By Colin Simpson, IBAO CEO

BACKGROUND
On June 20^th, 2016, the Ministry of Finance released the final report reviewing the mandate of the Financial Services Commission of Ontario (FSCO) entitled, Review of the Mandates of the Financial Services Commission of Ontario, Financial Services Tribunal, and the Deposit Insurance Corporation of Ontario. FSCO regulates such things as insurance agents and insurance companies. They also regulate credit unions and mortgage brokers, and approve auto insurance rates. FSCO has great impact on brokers (both directly and indirectly). The IBAO has been active throughout the review process, including formal submissions and hosted meetings to discuss the preliminary and final recommendations. Only a couple of weeks ago we had a very informative discussion with George Cooke (a name familiar to all brokers) who was one of the three authors of the report.

TIMING
It is important to note that this report is a set of recommendations and therefore it is not known exactly how, if, or when these proposals will be implemented. It could take in excess of 18 months to come to fruition (if at all).

HIGHLIGHTS
The report makes 44 recommendations. The most significant recommendation is that a new independent agency, the Financial Services Regulatory Authority (FSRA) be created. It is recommended that the FSRA be divided into three divisions:

* Market Conduct
* Prudential and Pensions
* Office of the Consumer, to help educate and represent the point of view of consumers (it should be noted that the Office of the Consumer is not to be a complaint resolution office).

The report puts a very strong emphasis on the following principles:

* Market Conduct Enforcement: the ability for the regulator to fight fraud and ensure the integrity and credibility of the sectors it regulates.
* Transparency and the Elimination of Regulatory Gaps: addressing differing regulatory standards for financial intermediaries that sell identical or similar products (this is where RIBO could be impacted).

Despite being outside of the author’s mandate, the report has also recommended that the FSRA be given the authority to determine the method and type of auto insurance rate regulation. The report highlights the need for the FSRA to be more nimble, enabling it to have rule-making authority similar to the Ontario Securities Commission.

IBAO RESPONSE
Our response to each of the 44 recommendations can be read in more detail here (look under the “FSCO” folder). We’re supportive of the majority of the recommendations in the report. In general, suggested changes create a move toward a level playing field which should benefit brokers. As insurance products continue to evolve and be sold through multiple distribution channels, it does not make sense to have licensing, disciplinary and education rules held to different standards. When consumers can buy the same or similar products through those different channels, they should expect the same or similar professional standards from those who they choose to transact with. We recognize that we need an efficient and effective regulatory structure. Bringing our regulatory framework into the 21^st Century should benefit us all, especially the consumers that brokers serve. We are particularly supportive of the recommendations in the report that include improving market conduct enforcement. This includes removing the resource and systemic barriers that constrain FSCO today.

TWO AREAS OF IBAO FOCUS:
1. The Speed of Change + Implementation: We need to ensure we understand how these recommendations are to be put into effect to ensure that they are done so in a controlled and orderly manner. IBAO is committed to ensuring that brokers are exposed to the least amount of risk and the maximum protection for consumers.
2. FSRA’s authority regarding auto rate regulation: IBAO will be at the table when any proposed changes are discussed. Brokers will have a voice on how rate regulation changes could be implemented. Changes to the auto rate regulations could have a profound implication on the dynamics of the market, directly impacting consumers and how our members conduct their business. We cannot lose sight of this.

BROKER IMPLICATIONS AND IBAO NEXT STEPS
The IBAO will continue to be at the table to ensure a fair and even playing field exists for our members as insurers distribute the same or similar product through a variety of distribution channels. While there are no direct implications to the operations of IBAO, there could be indirect implications for those that we directly work with (including bodies such as RIBO) as regulatory standards evolve. In connection with our potential concerns surrounding auto rate regulation, the IBAO has written to the Finance Minister to request a further consultation period be set, specifically to discuss the method and type of auto insurance rate regulation that the FSAR may implement. It is essential that we are proactive in this discussion given the potential impact that decisions surrounding rate regulation and implementation will influence market dynamics and impact consumers.

 The pace of change in our industry is certainly increasing, and we are committed to continuous advocacy. As we progress through these exciting times we will be frequently consulting and communicating with you to ensure that we are accurately representing your views. In the meantime, if you have any questions in connection with our response to this report, please do not hesitate to contact me directly.

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