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

AND IN THE MATTER OF Gurpreet Singh Ghuman, Industrial Alliance Insurance and Financial Services Inc., and World Financial Group Insurance Agency of Canada Inc.

NOTICE OF PROPOSAL TO IMPOSE ADMINISTRATIVE PENALTIES

TO: Gurpreet Singh Ghuman

AND TO:
Industrial Alliance Insurance and Financial Services Inc. 522 University Avenue, Suite 400
Toronto, Ontario
M5G 1Y7

Industrial Alliance Insurance and Financial Services Inc.
1080, Grande Allee West
P.O. Box 1907, Terminus station
Quebec, Quebec
G1K 7M3

AND TO:
World Financial Group Insurance Agency of Canada Inc.
5000 Yonge Street, Suite 800
Toronto, Ontario
M2N 7E9

TAKE NOTICE THAT pursuant to section 441.3 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”) is proposing to impose an administrative penalty in the total amount of $80,000 on Gurpreet Singh Ghuman for contravening section 392.2(6) of the Act by acting as a life insurance agent while not being duly licensed.

AND TAKE NOTICE THAT pursuant to section 441.3 of the Act, and by delegated authority from the Chief Executive Officer, the Director is proposing to impose the following administrative penalties in the total amount of $115,000 on Industrial Alliance Insurance and Financial Services Inc.:

An administrative penalty in the amount of $65,000 for contravening section 403(1) of the Act by indirectly paying or allowing compensation or anything of value to a person for placing or negotiating insurance on lives, or for attempting so to do, who, at the date thereof, is not an agent or broker.
An administrative penalty in the amount of $50,000 for contravening section 12(1) of Ontario Regulation 347/04 by failing to establish and maintain a system that is reasonably designed to ensure that each of its agents complies with the Act, the regulations, the Financial Services Regulatory Authority of Ontario rules, and the agent’s licence.

AND TAKE NOTICE THAT pursuant to section 441.3 of the Act, and by delegated authority from the Chief Executive Officer, the Director is proposing to impose an administrative penalty in the total amount of $50,000 on World Financial Group Insurance Agency of Canada Inc. for contravening section 403(1) of the Act by paying or allowing compensation or anything of value to a person for placing or negotiating insurance on lives, or for attempting so to do, who, at the date thereof, is not an agent or broker.

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(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 W, Suite 100
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 5 of Ontario Regulation 408/12, which state that the penalized person or entity shall pay the penalty no later than (thirty) 30 days after the person or entity is given notice of the order imposing the penalty, 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.

REASONS FOR PROPOSAL

I. INTRODUCTION

These are the reasons for the proposal by the Director to impose:
1. an administrative penalty in the total amount of $80,000 on Gurpreet Singh Ghuman (“Ghuman”);
2. two administrative penalties in the total amount of $115,000 on Industrial Alliance Insurance and Financial Services Inc. (“Industrial Alliance”); and
3. an administrative penalty in the total amount of $50,000 on World Financial Group Insurance Agency of Canada Inc. (“WFG”).

II. BACKGROUND

A. Parties

Ghuman was licensed as a Life Insurance and Accident and Sickness Agent (licence # 13133661) under the Act. Ghuman’s licence expired on October 7, 2021. Ghuman is not currently licensed under the Act.
Ghuman was contracted as an agent with WFG on October 11, 2013. WFG is a managing general agency operating in Ontario and is licensed as an insurance agency under the Act. WFG terminated Ghuman’s agent agreement for cause on June 23, 2023.
Ghuman acted as an insurance agent and advisor for Industrial Alliance, an insurance company licensed under the Act from November 8, 2013, until July 21, 2022, when Industrial Alliance terminated the relationship for cause.

B. Unlicensed Insurance Agent Activity

Between October 8, 2021, and July 14, 2022, (the “Relevant Time”) Ghuman solicited clients on behalf of insurers, applied for life insurance policies on behalf of the said clients, and/or arranged for the registration and placement of 59 life insurance policies for the clients. 58 of the said policies were written by Industrial Alliance (the “Unlicensed Sales”).
Ghuman was not licensed as a life insurance agent under the Act during the Relevant Time.
On August 9, 2021, FSRA sent an email to Ghuman to remind him that his licence was due to expire on October 7, 2021, (the “FSRA Reminder”). The FSRA Reminder included information on how to apply for renewal and stated:

“Please be reminded that it is your responsibility to ensure that your licence is always in force and that soliciting insurance business while unlicenced is a breach of the Insurance Act.”
In August 2023 Ghuman stated to FSRA that he had inadvertently failed to renew his licence. He further stated that neither WFG nor FSRA reminded him to renew his licence. Ghuman denied receiving the FSRA Reminder even though it was sent to the same email address as on FSRA’s records, and which Ghuman used in his subsequent communications with FSRA.
Ghuman stated to FSRA that he became aware of the expiry of his licence in July 2022 when he lost access to his Industrial Alliance account and was confronted by WFG about the Unlicensed Sales.
WFG stated to FSRA that in or around April 2021, it had incorrectly updated Ghuman’s licence expiry date in its systems, leading to the creation of an incorrect record relating to Ghuman’s licence status. WFG passed on the inaccurate information to Industrial Alliance. WFG stated as follows:

“In April 2021 Ghuman sent an update to WFG Head Office relating to the Ontario license for one of his team members. In error, the license expiry date was updated for Ghuman (license# 13133661) instead of the agent to whom the license belonged to. Thus, an incorrect record was stored on WFG’s system and passed on to the Industrial Alliance new business area.”
Industrial Alliance and WFG entered into agreements dated November 28, 2014, and November 16, 2021 (the “MGA Agreements”). As per the MGA Agreements WFG had a contractual obligation to ensure that persons contracted with WFG who were acting as insurance agents for Industrial Alliance were licensed under the Act during the Relevant Time.
Industrial Alliance was made aware of Ghuman’s unlicensed sale of 30 Industrial Alliance policies by FSRA in July 2022.
Industrial Alliance submitted a Life Agent Reporting Form to FSRA on August 2, 2022, reporting the Unlicensed Sales. Industrial Alliance further confirmed that it had terminated its relationship with Ghuman as of July 21, 2022.
On July 21, 2022, and December 20, 2022, Industrial Alliance, among other things, stated to FSRA that:
1. Industrial Alliance relies on WFG to monitor the licenses of agents associated with WFG. Ghuman’s licence code remained active on Industrial Alliance’s systems even after the expiry of Ghuman’s licence because of inaccurate information on Ghuman’s licence in WFG’s systems.
2. Industrial Alliance did not have any records relating to Ghuman’s licensing status for the entire period during which Ghuman sold life insurance policies as an agent of Industrial Alliance.
Industrial Alliance paid at least $257,371.48 as first year commissions, to Ghuman on the Unlicensed Sales, through WFG. WFG received or was entitled to receive $556,601.69 as overrides from Industrial Alliance on the Unlicensed Sales. Industrial Alliance represented to FSRA that these commissions and override amounts were reversed, with the exception of $2,048.
WFG represented to FSRA that it paid Ghuman $455,398.11 as commissions on the Unlicensed Sales and that this amount was returned to Industrial Alliance. WFG is attempting to collect the amount repaid to Industrial Alliance from Ghuman.
None of the 58 Industrial Alliance life insurance policies placed through the Unlicensed Sales were cancelled on account of Ghuman’s unlicensed status. Industrial Alliance was and/or is entitled to premiums on those life insurance policies.

III. CONTRAVENTIONS OR FAILURES TO COMPLY WITH THE ACT

A. Relating to Unlicensed Activity

Ghuman

As per section 1 of the Act, an “agent” means a person who, for compensation, commission or any other thing of value, solicits insurance on behalf of an insurer or transmits, for a person other than himself, herself or itself, an application for, or a policy of insurance to or from such insurer, or offers or assumes to act in the negotiation of such insurance or in negotiating its continuance or renewal with such insurer.
Section 392.2(6) of the Act provides that every person who acts as an insurance agent in Ontario without the licence required by Part XIV of the Act is guilty of an offence.
Section 2(1) of Ontario Regulation 347/04 provides that no individual, partnership, or corporation shall act as an agent unless the individual, partnership or corporation is licensed under the regulation.
As described above, Ghuman, while not being licensed as a life insurance agent under the Act, acted as an agent of Industrial Alliance and arranged for the placement of or applied on his clients’ behalf for 58 Industrial Alliance life insurance policies during the Relevant Time. Ghuman received commissions for doing so.
Ghuman did not renew his licence prior to its expiry on October 7, 2021, nor did he attempt to do so during the Relevant Time despite being reminded by FSRA to renew his licence.
In view of the above the Director is satisfied that Ghuman contravened section 392.2(6) of the Act and section 2(1) of Ontario Regulation 347/04 by acting as a life insurance agent while not being duly licensed.

Industrial Alliance and WFG

Section 403(1) of the Act provides that no insurer, and no officer, employee or agent thereof, shall directly or indirectly pay or allow, or agree to pay or allow, compensation or anything of value to any person for placing or negotiating insurance on lives, property or interests in Ontario, or negotiating the continuance or renewal thereof, or for attempting so to do, who, at the date thereof, is not an agent or broker and whoever contravenes this subsection is guilty of an offence.
Section 12(1) of Ontario Regulation 347/04 provides that every insurer that authorizes one or more agents to act on behalf of the insurer shall establish and maintain a system that is reasonably designed to ensure that each agent complies with the Act, the regulations, the Authority rules, and the agent’s licence.
Industrial Alliance did not keep any records on the status of Ghuman’s life insurance agent licence and relied on inaccurate information provided by WFG in this regard. Industrial Alliance failed to notice that Ghuman was not licensed during the Relevant Time and paid commissions to Ghuman through WFG on the Unlicensed Sales.
WFG represented to FSRA that it paid commissions to Ghuman on the Unlicensed Sales. WFG had contractually obligated itself to ensure that Ghuman was licensed while acting as an insurance agent for Industrial Alliance yet failed to do so thereby facilitating the Unlicensed Sales.
In view of the above, the Director is satisfied that Industrial Alliance and WFG contravened section 403(1) of the Act by compensating Ghuman for the Unlicensed Sales.
Further, the Director is also satisfied that Industrial Alliance contravened section 12(1) of Ontario Regulation 347/04 by failing to establish and maintain a system that is reasonably designed to ensure that each agent authorized to act on its behalf complies with the Act. Industrial Alliance’s wholesale reliance on WFG to ensure Ghuman was licensed under the Act was not reasonable in the circumstances.

IV. GROUNDS FOR IMPOSING ADMINISTRATIVE PENALTIES

The Director is satisfied that imposing administrative penalties on Ghuman, Industrial Alliance, and WFG 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.
In determining the amount of the administrative penalties below, the Director has considered the following criteria as required by section 4(2) of Ontario Regulation 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.
The Director is satisfied that an administrative penalty in the total amount of $80,000 should be imposed on Ghuman for contravening section 392.2(6) of the Act by acting as a life insurance agent while not being duly licensed.
The Director is satisfied that the following administrative penalties in the total amount of $115,000 should be imposed on Industrial Alliance:
1. A penalty in the amount of $65,000 for contravening section 403(1) of the Act by indirectly paying or compensating Ghuman for the Unlicensed Sales.
2. A penalty in the amount of $50,000 for contravening section 12(1) of Ontario Regulation 347/04 for failing to establish and maintain a system that is reasonably designed to ensure that each agent complies with the Act.
The Director is satisfied that an administrative penalty in the total amount of $50,000 should be imposed on WFG for contravening section 403(1) of the Act by paying compensation to Ghuman for the Unlicensed Sales, as Industrial Alliance’s agent.
In respect of the first criterion, the Director is satisfied that Ghuman’s actions displayed a reckless disregard for his responsibilities as a life insurance agent. Ghuman failed to renew his insurance agent licence despite the requirements of the Act, even though he was reminded by FSRA to do so. He continued to act as an insurance agent without a licence until his access code was terminated by Industrial Alliance. Ghuman was solely responsible for filing licence renewal applications in a timely manner.
Industrial Alliance and WFG exhibited negligent conduct by failing to take any steps to ascertain Ghuman’s licence status during the Relevant Time. Industrial Alliance admitted to not having any records relating to Ghuman’s licence status at all and to being fully reliant on WFG in this regard.
WFG admitted to entering incorrect information with respect to Ghuman’s licence status in their systems and made the incorrect information available to Industrial Alliance, despite its contractual obligations. Industrial Alliance admitted to relying on this incorrect information without taking any steps to ascertain its veracity.
In respect of the second criterion, the Director is satisfied that Ghuman’s unlicensed insurance agent activities and Industrial Alliance’s and WFG’s negligent facilitation of such activities had the potential to cause significant harm to clients and has harmed the public interest. Moreover, as Ghuman was not licensed when the Unlicensed Sales occurred, no Errors and Omissions coverage would be available for the subject insurance policies.
The public relies on the regulatory regime established by the Act and its regulations and is entitled to have confidence that regulated activities are carried on by persons who are duly licensed to do so. The insurance agent licensing scheme provided in the Act is therefore a critical and necessary component in protecting the public interest.
Further, Industrial Alliance’s payment of commissions and bonuses on the Unlicensed Sales to Ghuman through WFG and the failure of Industrial Alliance to maintain a reasonable system to ensure agent compliance undermines the regulatory regime and, by extension, harms the public interest.
Insurers and insurance agents voluntarily choose to engage in a business that requires a licence, and which involves regulation under the Act. They agree in advance and are expected to adhere to strict standards of conduct, and they accept that FSRA may hold them accountable for any departures from these standards.
The conduct of Ghuman, Industrial Alliance, and WFG, as described above, has resulted in a significant and repeated subversion of the regulatory regime which not only put the interests of as many as 58 clients at the risk of potential harm, but also undermined the integrity of the regulatory regime and harmed the public interest.
In respect of the third criterion, The Director has considered WFG’s representation that it has returned to Industrial Alliance all commissions and bonuses on the Unlicensed Sales, amounting to at least $455,398.11, and undertaken some staff retraining. WFG and Industrial Alliance have represented to FSRA that licensed insurance agents were assigned to each of Ghuman’s active Industrial Alliance clients after Ghuman was terminated.
The Director is unaware of any other steps taken by Ghuman, Industrial Alliance, and WFG to remedy the contraventions described in this proposal.
In respect of the fourth criterion, the Director is satisfied that Ghuman, Industrial Alliance, and WFG gained, or could have gained, significant financial benefit from the Unlicensed Sales.
Ghuman received at least $257,371.48 from Industrial Alliance, through WFG, as commissions and bonuses on the Unlicensed Sales.
WFG represented that it paid Ghuman commissions and bonuses on the Unlicensed Sales totaling to $455,398.11. WFG further represented that, as of March 27, 2024, Ghuman had not returned all of these commissions and bonuses and owed $406,077.77 to WFG on account of chargebacks.
WFG received or was entitled to receive $556,601.69 as overrides from Industrial Alliance on the Unlicensed Sales.
Industrial Alliance received or could reasonably expect to receive monthly premiums in respect of the 58 insurance policies resulting from the Unlicensed Sales.
In respect of the fifth criterion, the Director does not rely on any further contraventions or failures to comply in the preceding five years by Ghuman, Industrial Alliance, and WFG, other than those discussed in this Notice of Proposal.
Such further and other reasons as may come to the attention of the Director.

DATED at Toronto, Ontario, April 9, 2024

Original signed by

Elissa Sinha
Director, Litigation and Enforcement

By delegated authority from the Chief Executive Officer

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