1. Sept. 2012 Topics of interest & risk in our industry today Christine Scaini Compliance Consultant Market Conduct Compliance

2. Agenda Appreciating regulation in our industry The fight against money laundering Managing conflicts of interest –Disclosure statements Privacy

3. Risks related to non-compliance E&O doesn’t cover consequences of non- compliance and illegal acts Sanctions by regulators (including suspension/revocation of license, fines, reimbursement of fees) More regulation A damaged reputation Consumer complaints Litigation

4. Our regulatory environment Both provincial and federal laws apply to distribution activities Substantial provincial differences Sometimes the industry imposes compliance initiatives on itself - the alternative is for regulators to impose it Trend is for less regulation – principle’s based

5. FIGHT AGAINST MONEY LAUNDERING AND TERRORIST FINANCING Compliance program

6. Compliance program requirements Advisors, firms, MGAs, just as insurers, must establish a compliance program for themselves and their employees/advisors that includes the following key elements: –Appointment of a compliance officer –Establishment of compliance policies and procedures –Regular reviews of these policies and procedures –Provide training to people who act on their behalf (employees and advisors) –Document a risk assessment, take appropriate precautions

7. Compliance program where to start Review compliance regime requirements on FINTRAC’s site –Guideline 4: Implementation of a Compliance Regime Review the training materials on the advisor site Print and complete the Self-review of compliance policies and procedures worksheet

8. Self-review of compliance policies and procedures worksheet – RepNet : Advisor Support > Compliance > Money laundering & terrorist reporting To help ensure your business is compliant with policies and procedures required under the Proceeds of Crime (Money Laundering) & Terrorist Financing Act, you should periodically review your business practices. Done regularly, these reviews will help determine if your business has policies and procedures in place to comply with legislative and regulatory requirements, and whether those policies and procedures are being adhered to. Date of review: __________________ Name of person completing review: ______________________________ Signature of principal: ______________________________ Compliance itemsYesNoComments Appointment of a compliance officer 1. I/We have appointed a Compliance Officer for our practice. Written compliance policies and procedures 2. Within the past year, I/we have reviewed the criteria and process for identifying and reporting suspicious transactions and terrorist property and have established policies and procedures in this regard. 3. I/We are aware of the requirements under the legislation for record keeping. 4. I/We have reviewed the requirements under the legislation for client identification and verification and I/we collect all information required on product applications, or as required, for each particular line of business.

9. Self-review - continued Money laundering and terrorist financing risk evaluation 5. Within the past year, I/we have reviewed and documented the firm’s exposure to risk and have taken special measures to lower high risks. Regular self-reviews 6. I/We have completed a self-review of our policies and procedures and have re-evaluated the firm’s exposure to risk within the past two years. I/We have the documentation on file including any actions required and follow-ups completed. Ongoing compliance training 7. I/We have established standards for the frequency and method of training with documentation on file. 8. Details of the specific training material (i.e. what training was completed who completed the training and when was it completed) are documented and on file? If not provide details here. Large cash transactions 9. I/We have reviewed the legislated requirements with respect to reporting large cash transactions and comply with the requirements. Actions required: Details of follow-ups completed:

10. Guide to creating an anti-money laundering and anti-terrorism financing program We’ve provided a template to help advisors create a compliance program RepNet : Advisor Support > Compliance > Money laundering & terrorist reporting

11. Compliance program template Customize to your operation Fields that are to be filled out are in blue Please make sure you follow the instructions in red Delete instructions (in red) before printing

12. Risk assessment Required to have an assessment and documentation of risks related to ML and terrorist financing appropriate to you Refer to the risk checklist in FINTRAC’s Guideline 4. This will help you: –Identify potential high risks of ML and terrorist financing –Develop strategies to mitigate risk

13. Compliance policies and procedures Show your commitment to prevent, detect and address non-compliance Level of detail depends on your –needs and the complexity of your business. –risk of exposure Review policies and procedures and steps to reporting on the advisor site –Can be adopted and customized

14. MANAGING CONFLICTS OF INTEREST Disclosure Statements

15. Managing conflicts of interest: The Three Principles An industry initiative, but Regulators have “adopted” these principles for advisors’ business practices: 1. Priority of client’s interest 2. Disclosure of conflict of interest 3. Product suitability - selling to client’s needs

16. Advisor disclosure Regulators are concerned many advisors are not providing disclosure Insurers are going to “confirm” disclosure by adding a confirmation statement in the rep report of all life applications Disclosure remains a requirement for conference eligibility Signed disclosure must be in the client file for audit/demonstrating compliance

17. PRIVACY PROTECTION

18. Privacy protection – legal framework Federal privacy legislation (PIPEDA) Some provinces have their own privacy legislations (PIPA), substantially similar to federal legislation

19. Privacy protection Basic rules: Collect only what is necessary for the stated purpose Obtain appropriate consents from clients to collect, use, keep and communicate their information Take appropriate measures to protect personal information

20. Privacy compliance program Every compliance program should comprise the four following key items: –a compliance officer –policies and procedures on compliance –review periodically of your policies and procedures –training to employees and advisors Our compliance program template

21. Customize to your operation Fields that are to be filled out are in blue Please make sure you follow the instructions in red Delete instructions (in red) before printing

22. Privacy – what’s the next big concern? Privacy breach –Notification requirements (PIPEDA, AB, QC) –Reputation risk (privacy in the news) Technology related implications for privacy – Trans-boarder data flows, esp. through ‘software as a service& the U.S. Patriot Act –Innovations in technology (cloud computing) –Lack of appropriate encryption –Techno-generation & social media

23. What other tools/resources are available Code of business conduct and ethics Compliance: know your obligations RepNet www.clhia.ca/advisors www.fintrac.gc.ca www.priv.gc.ca Advocis Resources at head office

24. Market Conduct support Earleen Moulton, Manager, Market Conduct, Business Practices Support Michele Helie, Manager, Market Conduct, Quebec Compliance & Market Conduct support Christine Scaini, Compliance Consultant Compliance Market Conduct