The Canadian Council of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organizations (CISRO) agree there is a high risk of poor consumer outcomes associated with deferred sales charges (DSCs) in segregated fund sales, adding that this form of sales charge is not consistent with treating customers fairly. 

The two insurance groups made the comments in line with a decision by the Canadian Securities Administrators to ban DSCs in mutual funds effective June 1, 2022. 

Stop new DSC sales 

The insurance regulators also urge insurers to refrain from new DSC sales in segregated fund contracts in line with the June 1, 2022 ban in securities, and expect a transition to a cessation of such sales by June 1, 2023. 

Upfront commissions in segregated funds may present similar concerns to the sale of other financial products in terms of the potential for conflicts of interest and alignment in cost and services in situations where the consumer relies on an advisor to sell them a suitable product and the advisor is being paid by the product manufacturer for the sale. 

CCIR and CISRO said they are committed to improving outcomes for segregated fund customers and are contemplating what other changes may be needed. CCIR and CISRO will issue a joint consultation on upfront commissions in sales of segregated funds later this year.