Citation: Song v. Ontario (Superintendent Financial Services), 2016 ONFST 1 Decision No. I0613-2014-1 Date: 2016/01/05

IN THE MATTER OF the Insurance Act, R.S.O. 1990, c. I.8, as amended (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 against Qiong Ying Song dated July 25, 2014 issued by the Superintendent of Financial Services;

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

and

RESPONDENT

BEFORE:

Denis Boivin Chair of the Panel and Vice-Chair (Acting) of the Tribunal

APPEARANCES:

For the Applicant – Qiong Ying Song

For the Superintendent of Financial Services – Robert Conway

DATE HEARD: October 23, 2015

REASONS FOR DECISION

I. INTRODUCTION

1The Applicant, Qiong Ying Song, is licensed to carry on business as a life insurance and accident and sickness insurance agent in the Province of Ontario. On July 25, 2014, the Superintendent of Financial Services (“Superintendent”) issued a Notice of Proposal (“NOP”) in which he proposes to impose a general administrative monetary penalty (“general AMP”) of $1,000 on Ms. Song. In the NOP, it is alleged that Ms. Song failed to respond to a request for information, contrary to subsection 442.3(1)4 of the Insurance Act, R.S.O. 1990, c. I.8. This request for information relates to an online questionnaire administered by the Financial Services Commission of Ontario (“FSCO”) in the fall of 2013, a questionnaire that has given rise to many NOPs, hearings and decisions of the Financial Services Tribunal (“Tribunal”).

2At the start of this Hearing, Mr. Conway said that the Superintendent was amending the NOP by reducing the proposed penalty from $1,000 to $500. According to Mr. Conway, this amendment was made in light of two recent cases decided by the Tribunal, Sotoudeh v. Ontario (Superintendent Financial Services), 2015 ONFST 34 (“Sotoudeh”) and Sarai v. Ontario (Superintendent Financial Services), 2015 ONFST 35 (“Sarai”).

3For the following reasons, I conclude that Ms. Song has contravened a requirement under the Insurance Act and that a general AMP is appropriate. Furthermore, I agree with the Superintendent’s amended proposal; a penalty of $500 is a proportional response, after taking into account the prescribed circumstances and relevant precedents.

II. Issues

4The Pre-hearing Conference Memorandum and Notice of Hearing that were prepared for this matter identify three issues:

a. First, did Ms. Song fail to provide the Superintendent with the information requested via questionnaire initially sent on October 15, 2013, and thereby contravene or fail to comply with a requirement established under the Insurance Act, namely, sections 442.1 and 442.3?

b. Second, if the answer to issue (a) is yes, would a general AMP be appropriate, considering subsection 441.2(1) of the Insurance Act? Would it promote compliance with requirements established under the Insurance Act and/or prevent Ms. Song from deriving an economic benefit from her non-compliance?

c. Third, if the answer to issue (b) is yes, what is the appropriate amount for the general AMP, taking into account the five factors contained in subsection 4(2) of Ontario Regulation 408/12?

III. facts

5The parties filed an Agreed Statement of Facts (“ASF”) and an Agreed Book of Documents (“ABD”) with the Tribunal. The Applicant testified with the assistance of a Mandarin interpreter, as well as her husband, Jonathan Sui. They were both subject to cross-examination. For his part, Mr. Conway called one witness, Elena Schneider, a FSCO Regulatory Discipline Officer familiar with Ms. Song’s case who swore an Affidavit for the purposes of this Hearing.

6On the basis of this evidentiary record, I make the following findings of fact:

a. At all material times, Ms. Song was licensed under the Ontario Insurance Act and its regulations to carry on business in this province as a life insurance and accident and sickness insurance agent (“life insurance agent”). Her current licence will expire on October 19, 2016.

b. In an effort to accumulate information from the insurance industry which would assist FSCO in better understanding and assessing the process that life insurance agents use at the point of sale when making life insurance recommendations to potential policyholders, FSCO formulated an online questionnaire (the “Life Insurance Agent Questionnaire”) to be directed to a large, randomly selected sample of life insurance agents.

c. The Life Insurance Agent Questionnaire was intended to provide information to both FSCO and the life insurance industry that would assist in formulating and promoting best practices on product suitability of life insurance products at point of sale.

d. On September 27, 2013, FSCO sent an email to all licensed life insurance agents, including Ms. Song, informing them that FSCO would be launching the online questionnaire on October 15, 2013, and that that they may be selected as part of the sample to complete it. Agents were informed that those selected would be notified by electronic mail and that, if selected, completion of the questionnaire was mandatory.

e. Ms. Song was randomly selected as part of the agent sample required to complete the Life Insurance Agent Questionnaire.

f. On October 15, 2013, an email was sent by FSCO to Ms. Song informing her that she had been selected to complete the online questionnaire. She was informed that completion of the questionnaire was mandatory under the Insurance Act, and that she was required to complete it by November 15, 2013. A link was provided for online access.

g. Three reminder emails were sent by FSCO to Ms. Song: the first on October 28th, the second on November 4th, and the third on November 18th. In the third reminder, Ms. Song was again informed that completion of the questionnaire was mandatory and she was asked to complete the questionnaire by November 19, 2013. Again, she was told that regulatory action could be taken, if she failed to respond to this request for information.

h. The five emails mentioned in paragraphs 6(d), (f) and (g) of these Reasons were sent to a business email address supplied to Ms. Song by her sponsoring company, the London Life Insurance Company (“London Life”). This business email is the address that Ms. Song provided to FSCO when she applied for her life insurance agent licence, on October 18, 2011. It is the address that Ms. Song provided to FSCO when she reapplied for said licence, on October 26, 2013 – less than two weeks after FSCO’s email of October 15th. It is also the address that she provided to the Tribunal, on October 24, 2014, in her Request for Hearing.

i. FSCO received a “bounce-back” report with respect to each of the five emails mentioned in paragraphs 6(d), (f) and (g) of these Reasons. This report consists of every email address to which the intended email was sent, but was rejected due to circumstances such as an address being improperly spelled, no longer in effect, or an email account being full. In her Affidavit, Ms. Schneider states that she verified the bounce-back report for each of the five emails described in paragraphs 6(d), (f) and (g) of these Reasons, and swears that Ms. Song’s business email address does not appear on any of these reports. Therefore, in the opinion of Ms. Schneider, one can reasonably infer that the emails in question were successfully delivered to the address provided by Ms. Song to FSCO. I agree with her and I hereby find that the emails were successfully delivered to the Applicant. However, it should be noted that bounce back reports do not provide information on whether an email has been received in a junk mail folder rather than a person’s inbox.

j. Ms. Song testified that she did not see any of the five emails mentioned in paragraphs 6(d), (f) and (g) of these Reasons. She testified that she did not check her emails on a regular basis, during the relevant timeframe, because she was busy caring for her young child. She testified that her husband, Jonathan Sui, would provide assistance by checking her electronic messages during this period.

k. Mr. Sui is a licensed life insurance agent who works for the same insurance company as Ms. Song. During his testimony, Mr. Sui confirmed that he checked his wife’s emails most of the time. According to him, he did not see any of the five emails mentioned in paragraphs 6(d), (f) and (g) of these Reasons. However, he admitted that he did not check his wife’s junk mail folder during the relevant period. In fact, he said that he never checks this folder because he is afraid of computer viruses transmitted via electronic mail.

l. On December 2, 2013, a registered letter was sent to Ms. Song. Significantly, this letter was not sent to the “Ontario Mailing Address” provided by Ms. Song to FSCO, in her licence application of October 2011 and her renewal application of October 2013, but to a residential address on file with FSCO – an address on Hollywood Avenue, in North York, Ontario. In her testimony, Ms. Schneider stated that this was likely the result of a clerical error, because the letter should have been sent to the licensee’s mailing address of record – an address on Keele Street, in Concord, Ontario. The letter pointed out that despite several reminders, the Applicant had not completed the questionnaire and the Superintendent was considering imposing a penalty. Ms. Song was invited to provide an explanation by December 7, 2013.

m. The registered letter of December 2, 2013, was returned to FSCO unclaimed on January 24, 2014.

n. On March 10, 2014, a second registered letter was sent to Ms. Song. The purpose of this letter was to give Ms. Song another opportunity to complete the questionnaire. Again, this letter was not sent to the “Ontario Mailing Address” provided by Ms. Song to FSCO, in her licence application of October 2011 and her renewal application of October 2013. The letter itself refers to an address on Hillcrest Avenue, in Concord, Ontario. According to Ms. Schneider, this address was chosen because the previous letter had been returned unclaimed, and it was likely found after a search of the database of the Ministry of Transportation. However, the envelope containing said letter was addressed to the same place as the previous unclaimed letter – an address on Hollywood Avenue, in North York, Ontario. This was the result of another clerical error, according to Ms. Schneider.

o. The registered letter of March 10, 2014, was returned to FSCO unclaimed on April 23, 2014.

p. Ms. Song did not reside on Hollywood Avenue during the timeframe outlined in paragraphs 6(l) and 6(n) of these Reasons. Although this was her residential address on file with FSCO until June 1, 2015, she and her husband had moved to another home in September of 2012 – the address on Hillcrest Avenue – more than a year before the first registered letter had been sent. This being said, the “Ontario Mailing Address” on file with FSCO – the address on Keele Street – has remained the same throughout this timeframe. In fact, it is the address that was provided by Ms. Song to the Tribunal, on October 24, 2014, in her Request for Hearing.

IV. analysis

a. Issue 1: Was there a Contravention?

7The first issue is the following: did Ms. Song fail to provide the Superintendent with the information requested via questionnaire initially sent on October 15, 2013, and thereby contravene or fail to comply with a requirement established under the Insurance Act, namely, sections 442.1 and 442.3?

8In Sotoudeh, the Tribunal described the statutory framework that applies to the Life Insurance Agent Questionnaire administered by FSCO as follows (at paras. 8-9):

The 2013 Life Insurance Agent Questionnaire was prepared and administered in conformity with the discretionary powers conferred upon the Superintendent by section 442.1 of the Insurance Act, R.S.O. 1990, c. I.8. Subsection 442.1(1) allows the Superintendent or a person designated by the Superintendent to “direct an inquiry” to various entities and individuals, including licensed life insurance agents, about their acts and practices or about such matters as may be specified by the Superintendent.

Once an inquiry has been made within the meaning of subsection 442.1(1), a statutory duty is triggered; the entity or individual to whom the request for information has been directed must respond. This duty is recognized in two distinct provisions. The first is subsection 442.1(5), which reads as follows: “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.” The second source for the duty to respond is subsection 442.3(1). Summarized for present purposes, this provision requires a person who holds a licence under the Insurance Act to give “full information” about activities related to the business of this person, upon the request of the Superintendent or a person designated by the Superintendent.

9Turning to the facts of this case, I find that Ms. Song has failed to comply with the statutory duty imposed by subsections 442.1(5) and 442.3(1) of the Insurance Act. A person designated by the Superintendent directed an inquiry to Ms. Song, on October 15, 2013, by using her correct electronic address on file. She was sent three subsequent reminder emails. Her electronic address did not appear on any bounce back report, so all of the emails were successfully delivered to her account: see Notta v. Ontario (Superintendent Financial Services), 2015 ONFST 2 at para. 17. With respect to email communications, FSCO had done all that it could reasonably be expected to do in order to reach the Applicant. Indeed, as noted by the Tribunal in Sarai, supra at para. 16, “where a person provides an email address in an application for a licence to practice a regulated activity, it is reasonable to assume that the regulator may communicate with that person by email and assume that the person receives the email if no bounce back report is received.” The Applicant may not have seen the emails, but this is not because the messages were not delivered to their intended recipient; it is because Ms. Song did not regularly check her emails during the relevant timeframe and/or her husband never checked her junk mail folder. However true, these explanations are not valid excuses for a licensee engaged in a regulated activity.

10Ms. Song did not respond in the manner and within the period of time specified in the Superintendent’s request for information. Accordingly, the answer to the first issue is, “yes”, the Applicant did contravene a requirement established under the Insurance Act.

b. Issue 2: Is a General AMP Appropriate?

11The two statutory provisions that Ms. Song has breached are prescribed for the purpose of imposing a general AMP: see Ontario Regulation 408/12, section 2, Schedule 1, items 44.1 and 44.2, respectively. Provided that a monetary fine would promote one of the two legislative objectives listed in subsection 441.2(1) of the Insurance Act, a general AMP would be an appropriate response for Ms. Song’s contravention. Therefore, the second issue can be stated as follows: would a penalty promote compliance with requirements established under the Insurance Act and/or prevent Ms. Song from deriving an economic benefit from her non-compliance?

12As recognized elsewhere, there may be special circumstances in which it would be inappropriate to impose a general AMP on someone who has failed to comply with a request for information: Sengmanee v. Ontario (Superintendent Financial Services), 2015 ONFST 27 at paras. 22-29. However, in the present case, there is no evidence of any unusual or rare circumstance that militates against the imposition of a general AMP. During her testimony, the Applicant mentioned that she was caring for a young child in the fall of 2013, but she also noted that she worked during this period. Therefore, it is reasonable to assume that she was capable of checking her email messages and responding to an inquiry.

13Clearly, the Applicant did not derive any real economic benefit from her contravention. However, a general AMP would encourage both her and other licensees to fulfil their statutory obligations. In particular, to quote from paragraph 23 of the Sarai decision, licensees who become aware of the circumstances described in this decision and the reasoning set out herein “may be more likely to take steps to reduce the likelihood that they will miss an important email communication in the future, whether that be through checking their junk mail folder on a regular basis or setting their email options to always accept communications from the Superintendent or to otherwise improve the probability that email communications from the Superintendent will be received.”

14Therefore, the answer to the second issue is, “yes”, a general AMP would promote compliance with requirements established under the Insurance Act.

c. Issue 3: What is the Appropriate Amount of the Penalty?

15In determining the amount of Ms. Song’s penalty, the Tribunal must consider the five criteria listed in section 4(2) of Ontario Regulation 408/12. In addition, I cannot disregard the fact that the Superintendent himself has reduced the proposed penalty from $1,000 to $500 in light of the outcome of two recent decisions, Sotoudeh and Sarai. In these two precedents, as in the present case, there was no evidence that the agents had actually received a second opportunity to complete the Life Insurance Agent Questionnaire by registered mail; therefore, their failure to respond to the inquiry directed by the Superintendent was negligent, but neither reckless nor intentional.

16Having reviewed the evidence, I make the following findings with respect to the application of the relevant criteria to the circumstances of this case:

a. To what degree was Ms. Song’s contravention intentional, reckless or negligent? As alluded to in the previous paragraph, I find that Ms. Song’s contravention was negligent at worst. I accept her testimony that she was unaware of the request for information directed by the Superintendent, but this is because she did not personally check her email messages on a regular basis or take any steps to ensure that she became aware of any important messages that may have been misdirected to her junk mail folder. In my view, her actions during the timeframe in question, with respect to her business email account, do not meet the standard of conduct that is expected from a licensee engaged in a regulated activity, such as selling life insurance.

b. To what extent did Ms. Song’s contravention cause harm or potential harm to others? There is no evidence that Ms. Song’s contravention of the Insurance Act caused harm or potential harm to anyone. However, as noted in many precedents dealing with the Life Insurance Agent Questionnaire, a licensee’s failure to respond to an official request for information entails costs for FSCO, the regulated sectors and the public in general: see, for example, Sotoudeh, supra at para. 15; Sarai, supra at para. 28.

c. To what extent did Ms. Song try to mitigate any loss or take other remedial action? Given that Ms. Song was unware of the request for information directed by the Superintendent, she did not take any remedial action in respect of her failure to respond to the Life Insurance Agent Questionnaire. However, it is possible that if Ms. Song had received the registered letters described in paragraphs 6(l) and 6(n) of these Reasons, she would have responded to them and taken the remedial measures offered in those letters – namely, she would have provided an explanation for her failure to respond and, later, would have responded to the reopened questionnaire. Unfortunately, she was not given an opportunity to take such measures, because the letters were sent, in error, to her old residential address on file, rather than her mailing address.

d. To what extent did Ms. Song derive or reasonably might have expected to derive, directly or indirectly, any economic benefit from her contravention? In his written submissions, counsel for the Superintendent concedes that Ms. Song did not derive any economic benefit for her contravention of the Insurance Act. I agree and hereby find that Ms. Song did not derive any financial benefit from her failure to complete the Life Insurance Agent Questionnaire.

e. Has Ms. Song committed any other contraventions during the previous five years? This criterion has no application in this case. There was no suggestion that Ms. Song has, in the past, failed to comply with any other requirement under the Insurance Act or with any other financial services legislation of Ontario or of any other jurisdiction.

17Based on these findings, I agree with the modified proposal of the Superintendent and conclude that a general AMP in the amount of $500 would be proportional to all relevant circumstances. In my view, this amount is substantial enough to promote compliance with the Insurance Act, while also recognizing the fact that Ms. Song has not been found to have acted intentionally or recklessly in failing to respond to the Life Insurance Agent Questionnaire.

V. ORDER

18The Tribunal orders the Superintendent to impose an administrative monetary penalty in the amount of $500 as against Ms. Song.

Dated at Toronto, this 5th day of January, 2016.

“Denis Boivin” Denis Boivin