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 Industrial Alliance Insurance and Financial Services Inc.

MINUTES OF SETTLEMENT AND UNDERTAKING

PART I – INTRODUCTION

Industrial Alliance Insurance and Financial Services Inc. (“Industrial Alliance”) is an insurer licensed under the Act.
On April 9, 2024, the Director, Litigation and Enforcement (the “’Director”), by delegated authority from the Chief Executive Officer (“CEO”) of the Financial Services Regulatory Authority of Ontario (“FSRA”), issued a Notice of Proposal in respect of Industrial Alliance, amongst other persons, proposing, among other things, to impose administrative penalties on Industrial Alliance (the “NOP”).
The NOP was delivered to Industrial Alliance on April 10, 2023. On April 24, 2024, requested a hearing before the Financial Services Tribunal (the “Tribunal”) in respect of the NOP.
Industrial Alliance and the Director, by delegated authority from the CEO, (collectively the “Parties”) wish to resolve this matter on consent and without a hearing before the Tribunal.

PART II – AGREED FACTS

The MGA Agreements

Industrial Alliance and World Financial Group Insurance Agency of Canada Inc. (“WFG”), entered into agreements dated November 28, 2014, and November 16, 2021 (the “MGA Agreements”). Under the terms of 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 (defined below).
WFG is a managing general agency operating in Ontario and is licensed as an insurance agency under the Act.
Industrial Alliance represented that it relied on WFG’s controls to ensure that the information it received was current, complete and accurate, and that Industrial Alliance had no reason to believe that there were any material weaknesses in these controls.

The Unlicensed Activity

Gurpreet Ghuman (“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. Ghuman acted as an insurance agent and advisor for Industrial Alliance from November 8, 2013, until July 21, 2022, when Industrial Alliance terminated the relationship for cause.
Between October 8, 2021, and July 14, 2022, (the “Relevant Time”) Ghuman solicited on behalf of Industrial Alliance and/or arranged for the registration and placement of 58 life insurance policies written by Industrial Alliance (the “Unlicensed Sales”), even though he was not licensed under the Act during the Relevant Time.
Ghuman was able to continue to sell Industrial Alliance policies after October 7, 2021, because in or about April 2021, WFG had erroneously updated Ghuman’s licence expiry date in its systems, leading to an incorrect record relating to his status. WFG passed on the inaccurate information to Industrial Alliance and Industrial Alliance relied on the information.
FSRA notified Industrial Alliance about unlicensed sales of its policies on July 13, 2022. Upon receiving this notification from FSRA, Industrial Alliance suspended Ghuman’s access on July 14, 2022, and formally terminated its relationship with Ghuman as of July 21, 2022.
Industrial Alliance submitted a Life Agent Reporting Form to FSRA on August 2, 2022, reporting the Unlicensed Sales.
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 independent records relating to Ghuman’s licensing status for the entire period during which Ghuman sold life insurance policies as an agent of Industrial Alliance.
Correspondence between Industrial Alliance and WFG between July 15, 2022, and July 27, 2022, provided by Industrial Alliance to FSRA on April 16, 2024, among other things, reflect that,
1. Industrial Alliance immediately contacted WFG to determine the reasons why the expiry of Ghuman’s license had not been reflected in WFG’s systems;
2. Industrial Alliance sought WFG’s assurance that this was an isolated error that would not re-occur; and
3. Industrial Alliance requested that WFG appoint a new agent to review and ensure the suitability of the policies that Ghuman placed through Industrial Alliance during the Relevant Time.
On August 2, 2022, Industrial Alliance represented to FSRA that WFG had re-trained its staff handling license renewals and had taken certain other steps to limit the risk of re-occurrence.
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 and WFG represented to FSRA that licensed insurance agents were assigned to each of Ghuman’s active Industrial Alliance clients after Ghuman was terminated. Industrial Alliance represented that it was not informed by WFG of any product suitability issues with respect to any of the active life insurance policies.

Commissions

Industrial Alliance paid at least $257,371.48 as first year commissions, indirectly through WFG to Ghuman, on the Unlicensed Sales. WFG received or was entitled to receive $556,601.69 as overrides from Industrial Alliance on the Unlicensed Sales. Industrial Alliance represented that the first-year commissions were paid to WFG for distribution to Ghuman.
Once Industrial Alliance became aware that Ghuman had not renewed his licence, it immediately took measures to reverse the complete amount it had paid to WFG in commissions on the Unlicensed Sales. Industrial Alliance represented to FSRA that these commissions and override amounts were reversed, with the exception of $2,048, which Industrial Alliance represented could not be reversed due to systems constraints.

PART III – NON-COMPLIANCE WITH THE ACT

In view of the agreed facts described in Part II of these Minutes and the resulting non-compliance with the below stated provisions, and to avoid a hearing before the Tribunal, Industrial Alliance consents to the imposition of the following administrative penalties in the total amount of $115,000 pursuant to section 441.3 of the Act:
1. An administrative penalty in the amount of $65,000 for contravening section 403(1) of the Act; and
2. An administrative penalty in the amount of $50,000 for contravening section 12(1) of Ontario Regulation 347/04.

PART IV – TERMS OF SETTLEMENT

Industrial Alliance agrees and admits the facts stated in Part II and the contraventions stated in Part III of these Minutes.
Industrial Alliance acknowledges and agrees that it has been given the opportunity to seek independent legal advice and it has done so (or has waived the right to do so) and is entering into these Minutes of Settlement voluntarily, understanding the consequences of doing so.
Industrial Alliance acknowledges that these Minutes are an undertaking within the meaning of the Act, and that failure to comply may result in immediate regulatory action including, but not limited to, the issuance of a Notice of Proposal to revoke the licence, a Notice of Proposal to impose an administrative penalty, or a prosecution under the Provincial Offences Act.

(a) Issuance of Orders

Industrial Alliance acknowledges that, upon execution of these Minutes by both Parties, the order attached as Appendix “A” to these Minutes (the “Order”) will be issued.

(b) Process for Execution of Settlement

Industrial Alliance acknowledges that these Minutes are not binding on the Director until signed by the Director.
These Minutes may be executed in counterparts and may be executed and delivered by facsimile or e-mail, and all such counterparts and facsimiles or e-mails, as applicable, shall together constitute one and the same agreement.
Upon receiving an executed copy of these Minutes from FSRA, Industrial Alliance will withdraw their Request for Hearing (Form 1) in respect of the NOP before the Tribunal by completing a Withdrawal/Discontinuance (Form 5) and filing it with the Registrar at the Tribunal within two (2) business days.
Upon confirmation from the Tribunal that the Request for Hearing has been withdrawn and the hearing has been cancelled, the Parties agree that the Director will issue Orders in the form attached as Appendix “A” to these Minutes.
The Parties accept and understand that these Minutes and any rights within the Minutes shall enure to the Parties and to any successors or assigns of the Parties.

(c) Disclosure of Minutes and Orders

The Parties will keep the terms of these Minutes and the Orders confidential until the Orders are issued, except that:
1. The Director shall be permitted to disclose the Minutes and the Orders within FSRA;
2. Industrial Alliance shall be permitted to disclose the Minutes and the Orders with its affiliates and legal advisors. Industrial Alliance agrees that such disclosure must only be made on a confidential basis and Industrial Alliance shall prohibit the recipient from disclosing the terms of these Minutes and the Orders to any other person or entity; and
3. The Parties shall be permitted to inform the Tribunal.
If either of the Parties do not sign these Minutes or the Director does not issue the Orders:
1. These Minutes, the Orders, and all related discussions and negotiations will be without prejudice to FSRA and Industrial Alliance; and
2. FSRA and Industrial Alliance will each be entitled to all available proceedings, remedies and challenges, including proceeding to a hearing of the allegations contained in the NOP. Any proceedings, remedies and challenges will not be affected by these Minutes, the Orders, or any related discussions or negotiations.
Upon issuance of the Orders:
1. Industrial Alliance agrees that these Minutes and the Orders form part of their administrative record for the purposes of any future licensing decision or as an aggravating factor in respect of a future administrative penalty or prosecution against them or any affiliated entities;
2. Industrial Alliance acknowledges that these Minutes and the Orders are public and will be published by FSRA on its public website (or that of its successor) along with a press release that summarizes these Minutes and the Orders; and
3. The Parties agree not to make representations to any member of the public or media or in a public forum that are inconsistent with these Minutes or the Orders.

(d) Further Proceedings

Whether or not the Orders are issued, Industrial Alliance will not use, in any proceeding, these Minutes or the negotiation or process of approval of these Minutes as the basis for any attack on FSRA’s jurisdiction, alleged bias, alleged unfairness, or any other remedies or challenges that may be available.
Upon issuance of the Orders:
1. Industrial Alliance waives all rights to a hearing before the Tribunal regarding the NOP;
2. Industrial Alliance waives all rights to a judicial review or appeal of the Orders;
3. The Director agrees that FSRA will not take any further proceedings against Industrial Alliance arising solely from the facts contained in Part II of these Minutes, unless facts not disclosed by Industrial Alliance come to the attention of FSRA that are materially different from those contained in Part II of these Minutes or Industrial Alliance fails to comply with any term in the Orders; and
4. Industrial Alliance agrees that should it fail to comply with any term in these Minutes or the Orders, FSRA is entitled to bring any proceedings available to it.

DATED at Quebec City, on April 26, 2024

Original signed by

For Industrial Alliance

DATED at Quebec City, on April 26, 2024

Original signed by

Renée Carbonneau
Name of Witness

DATED at Toronto, Ontario, April 26, 2024

Original signed by

Elissa Sinha
Director, Litigation and Enforcement
Financial Services Regulatory Authority of Ontario

By delegated authority from the Chief Executive Officer

APPENDIX A

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 Industrial Alliance Insurance and Financial Services Inc.

ORDER TO IMPOSE ADMINISTRATIVE PENALTIES

Industrial Alliance Insurance and Financial Services Inc. (“Industrial Alliance”) is an insurer licenced under the Act.

On April 9, 2024, by delegated authority from the Chief Executive Officer of Financial Services Regulatory Authority of Ontario (“FSRA”), the Director, Litigation and Enforcement (the “Director”) issued a Notice of Proposal proposing to, among other things, impose administrative penalties on Industrial Alliance for contravening section 403(1) of the Act and section 12(1) of Ontario Regulation 347/04 (the “Notice of Proposal”).

The Notice of Proposal was delivered to Industrial Alliance on April 10, 2024. A Request for Hearing (Form 1) dated April 24, 2024, was delivered to the Financial Services Tribunal (the “Tribunal”), in accordance with section 441.3(5) of the Act respecting the Notice of Proposal.

On [TBD], Industrial Alliance withdrew the Request for Hearing and on [TBD] the Tribunal closed its file with respect to the matter. This order is made pursuant to a Minutes of Settlement and Undertaking (the “Minutes”) entered into by Industrial Alliance and the Director on [TBD]. Industrial Alliance has, among other things, consented and undertaken to pay administrative penalties in the amount and manner stated in the Minutes.

ORDER

The following administrative penalties in the amount of $115,000 are hereby imposed on Industrial Alliance, for the reasons set out in the Minutes of Settlement dated [TBD]:

An administrative penalty in the amount of $65,000 for contravening section 403(1) of the Act; and
An administrative penalty in the amount of $50,000 for contravening section 12(1) of Ontario Regulation 347/04.

TAKE NOTICE THAT the Financial Services Regulatory Authority of Ontario (“FSRA”) will deliver an invoice to Industrial Alliance with information as to where and how to make the payment.

If Industrial Alliance fails to pay the administrative penalty in accordance with the terms of this Order and any further agreement or undertaking, the Chief Executive Officer may file the Order with the Superior Court of Justice and the Order may be enforced as if it were an order of the court. An administrative penalty that is not paid in accordance with the terms of an order imposing the penalty is a debt due to the Crown and is enforceable as such.

DATED at Toronto, Ontario,

Elissa Sinha
Director, Litigation and Enforcement
Financial Services Regulatory Authority of Ontario

By delegated authority from the Chief Executive Officer

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