FINANCIAL SERVICES TRIBUNAL

Citation: Groeblacher v. Ontario (Superintendent Financial Services), 2015 ONFST 30 Decision No. I0574-2014-1 Date: 2015/08/31

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 30, 2014 issued by the Superintendent of Financial Services against Rudolf Groeblacher;

AND IN THE MATTER OF a Hearing in accordance with subsection 441.3(5) of the Insurance Act, R.S.O. 1990, c. I.8

B E T W E E N:

RUDOLF GROEBLACHER

APPLICANT

and

SUPERINTENDENT OF FINANCIAL SERVICES

RESPONDENT

BEFORE:

Florence A. Holden Chair of the Panel and Chair (Acting) of the Tribunal

APPEARANCES:

For the Applicant – Rudolph Groeblacher – self-represented

For the Superintendent of Financial Services –Joe Nemet

DATE HEARD: August 25, 2015

REASONS FOR DECISION

I. INTRODUCTION

1This matter comes before me as a result of a Request for Hearing filed by the Applicant in response to a Notice of Proposal (“NOP”) dated July 30, 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. Groeblacher, as a licensed life insurance 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 Act, specifically his failure to respond to a market conduct questionnaire of licensed life insurance agents conducted by the Superintendent in 2013. This case is one of a large number of similar fact cases before the Tribunal.

2This case is similar to a number of cases that have already been decided by this Tribunal. At a pre-hearing conference held on June 4, 2015, Mr. Groeblacher conceded that he had failed to provide the Superintendent with the information requested via a questionnaire initially sent on October 15, 2013. Consequently he thereby contravened or failed to comply with a requirement under the Act, namely sections 442.1 and 442.3(4). He affirmed the contravention at the hearing and the parties also filed an agreed statement of facts which provided further affirmation of the contravention.

3On the basis that material facts were no longer in dispute, the only remaining issues related to penalty. Having reviewed the evidence of both parties as outlined in a signed Agreed Statement of Facts and Book/Index of Documents, both filed August 18, 2015, the testimony of Mr. Groeblacher, and considered the submissions of both parties and the affidavit of Mr. Anatol Monid before me, I order the Superintendent, pursuant to section 441.3(6) of the Act, to carry out his proposal as issued for an AMP in an amount of $1,000 as against the Applicant. The reasons for my decision follow.

II. BACKGROUND

4As the Tribunal has repeatedly noted in prior decisions, administrative monetary penalties 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. AMPs can be imposed for breaches of order, undertakings and licence conditions, as well as for contraventions of statutory provisions.

5As noted in the Qin decision¹ and supported by Mr. Monid’s affidavit, the purpose of the mandatory questionnaire was intended to assist FSCO, using evidence-based results, in assessing the process insurance agents used in making recommendations and selling life insurance policies and products at the point of sale. Part of FSCO’s purposes under the FSCO Act in the regulation of the insurance industry is to “provide regulatory services that protect the public interest and enhance public confidence in the regulated sectors”.² The questionnaire is meant to assist the Superintendent in fulfilling FSCO’s legislated obligations to the public, though the development of a comprehensive regulatory approach that would ensure that life agents identify and recommend suitable insurance products.

THE ISSUES

6The following two issues will be determined by this Tribunal:

a. Is the imposition of the proposed AMP appropriate to serve one or both of the purposes set out in section 441.2(1) of the Act?

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

7There were no other preliminary matters and the parties had previously accepted the jurisdiction of the Tribunal.

III. THE FACTS

8Based on an agreed statement of facts and index of documents filed by the parties, whose contents I accept as proof therein, as well as submissions from Mr. Groeblacher I find the following key facts:

a. Since November 12, 2008, Mr. Groeblacher has been licensed under the Act as a Life Insurance and Accident and Sickness Agent. Mr. Groeblacher’s licence expired November 16, 2014.

b. Mr. Groeblacher and his wife were both active in the life insurance business, but Mr. Groeblacher took another full-time job about five years ago. I accept his undisputed testimony that he was no longer actively engaged in the insurance industry by the fall of 2013, but find that he failed to surrender his licence.

c. On September 27, 2013, the Superintendent sent an email to all licensed agents, including Mr. Groeblacher, informing them that FSCO will be launching the online questionnaire on October 15, 2013, and that they may be selected as part of the sample to complete it. Agents were informed that selected agents will be notified via email and, that if selected, completion of the questionnaire is mandatory. That email, and all emails and the registered letters described below, were sent to Mr. Groeblacher at the email and mailing addresses that he had provided to the Superintendent in 2013.

d. Mr. Groeblacher was randomly selected as part of the agent sample required to complete the questionnaire.

e. On October 15, 2013 an email was sent by the Superintendent to Mr. Groeblacher informing him that he had been selected to complete the mandatory online questionnaire. Mr. Groeblacher was informed that completion of the questionnaire was mandatory under the Act, and that he was required to complete it by November 15, 2013. A link was provided for online access.

f. Mr. Groeblacher acknowledged in his testimony that he received the email but stated that he had difficulty accessing the questionnaire. He made no attempt to contact FSCO for more information and he did not complete the questionnaire. On October 28, 2013, a reminder email was sent reminding him that completion of the questionnaire was mandatory and failure to do so could result in regulatory action.

g. Mr. Groeblacher did not complete the questionnaire and on November 4, 2013, a second email reminder was sent reminding him that the questionnaire was required to be completed by November 15, 2013.

h. Mr. Groeblacher did not complete the questionnaire and on November 18, 2013, a third reminder email was sent to Mr. Groeblacher. In that email Mr. Groeblacher was again reminded that completion of the questionnaire was mandatory and that the original deadline for completion of November 15 was extended to November 19, 2013. Mr. Groeblacher did not complete the questionnaire. In his testimony however, he acknowledged that he did receive the emails and he was aware of a possible penalty, which he assumed might be a licence revocation, but not a financial penalty.

i. On December 2, 2013, a registered letter was sent to Mr. Groeblacher. The letter pointed out that despite the several reminders, he had not completed the questionnaire and the Superintendent was considering imposing a penalty. Mr. Groeblacher was invited to provide an explanation by December 17, 2013.

j. Mr. Groeblacher conceded that he received that letter and did not dispute the Superintendent’s submissions that he responded in an email dated December 9, 2013 and provided an alternative email address and alternative name of “Robert Groeblacher”. While Mr. Groeblacher suggested in his testimony that he may have had some difficulties with his email address, he did not provide any details as to why or what the nature of his difficulties were in that regard, and indicated that his wife also used that same address for her life licence insurance business. In any event he agreed he had received the email requests for information.

k. Mr. Groeblacher further indicated in testimony that at some point he attended a session at his former employer’s (with whom he was still connected), and was advised that he did not have to complete the questionnaire. He provided no meeting date, no name of person advising him or other evidence or explanation as to why such information would have been given to him. I find his testimony lacks credibility on this point and give it no weight.

l. On March 10, 2014, another registered letter was sent advising that the questionnaire link had been re-opened to give one final chance for Mr. Groeblacher to provide the requested information and that the questionnaire link would be closed March 26, 2014. The contents of the letter advised that failure to provide the requested information would result in enforcement action. The letter was sent to same address as the letter of December 2, 2013, and Mr. Groeblacher admitted receipt in his testimony.

m. Mr. Groeblacher neither responded to the letter of March 10, 2014 by surrendering his licence, nor did he complete the questionnaire.

n. The Superintendent issued a Notice of Proposal to Impose an Administrative Monetary Penalty, dated July 30, 2014.

o. Mr. Groeblacher filed a Request for Hearing on August 11, 2014.

IV. STATUTORY FRAMEWORK AND ANALYSIS

9As noted in earlier cases³, 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. In order to perform his regulatory functions, the Superintendent must be able to question agents and insurers with respect to their business activities.

10For simplicity, I repeat the framework that has been outlined in earlier cases.

11The ability of the Superintendent to issue the questionnaire and require the agent to respond follows from sections 441.1(1), 442.1 and 442.3 of the Act which read in part as follows:

Section 442.1:

(1) The Superintendent or a person designated by the Superintendent may direct an enquiry to any of the following persons about contracts, settlements or adjustments under contracts, the financial affairs of an insurer, the acts and practices of an insurer, agent, or adjuster or such other matters as may be specified by the Superintendent: …

4. An agent or adjuster who holds or held a licence under this Act;…

(5) A person to whom an inquiry is directed shall answer promptly, explicitly, and completely and shall do so in the manner and within the period specified by the Superintendent or the designate.”

Section 442.3 (1) and (3) state:

(1) Upon the request of the Superintendent or a person designated by the Superintendent, a person to whom an inquiry may be directed under section 442.1 shall give the Superintendent or designate full information, and shall provide records, about the following matter:

4. Activities related to the business of a person who holds or held a licence under this Act….

(3) A person to whom a request is directed under this section shall answer promptly, explicitly and completely and shall do so in the manner and within the period specified by the Superintendent or the designate.

12Based on these findings, I find that Mr. Groeblacher did fail to provide the Superintendent with the information requested via a questionnaire initially sent on October 15, 2013 and contrary to s. 442.3(1)(4) of the Act.

13The first remaining issue before me is: Is the imposition of the proposed AMP appropriate to serve one or both of the purposes set out in section 441.2(1) of the Act? I find the answer to be yes.

14Subsection 441.2(1) of the Act states that an AMP may be imposed for either of the following purposes:

1. To promote compliance with the requirements established under the Act.

2. To prevent a person or entity from deriving, directly or indirectly, any economic benefit as a result of contravening or failing to comply with a requirement established under this act.

15As this Tribunal has noted in other cases, it remains open, on the facts of each individual case, for the Superintendent and the Tribunal, substituting its decision for that of the Superintendent, to impose no penalty in exceptional circumstances.⁴ No exceptional circumstances exist in this case.

16I find that the imposition of a monetary penalty in this case will promote compliance with the Act in general, and with the obligation to respond to the Superintendent’s requests for information in particular, by demonstrating to Mr. Groeblacher and other similarly situated licensees that non-compliance with statutory requirements will attract a negative monetary consequence. A finding in this case that an AMP may fulfil the purpose of s. 441.2(1)(1) of the Act is sufficient in my view to impose an AMP on Mr. Groeblacher.

17The remaining issue before me is: What is the appropriate amount of the AMP taking into account the criteria contained in subsection 4(2) of Ontario Regulation 408/12?

18The maximum general administrative penalty that may be imposed by the Superintendent on an individual in these circumstances is $100,000 for a failure to comply under s.442.1 and 442.3 of the Act as listed in Schedule 1 to Regulation 408/12. The proposed penalty in this case was $1,000.

19In determining the amount of the penalty up to that maximum, the Superintendent and consequently the Tribunal, is required by Ontario Regulation 408/12 to consider only 5 specified criteria. Personal financial circumstances of the applicant are not a consideration. The criteria are:

a. The degree to which the contravention or failure was intentional, reckless or negligent.

b. The extent of the harm or potential harm to others resulting from the contravention or failure.

c. The extent to which the person or entity tried to mitigate any loss or to take any other remedial action.

d. The extent to which the person or entity derived or reasonably might have expected to derive, directly or indirectly, any economic benefit from the contravention or failure.

e. Any other contraventions or failures to comply with a requirement established under the Act or any other financial services legislation of Ontario or with any jurisdiction during the preceding five years by the person.

20After reviewing the evidence and these criteria, I have made the following further findings:

a. On the first criteria, I find Mr. Groeblacher’s actions were intentional. While he may not have been engaged in the industry, he was aware of the mandatory questionnaire over a period of several months and when given the repeated opportunity to reply still took no action. He was also aware that he was subject to penalty although he did not appreciate perhaps that it could take a monetary form.

b. On the second criteria, no direct harm to clients was adduced. I find that indirect harm to others may result in these circumstances. As noted in Notta, Molenda, and Weaver⁵, failure to respond to a request by the Superintendent or his delegate results in additional cost of regulation, which costs are ultimately passed on to the industry and likely the public. As well, such actions, as noted above, frustrate the Superintendent’s ability to collect information that will permit him to effectively fulfill FSCO’s legislated mandate to develop a comprehensive regulatory approach to ensure that life agents identify and recommend suitable insurance products to the public.

c. On the third issue, I find that Mr. Groeblacher took no steps to mitigate or take remedial action.

d. On the fourth issue, I find no evidence that Mr. Groeblacher received an economic benefit from the contravention of the Act.

e. On the fifth issue, I find that there was no evidence of any other previous contraventions under this Act or other financial services legislation.

21Based on all of these findings, I find no reason to interfere with the Superintendent’s decision in this matter.

V. ORDER

22I hereby order the Superintendent to carry out his proposal and impose an administrative monetary penalty in the amount of $1,000 as against the Applicant, Mr. Groeblacher.

Dated at Toronto, this 31st day of August, 2015.

“Florence A. Holden” Florence A. Holden

Footnotes

1. 1Qin v. Ontario (Superintendent Financial Services), 2015 ONFST 22, paragraph 4.
2. 2Financial Services Commission of Ontario Act, 1997, S.O. 1997, c.28, section 3(a).
3. 3Notta v. Ontario (Superintendent Financial Services), 2015 ONFST 2, paragraph 12 citing White v. Ontario (Superintendent Financial Services), 2014 ONFST 9.
4. 4Notta, ibid, paragraph 28; Qin, op cited, at paragraph 15.
5. 5Weaver v. Ontario (Superintendent Financial Services), 2015 ONFST 23.