Agent sanctioned for “flagrant disregard” of code of conduct

After signing as a witness to a transfer of ownership form when he did not witness anyone signing the document on behalf of the insured, for facilitating the transfer of policy ownership to another without first contacting the policy’s owner for consent, for failing to advise clients that there would be tax consequences associated with such a transfer of ownership, and then for downplaying the severity of his conduct, the Insurance Council of British Columbia has ordered Ka Fai (Patrick) Cheng to pay a fine and complete two continuing education courses.

A life accident and sickness insurance agent, licensed with the council since October 1995, Cheng was sanctioned over a policy that was issued back in 1998. “The licensee was the agent of this policy since inception,” the council’s intended decision states.

In 2003 ownership of the policy was transferred from his client to the client’s daughter. Cheng did not meet with the daughter prior to the change of ownership. It was later revealed that he had not met her in person since the policy was issued in 1998.

In 2017, the father then asked Cheng to transfer ownership of the policy back to himself. “As ST was the original owner of the policy, the licensee did not question this request and did not contact JT (the daughter) for consent. Due to the licensee’s long standing client relationship with ST, he continued to view ST as the owner of the policy when he was no longer the legal owner of the policy at that time.” 

The forms for transfer were prepared, returned, and then resent to the clients because they were incorrectly filled out the first time. After the forms were resigned, Cheng arranged a meeting with the father to retrieve them. JT did not attend the meeting.

At the meeting it was discovered that the witness section of the forms had not been completed. After comparing the signature to JT’s signature found on another form, Cheng signed the transfer form as a witness. The daughter did not become aware of the transfer until her taxes were reassessed by the Canada Revenue Agency (CRA). “The licensee admitted he was not aware there could be tax consequences from the transfer of ownership,” the intended decision states.

“Council feels the licensee tried to minimize the severity of his conduct,” they add. “Council felt the licensee attempted to shift responsibility to the insurer, stating the final authority to complete the transfer of the policy would be the insurer, and that his facilitating the transfer forms was only one aspect of the transfer. The licensee (further) stated that the insurer has a procedure to verify signatures before processing documentation and implied that he relied on this procedure.” 

He also reportedly said anyone could have witnessed the forms without him being aware if the signatures were appropriately executed or not. “Council determined that the licensee was diminishing the fact that he signed as a witness on a document when he had in fact not witnessed the appropriate signature.” 

In addition to a fine of $2,000 and costs in the amount of $1,500, Cheng is also ordered to complete two courses, the Council Rules Course, and the Advocis Knowing the Code of Professional Conduct course before June 2.