The Financial Services Regulatory Authority of Ontario (FSRA) announced May 17 that the Minister of Finance in the province has approved an amendment to the Unfair or Deceptive Acts or Practices (UDAP) rule, eliminating new sales of segregated fund contracts which charge customers for withdrawing their investments early. The amended rule banning deferred sales charges (DSC) takes effect June 1, 2023.
FSRA says it took the action to ban DSC contracts to better protect consumers. “FSRA plans to launch consultations on an updated version of another amendment to the UDAP rule that would address concerns regarding DSCs in contracts that already exist,” they state in an announcement about the amended rule’s new effective dates.
The UDAP rule was originally approved by the Minister of Finance in February 2022 and made effective on April 1 that same year. “Amendment 1 to the UDAP rule was approved by the minister on May 17, 2023.”
The second public consultation, planned for June 2023, will address proposed changes that simplify the information a customer receives if insurers use their pre-existing contractual right to switch the customer from a DSC to a sales charge option “that is in all ways more favourable to the customer,” they write. “In this situation such disclosure may occur later, since early disclosure is not required for the switch. The same approach would not be available for an insurer switching a customer to a sales charge option that is not in all ways more favourable to the customer, such as the advisor chargeback option.”
