Below is an example and brief description of unsuitable activities. These activities must be avoided at all times. Standard Life may terminate an advisor’s contract if it is found that the advisor has engaged in unsuitable activities:
A – Criminal Behaviour While Conducting Business
Although there are many other criminal activities, the following are those criminal activities that relate specifically to the conduct of financial services business.
1. Fraud
Fraud means an intentional deception or misrepresentation which an individual knows to be false or does not believe to be true and is made knowing that it may be detrimental to the other party and that it could result in some unauthorized benefit to himself, herself, or some other person.
2. Misappropriation of client funds
Misappropriation of client funds means taking money or other property received from the client for a specific purpose and fraudulently misapplying it to another purpose.
3. Forgery
Forgery means knowingly making a false document with intent
- (a) that it should in any way be used or acted upon as genuine, to the prejudice of a person, or
- (b) that some person should be induced, by the belief that it is genuine, to do or to refrain from doing anything.
4. Money laundering
Money laundering means the process of transferring property or proceeds of any property with intent to conceal the true origin and ownership of such property and knowing that all or a part of that property was obtained or derived directly or indirectly as a result of a criminal or drug offence.
5. Bribery
Bribery means the offering a payment or other advantage to another party to induce them to act improperly, or agreeing to accept a payment or other advantage from another person as an inducement to act improperly in connection with business matters.
B – Contravention Of Regulations And Other Unsuitable Actions
1. Licensing Requirements Under the Act
Producers must have a valid Licence for every jurisdiction in which they do business. All terms and conditions attached to a Licence must be respected.
2. Privacy or Confidentiality
The privacy/confidentiality of a client must not be breached.
3. Holding Out
A producer must not intentionally mislead the consumer, through business cards, stationery or advertising, in regards to credentials or designations, or the ability to provide advice or service.
4. Conflict of Interest
Producers must disclose to a prospective buyer or client all conflicts of interests or potential conflicts of interests associated with a transaction or recommendation.
5. Tied Selling
It is prohibited to make the purchase of one Product conditional on the purchase of another Product.
6. Premium Rebating
Premium rebating occurs if a producer makes an agreement as to the premium to be paid for a policy lower than the premium set forth in the policy. In addition, a producer may not pay (or offer to pay) a rebate of the whole or part of the premium stipulated by the policy, or any consideration or thing of value intended to be in the nature of a premium rebate.
7. Replacements
- (a) Undisclosed and/or Systematic Replacements
Provincial laws require that specific procedures are followed when replacements are carried out. In and of themselves, replacements are not necessarily evidence of unsuitable conduct; however, replacements can be tolerated only when they are not to the detriment of the client. - (b) Twisting
Twisting is the unethical act of persuading a policyholder to drop a policy solely for the purpose of selling another policy without regard to possible disadvantages to the policyholder. It can also involve using the values, either through loans or through the re-direction of dividends, of one policy to purchase another. - (c) Churning
Churning occurs when a producer, exercising control over the volume and frequency of trades, abuses a customer's confidence for personal gain by initiating transactions that are excessive in view of the character of the account and the client's personal objectives. Churning is generally confined to securities and commodities, but can occur with annuity-type contracts as well.
8. Misrepresentation and Disclosure
- (a) Misleading Statements
Producers should make every attempt to ensure that, in their sales process or in advertisements, they do not make misleading statements and that information which is material to the decision-making is fully and accurately disclosed prior to a purchase being made. - (b) Illustrations
It is expected that all producers will follow the CLHIA Guidelines on the use of illustrations. Producers must present information about a product accurately, honestly, completely and in plain language. All reasonable facts necessary to enable the client to make an informed decision about insurance needs and the product being recommended should be available. Material changes must not be made to company-provided illustrations, and software must not be manipulated beyond its defined parameters to create an unreasonable expectation. - (c) Incomplete comparisons
A producer must not provide any incomplete comparison of any policy with that of another insurer with the intent to convince a client to lapse or surrender a policy.
9. Know Your Client Rule/Product-Client Suitability
Producers should make every attempt to ensure that they have made a diligent and business-like effort to analyse the client's needs, objectives and financial circumstances in order to determine the appropriateness of product recommendations to the client.
10. Misleading Statements, Omissions or Misrepresentation to the Company
The producer must provide full, complete and accurate information to the insurer. Material misrepresentation, omissions or misleading statements to the company must not be made.
11. Coercion and Undue Influence
This can be defined as taking advantage of a client if the producer knows or ought to know that the client is unable to understand the character, nature, language or effect of the transaction or proposed transaction.
12. Inducements
A producer must not make any payment or gift, or any offer to pay or give, directly or indirectly, any money or thing of value as an inducement to convince any prospective insured to purchase insurance.
13. Competence
Producers must maintain competence, through continuing education, in the performance of his/her professional duties.
14. Other
Other activities such as lack of trustworthiness, commission sharing with unlicensed individuals, unnecessary delay in delivering policies and trafficking may also be considered unsuitable activities.
*CLHIA Guideline G8 Screening Agents for Suitability and Reporting Unsuitable Agents
