FINANCIAL SERVICES TRIBUNAL

2018 ONFST 24

Decision No. IA786-2018-1

Date: 2018/12/07

IN THE MATTER OF the Insurance Act, R.S.O. 1990, c. I.8, as amended, in particular sections 392.5 and 407.1;

AND IN THE MATTER OF the Notice of Proposal to Suspend Licence dated February 9, 2018, issued by the Director, Licensing Branch by delegated authority from the Superintendent of Financial Services;

AND IN THE MATTER OF a Request for Hearing in accordance with subsection 407.1(3) of the Insurance Act.

B E T W E E N:

GERALD JOSEPH PHILIPPE AUGER

APPLICANT

and

SUPERINTENDENT OF FINANCIAL SERVICES

RESPONDENT

BEFORE:

Denis Boivin Chair of the Panel and Vice-Chair of the Tribunal

Ian McSweeney Member of the Panel and Chair of the Tribunal

Jeffrey Richardson Member of the Panel and Member of the Tribunal

WRITTEN SUBMISSIONS:

For the Applicant – No Submissions Received

For the Superintendent of Financial Services – Ariel Schneider

REASONS FOR DECISION

I. INTRODUCTION

1The Applicant in this matter is named Gerald Joseph Philippe Auger. Currently, he is licensed as a life insurance agent and accident and sickness insurance agent (“life insurance agent”) under the Insurance Act, R.S.O 1990, c. I.8. His licence is scheduled to expire on October 19, 2019.

2On February 9, 2018, a Notice of Proposal (“NOP”) was issued by the Director, Licensing Branch by delegated authority from the Superintendent of Financial Services (“Superintendent”). This NOP proposed to suspend the Applicant’s licence for a period of three (3) months on two grounds: (1) he failed to complete his required continuing education (“CE”) credits prior to the expiration of his licence for five consecutive licensing periods and (2) he made a false statement on two licensing applications with respect to his CE credits.

3On February 27, 2018, the Applicant requested a hearing before the Financial Services Tribunal (“Tribunal”) in accordance with subsection 407.1(3) of the Insurance Act. In his Request for Hearing (Form 1), Mr. Auger does not dispute or challenge the allegations made against him in the NOP. Instead, he states the following: “I would like to discuss/consider alternative discipline, if any.”

4Two pre-hearing teleconferences were held in this matter, on April 5 and June 13, 2018. During these teleconferences, it was determined that the parties agreed on all relevant facts and that the only issue, in this case, was whether a suspension of the Applicant’s licence for a period of three (3) months was an appropriate sanction. The parties were invited to make written submissions according to the schedule established at the pre-hearing with the final submissions due September 7, 2018.

5The Applicant did not file any written submissions. However, in coming to our decision, we took into account the fact that Mr. Auger proposed the following alternative sanction in his Request for Hearing (Form 1) filed on February 27th: “a financial penalty equal to 3 mths of suspension of approximately $500, to be paid over the coming year”.

6For the following reason, we conclude that the penalty proposed by the Superintendent’s delegate is appropriate and reject the alternative submitted by the Applicant.

II. issues

7In preparing their submissions, the parties were asked to address the following issues:

a. Did Mr. Auger fail to complete his CE credits by the following licence expiry dates:

i. September 4, 2007;

ii. October 8, 2009;

iii. November 16, 2011;

iv. July 4, 2015; and

v. October 19, 2017?

b. Did Mr. Auger make a material misstatement in the application for his licence by inaccurately stating that he completed his CE credits on the applications submitted on June 24, 2013 and August 21, 2015?

c. If the answers to issues (a) or (b) are yes, is the suspension of Mr. Auger’s licence appropriate under subsections 392.5(1) and 392.5(2) of the Act?

d. If the answer to issue (c) is yes, what is the appropriate length of the suspension?

III. FACTS

8In preparation for the pre-hearing teleconference held on June 13, 2018, the parties filed an Agreed Statement of Facts (“ASF”) and an Agreed Book of Documents (“ABD”). Together, these two documents contain all the evidence that is required to answer the questions raised by this proceeding.

9The ASF, in its entirety, reads as follows:

1. Gerald Joseph Philippe Auger (“Mr. Auger”) first became licensed as a Sponsored Life Insurance Agent (licence # 03079482) on September 5, 2003. His licence expired on September 4, 2005, and was reissued as a Life Insurance and A&S Insurance Agent Licence on September 5, 2005.

2. Mr. Auger’s licence expired on September 4, 2007. He submitted an application to renew his licence on October 5, 2007. Mr. Auger answered “no” to having completed his continuing education (“CE”) credits by the expiry date of his licence, and provided the following comment:

I have not been formally tracking the number of hours in training on Industry & Product Training.

3. The application was assigned to a Licensing & Registration Specialist (“LRS”) with the Licensing Compliance Unit at the Financial Services Commission of Ontario (“FSCO”). The Application was renewed on October 9, 2007. On November 15, 2007, Mr. Auger entered into a Minutes of Settlement agreement with FSCO.

4. On October 8, 2009, Mr. Auger’s licence expired. On October 26, 2009, Mr. Auger submitted an application to renew his licence. Mr. Auger answered “no” to having completed his CE credits by the expiry date of his licence, and provided the following comment:

I am currently securing the certificates and will complete any outstanding hours within a reasonable timeframe as agreed to by a FSCO representative.

5. The application was assigned to another LRS (the “Second LRS”). Mr. Auger’s licence was renewed on November 17, 2009.

6. On February 10, 2010, the Second LRS sent Mr. Auger a caution letter for CE non-compliance.

7. On November 16, 2011, Mr. Auger’s licence expired.

8. On November 19, 2012, Mr. Auger spoke with a third LRS (the “Third LRS”). Mr. Auger told the Third LRS that he has child support arrears, and asked the Third LRS whether FSCO would deny an application for licensing as a result. The Third LRS advised Mr. Auger that applications are reviewed on a case-by-case basis and that FSCO could not comment on an application before it is submitted.

9. On June 24, 2013, Mr. Auger submitted an application to renew his licence. Mr. Auger answered ‘yes’ to having completed his CE credits by the expiry date of his licence (November 16, 2011).

10. The application was assigned to the original LRS. On June 25, 2013, the original LRS requested proof of CE certificates from Mr. Auger. On July 4, 2013, Mr. Auger provided copies of his CE certificates. The credits were completed after the expiration of Mr. Auger’s licence. Mr. Auger’s licence was renewed on July 5, 2013.

11. On July 4, 2015, Mr. Auger’s licence expired. On August 21, 2015, Mr. Auger applied for renewal of his licence. Mr. Auger answered “yes” to having completed his CE credits by the expiry date of his licence. The application was assigned to a fourth LRS (the “Fourth LRS”).

12. On August 24, 2015, the Fourth LRS wrote to Mr. Auger requesting proof of his CE certificates. On August 27, 2015, proof was received of eight CE credits. The Fourth LRS sent an email requesting proof of the remaining twenty-two CE credits. On or about October 5, 2015, proof was received of twenty-five total CE credits. The Fourth LRS sent Mr. Auger a request for the remaining five CE credits by October 16, failing which the application would be escalated to be refused. On October 20, 2015, proof was received of the outstanding CE credits, completed as of October 20, 2015. On October 20, 2015, the Fourth LRS issued Mr. Auger’s licence and sent him a letter reminding him of his CE obligations.

13. On October 19, 2017, Mr. Auger’s licence expired. On October 26, 2017, Mr. Auger applied for renewal of his licence. Mr. Auger answered ‘no’ to having completed his CE credits by the expiry date of his licence, and provided the following comment:

I am unable to produce the certificates for 22 CE hours, notwithstanding I will have completed them by Oct 26th, 2017. I have however conducted a minimum 40 distinct training Hours for Advisors on important needs analysis and field underwriting principles for Life & LB products, as well as appropriate contact and approach principles and strategies to engage prospects into a client relationship, as well as a detailed overview of the Marketplace.

14. The application was assigned to the original LRS. On November 1, 2017, the original LRS wrote to Mr. Auger, requesting, inter alia, proof of his CE certificates.

15. On November 3, 2017, Mr. Auger responded to the original LRS, stating that his CE credits were completed late because he thought his licence was expiring on October 29 instead of October 19. Mr. Auger provided copies of CE certificates, completed as of October 31, 2017.

16. On November 6, 2017, Mr. Auger’s licence was issued.

17. Mr. Auger’s current licence is scheduled to expire on October 19, 2019.

18. To date, Mr. Auger has failed to complete his required CE credits prior to the expiration of his licence, for five consecutive licensing periods.

19. Mr. Auger has twice falsely stated in his licensing application that he completed his CE credits before the licence expiry date.

IV. statutory framework

10The Superintendent’s authority to suspend the licence of an insurance agent is found in section 392.5 of the Insurance Act. Pursuant to subsection 392.5(1), the Superintendent may suspend the licence of an agent if this person has failed to comply with the Insurance Act, the regulations or a condition of the licence. In the present case, the NOP alleges that Mr. Auger has contravened section 14 of Ontario Regulation 347/04. According to this provision, “[a]n individual who holds a life insurance licence shall complete at least 30 hours every two years of continuing education acceptable to the Superintendent in respect of life insurance.”

11In addition, subsection 392.5(2) of the Insurance Act states that the Superintendent may suspend an insurance agent’s licence if any prescribed grounds for revoking or suspending a licence, or for refusing to issue a licence, exist. In this case, the NOP alleges that Mr. Auger has made “a material misstatement or omission” in his licence application. This represents one of the prescribed grounds for revoking or suspending a licence: see subsection 8(b) of Ontario Regulation 347/04.

12Lastly, in accordance with subsection 407.1(4) of the Insurance Act, the Tribunal has the authority to direct the Superintendent to carry out the proposal with or without changes or substitute our opinion for that of the Superintendent. We may also impose such conditions as we consider appropriate in the circumstances.

V. ANALYIS

A. Issues (a) and (b)

13On the basis of the evidence jointly submitted by the parties, the answer to issue (a) is “yes”. The Applicant has failed to complete his required CE credits prior to the expiration of his licence, for five consecutive licensing periods: (1) the period ending September 4, 2007; (2) the period ending October 8, 2009; (3) the period ending November 16, 2011; (4) the period ending July 4, 2015; and (5) the period ending October 19, 2017.

14Likewise, the evidence establishes that Mr. Auger twice falsely stated in his licensing application that he completed his CE credits before the licence expiry date. This occurred on the applications submitted on June 24, 2013 and August 21, 2015. Thus, the answer to issue (b) is also “yes”.

B. Issues (c) and (d)

15Life insurance agents are professionals who work in the financial services industry. They have voluntarily chosen to engage in a business that requires a licence, and which involves regulation. They agree in advance to adhere to strict standards of conduct, of which they are presumed to be aware. The Tribunal has made statements to this effect in numerous cases involving the requirement to maintain errors and omissions (“E&O”) insurance, but they are equally applicable in the context of this case. Continuing education is an important requirement that helps ensure that life insurance agents have a sufficient and updated knowledge of the industry and the products available to the public. Like the E&O requirement, the CE requirement plays an important role in consumer protection.

16The duty of life insurance agents to complete at least 30 hours every two years of continuing education acceptable to the Superintendent in respect of life insurance is not a new requirement. It came into effect more than twenty years ago, on February 1, 1995: see Ontario Regulation 663, s. 18, as amended by Ontario Regulation 760/94, s. 13. In other words, this requirement became part of the regulatory framework in which life insurance agents must operate eight years before Mr. Auger first became licensed.

17By failing to complete the required 30 hours of continuing education before the expiry of his licence for five consecutive licensing periods, Mr. Auger has contravened section 14 of Ontario Regulation 347/04 five consecutive times. In the context of this proceeding, he has not provided any reasonable explanation or excuse for his repeated omissions; instead, he has only expressed a preference for a monetary penalty, in lieu of a suspension.

18Subsection 392.5(1) of the Insurance Act allows the Superintendent to suspend the licence of an agent if this person has failed to comply with the Insurance Act, the regulations or a condition of the licence. Not all contraventions are equal; context is important in determining whether a suspension is a proportional and appropriate response with respect to any given contravention or series of contraventions. In this case, we are dealing with a life insurance professional who has repeatedly failed to take the CE requirement seriously. Mr. Auger’s conduct has shown a reckless disregard for a key component of the regulatory framework in which he chose to operate. This alone would, in our view, be sufficient to justify a suspension.

19But there is more. By answering “yes” to having completed his CE credits by the expiry date of his licence, in the applications submitted on June 24, 2013 and August 21, 2015, the Applicant made two false statements in the context of the renewal process for his life insurance agent’s licence. Subsection 447(2)(a) of the Insurance Act states that every person is guilty of an offence who “directly or indirectly furnishes false, misleading or incomplete information to the Commission … whether the information is required under the Act or is volunteered.” In the present case, we find that Mr. Auger breached the prohibition created by subsection 447(2)(a) on two occasions, and that his actions in this respect provide an independent contravention for the purposes of subsection 392.5(1). However, the NOP was not framed in this manner. Instead, the NOP invokes subsection 8(b) of Ontario Regulation 347/04, one of the “prescribed grounds” for suspending or revoking a licence within the meaning of subsection 392.5(2) of the Insurance Act. According to subsection 8(b), the Superintendent is authorized to suspend a licence if it appears that the licensee “has made a material misstatement or omission in the application for the licence”. Clearly, in this case, the two answers given by Mr. Auger were “misstatements” and they relate to material information required to assess his renewal application. Thus, regardless of whether we characterize the responses given by Mr. Auger as a contravention of subsection 447(2)(a) or constitutes one of the prescribed grounds under subsection 8(b), his false statements provide additional and independent support for the sanction proposed by the Superintendent’s delegate.

20In Thind v. Ontario (Superintendent Financial Services), 2015 ONFST 37 at para. 14, the Tribunal made the following observations with respect to the licensing process administered by the Financial Services Commission of Ontario (“FSCO”):

[T]he licensing process established by Part XIV of the Insurance Act depends on information. FSCO does not have the resources to interview or investigate each person who applies for a licence or renewal under this Part. Instead, FSCO must rely on the information applicants provide on their electronic forms in order to make its determinations with respect to their suitability. When information is false, misleading or inaccurate, this jeopardizes the ability of the regulator to perform the gate-keeping and supervisory functions inherent in Part XIV of the Insurance Act. Likewise, furnishing false, misleading or inaccurate information may improperly result in economic benefit or the expectation thereof for the applicant, because this person’s licence might not otherwise have been issued or renewed, or may have been subject to conditions, had the information provided been true, correct and complete.

21To be clear, in the present case, counsel for the Superintendent has not suggested that Mr. Auger is unsuitable to hold a life insurance agent’s licence or that the renewal applications submitted on June 24, 2013 and August 21, 2015 would have been denied, but for the material misstatements made therein. Nevertheless, his actions are serious and must be dealt with seriously. Indeed, providing false information on a licence application undermines the Superintendent’s ability to regulate the insurance industry and has the potential of putting the public at risk, especially when the information in question relates to a statutory requirement for the licence, such as the E&O and CE requirements.

22To date, the Tribunal has confirmed in three cases that licence suspension is an appropriate sanction for failing to complete CE credits: see Fraser v. Ontario (Superintendent Financial Services), 1999 ONFST 4 (Fraser) (one-week suspension); Rendall v Ontario (Superintendent Financial Services), 2000 ONFST 1 (Rendall) (sixty-day suspension); and Williams v. Ontario (Superintendent Financial Services), 2009 ONFST 12 (Williams) (120-day suspension or until the agent submits proof of having completed the missing requirements, whichever comes first). Naturally, each case is unique and must be decided on the basis of its own facts, as established by the evidence adduced during the hearing. However, in determining whether a suspension is a proportional response, in the matter at hand, our case-law provides insight and guidance. In addition, we are guided by the fact that Mr. Auger’s conduct is not an isolated incident – he failed to comply in multiple licensing periods.

23We agree with counsel for the Superintendent; the matter at hand is most analogous to the Rendall case. In that case, the Tribunal ordered a sixty-day suspension for a failure to complete CE credits over a four-year licensing period as well as furnishing false information as to the completion of those requirements on the agent’s licence renewal application. The Rendall case also involved a failure to facilitate an examination, a contravention that is not alleged in the present case. Still, the conduct of Mr. Auger is more severe than the conduct involved in Rendall. In this case, we are dealing with Mr. Auger’s failure to comply with the CE requirement during five licensing periods, spanning over a decade. In addition, Mr. Auger furnished false information about completing his CE credits on two separate applications. In light of these circumstances, the ninety-day suspension proposed by the Superintendent’s delegate is more than reasonable.

24We are mindful of the fact that Mr. Auger has proposed an alternative penalty, namely, an administrative monetary penalty or “AMP” of approximately $500. In some cases, an AMP will provide a measured response to a failure to comply with the CE requirement and/or a false statement made on a licence application. However, in light of the repeated and reckless nature of Mr. Auger’s contraventions, something more is required in the case at hand. The importance of the CE requirement and of trustfulness in the licensing renewal process must be brought home to Mr. Auger. In our view, this can only be accomplished with a suspension.

VI. order

25For the foregoing reasons, the Tribunal orders the Superintendent to suspend the life insurance agent’s licence of the Applicant, Mr. Auger, for a period of three (3) months.

Dated at Toronto, this 7th day of December, 2018.

“Denis Boivin” Denis Boivin

“Ian McSweeney” Ian McSweeney

“Jeffrey Richardson” Jeffrey Richardson