Citation: Sengmanee v. Ontario (Superintendent Financial Services), 2015 ONFST 27 Decision No. I0584-2014-1 Date: 2015/08/04

IN THE MATTER OF the Insurance Act, R.S.O. 1990, c. I.8, (the “Act”) in particular sections 441.1, 441.2 and 441.3;

AND IN THE MATTER OF a Notice of Proposal to Impose an Administrative Monetary Penalty dated July 25, 2014 issued by the Superintendent of Financial Services against Phonepasit Sengmanee;

AND IN THE MATTER OF a Hearing in accordance with subsection 441.3(5) of the Act.

and

RESPONDENT

BEFORE:

Bethune Whiston Member of the Tribunal and Chair of the Panel Florence A. Holden Chair (Acting) of the Tribunal and Member of the Panel Denis Boivin Vice-Chair (Acting) of the Tribunal and Member of the Panel

APPEARANCES:

For the Applicant – Mr. Phonepasit Sengmanee For the Superintendent of Financial Services – Mr. Douglas Lee, Counsel

Date HearD: June 3, 2015

REASONS FOR DECISION

I. INTRODUCTION

1This matter comes before us as a result of a Request for Hearing filed by the Applicant in response to a Notice of Proposal (“NOP”) dated July 25, 2014 to Impose an Administrative Monetary Penalty (“AMP”) in the amount of $1,000 on the Applicant. The Superintendent seeks to impose the penalty due to the alleged failure of Mr. Sengmanee, as a licensed life insurance agent (“life agent”), to fulfill his statutory obligation to give the Superintendent requested information about his activities related to the business of insurance pursuant to section 442.3(1)4 of the Insurance Act, R.S.O. 1990, c. I.8 (the “Act”), specifically his failure to respond to a mandatory market conduct questionnaire issued to life agents by the Superintendent in 2013.

2We have found, and Mr. Sengmanee does not dispute, that he did not respond to the questionnaire. However, under the unique and difficult circumstances of this particular case, and given the compelling narrative provided by Mr. Sengmanee, we have found that it is not appropriate to impose a penalty for the failure to respond in this exceptional case. It will require highly unusual facts to lead to a conclusion that a penalty is not appropriate in other failure to respond cases under the Act and we do not expect it to be a common occurrence, as previously noted in other Tribunal decisions.

II. BACKGROUND

3There have been several cases before the Financial Services Tribunal (“FST”) in respect of alleged contraventions under Section 442.1 of the Act by insurance agents and related AMPs. AMPs under the Act were introduced into law effective January 1, 2013 to allow the Financial Services Commission of Ontario (“FSCO”), the regulator, to address contraventions in the law more efficiently, to promote compliance and to prevent financial benefit to violators. We are aware that FSCO publically communicated its new powers to use AMPs to the insurance industry.

4We accept the uncontradicted testimony of Mr. Anatol Monid, the Interim Executive Director of the Licensing and Market Conduct Division (“LMCD”) of FSCO, that FSCO developed a market conduct questionnaire for life agents in 2013. The mandatory survey was intended to assist FSCO to assess the process agents used in making product recommendations at the point of sale and determining how they supported the financial literacy of consumers, with a view to establishing best practices.

5Mr. Monid outlined the e-mail delivery process using the last known address of insurance agents on file with FSCO, an approach already accepted in prior cases by the Tribunal.

6Further uncontradicted testimony was provided by Ms. Elena Schneider, Regulatory Discipline Officer of the LMCD. She indicated that 48,000 life agents were advised in September 2013, by FSCO, of an upcoming mandatory on-line questionnaire. The communication to agents was by e-mail sent to the e-mail addresses that were available to the LMCD as provided and updated by the insurance agents.

7Ms. Schneider testified that the questionnaire was sent by e-mail to a random sample selection of life agents on October 15, 2013, and additional e-mails related to the questionnaire were sent on October 28, November 4 and November 18, 2013. The initial deadline for completion was November 15, 2013, and an extended deadline was offered of November 19, 2013. The e-mails made it clear that the questionnaire was mandatory, that there was a deadline by which agents had to respond and if they failed to respond regulatory action might be taken. Recipients were provided with a phone number where they could receive additional information.

8FSCO followed up with non-responders by registered letter in March of 2014 and extended the time for reply. Regulatory action was eventually taken against those who failed to respond to this extension.

9Further information respecting FSCO’s approach to this 2013 market conduct questionnaire and to the actions taken against those licensed insurance agents who allegedly did not respond to the questionnaire, can be found in the other decisions of this Tribunal related to these alleged failures to respond, and we simply note that a similar process was followed in this case.

III. The Issues

10The following issues were before the Tribunal at the hearing:

a. Did Mr. Sengmanee fail to provide the Superintendent with the information requested via questionnaire initially sent on October 15, 2013, and consequently breach section 442.3(1)4 of the Act?

b. Is the imposition of the proposed AMP appropriate under section 441.2 of the Act, to promote compliance with the requirements established under the Act and/or prevent Mr. Sengmanee from deriving an economic benefit from the non-compliance?

c. What is the appropriate amount of the AMP taking into account the criteria contained in subsection 4(2) of Ontario Regulation 408/12 to the Act?

11Although the Notice of Hearing for this proceeding referred to other issues, they were not properly before us, and in any case they are not relevant for the present purposes.

IV. THE FACTS

12Most of the evidence that is relevant to these issues is contained in an Agreed Statement of Facts (“ASF”) and an Agreed Book of Documents (“ABD”) filed with the consent of both parties with the Registrar’s office on March 31, 2015, and received by the Tribunal. Mr. Sengmanee also submitted into evidence some documentation in support of his testimony.

13In addition, the Tribunal heard oral testimony from three witnesses: 1) Anatol Monid, 2) Elena Schneider, and 3) Phonepasit Sengmanee.

14Based on the testimony of the Applicant, Mr. Sengmanee, and all of the evidence before us, we find the following facts related to Mr. Sengmanee’s work as a life agent:

a. Mr. Phonepasit Sengmanee was licensed as a life insurance and accident and sickness insurance agent by FSCO on April 23, 2013, as a result of an application made by him on March 28, 2013. On his application, he indicated a gmail address. This gmail address remained active and Mr. Sengmanee confirmed that he continues to use the same gmail address as at the date of this hearing.

b. Mr. Sengmanee was sponsored by Primerica Life Insurance Company of Canada (“Primerica”) in making the application to be licensed as a life agent. From February to May 2013, he actively tried to create a career as a life agent. For various reasons, however, he became disillusioned with his activities at Primerica and started looking for a new job in June of 2013.

c. At that point in time, Mr. Sengmanee considered that his attempt at a life insurance career had failed, and he ceased to pay attention to any communications respecting general insurance matters.

d. At no time did Mr. Sengmanee advise FSCO that he was no longer practicing as a life agent, however, on May 24, 2014, Mr. Sengmanee’s life agent licence was surrendered.

e. Mr. Sengmanee was working as a waiter part-time in Lucan, Ontario before, during and after his brief period actively working as a life agent. His income tax return for 2013 shows less than $1,000 of his earnings for that year was related to commissions from his life agent work. Mr. Sengmanee had never had direct contact with a client on insurance business.

15We find that Mr. Sengmanee did not respond to the survey when it was initially sent to life agents. He also did not respond to any further attempts from FSCO to communicate with him about the survey.

16Based on the testimony of Mr. Monid and Ms. Schneider, and other evidence presented to us, we find the following with respect to the communications that were sent to Mr. Sengmanee and received at his e-mail address:

a. Mr. Sengmanee was sent the initial FSCO e-mail on September 27, 2013, advising all licensed insurance agents that a mandatory questionnaire would be distributed to selected agents in the fall of 2013.

b. Based on the text of the e-mail placed before us, we find that the life agents were advised that selected agents would be notified of their selection via e-mail on October 11, 2013, the questionnaire would be sent, also by e-mail, on October 15 and that completion of the questionnaire was mandatory pursuant to Section 442.3 of the Act. Agents were advised to complete the questionnaire, if asked, by November 14, 2013. Further the e-mail indicated that “Failure to respond could result in regulatory action.”

c. We find that Mr. Sengmanee was selected as one of the agents to receive the mandatory questionnaire, and that he was sent an e-mail with a link to the questionnaire on October 15, 2013. The questionnaire and related e-mail was delivered to the same e-mail address he provided to FSCO on his licence application. Other e-mails respecting the questionnaire, dated October 28, November 4 and November 18, 2013, were also sent by FSCO to Mr. Sengmanee’s e-mail address.

d. Mr. Sengamanee does not dispute that he received the e-mails just that he did not open or read them.

e. In addition, two registered letters, the first on December 2, 2013, and the second in March 2014, were sent to Mr. Sengmanee’s Kitchener, Ontario address on file. No evidence was provided to us as to whether the first letter was successfully received or not. There was no response to the December letter from Mr. Sengmanee. The Canada Post report related to the March letter indicated that the letter was unclaimed and it was returned to sender.

f. We find that Mr. Sengmanee did receive FSCO’s e-mails related to the questionnaire, although he may not have received the December registered letter and he did not receive the March 2014 registered letter sent by FSCO. However, in light of the circumstances described in paragraph 17 of our Reasons, we find that Mr. Sengmanee did not pay attention to any correspondence from FSCO or any other e-mails related to the general insurance industry.

17In light of the following facts, we find that Mr. Sengmanee was extremely distracted by urgent personal and family matters during the time period that the FSCO correspondence was sent.

a. In 2011, Mr. Sengmanee and his spouse were together with their two children. They experienced difficulties and separated. He moved to the Kitchener address and she and the children lived in Exeter. In September of 2012, Mr. Sengmanee and his spouse had a third child, a son. This child was in and out of the Children’s Hospital in London, Ontario, almost every month in 2012 and 2013, and often several times a month. This situation continued in 2014, with some inpatient and frequent outpatient visits. Mr. Sengmanee regularly stayed at the Ronald MacDonald House of Southwestern Ontario to be close to his hospitalized son and the rest of his family.

b. Mr. Sengmanee’s son was very ill, failing to thrive and gain weight and for a long time his illness was undiagnosed. We understand that Mr. Sengmanee’s son has now been diagnosed with an extremely rare chronic condition. A letter dated April 14, 2015, from the Pediatric Nephrology department at the Children’s Hospital indicated that Mr. Sengmanee was “…the primary caretaker (and)…the parent that usually remains in hospital with [his son] during his admissions and brings him to his follow-up outpatient appointments as well as following through with his prescribed feeding schedule in the home.” The Superintendent did not dispute these facts relating to Mr. Sengmanee’s son, although he may not been aware of them when the NOP was issued.

c. From the evidence before us, it is clear that Mr. Sengmanee was dividing his time between four different locations during 2013 and 2014. He was working as a waiter in Lucan; he had a home address in Kitchener with his in-laws where he stayed from time to time; he stayed in London when his son was admitted to the hospital; and he also spent some time in Exeter, where his other children were living with their mother.

d. Not only was Mr. Sengmanee’s family situation very distressing, he was also struggling to find employment that would help to support himself and his family and had several different types of employment in 2012 and 2013.This was not a normal family situation or even one where a family member is simply ill or under care for a time during the period in question. Mr. Sengmanee’s personal circumstances at the time the communications were sent were so extreme that he could not focus on the communications sufficiently to understand that he was required to complete a mandatory questionnaire and that there would be consequences to any decision not to respond.

V. statutory framework and Analysis

18As this Tribunal noted in Molenda v. Ontario (Superintendent Financial Services), 2015 ONFST 18 (“Molenda”), life insurance agents have voluntarily chosen to participate in a business that requires a licence and involves regulation. They agree to subject themselves to a regulatory regime.

19The ability of the Superintendent to issue the questionnaire and require life agents to respond follows from sections 441.1(1), 442.1 and 442.3 of the Act (see paragraph 13 of the first decision of the FST on these alleged failures to respond cases, namely Notta v. Ontario (Superintendent Financial Services), 2015 ONFST 2 (“Notta”)).

20The first issue is: Did Mr. Sengmanee fail to provide the Superintendent with the information requested via a questionnaire initially sent on October 15, 2013 and consequently breach section 442.3(1) of the Act?

21We find that Mr. Sengmanee did fail to provide the Superintendent with the information requested and that he did breach section 442.3(1) of the Act.

22The second issue is: Is the imposition of the proposed AMP appropriate under section 441.2 of the Act to promote compliance with the requirements established under the Act and/or prevent Mr. Sengmanee from deriving an economic benefit from the non-compliance?

23According to section 441.3(1) of the Act, if the Superintendent is satisfied that a person has contravened a prescribed provision of the Act or a regulation, the Superintendent may impose a general AMP on that person. Pursuant to section 2 of Regulation 408/12 the duty of an agent to provide information to the Superintendent, pursuant to section 442.3(1) of the Act is “prescribed” for the purposes of imposing a general AMP.

24The relevant provisions of the Act read as follows:

“441.1 For the purpose of this Part, …

“requirement established under this Act” means,

(a) a requirement imposed by a provision of this Act that is prescribed for the purpose of section 441.3 or 441.4 or by a provision of a regulation that is prescribed for the purpose of either of those sections, …

441.2 (1) An administrative penalty may be imposed under section 441.3 or 441.4 for either of the following purposes:

To promote compliance with the requirements established under this Act.
To prevent a person from deriving, directly or indirectly, any economic benefit as a result of contravening or failing to comply with a requirement established under this Act.”

25The use of AMPs in the insurance industry and in other industries, such as mortgage brokers, to promote compliance is well established. The FST has itself imposed AMPs on numerous occasions as a general deterrent element to send a message to others in a similar position to the person against whom the order is directed or to other industry participants in general: see Notta at para. 23 and Pirapakaran v. Ontario (Superintendent Financial Services) (FST Decision No. I0570-2014-1) at para. 25 and 26 (“Pirapakaran”).

26In order to maintain public confidence in the regulated sectors, we accept that the imposition of AMPs by the Superintendent, or by the FST acting in the context of a de novo hearing, is generally appropriate. It is also appropriate to encourage licensees to fulfill their professional and legislative obligations. Consequently, it will rarely be the case that personal circumstances will be sufficiently extreme as to impact on a decision to impose an AMP.

27However, section 441.3(1) of the Act is discretionary as evidenced by the use of the word “may”. It contemplates that in some exceptional circumstances, a penalty need not be imposed. Such exceptional circumstances exist in this case. We find that the hardships being endured by Mr. Sengmanee and his family at the time the communications related to the questionnaire were sent cry out for the use of such discretion. Putting ourselves in Mr. Sengmanee’s shoes we can fully understand why he did not thoroughly read the e-mails he received respecting the questionnaire among the hundreds in his in-box and, therefore, why he did not understand that he was required to take action to respond to the communications. Although each e-mail sent on behalf of FSCO respecting the questionnaire did indicate, in the body of the e-mail, that it was a mandatory questionnaire, none of the e-mails indicated this in the subject line. The mandatory nature of the communications could easily be missed by someone overwhelmed by life and death matters. The failure to impose a penalty in this instance will not, in our view, encourage other insurance agents to flaunt the requirements of the Act.

28Respecting the second purpose indicated in subsection (1) of section 441.2, there was no evidence before us that Mr. Sengmanee received any economic benefit, directly or indirectly as a result of contravening or failing to comply with a requirement established under the Act. We do not find compelling Superintendent’s counsel’s suggestion that an indirect economic benefit may have been received by the Applicant related to the small savings in personal time (less than half an hour to complete the survey), although he conceded it was negligible at best.

29As neither of the two purposes indicated in subsection 441.2 (1) would be promoted by penalizing Mr. Sengmanee, we find that the imposition of the proposed AMP is not appropriate. In light of this finding, there is no requirement for us to address the third issue, namely the amount of the AMP.

30Pursuant to subsection 441.3(6) of the Act, when the Tribunal has held a hearing following a notice of proposal to impose an AMP, the Tribunal may, by order, direct the Superintendent to carry out the proposal, with or without changes, or substitute its opinion for that of the Superintendent.

VI. ORDER

31The FST hereby directs the Superintendent, by order, not to carry out his proposal to impose an AMP of $1,000 on the Applicant, Mr. Phonepasit Sengmanee.

Dated at Toronto, this 4th day of August, 2015.

“Bethune Whiston” Bethune Whiston

“Florence A. Holden” Florence A. Holden

“Denis Boivin” Denis Boivin