired. He was fined $750 and is currently licensed.

Charge: Working as an agent while unlicensed
Against: Unique Benefits Group Corp. (Concord)
Verdict: Guilty

On October 13, 2000, in Toronto provincial court, Unique Benefits Group Corp., through its President, Fred Vecchio, pleaded guilty and was convicted of paying commissions to an unlicensed agent in relation to the David Ledo case (see above). The agency was fined $500.

Charge: Working as an agent while unlicensed
Against: Jo-Ann S. Buhlman (Hamilton), Level II agent
Verdict: Guilty

On October 11, 2000, in Hamilton provincial court, Jo-Ann S. Buhlman pleaded guilty and was convicted of practising as a life and general insurance agent after her licence had expired. She was fined $500 and is currently licensed for both life and general insurance.

Hearings

An Advisory Board assists in determining the granting or refusal of a new licence or the possible revocation or suspension of an existing licence for insurance agents and adjusters. The Board considers evidence presented by the applicant or agent as well as that put forward by counsel for FSCO.

Life agent: James P. Hawkins (Oakville), Level II agent
Advisory Board Hearing: : Agent did not request hearing
Decision: Licence revoked

A Notice of Proposed Hearing was sent to James Hawkins to consider suspending or revoking his life insurance agent's licence following allegations of multiple instances of submitting false applications for insurance; failing to properly complete disclosure statements; and failing to facilitate an examination.

By decision dated December 7, 2000, the Superintendent found the allegations against Mr. Hawkins to be established and ordered that his life insurance agent's licence be revoked.

Life agent: Irena Olczak (Mississauga), Level I agent, sponsored by Equitable Life Insurance Company
Advisory Board Hearing: : October 30, 2000
Decision: Licence suspended


An Advisory Board hearing was conducted in Toronto to consider allegations that Ms. Olczak failed to comply with the continuing education requirements and failed to facilitate an examination. In its report, the Board recommended that Ms. Olczak's licence be suspended for a period of 60 days; and that she complete the required continuing education hours within the same time period, failing which her licence be revoked.

By decision dated December 22, 2000, the Superintendent accepted the findings of fact of the Board and ordered that Ms. Olczak's licence be suspended for a period of 60 days commencing on January 15, 2001. The Superintendent further ordered that Ms. Olczak submit by April 30, 2001, satisfactory evidence of completion of 30 hours of continuing education failing which, her licence will be revoked on April 30, 2001.

Life agent: Olabude Opaleke (Winnipeg MB), Level II agent
Advisory Board Hearing: : Agent did not request hearing
Decision: Licence revoked

A Notice of Proposed Hearing was sent to Olabude Opaleke to consider suspending or revoking his life insurance agent's licence following several allegations of submitting false applications for insurance; forging signatures; bearing false witness to such forged signatures; and being untrustworthy to transact the business of insurance.

By decision dated December 27, 2000, the Superintendent found the allegations against Mr. Opaleke to be established and ordered that his life insurance agent's licence be revoked.

Life agent: Eric J. Routh (Mississauga), Level II agent
Advisory Board Hearing: : September 13, 2000
Decision: Licence suspended

An Advisory Board hearing was conducted in Toronto to consider allegations that Mr. Routh failed to comply with the continuing education requirements and made a material misstatement in his renewal application that he had completed the required continuing education hours. In its report, the Board recommended that Mr. Routh's licence be suspended for a period of 90 days; that he complete the required continuing education hours within the same time period, failing which his licence will be revoked; and that he be reminded of the additional hours required before the expiry of his current licence.

By decision dated October 19, 2000, the Superintendent accepted the findings of fact of the Board and ordered that Mr. Routh's licence be suspended for a period of 60 days commencing on November 15, 2000. The Superintendent further ordered that Mr. Routh submit by March 2, 2001, satisfactory evidence of completion of 83.75 hours of continuing education. Should he fail to do so, his licence will be suspended on March 2, 2001, until such time as he complies with the first condition of the order. Mr. Routh's compliance has to be achieved by December 31, 2001, failing which his licence will be revoked on December 31, 2001.

Life agent: Jutinder Suri (Mississauga), Level II agent
Advisory Board Hearing: : October 23, 2000
Decision: Licence revoked

An Advisory Board hearing was conducted in Toronto to consider suspending or revoking the life insurance agent's licence of Jutinder Suri as a result of allegations placing his own interests above those of his clients by using confidential financial information to target clients for personal loans; and being untrustworthy to transact the business of insurance. The Board found the allegations to be established in that Mr. Suri had repeatedly engaged in a practice of borrowing money from his clients during a nine-year period. The clients, some of whom were elderly or spoke little English, have not been repaid. The Board recommended that Mr. Suri's licence be revoked, noting the seriousness of the conduct and a concern that he might again consider his clients an accessible source of loans.

By decision dated November 20, 2000, the Superintendent accepted the findings of fact of the Board and ordered that Mr. Suri's licence be revoked. The agent has appealed the Superintendent's decision.

Life agent: Barry Walsh (Navan, ON), Level II agent
Advisory Board Hearing: : September 13, 2000
Decision: Licence suspended

An Advisory Board hearing was conducted in Toronto to consider allegations that Mr. Walsh failed to comply with the continuing education requirements and made a material misstatement in his renewal application that he had completed the required continuing education. In its report, the Board recommended that Mr. Walsh's licence be suspended for a period of 30 days; and that he complete the required continuing education hours within the same time period, failing which his licence will be revoked.

By decision dated October 20, 2000, the Superintendent accepted the findings of fact of the Board and ordered that Mr. Walsh's licence be suspended for of a period of 30 days commencing on November 15, 2000. The Superintendent further ordered that Mr. Walsh submit by April 30, 2001, satisfactory evidence of completion of 30 hours of continuing education failing which, his licence will be revoked on April 30, 2001.

Dispute Resolution Decisions

The Dispute Resolution Group provides mediation, neutral evaluation, arbitration and appeal services as fair, cost-effective and timely alternatives to the court system. An arbitrator may decide at the conclusion of an arbitration hearing involving insurers and statutory accident benefits claimants, to impose penalties under the Insurance Act. Under section 282(10), a special award may be made against an insurer that has unreasonably withheld or delayed the payment of benefits. Under section 282(11.2), an assessment award may be made against an insured person if the arbitration is frivolous or vexatious, or an abuse of process.

Applicant: Dalbir Singh Dhami
Insurer: State Farm Mutual Automobile Insurance Company
Type of Decision: Arbitration
Date of Decision: November 21, 2000
File Number: A99-001175
Legislation: Bill 59
Appeal Status: No appeal
Type of Award: Assessment
Amount of Award: $3,000
Issue: Income replacement benefits

Findings

Neither Mr. Dhami nor his representative, a non-lawyer, attended the arbitration hearing. The arbitrator found that Mr. Dhami was properly notified in his absence, and that Mr. Dhami abused the process by commencing a claim he was not prepared to pursue.

Order

(1) Mr. Dhami's Application for Arbitration is dismissed.
(2) Mr. Dhami shall pay State Farm its assessment fee of $3,000.
(3) Mr. Dhami shall pay State Farm its arbitration expenses in the amount of $500.

Applicant: David Gutzke
Insurer: Dufferin Mutual Insurance Company
Type of Decision: Arbitration
Date of Decision: November 27, 2000
File Number: A99-000640
Legislation: Bill 164
Appeal Status: Under appeal
Type of Award: Special Award
Amount of Award: $7,500, inclusive of interest
Issue: Entitlement to various accident benefits, including income replacement benefits from April 1997, rehabilitation benefits and lost wages.


Findings

Although the insured person continued to be actively engaged in the workforce for some four years post-accident, the arbitrator found that his accident-related injuries prevented him from performing the essential tasks of his employment. Severe pain arising from his ongoing heavy work may have been the immediate cause of the insured person eventually leaving work, but the proximate cause was the accident. The arbitrator found that the insurer failed to deal properly with the question of rehabilitation, unreasonably withholding the payment of rehabilitation benefits aimed at retraining the insured person for a less physically demanding job.

Order

(1) Mr. Gutzke is entitled to receive a weekly income replacement benefit from April 27, 1997, and ongoing.
(2) Mr. Gutzke is entitled to rehabilitation benefits as outlined in the report of Rehabilitation Management Inc.
(3) Dufferin is not required to pay for Mr. Gutzke's lost wages resulting from attendance at therapy or treatment.
(4) Dufferin is liable to pay a special award of $7,500 to Mr. Gutzke.
(5) The issue of expenses is deferred.

Applicant: Elcka Lave
Insurer: Zurich Insurance Company
Type of Decision: Arbitration
Date of Decision: December 8, 2000
File Number: A98-001214
Legislation: Bill 164
Appeal Status: No appeal filed
Type of Award: Assessment
Amount of Award: $3,000
Issue: Entitlement to income replacement benefits, non-earner benefits, housekeeping expenses and arbitration expenses.

Findings

In an earlier decision dated June 26, 2000, the arbitrator held that the insured person was entitled to housekeeping expenses of $720, but not to any further weekly benefits. She also found that the insured person abused the process by refusing to comply with production requests, ignoring the pre-hearing arbitrator's production orders and refusing to answer questions relevant to the issues in dispute.

In this decision, the arbitrator set the assessment at $1,000 and ordered the insured person to pay the insurer's arbitration expenses, fixed at $2,000.

Order

(1) Mrs. Lave shall pay to Zurich Insurance Company its arbitration expenses in the amount of $2,000.
(2) Mrs. Lave shall repay to Zurich Insurance Company $1,000 of the assessment it was required to pay to arbitrate her claim.

Applicant: Zita Da Rosa
Insurer: Allstate Insurance Company of Canada
Type of Decision: Arbitration
Date of Decision: December 20, 2000
File Number: A99-000110
Legislation: Bill 164
Appeal Status: No appeal filed (appeal period not expired)
Type of Award: Special Award
Amount of Award: $10,000, inclusive of interest
Issue: Entitlement to various supplementary medical and rehabilitation benefits

Findings

The insured person was successful on a number of claims, although she abandoned others. In addition, the arbitrator found that the insurer unreasonably withheld chronic care co-payments and long-term care accommodation fees.

Order

In a lengthy, nine-paragraph order, the arbitrator ordered the insurer to pay various medical, attendant care and rehabilitation benefits, plus interest and two-thirds of Mrs. Da Rosa's arbitration expenses. With respect to the special award, she ordered as follows: "Allstate Insurance Company of Canada shall pay Zita Da Rosa a special award pursuant to subsection 282(10) of the Insurance Act, of $10,000, inclusive of interest, because it unreasonably withheld chronic care co-payments and long-term care accommodation fees from Mrs. Da Rosa."

Financial Services Tribunal Decisions

Applicant: Sussman Mortgage Funding Inc. o/a Mortgage Funding
Sector: Mortgage Brokers Act
Type of Matter: Superintendent's Notice of Proposal to Revoke Registration dated August 24, 1999
Issue: Applicant's motion for an order that the Superintendent's Notice of Further and Other Particulars #2 be struck; that the hearing proceed on the basis that penalty being sought by the Superintendent be restricted to a suspension, not revocation, of registration.
Date of Decision/Order: November 30, 2000

For the full text of the Decision/Order, please refer to FSCO's website at: www.fsco.gov.on.ca

Applicant: Crump Barter Services Inc. and Joseph G. Crump
Sector: Insurance Act
Type of Matter: Superintendent's Interim Cease and Desist Order dated April 10, 2000
Issue: The issue in this case is whether Madsen and Tri-Continental should be required to be named in the notice on the Crump website
Date of Decision/Order: October 30, 2000

For the full text of the Decision/Order, please refer to FSCO's website at: www.fsco.gov.on.ca



Martha Milczynski Dina Palozzi
Chair Chief Executive Officer
Financial Services Commission Financial Services Commission
of Ontario of Ontario
Chair Superintendent of Financial Services
Financial Services Tribunal -

March 14, 2001