How Compliance Fits Sandra Dolson Wholesale Compliance Manager SLF Canada

Environment Significant misconduct incidents / allegation in financial services (e.g. Earl Jones, Milo Brost) Regulators have lower risk tolerance……raising the bar on control functions and compliance risk management Both provincial and federal laws apply to distribution activities Rule based vs principle based - trend is for less regulation Sometimes the industry imposes compliance initiatives on itself - the alternative is for regulators to impose it

Once upon a time …..

Compliance is…….. about trust that the public places in you. what protects this trust what is looked to by the regulators to prove that we are protecting this trust.

Risk Assessment Checklist ObligationRiskControl Privacy Protect clients information To comply with federal and provincial privacy laws Reputational risk Regulatory risk Possible fines ? AML/ATF To help detect and deter money laundering and the financing of terrorist activities To comply with AML/ATF regulation Possible fines and/or imprisonment ? Managing Conflicts of Interest Interests of the consumer must be placed ahead of the advisor Disclosure of conflicts or potential conflicts Product must be suitable for the clients needs To comply with industry guidelines/standards Unable to demonstrate appropriate sales practices Lack of consumer trust Lack of industry compliance could lead to regulated disclosure ? Advisor Disclosure To comply with industry guidelines/standards Must be provided prior to the sales transaction The consumer must have clear information about: companies you represent and your relationship with the companies how you are compensated additional compensation you may receive (ie travel incentives) conflicts of interest consumers right to ask for more info any industry-related license(s) you hold Lack of consumer trust Lack of industry compliance could lead to regulated disclosure Failure to disclose could lead to consequences such as: - litigation - E&O may not cover you - unsuitable sales conduct ?

Risk Assessment Checklist – cond ObligationRiskControl Product Suitability To help your client make an informed and confident purchase decision To comply with industry/company guidelines/standards Lack of consumer trust and/or confidence Lack of industry compliance could lead to regulated disclosure ? Policy Replacement To comply with provincial regulations Disclose all information needed so client has a good understanding of the product you are recommending and impact of proposed replacement of original policy Lack of consumer trust Lack of compliance with provincial regulation ? Record Keeping Files must be current, correct, complete, consistent & contemporaneous If there are incorrect notes, all other notes may become questionable ? Education & Training C.E. Credits Licensing requirement License suspension ? E & O Understand your policy Licensing requirement in most provinces Carrier requirement as part of your contract Not covered ? Awareness of Responsibilities Understand laws, regulations and industry guidelines Refer to risks in checklist ?

Privacy Obligation Protect your clients personal information To comply with federal and provincial privacy laws Risk Reputational Regulatory Monetary Control Privacy Policy – Do you provide a copy of your privacy policy to your clients? Do you provide the carriers privacy policy? Internal Policies (i.e. secure communication to clients via or fax, phone, office space, laptop security, working from home etc.) Privacy training

Anti-Money Laundering & Anti-Terrorist Financing Obligation Comply with Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) Risk Imprisonment from 6 months to 5 years Fines from $500,000 to $2,000,000 Administrative monetary penalties, or All three of the above. Control Compliance Regime as required by AML/ATF Verify the identity of your clients, and keep records Report Suspicious Transactions Risk assessment checklist of compliance regime

Managing Conflicts of Interest Obligation Protect your clients personal information Disclosure of conflicts or potential conflicts Product must be suitable for the clients needs You must comply with industry guidelines/standards Risk Unable to demonstrate appropriate sales practices Lack of consumer trust Lack of industry compliance could lead to regulated disclosure Control The Approach – as recommended by CLHIA, Advocis, CAILBA, etc. Determine your clients needs and objectives

Advisor Disclosure Obligation You must comply with industry guidelines/standards Must be provided prior to the sales transaction The consumer must have clear information about: - the companies you represent and your relationship with the companies - how you are compensated - additional compensation you may receive (ie travel incentives) - conflicts of interest - consumers right to ask for more info - any industry-related license(s) you hold Risk Lack of consumer trust and/or confidence Lack of industry compliance could lead to regulated disclosure Control The Approach – as recommended by CLHIA, Advocis, CAILBA, etc Written documentation of disclosure

Product Suitability Obligation Disclose all information needed so client has a good understanding of the product you are recommending and impact of proposed replacement of original policy Advice should meet the clients need and situation to help your client make an informed and confident purchase decision Risk Lack of consumer trust and/or confidence Lack of industry compliance could lead to regulated disclosure Control Follow The Approach as recommended by CLHIA, Advocis, CAILBA, etc. Refer to product information on carriers websites

Policy Replacement Obligation You must comply with the provincial regulation Disclose all information needed so the client has a good understanding of the product you are recommending and the impact of proposed replacement of original policy Risk Lack of consumer trust and/or confidence Lack of compliance with the provincial regulation Control Follow the provincial replacement disclosure requirements Ensure the client needs are met and the clients best interest come foremost

Record Keeping Obligation Files must be current, correct, complete, consistent & contemporaneous Risk If there are incorrect notes, all other notes may become questionable Control Have a consistent process for documenting your client interactions. Make sure all members of your business use the same method for documentation

Education & Training Obligation Continue your education as you work in the industry Licensing requirement Risk License suspension Control attend education sessions regularly to keep current have employees trained so they understand why you have the practices your business follows

Errors & Omissions Insurance Obligation Have appropriate coverage for your business Licensing requirement in most provinces Carrier requirement as part of your contract Risk Not having the coverage when most needed License revoked Control Understand the policy you have in force As your needs change, ensure you policy is appropriate

Awareness of Responsibilities Obligation To Understand laws, regulations and industry guidelines Risk Culmination of the previous Risks on previous slides Control Comply with all insurance and other applicable laws, regulations and industry guidelines including policies and directives established from time to time by a carrier Become a member of a professional organization (i.e. Advocis)

Control Checklist Privacy Privacy Policy Privacy training Communicate securely Provided client a copy of your privacy policy Provided a copy of the carriers privacy policy Review of privacy practices in your office Yes No AML/ATF Compliance regime Risk assessment of compliance regime Do you understand your obligations? Yes No Managing Conflicts of Interest Do you follow the Approach Yes No Advisor Disclosure Do you follow the Approach? Do you have written documentation of disclosure? Yes No Product Suitability Do you follow the Approach? Have you provided your client information to make an informed and confident purchase decision? Yes No

Policy Replacement Do you understand the provincial replacement disclosure regulations? Have you provided the client a written explanation of the advantages and disadvantages of replacing an existing life insurance policy before starting an application for a new policy? Yes No Record Keeping Do you have a consistent process for documenting client interactions? Yes No Education & Training Do you attend educational classes to stay current? Do you understand your provincial CE licensing requirements? Yes No E & O Do you have E&O coverage? Do you understand your policy? Is it a requirement of your licensing? Is it a requirement of your Carrier contract? Yes No Control Checklist

Do you understand your responsibilities?