Enforcement order

IN THE MATTER OF the Insurance Act, R.S.O. 1990, c.I.8, as amended (the “Act”), in particular sections 441, 441.2, and 441.3;

AND IN THE MATTER OF Sobenna Green, Jermaine Scott, redacted, and Pinyatas Lounge Inc.

NOTICE OF PROPOSAL TO MAKE COMPLIANCE ORDERS and NOTICE OF PROPOSAL TO IMPOSE ADMINISTRATIVE PENALTIES

TO:
Sobenna Green

AND TO:
Jermaine Scott

AND TO:
redacted

AND TO:
Pinyatas Lounge Inc.
c/o Sobenna Green
2550 Finch Avenue West, Suite 72120 Toronto, ON M9M 2G3

TAKE NOTICE THAT pursuant to section 441 of the Act, and by delegated authority from the Chief Executive Officer of the Financial Services Regulatory Authority of Ontario (the “Chief Executive Officer”), the Director, Litigation and Enforcement, (the “Director”) has made a Report, attached as Schedule “A,” and is proposing to order:

Sobenna Green to:
1. Cease acting as an insurance agent, including the advertising, soliciting, offering, and sale of automobile insurance;
2. Cease charging a premium allowance or fee other than as stipulated in a contract of insurance; and
3. Cease making false or misleading statements or representations to an insurer.

Jermaine Scott to:
1. Cease acting as an insurance agent, including the advertising, soliciting, offering, and sale of automobile insurance;
2. Cease charging a premium allowance or fee other than as stipulated in a contract of insurance; and
3. Cease making false or misleading statements or representations to an insurer;

redacted; and

Pinyatas Lounge Inc. to cease charging a premium allowance or fee other than as stipulated in a contract of insurance.

AND TAKE NOTICE THAT pursuant to section 441.3 of the Act, and for the reasons set out in Schedule “B,” the Director by delegated authority from the Chief Executive Officer, is proposing to impose the following administrative penalties:

Four administrative penalties in the total amount of $50,000 on Sobenna Green as follows:
1. $20,000 for acting as an agent without being licensed, contrary to subsection 2(1) of O. Reg. 347/04;
2. $20,000 for charging unstipulated fees, contrary to subsection 1(8) of O. Reg. 7/00;
3. $5,000 for making false or misleading statements or representations to an insurer, contrary to paragraph 447(2)(a.1) of the Act; and
4. $5,000 for furnishing false, misleading or incomplete information to the Financial Services Regulatory Authority of Ontario (“FSRA”), contrary to paragraph 447(2)(a) of the Act;

Three administrative penalties in the total amount of $20,000 on Jermaine Scott as follows:
1. $10,000 for acting as an agent without being licensed, contrary to subsection 2(1) of O. Reg. 347/04;
2. $5,000 for charging unstipulated fees, contrary to subsection 1(8) of O. Reg. 7/00; and
3. $5,000 for making false or misleading statements or representations to an insurer, contrary to paragraph 447(2)(a.1) of the Act;

redacted; and

One administrative penalty in the amount of $20,000 on Pinyatas Lounge Inc. for charging unstipulated fees, contrary to subsection 1(8) of O. Reg. 7/00.

Details of these contraventions and reasons for this proposal are described below. This Notice of Proposal includes allegations that may be considered at a hearing.

SI VOUS DÉSIREZ RECEVOIR CET AVIS EN FRANÇAIS, veuillez nous envoyer votre demande par courriel immédiatement à: contactcentre@fsrao.ca.

YOU ARE ENTITLED TO A HEARING BY THE FINANCIAL SERVICES TRIBUNAL (THE “TRIBUNAL”) PURSUANT TO SECTIONS 441(3), 441(5), 441.3(2), and 441.3(5) OF THE ACT. A hearing by the Tribunal about this Notice of Proposal may be requested by completing the enclosed Request for Hearing Form (Form 1) and delivering it to the Tribunal within fifteen (15) days after this Notice of Proposal is received by you. The Request for Hearing Form (Form 1) must be mailed, delivered, faxed or emailed to:

Address:
Financial Services Tribunal
25 Sheppard Avenue West, 7th Floor Toronto ON M2N 6S6

Attention: Registrar

Fax: 416-226-7750

Email: contact@fstontario.ca

TAKE NOTICE THAT if you do not deliver a written request for a hearing to the Tribunal within fifteen (15) days after this Notice of Proposal is received by you, orders will be issued as described in this Notice of Proposal.

TAKE FURTHER NOTICE of the payment requirements in section 4 of O. Reg. 192/08, which state that the penalized person or entity shall pay the penalty within (thirty) 30 days after the person or entity is given notice of the order imposing the penalty, within thirty
(30) days after the matter is finally determined if a hearing is requested or such longer time as may be specified in the order.

For additional copies of the Request for Hearing Form (Form 1), visit the Tribunal’s website at www.fstontario.ca

The hearing before the Tribunal will proceed in accordance with the Rules of Practice and Procedure for Proceedings before the Financial Services Tribunal (“Rules”) made under the authority of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22, as amended. The Rules are available at the website of the Tribunal: www.fstontario.ca. Alternatively, a copy can be obtained by telephoning the Registrar of the Tribunal at 416-590-7294, or toll free at 1-800-668-0128 extension 7294.

At a hearing, your character, conduct and/or competence may be in issue. You may be furnished with further and or other particulars, including further or other grounds, to support this proposal.

SCHEDULE “A”

REPORT OF THE CHIEF EXECUTIVE OFFICER

I. INTRODUCTION

The Director is of the opinion that:
1. Sobenna Green, also known as Quota (“Green”);
2. Jermaine Scott, also known as Don Skilachi, Jarmaine Sterling, Jerome Sting, Jermaine Wood, Julian James, Tony, and Skills (“Scott”);
3. redacted; and
4. Pinyatas Lounge Inc. (“Pinyatas”)
are committing acts or pursuing a course of conduct that constitutes an unfair or deceptive act or practice under the Act. This is the Director’s report pursuant to section 441 of the Act.

II. BACKGROUND

A. Parties

Green is not and never has been licensed under the Act.

Scott is not and never has been licensed under the Act.

Green performs as a musician using the stage name “Quota.” Scott has promoted Green’s musical career.

redactedis not and never has been licensed under the Act.

Pinyatas is an Ontario corporation and is registered to Green. Pinyatas is not and never has been licensed under the Act.

B. Scheme to Solicit, Offer, and Sell Automobile Insurance Without a License

In January 2021 Royal & Sun Alliance Insurance Company of Canada (“RSA”) submitted a complaint to FSRA. RSA alleged that two unlicensed individuals (the “Unlicensed Male” and “Unlicensed Female”) were soliciting and applying for automobile insurance policies on behalf of members of the public through RSA’s subsidiary, Unifund Assurance Company (“Unifund”).

Unifund reported 102 instances in which the Unlicensed Male or Unlicensed Female contacted it by telephone, impersonated prospective insureds, and provided false information regarding these insureds for the purpose of obtaining automobile insurance.

As a result of these 102 instances, Unifund issued 72 policies based on false information (the “Fraudulent Policies”). Unifund estimates that the false information caused these Fraudulent Policies to be rated incorrectly, and resulted in an undercharging of premiums of approximately $65,000. As of January 14, 2021, 36 of the 72 Fraudulent Policies had been cancelled either due to non-payment or at the request of the insured.

Following investigation, FSRA determined that Green and Scott were the Unlicensed Female and Unlicensed Male, and that Green, Scott, redacted, and Pinyatas had engaged in a coordinated scheme to cause these Fraudulent Policies to be issued.

(i) The “Green Account”

FSRA identified a bank account held by CIBC in the name of and controlled by Green (the “Green Account”).

FSRA served a summons on CIBC for records related to the Green Account. The Summons revealed two incoming e-transfers from a sender that had been identified by Unifund as a holder of one of the Fraudulent Policies. 21 additional transfers were sent from individuals identified by other insurance companies as having applied for a fraudulent policy.

The Summons also revealed 328 e-transfers totalling $239,301.64 deposited in the Green Account with an apparent link to insurance:
1. 317 e-transfers totalling $233,834.44 were received by “lavadoinsurance@gmail.com” and deposited in the Green Account;
2. Seven e-transfers totalling $3,600 were received by “insurancequota@gmail.com” and deposited in the Green Account;
3. Four e-transfers totalling $1,867.20 were received by “donskilachi@gmail.com” and deposited in the Green Account.

Of these 328 e-transfers, 106 (totalling $81,419.29) referenced “insurance” in the memo for the transfer, 39 (totalling $29,892.64) referenced one of Scott’s aliases and “insurance,” 94 (totalling $67,889.00) referenced one of Scott’s aliases, and three (totalling $2,354.00) referenced “car.”

(ii) The “Pinyatas Account”

FSRA identified a bank account held by BMO in the name of and controlled by Pinyatas (the “Pinyatas Account”).

FSRA served a summons on BMO for records related to the Pinyatas Account. The summons revealed five incoming e-transfers from a sender that had been identified by Unifund as a holder of one of the Fraudulent Policies. Six additional transfers were sent from individuals identified by other insurance companies as having applied for a fraudulent policy.

The summons also revealed 34 e-transfers deposited in the Pinyatas Account that referenced “insurance” in the memo for the transfer. Another 37 e-transfers referenced one of Scott’s aliases.

(iii) The “redacted Account”

FSRA identified a bank account held by Scotiabank in the name of and controlled by redacted (the “redacted Account”).

FSRA served a summons on Scotiabank for records related to the redacted Account.

The summons revealed three incoming e-transfers totaling $4,061 from a sender that had been identified by Unifund as a holder of one of the Fraudulent Policies.

Of this $4,061 transferred to the redacted Account:
1. redacted subsequently transferred $970 to the Green Account;
2. redactedsubsequently transferred $1,974 to the Pinyatas Account; and
3. redacted kept $1,117.
(iv) Common Telephone Numbers

FSRA reviewed bank records from the Green Account and the Pinyatas Account. The Green Account records listed three telephone numbers and the Pinyatas Account records listed one telephone number as belonging to the account holder.

Four members of the public who had received a Fraudulent Policy identified a phone number listed on the Green Account or Pinyatas Account as the phone number of the Unlicensed Male who had arrange their Fraudulent Policy on their behalf.

Unifund reviewed the records of the telephone numbers that the Unlicensed Male and Unlicensed Female called from to apply for the Fraudulent Policies issued to these four members of the public. These telephone numbers were also used to apply for Fraudulent Policies on behalf of thirteen other members of the public.

C. Examinations of redacted

In response to a summons issued under the Act, redacted attended for two examinations under oath by a person designated by the Chief Executive Officer.

During his examinations, redacted admitted.

He is not and never has been licensed under the Act;

Members of the public sent him funds in respect of insurance policies and he forwarded the funds to his insurance contact;

His insurance contact was Scott; and

He believed that Scott had been arranging insurance policies for members of the public for 20 years.

D. Examinations of Green

In response to a summons issued under the Act, Green attended for two examinations under oath by a person designated by the Chief Executive Officer (the “Green Examinations”).

At the Green Examinations, Green provided false, misleading, or incomplete information to FSRA, including:
1. Denying using the stage name Quota;
2. Denying knowing Scott;
3. Denying knowing redacted;
4. Denying ownership or control of Green Account;
5. Denying control of the Pinyatas Account;
6. Denying arranging Fraudulent Policies;
7. Denying any knowledge of why e-transfers of funds were sent to the Green Account and the Pinyatas Account that appeared to be related to the sale of automobile insurance; and
8. Denying taking money from members of the public in exchange for arranging Fraudulent Policies.

SCHEDULE “B”

REASONS FOR PROPOSAL

These are the reasons for the proposal by the Director to:
1. Order Green to:
  1. Cease acting as an insurance agent, including the advertising, soliciting, offering, and sale of automobile insurance;
  2. Cease charging a premium allowance or fee other than as stipulated in a contract of insurance; and
  3. Cease making false or misleading statements or representations to an insurer.
2. Order Scott to:
  1. Cease acting as an insurance agent, including the advertising, soliciting, offering, and sale of automobile insurance;
  2. Cease charging a premium allowance or fee other than as stipulated in a contract of insurance; and
  3. Cease making false or misleading statements or representations to an insurer;
3. redacted
4. Order Pinyatas to cease charging a premium allowance or fee other than as stipulated in a contract of insurance;
5. Impose four administrative penalties in the total amount of $50,000 on Green;
6. Impose three administrative penalties in the total amount of $20,000 on Scott;
7. redacted; and
8. Impose one administrative penalty in the amount of $20,000 on Pinyatas.

I. CONTRAVENTIONS OR FAILURES TO COMPLY WITH THE ACT

A. Acting as an agent without being licensed

Subsection 2(1) of O. Reg. 347/04 states that “No individual, partnership or corporation shall act as an agent unless the individual, partnership or corporation is licensed under this Regulation.”

Section 1 of the Act provides that the activities of an agent include:
1. soliciting insurance on behalf of an insurer or transmitting, for a person other than himself, herself or itself, an application for, or a policy of insurance to or from an insurer; or
2. offering or assuming to act in the negotiation of insurance or in negotiating its continuance or renewal with an insurer for compensation, commission or any other thing of value.

The Director is satisfied that Green and Scott contravened subsection 2(1) of O. Reg. 347/04 by acting as agents without being licensed by soliciting and negotiating the Fraudulent Policies.

B. Unfair or Deceptive Acts or Practices

Section 439 of the Act states that “No person shall engage in any unfair or deceptive act or practice.”

Subsection 1(1) of O. Reg. 7/00 stated that the commission of any act prohibited under the Act or the regulations is prescribed as an unfair or deceptive act or practice.

In carrying out their scheme, the Director is satisfied that Green, Scott, redacted, and Pinyatas engaged in unfair or deceptive acts or practices contrary to section 439 of the Act.

(i) Unlicensed activity

The Director is of the opinion that Green and Scott have engaged and are engaging in activities reserved for licensed insurance agents, contrary to section 2(1) of O. Reg. 347/04.

By contravening section 2(1) of O. Reg. 347/04, Green and Scott are committing an act or pursuing a course of conduct that is an unfair or deceptive act or practice or might reasonably be expected to result in a state of affairs that would constitute an unfair or deceptive act or practice under the Act.

(ii) Unstipulated fees

Subsection 1(8) of O. Reg. 7/00 stated that it is an an unfair or deceptive act or practice to charge a premium allowance or fee other than as stipulated in a contract of insurance upon which a sales commission is payable to the person.

The Director is satisfied that by charging members of the public fees other than as stipulated in a contract of insurance upon which a sales commission is payable to the person, Green, Scott, redacted, and Pinyatas contravened subsection 1(8) of O. Reg. 7/00 and are committing an act or pursuing a course of conduct that is an unfair or deceptive act or practice or might reasonably be expected to result in a state of affairs that would constitute an unfair or deceptive act or practice under the Act.

C. False, Misleading, or Incomplete Information

(i) False or misleading statement or representation to an insurer

Paragraph 447(2)(a.1) of the Act states that “Every person is guilty of an offence who knowingly makes a false or misleading statement or representation to an insurer in connection with the person’s entitlement to a benefit under a contract of insurance.”

The Director is satisfied that Green and Scott made false or misleading statements or representations to insurance companies in applying for the Fraudulent Policies and contravened paragraph 447(2)(a.1) of the Act.

(ii) False, misleading or incomplete information to FSRA

Paragraph 447(2)(a) of the Act states that “Every person is guilty of an offence who directly or indirectly furnishes false, misleading or incomplete information to [FSRA] whether the information is required under this Act or is volunteered.”

The Director is satisfied that by furnishing false, misleading or incomplete information during the Green Examinations, Green contravened paragraph 447(2)(a) of the Act.

II. GROUNDS TO ISSUE COMPLIANCE ORDER

Section 441(1) of the Act states that, upon examination or investigation, or upon any other evidence, the Chief Executive Officer shall make a report if he or she is of the opinion that a person has committed or is committing any act, or has pursued or is pursuing any course of conduct, that is an unfair or deceptive act or practice or might reasonably be expected to result in a state of affairs that would constitute an unfair or deceptive act or practice. This Report is at Schedule “A.”

Section 441(2) of the Act states that the Chief Executive Officer may give notice in writing, which shall include a copy of the report made under subsection 441(1), to the person that the Chief Executive Officer intends to order the person,
1. to cease or refrain from doing any act or pursuing any course of conduct identified by the Chief Executive Officer;
2. to cease engaging in the business of insurance or any aspect of the business of insurance specified by the Chief Executive Officer; or
3. to perform the acts that, in the opinion of the Chief Executive Officer, are necessary to remedy the situation.

The Director is of the opinion that Green, Scott, redacted, and Pinyatas have committed acts that are unfair or deceptive acts or practices, as described above.

III. GROUNDS FOR IMPOSING ADMINSTRATIVE PENALTIES

The Director is satisfied that imposing administrative penalties on Green, Scott, redacted, and/or Pinyatas under section 441.3(1) of the Act will satisfy one or both of the following purposes under section 441.2(1) of the Act:
1. To promote compliance with the requirements established under the Act.
2. To prevent a person from deriving, directly or indirectly, any economic benefit as a result of contravening or failing to comply with a requirement established under this Act.

The Director is satisfied that the following administrative penalties should be imposed:
1. On Green:
  1. $20,000 for contravening subsection 2(1) of O. Reg. 347/04 by acting as an agent without being licensed;
  2. $20,000 for contravening subsection 1(8) of O. Reg. 7/00 by charging unstipulated fees;
  3. $5,000 for contravening paragraph 447(2)(a.1) of the Act for making false or misleading statements or representations to an insurer;
  4. $5,000 for contravening paragraph 447(2)(a) of the Act by furnishing false, misleading or incomplete information to FSRA during the Green Examinations.
2. On Scott:
  1. $10,000 for contravening subsection 2(1) of O. Reg. 347/04 by acting as an agent without being licensed;
  2. $5,000 for contravening Subsection 1(8) of O. Reg. 7/00 by charging unstipulated fees;
  3. $5,000 for contravening paragraph 447(2)(a.1) of the Act for making false or misleading statements or representations to an insurer;
3. redacted; and
4. On Pinyatas, $20,000 for contravening Subsection 1(8) of O. Reg. 7/00 by charging unstipulated fees;

In determining the amount of these administrative penalties, the Director has considered the following criteria as required by section 4(2) of O. Reg. 408/12:
1. The degree to which the contravention or failure was intentional, reckless, or negligent.
2. The extent of the harm or potential harm to others resulting from the contravention or failure.
3. The extent to which the person or entity tried to mitigate any loss or take other remedial action.
4. 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.
5. Any other contraventions or failures to comply with a requirement established under the Act or with any other financial services legislation of Ontario or of any jurisdiction during the preceding five years by the person or entity.

In respect of the first criterion, the Director is satisfied that Green, Scott, redacted, and Pinyatas’ contraventions of the Act were intentional. Unifund identified 102 instances in which Scott, Green, redacted, and Pinyatas attempted to have Fraudulent Policies issued, and 72 instances in which they succeeded. Their pattern of misconduct involved repeated misrepresentations, unlicensed activities, and charging of unstipulated fees.

In respect of the second criterion, the Director is satisfied that Green, Scott, redacted, and Pinyatas’ contraventions of the Act caused significant potential and actual harm:
1. By acting as agents without being licensed, Green and Scott undermined the oversight and accountability functions of the insurance licensing regime. The insurance licensing regime serves to protect the public by ensuring that only suitable persons act as agents, and that their conduct is regulated;
2. The misrepresentations made to the insurance company by Green and Scott entitled the company to void the policies issued to the members of the public. This presents two significant risks. First, the vast majority of claims made against the policies would not be honored if the policies are voided. Second, operation of the consumer’s vehicle could have the same effect as driving a vehicle without insurance, posing a significant risk to anyone operating a vehicle that is covered by the policy and a risk to the public brought by the operation of uninsured vehicles.
3. By charging fees other than stipulated in a contract of insurance, Green, Scott, redacted, and Pinyatas undermined the oversight function within Ontario’s insurance industry. Fees charged in connection with insurance transactions are regulated to ensure that consumers are not charged unauthorized or inappropriate fees;
4. The members of the public on whose behalf Green, Scott, redacted, and Pinyatas acted were defrauded of funds and did not receive valid policies of insurance; and
5. Green’s false, misleading, or incomplete statements during the Green Examinations were made in an effort to hinder an investigation under the Act. Such investigations are critical to protect the public and ensure that the Act and regulations are complied with.

In respect of the third criterion, the Director is not aware of any efforts by Green, Scott, redacted, or Pinyatas to mitigate any losses or take any remedial action.

In respect of the fourth criterion, Green, Scott, redacted, and Pinyatas engaged in the scheme with the goal of obtaining economic benefit. Records from the Green Account, Pinyatas Account, and redacted Account show incoming e-transfers of more than $250,000 with an apparent link to insurance.

In respect of the fifth criterion, the Director is unaware of any further contraventions or failures to comply in the preceding five years by Green, Scott, redacted, or Pinyatas.

Such further and other reasons as may come to the Director’s attention.

DATED at Toronto, Ontario, November 4, 2022

Original signed by

Elissa Sinha
Director, Litigation and Enforcement

By delegated authority from the Chief Executive Officer

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