The Financial Services Regulatory Authority of Ontario (FSRA) has published two rule amendments to the Unfair or Deceptive Acts or Practices (UDAP) rule, which would prohibit insurers from issuing new individual segregated fund contracts using deferred sales charges (DSC) beyond June 1, 2023.
Interested stakeholders are invited to provide their feedback to the rule amendments before the end of the day on February 23, 2023.
“If approved, the proposed amendments would ban sales of new individual segregated fund contracts with DSCs effective June 1, 2023,” FSRA states in its announcement about the proposed rule changes. “This would bring the regulation of segregated funds in Ontario in line with securities regulators across Canada, who ended DSCs for mutual funds effective June 2022.” They also say the rule changes bring regulations into line with the expectations of regulators across the country.
“These charges raise serious consumer protection concerns for customers who may need to access their own investments,” says Huston Loke, FSRA’s executive vice president of market conduct.
“On February 10,2022, the Canadian Council of Insurance Regulators (CCIR) and Canadian Insurance Services Regulatory Organizations (CISRO) announced that due to the high risk of poor consumer outcomes associated with DSCs in the sale of individual variable insurance contracts, insurers should refrain from engaging in new DSC sales and that a transition to the cessation of such sales is expected by June 1, 2023,” the proposed rule states – a national position announced by all insurance regulators across Canada, they add.
The published rules also examine anticipated costs and benefits and alternative approaches considered.
