FINANCIAL SERVICES TRIBUNAL
IN THE MATTER OF the Insurance Act, R.S.O. 1990, c. I.8, as amended (the “Act”), in particular sections 392.4 and 407.1;
AND IN THE MATTER OF the Notice of Proposal to Refuse to Renew Licence dated October 10, 2017, issued by the Director, Licensing Branch by delegated authority from the Superintendent of Financial Services;
AND IN THE MATTER OF a Hearing in accordance with subsection 407.1(3) of the Act.
B E T W E E N:
IKECHUKWU DELE NWAEZE
APPLICANT
and
SUPERINTENDENT OF FINANCIAL SERVICES
RESPONDENT
BEFORE:
Julie Maciura Chair of the Panel and Member of the Tribunal
Mohammad Faisal Siddiqi Member of the Panel and Member of the Tribunal
Craig Brown Member of the Panel and Member of the Tribunal
APPEARANCES:
For the Applicant – Mr. Ikechukwu Dele Nwaeze
For the Superintendent of Financial Services – Ms. Deborah MacPhail
REASONS FOR DECISION
I. INTRODUCTION
1Ikechukwu Dele Nwaeze (the “Applicant”) was licensed as an insurance agent under the Insurance Act, R.S.O. 1990, c. I.8, as amended (the “Act”) from September 29, 2014 to September 28, 2016.
2On October 10, 2017, the Director, Licensing Branch by delegated authority from the Superintendent of Financial Services (“Superintendent”), issued a Notice of Proposal to Refuse to Renew Licence (“NOP”) to the Applicant. In this NOP, the Superintendent proposes to refuse to renew the Applicant’s licence on the grounds, broadly stated, that the Applicant submitted five false continuing education certificates in February 2017 with his application to renew his licence and as such: has made a material misstatement in his application for licence; has been guilty of a fraudulent act or practice; has demonstrated incompetence or untrustworthiness to transact the insurance agency business for which the license has been granted; and has violated a condition of his licence by not having completed the required 30 hours of continuing education.
3On October 30, 2017, the Applicant requested a hearing before the Financial Services Tribunal of Ontario (the “Tribunal”). A hearing took place before a panel of the Tribunal (the “Panel”) on April 30, 2018.
4Having reviewed the evidence tendered during the hearing and the submissions of both parties, the Panel have come to the following conclusions. First, on a balance of probabilities based on clear, cogent and convincing evidence, we find that the Applicant has contravened the requirement to have completed 30 hours of continuing education. Second, we find that his license should not be renewed, given his actions with respect to his 2017 licence application and the continuing education certificates. Third, in light of the circumstances of the case, the sanction proposed by the Superintendent is proportional to the risk created by the actions of the Applicant.
5On the basis of these findings, we order the Superintendent to refuse to renew the licence of the Applicant.
6Our reasons for issuing this order follow.
II. issues
7The parties agreed that the issues in this hearing were as follows:
a. Is the Applicant suitable to be licensed as an insurance agent pursuant to subsection 392.4(1) of the Act and subsection 7(4) and section 8 of Ontario Regulation 347/04?
b. Based on the answer to issue (a), what order should the Superintendent be directed to make?
III. FACTS
8The Superintendent and the Applicant had filed and jointly submitted a short Agreed Statement of Facts (“ASF”), as well as an Agreed Book of Documents (“ABD”) containing the Applicant’s 2017 licence renewal application and copies of the five continuing education certificates in issue. The Panel accepts these and has incorporated their contents within our findings of fact. The Applicant also submitted into evidence certain continuing education certificates relating to courses he took in 2018.
9The Applicant confirmed that he intended to represent himself throughout the proceedings. During the earlier prehearing conference in this matter, the Chair encouraged him to obtain legal representation but the Applicant chose to continue to represent himself.
10The Applicant testified on his own behalf but did not call any other witnesses.
11The Superintendent called two witnesses – Mr. Michael Rutledge and Mr. Roy Steinebach. The Superintendent’s witnesses and the Applicant all testified under affirmation and were subject to cross-examination.
12The Tribunal accepts the facts as agreed to by the parties in the filed ASF as follows:
a. The Applicant was licensed as an insurance agent under the Act from September 29, 2014 to September 28, 2016. His licence number was 14139727.
b. On February 7, 2017, Amy Wu of Combined Insurance filed an application with the Superintendent to renew the Applicant’s licence.
c. As part of the application, five Continuing Education Certificates bearing the Applicant’s name were submitted, as follows:
i. A certificate dated September 10, 2016 issued by Michael J. Rutledge (“Mr. Rutledge) for 6 credit hours for a course called “Financial Planning for Agents”;
ii. A certificate dated September 11, 2016 issued by Mr. Rutledge for 6 credit hours for a course called “Life Insurance for Estate Planning, Wills, Trust Funds – Agent’s Role”;
iii. A certificate dated September 17, 2016 issued by Mr. Rutledge for 6 credit hours for a course called “Universal Life Insurance Policies”;
iv. A certificate dated September 24, 2016 issued by Mr. Rutledge for 6 credit hours for a course called “Consumer Needs Analysis”;
v. A certificate dated October 10, 2016 issued by Mr. Rutledge for 6 credit hours for a course called “Segregated Funds Policies”.
d. The Applicant paid Mr. Rutledge $100 for the above five certificates.
13The Tribunal also finds the following facts based on the testimony of the witnesses given at the hearing:
a. The Applicant met with Mr. Rutledge only one time.
b. Mr. Rutledge gave the Applicant the five continuing education certificates at their one meeting.
c. Mr. Rutledge did not give the Applicant any materials to allow the Applicant to carry out self-study.
d. As of September 2016 the Applicant had not completed 30 hours of continuing education.
14Mr. Rutledge testified that he was briefly licensed as an insurance agent in 1981 with AllState. He was a legitimate continuing education teacher from approximately 1996 to 2000. It is not entirely clear what Mr. Rutledge did between 2000 and 2012. After 2012, Mr. Rutledge was working more than 50 hours a week in the food services industry and he had no intention of teaching insurance topics to students and insurance agents because he had no time. However, if someone whose licence renewal was imminent and who did not have enough continuing education credits called him or was referred to him by another agent who knew him, then Mr. Rutledge would help them.
15Mr. Rutledge testified that he did not keep records of students and agents to whom he gave study materials. He said, however, that he only ever gave study materials to one student (leaving aside his legitimate teaching back in the late 1990s).
16Mr. Rutledge testified that he met the Applicant only one time. Mr. Rutledge recalls that he was given the Applicant’s name by Mr. Domenic Vesia, who was known to Mr. Rutledge and was someone with whom the Applicant had previously worked and was again planning to work. As a result of his discussion with Mr. Vesia, Mr. Rutledge knew that the Applicant’s licence renewal was imminent.
17Mr. Rutledge believes that he texted the Applicant in advance of their meeting so that Mr. Rutledge had the correct spelling of the Applicant’s name for the certificates. He testified that they met only one time on a Sunday afternoon (about 1:30 p.m. – he knew the Applicant had come from church) in September 2016 near the Pickle Barrel restaurant in Yorkdale Mall. During this meeting Mr. Rutledge gave the Applicant the five continuing education certificates (copies of which are found in the ABD) in exchange for $100. Mr. Rutledge says he also gave the Applicant a receipt for the $100, for tax purposes.
18Mr. Rutledge testified that the Applicant contacted him some time after their transaction (he believes it was January 2017) to say that the certificates were not being accepted. When this happened, Mr. Rutledge testified that he assumed that other agents had been interviewed by the Financial Services Commission of Ontario (FSCO) and so he contacted FSCO and admitted that he had provided continuing education certificates to some insurance agents without actually having taught them the courses.
19When asked how many people he had done this for, Mr. Rutledge testified that he estimates that it was 16 in total over a four year period.
20Mr. Rutledge admits that he stopped returning the Applicant’s phone calls at some point because by then Mr. Rutledge had been interviewed by Mr. Steinebach (an investigator for FSCO), who told him not to engage with the Applicant.
21When asked why he did not go back (after FSCO became concerned about the validity of the certificates) and give students books and practice videos so that they could in fact study material related to the certificates, Mr. Rutledge says that he realized that there would be too many stories and lies to keep straight if he did that.
22When pressed by the Applicant in cross-examination, Mr. Rutledge was steadfast in his assertion that there was only ever one meeting between them.
23The Panel heard evidence from Mr. Roy Steinebach, who has been an investigator with FSCO since February 2017. Prior to his current role with FSCO, Mr. Steinebach was a police officer with the RCMP. Mr. Steinebach testified that Mr. Rutledge sent a letter to FSCO at the end of January 2017 in which he described in general terms his role in selling false continuing education certificates to insurance agents.
24Mr. Steinebach spoke to Mr. Rutledge on or about April 24, 2017 and after interviewing him he understood that Mr. Rutledge had been a long-time (legitimate) provider of continuing education but that subsequent to 2012 or 2013 Mr. Rutledge had provided continuing education certificates to insurance agents, including the Applicant, without the agents doing any work to earn the credits.
25Mr. Steinebach testified that he also interviewed the Applicant who told Mr. Steinebach that he got assignments and study material from Mr. Rutledge and did self-study but said he did not get face-to-face instruction from Mr. Rutledge. The Applicant did not give Mr. Steinebach copies (either hard copies or electronic copies) of any of the material he claimed that Mr. Rutledge gave him.
26The Applicant testified that he met Mr. Rutledge five times, starting in September 2016. He initially said that he met Mr. Rutledge every second Sunday but then amended that during his testimony to say he met Mr. Rutledge every Sunday for five weeks in a row. The Applicant claims that after each visit with Mr. Rutledge, he (the Applicant) went away and did work on material that Mr. Rutledge had given him relating to each course. The Applicant says some of the courses took six or seven hours of self-study to complete. The Applicant did not explain why two of the certificates were dated only one day apart.
27When asked if he still had copies of the material that he claimed Mr. Rutledge had given him, the Applicant said that no, he gave it all back to Mr. Rutledge.
28The certificates on their face are not consistent with the claim that the Applicant met Mr. Rutledge once every five weeks, as one of them is dated September 10, 2016 and another is dated September 11, 2016. Additionally, the Applicant’s claim that he met Mr. Rutledge five times is inconsistent with the Applicant’s claim that he did not recognize Mr. Rutledge when he came into the hearing room on April 30, 2018. If the Applicant had indeed met Mr. Rutledge once every week for five weeks only a year and a half earlier, it would stand to reason that the Applicant would have easily recognized Mr. Rutledge at the hearing.
29The Applicant claims to have submitted to FSCO by fax an application for renewal of his licence in 2016. He said he did not keep a copy of that application. Mr. Steinebach testified that there is no record of any application being submitted in 2016 by the Applicant. The Panel finds it extremely unlikely that there was any application sent other than the one sent in January 2017, but in any event, it would be irrelevant to the issues before the Panel because even if the Applicant had submitted his renewal application before the expiry of his licence he still would have been required to have completed 30 hours of continuing education and he admitted during his testimony that he had not done that by September 2016.
30Mr. Rutledge testified that it would put him in a better light to agree with the Applicant’s suggestion that he gave the Applicant self-study work to do (which might have somewhat “validated” the certificates even if the work was done after the fact), but Mr. Rutledge says that is not true. Mr. Rutledge says there was only ever one student to whom he gave “self-study” work and that this was a woman who wanted the videos associated with the courses. Other than that one time, Mr. Rutledge never gave anyone self-study material and this was because he was working full time and was too busy to teach students one-on-one. And he also testified that it also wasn’t worth his while financially (i.e., he couldn’t charge enough money teaching one student at a time to make it worth his time).
31When asked why he would sell continuing education certificates to students without having taught them the course, Mr. Rutledge said that he was being empathetic and was trying to help out agents whose renewal was “imminent”. He says that he knows his actions were stupid.
32Mr. Rutledge did not have a particularly good explanation as to why he would sell continuing education certificates to students without teaching them the coursework. The Panel found that Mr. Rutledge tried somewhat to downplay the seriousness of what he had done (for example, he described calling FSCO to disclose “what happened” rather than “what I had done”), but at no time did he waiver from his testimony that he only met the Applicant once, that he did not give him any self-study material, and that he gave the Applicant five continuing education certificates in exchange for $100.
33The Panel prefers the evidence of Mr. Rutledge over that of the Applicant. Mr. Rutledge admitted to engaging in conduct that puts him in a very bad light and in fact exposes him to potential liability or action by FSCO. It defies logic that someone would admit to something, if it was not true, that could jeopardize their legal position and certainly would jeopardize their reputation. The Applicant on the other hand, has a vested interest in putting a positive spin on his actions so as to save both is reputation and his ability to keep his insurance licence. The Panel accepts the evidence of Mr. Rutledge and it rejects the evidence of the Applicant where it is contradicted by Mr. Rutledge.
34The Panel finds that it defies belief that Mr. Rutledge would have met the Applicant at Yorkdale Shopping Mall, given him homework and a test to do, marked the test, and then repeated this entire process a total of five times over the course of five weeks, all for a total of $100.
35During his testimony the Applicant testified that each time he met with Mr. Rutledge, he (the Applicant) kept asking himself why Mr. Rutledge was not thinking that “this was a set-up”, by FSCO. The Applicant asked Mr. Rutledge that question as well during his cross-examination of Mr. Rutledge. The Panel finds that this itself demonstrates that the Applicant knew that what he was doing was wrong, otherwise why would Mr. Rutledge have to worry about being “set-up”?
36The Panel finds on a balance of probabilities that Mr. Rutledge sold the Applicant five fraudulent continuing education certificates, that the Applicant did not complete any training or work to earn those certificates, and that the Applicant submitted those fraudulent certificates to FSCO with his 2017 licence renewal application.
IV. STATUTORY FRAMEWORK
37The relevant statutory framework is as follows.
a. Section 392.4(1) provides that: “The Superintendent shall issue a licence to act as an insurance agent in Ontario to an applicant who applies in accordance with section 392.3 and who satisfies the prescribed requirements for the licence unless the Superintendent believes, on reasonable grounds, that the applicant is not suitable to be licensed having regard to such circumstances as may be prescribed and such other matters as the Superintendent considers appropriate.”
b. Subsection 7(4) of Ontario Regulation 347/04 provides that: “An application for renewal of a licence may be refused on any grounds on which the Superintendent is authorized to suspend or revoke the licence.”
c. Section 8 of Ontario Regulation 347/04 provides that: “The Superintendent may suspend or revoke a licence on any grounds on which an application for a licence may be refused or if, after due investigation and hearing, it appears to the Superintendent that the licensee,
a. Has violated any provision of the licence in the licensee’s operation as an agent;
b. Has made a material misstatement or omission in the application for the licence;
c. Has been guilty of a fraudulent act or practice; or
d. Has demonstrated incompetence or untrustworthiness to transact the insurance agency business for which the license has been granted.”
d. Section 14 of Ontario Regulation 347/04 provides that: “An individual who holds a life insurance licence is required to complete at least 30 hours every two years of continuing education that is acceptable to the Superintendent in respect of life insurance.”
V. analysis
Issue A: Is the Applicant suitable to be licensed as an insurance agent pursuant to subsection 392.4(1) of the Act and subsection 7(4) and section 8 of Ontario Regulation 347/04?
38We find that the Applicant is not suitable to be licensed as an insurance agent pursuant to subsection 392.4(1) and subsection 7(4) and section 8 of Ontario Regulation 347/04 for the following reasons.
Violated Any Provision of the Licence
39We find that the Applicant did not complete 30 hours of acceptable continuing education every two years as is required by section 14 of Ontario Regulation 347/04. This is a condition of every insurance agent licence. The Applicant was licensed from September 29, 2014 to September 28, 2016 and he agreed on cross-examination that he had not completed 30 hours of continuing education by September 2016. The Applicant stated that, rather, he had completed 8 hours of continuing education by September 2016, but he did not provide any proof at the hearing of having done even that amount.
40This failure itself provides grounds to refuse to renew his application under section 8(a) of Ontario Regulation 347/04, but of course the failure to complete the 30 hours of continuing education is what led to the other conduct at issue here.
Material Misstatement or Omission in the Application/Fraudulent Act or Practice
41We find that the Applicant did make a material misstatement in his 2017 application for renewal of his licence when he submitted, or cause to be submitted on his behalf, the five continuing education certificates that Mr. Rutledge sold to him for $100 when he had not actually completed any training or education prior to obtaining those certificates.
42While the Applicant suggests that he was misled by Mr. Vesia into believing that it was acceptable to obtain certificates from Mr. Rutledge after carrying out some self-study of material each week, we find as a fact that the Applicant did not actually carry out self-study because Mr. Rutledge did not give him any material and he also did not meet Mr. Rutledge more than once. Since the Applicant received all five certificates at the same time (even though they have different dates on them), it is irrelevant whether he actually did carry out any self-study after the fact, because the certificates themselves were fraudulent.
43It was the Applicant’s obligation to be familiar with the requirements for 30 hours of continuing education. He testified that he had been an accountant for 20 years prior to becoming licensed as an insurance agent. He also held his insurance agent licence for two full years. As such, the Panel finds it surprising that he would not have been aware of his regulatory obligations, including the continuing education requirements. We do not find credible the Applicant’s explanation that he was advised by an unnamed colleague either at Financial Horizons or at Combined Insurance that he did not have to complete 30 hours of continuing education if he renewed his licence before it expired. No witnesses testified on the Applicant’s behalf that they told him this, and even if they had, the information would have been incorrect.
44The Applicant repeatedly testified that he is not the type of person to cut corners and that he was fully capable of carrying out the required continuing education, if only he had known he was required to do it. The Panel, however, finds that the Applicant, for whatever reason, found himself in a position of not having completed his 30 hours of continuing education and rather than taking steps to complete the education, or alternatively, being honest about his failure to complete the requirement, he chose a dishonest route to try to remedy his problem.
45We find that the submission of the fraudulent certificates amounts to a material misstatement in the Applicant’s 2017 application and as such, is grounds to refuse to renew his licence under paragraphs 8(b) and (c) of Ontario Regulation 347/04.
Incompetence or Untrustworthiness to Transact Insurance Business
46The Tribunal finds that the Applicant’s submission of five fraudulent continuing education certificates with his 2017 renewal application demonstrates untrustworthiness to transact the business for which his licence was granted.
47The Applicant’s submission of the five fraudulent certificates demonstrates a willingness to act with dishonesty and a lack of integrity. The subject of the dishonesty was also a fundamental requirement of the licence itself – the dishonesty was in relation to whether the Applicant had fulfilled a mandatory condition of his licence, i.e., the completion of 30 hours of continuing education. We find that this action also provides grounds to refuse to renew his licence under section 8(d) of Ontario Regulation 347/04.
48We are not convinced that the failure to complete the continuing education hours automatically constitutes incompetence. While there is no guarantee that the Applicant would have the requisite knowledge to competently carry on the insurance business because of his failure to carry out the continuing education, it does not necessarily follow that this necessarily demonstrates incompetence.
Issue B: Based on the answer to issue (a), what order should the Superintendent be directed to make?
49In considering what order the Superintendent should be directed to make, we take guidance from Henderson v Ontario (Superintendent Financial Services) 2008 ONFST 7, which held that the overriding concerns on the issue of what sanction to impose against an applicant or licensee are to balance the need to protect the public with the financial repercussions to that individual. While Henderson involved a mortgage broker licence, the principles of that case are also relevant to insurance agent licences.
50In Henderson the Tribunal described nine factors that should be considered. We have set out the seven1 factors below which are relevant here and how they apply in this case.
51The time that has elapsed since the conduct has occurred: The conduct in issue in this case is relatively recent, as the relevant application for renewal was submitted in February 2017.
52The prolonged or repetitive nature of the conduct: The conduct in question relates to only one incident of dishonesty, but the Applicant submitted five fraudulent certificates which related to 30 hours of continuing education. The Applicant claimed to have completed eight hours of continuing education by September 2016 and yet he did not submit with his renewal application any legitimate certificate relating to the eight hours of education he claims that he had completed.
53The advertent or inadvertent nature of the conduct: The Panel finds as a fact that the Applicant met with Mr. Rutledge only one time, and as such, it would have been clear to any reasonable person that submitting to one’s regulator five certificates (all with different dates on them) that were obtained on a Sunday afternoon in a shopping mall from a complete stranger, in exchange for $100, and without receiving any training from the person selling you the certificates, was not ethical or honest behaviour. If the Applicant did not knowingly participate in this fraudulent activity then he was, at best, wilfully blind to it.
54The extent to which the conduct can be taken to call into question the integrity, honesty, or law abiding nature of the individual: The Applicant’s conduct is directly related to his integrity and honesty. His conduct demonstrates that he is prepared to misrepresent facts and mislead the Superintendent about a fundamental condition of his licence.
55The closeness of the conduct to the context of activities in which the individual would be engaged as an insurance agent: The Tribunal finds that the conduct is closely related to the activities in which the Applicant would be engaged as an insurance agent, because the requirement to complete the continuing education is a fundamental condition of his licence and is intended to ensure that licensees remain competent, current and aware of changes in the industry. As well, the willingness to provide false information to the Superintendent makes it difficult to ensure that the Applicant will not engage in similar behaviour with clients or colleagues. The public cannot be protected if the Superintendent cannot even rely on licensees and applicants to be honest with the Superintendent himself.
56Any unusual or severe pressure the individual was under at the time of the conduct that would explain the conduct but is unlikely to reoccur: There is no evidence of any unusual or severe pressure on the Applicant during the relevant time period. In fact, the applicant has testified that it was certainly well within his ability to carry out 30 hours of continuing education within the two year period, as he claims to have studied for one month straight when he had to write the LLQP (Life License Qualification Program exam) and was the only person in his sitting to pass it. As such, he was fully capable of doing the 30 hours of continuing education.
57Any consistent and prolonged pattern of reformed or redeeming behaviour on the part of the individual since the conduct occurred: The conduct only occurred in February 2017 and so there has not been a long period of time between the submission of the fraudulent certificates and the hearing. As well, at the hearing the Applicant took very little responsibility for his actions, described himself as a victim, and blamed both Mr. Vesia and Mr. Rutledge for misleading him and taking advantage of him. The Applicant did not file any letters of reference on his behalf or call any character witnesses. While he did submit continuing education certificates for training he undertook in 2018 that does not undo the conduct in which he engaged in 2016 and 2017.
58We conclude from this analysis that there is clear, cogent and convincing evidence that the Applicant has violated a provision of his licence, has made a material misstatement in an application for the licence, has been guilty of a fraudulent act, and has demonstrated untrustworthiness to transact the insurance agency business for which the license has been granted. The Superintendent has satisfied its burden of proving, on a balance of probabilities, that the Applicant’s licence should not be renewed, having regard to the circumstances prescribed in subsection 7(4) and section 8 of Ontario Regulation 347/04.
59In applying the licensing provisions of the Act and regulation, we are mindful of the fact that the Act is intended to protect the public interest. This public interest purpose is implicit in the Act and the enforcement provisions therein, including the fact that the Superintendent is given responsibility for supervising the insurance industry. The statutory purposes of the Financial Services Commission, of which the Superintendent is the chief executive officer, include providing “regulatory services that protect the public interest and enhance public confidence in the regulated sectors” (section 3(a) of the Financial Services Commission of Ontario Act, 1997).
60At the same time, we must keep in mind that the refusal to renew an insurance agent licence can have serious consequences for an Applicant as it will preclude that individual from earning a living in his or her chosen line of work. Given these serious consequences, the quality of evidence required to meet the burden of proof to support disciplinary action against an Applicant should be clear, cogent and convincing and we find that it is in this case.
61While the Notice of Proposal also relies, as a ground for refusing to renew the licence, on the fact that submitting false or misleading information to the Financial Services Commission of Ontario constitutes an offence under the Insurance Act pursuant to clause 447(2)(a), and that by submitting the certificates the Applicant thus committed an offence under the Act, the Superintendent did not make any oral or written submissions with regard to that ground and so we do not address it here.
VI. ORDER
62There was no evidence presented that would indicate that the public interest would be adequately protected in this case if an insurance agent licence were to be issued to the Applicant with restrictive conditions attached. We, therefore, order the Superintendent to refuse to renew the insurance agent license of the Applicant.
Dated at Toronto, this 17th day of May, 2018.
“Julie Maciura” Julie Maciura
“Mohammad Faisal Siddiqi” Mohammad Faisal Siddiqi
“Craig Brown” Craig Brown