1
Q
CHAPTER 4
Demonstrating ethical behaviour and providing practical advice help build a trusting agent-client relationship.
What are some ethical conducts?
A
- Dealing with conflicts of interest;
- Client needs analysis;
- Selling ethically;
- Meeting fiduciary obligations;
- Complying with statutes, regulations and codes of conduct.
2
Q
Sanctions for non-compliance with the principles and rules that apply to licenced insurance agents can include….
A
Important monetary penalties and the revocation of the agent’s licence.
3
Q
The Office of the Superintendent of Financial Institutions (OSFI) is a federal, provincial and territorial government who legislate and enact regulations for insurance
companies under the Insurance Company Act
What is their role?
A
To determine the financial soundness of the federally incorporated life insurance companies
4
Q
Ethics Terminology
OmbudService for Life and Health Insurance (OLHI)
A
A free, fast, independent, and impartial alternative dispute resolution public service for Canadian life and health insurance consumers.
5
Q
TRUE OR FALSE?
The provinces and territories are not responsible for regulating market conduct.
A
FALSE
The provinces and territories are also responsible for regulating market conduct
6
Q
Who are the Canadian Council of Insurance Regulators (CCIR) and what is their mandate?
A
- An association of insurance regulators.
- The mandate of the CCIR is to facilitate and promote an efficient and effective insurance regulatory system in Canada to serve the public interest.
- Members work together to develop solutions for common regulatory issues.
7
Q
Regulatory Authorities such as CCIR & CISRO usually have a mandate, name at-least two
A
They fulfill their mandate by setting expectations and requirements for regulating the conduct of life insurance agents toward clients, including:
- Promoting transparency to clients;
- Taking enforcement actions against breaches of conduct;
- Equipping clients with financial knowledge and skills (understanding financial concepts and terminology);
- Giving clients access to independent complaint resolution avenues, such as the OmbudService for Life and Health Insurance.
8
Q
TRUE OR FALSE?
Office of the Superintendent of Financial Institutions (OSFI) is also responsible for the licencing, regulating and supervision of an insurance agent’s practice.
A
FALSE
Office of the Superintendent of Financial Institutions (OSFI) is not responsible for the licencing, regulating and supervision of an insurance agent’s practice.
9
Q
TRUE OR FALSE?
There are nine provincial and four territorial regulators responsible for the regulation of agents and agencies.
A
FALSE
There are ten provincial and three territorial regulators responsible for the regulation of agents and agencies.
10
Q
TRUE OR FALSE?
In Ontario, life insurance agents, accident & sickness insurance agents and corporate agencies are licenced by the Financial Services Regulatory Authority of Ontario (FSRA) (in replacement of the Financial Services Commission of Ontario (FSCO)), which also regulates insurers.
A
TRUE
11
Q
Ethics Terminology
Canadian Insurance Services Regulatory Organizations (CISRO)
A
Inter-jurisdictional group of regulating authorities who are dedicated to developing consistent standards of qualifications and practice for insurance intermediaries dealing in insurance of persons and property
12
Q
CISRO, in collaboration with CCIR, has published a Guidance entitled Conduct of Insurance Business and Fair Treatment of Customers
According to the Guidance, fair treatment of customers encompasses concepts such as…
A
- Ethical behavior
- Acting in good faith
- The prohibition of abusive practices.
13
Q
There are a number of other authorities that protect the client. Name some
A
- Office of the Privacy Commissioner of Canada;
- Financial Transactions and Reports Analysis Centre of Canada (FINTRAC);
- Assuris;
- OmbudService for Life and Health Insurance (OLHI);
- Canadian Council of Insurance Regulators (CCIR).
14
Q
FILL IN THE BLANK!
The mandate and mission of ________________ is to administer enforcement of the federal Personal Information Protection and Electronic Documents Act (PIPEDA), Canada’s private sector privacy legislation, and to “protect and promote the privacy rights of individuals”
A
The Office of the Privacy Commissioner of Canada
15
Q
FILL IN THE BLANKS
Life insurance agents operating in __________, __________, and _________ are subject to their own provinces’ personal information protection act.
A
British Columbia, Alberta and Québec
16
Q
Ethics Terminology
Financial Transactions and Reports Analyses Centre of Canada (FINTRAC)
A
- Canadian independent agency with a mandate to facilitate the detection, prevention and deterrence of money laundering and the financing of terrorist activities, while ensuring the protection of personal information under its control.
- Operates within the ambit of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its regulations.
17
Q
While ensuring the protection of personal information under its control. Financial Transactions and Reports Analyses Centre of Canada (FINTRAC) fulfills its mandate through some activities, name at least one.
A
- Receiving financial transaction reports in accordance with the PCMLTFA and regulations and safeguarding personal information under its control;
- Ensuring compliance of reporting entities with the PCMLTFA and regulations;
- Producing financial intelligence relevant to investigations on money laundering, terrorist activity financing and threats to the security of Canada;
- Researching and analyzing data from a variety of information sources that shed light on trends and patterns in money laundering and terrorist financing;
- Maintaining a registry of money services businesses in Canada; and
- Enhancing public awareness and understanding of money laundering and terrorist activity financing
18
Q
The Proceeds of Crime (Money Laundering) and Terrorist Financing Act has key objectives, name at least two.
A
- To implement specific measures to detect and deter money laundering and the financing of terrorist activities;
- To facilitate the investigation and prosecution of money laundering offences and terrorist activity
financing offences; - To respond to the threat posed by organized crime; and
- To assist in fulfilling Canada’s international commitments to participate in the fight against transnational crime
19
Q
TRUE OR FALSE?
Certain individuals, including staff of financial institutions and insurance of persons representatives, are required to report suspicious financial transactions to FINTRAC.
A
TRUE
20
Q
FINTRAC published guidance that applies and reiterates the obligations imposed on insurance representatives by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
What are some of their principal obligations? (name one)
A
- Establishment and implementation of a compliance program;
- Record-keeping requirements;
- Reporting requirements (suspicious transactions, terrorist property, large cash transactions, large virtual currency transactions)
21
Q
In regards to FINTRAC, PCMLTFA and their principal obligations, “Know-your-client” requirements, includes client identification requirements, what are they?
A
- Verification of clients’ and beneficiaries’ identity (individuals, legal persons and other entities);
- Ongoing monitoring of the business relationship;
- Identification of beneficial owners;
- Third party determination; and
- Determination of politically exposed persons and heads of international organizations.
22
Q
A FINTRAC insurance representative is required to verify the identity of any person or entity (hereinafter “the client” or “the beneficiary”) for whom an information record is kept regarding the sale of an immediate / deferred annuity or a life insurance policy under two common transactions, what are they?
A
- For which the client may pay $10,000 or more over the duration of the annuity or policy;
- For which a beneficiary may receive $10,000 or more over the duration of the annuity or policy
[Ref. 4.1.4.2 ]
23
Q
In regards to FINTRAC Identity verification, an identity need not be verified again if…
A
- The identity of an individual has already been verified or the existence of an entity has already been confirmed using a method permitted by the Act and its regulations,
- The required documents are kept on file, and
- No doubt remains as to the information obtained
24
Q
FINTRAC describes five (5) methods to verify the identity of a person or an entity, what are they?
A
- Government-issued photo identification method (Some examples include a Canadian passport, a permanent resident card, driver’s licence etc…)
- Credit file method
- Dual-process method
- Affiliate or member method
- Reliance method
25
*TRUE OR FALSE?*
In regards to FINTRAC Identity verification, a social insurance card may not be used to verify identity, and a social insurance number (S.I.N.) may not be used in a report made to FINTRAC.
TRUE
26
# *Ethics Terminology*
Dual-process method
Requires performing two actions, **consulting two independent credit transactions or referring to two reliable and distinct sources** to verify a client’s or beneficiary’s identity
| [STUDY REFERENCE: 4.1.4.2]
27
# *Ethics Terminology*
Credit file method
- **A credit file is used as an identification method to verify the identity** of a person who is not physically present
- This method requires that consent first be obtained from the client or beneficiary before consulting the information contained in the credit file
| [STUDY REFERENCE: 4.1.4.2]
28
# *Ethics Terminology*
Affiliate or member method
The identity of a person or an entity which can be **verified by confirming** that entities such as **banks, credit unions, loan companies, etc**... has previously performed such a verification.
| [STUDY REFERENCE: 4.1.4.2]
29
# *Ethics Terminology*
Reliance method
A person’s or entity’s identity verified by **relying on the measures already taken**
| [STUDY REFERENCE: 4.1.4.2]
30
# *Ethics Terminology*
Mandatary
One to whom a command or charge is given; one who has received and holds a mandate to act for another; an attorney.
31
*TRUE OR FALSE?*
The insurance of persons representative cannot use a mandatary acting on his behalf to verify the identity of a person.
FALSE
The insurance of persons representative **can** use a mandatary acting on his behalf to verify the identity of a person
| [Ref. 4.1.4.2]
32
In regards to FINTRAC Identity verification, how do you verify the identity of a corporation? *(name one)*
*To verify the identity of a corporation, an insurance of persons representative must consult one of the following documents:*
- a certificate of incorporation;
- a record that the corporation has to file annually under provincial securities legislation; or
- the most recent version of any other record that confirms the corporation’s existence and contains its name and address and the names of its directors, *(such as a certificate of active corporate status, the corporation’s annual report signed by an audit firm)*
- A letter or notice of assessment for the corporation from a municipal, provincial, territorial or federal government.
33
*TRUE OR FALSE?*
If a client or beneficiary is a corporation, the insurance of persons representative must obtain a signing authority resolution clearly designating the individuals duly authorized to act and sign on behalf of the corporation.
TRUE
34
# *Ethics Terminology*
Beneficial owners
Beneficial owners are the individuals who **directly or indirectly own or control 25% or more of a corporation** or an entity other than a corporation.
35
*TRUE OR FALSE?*
In the case of a corporation, the beneficial owners are often the employees.
FALSE
In the case of a corporation, the beneficial owners are often its shareholders.
| [Ref. 4.1.4.2]
36
*TRUE OR FALSE?*
In the case of a trust, Beneficial owners are the trustees, the known beneficiaries and the settlors of the trust.
TRUE
37
*TRUE OR FALSE?*
Beneficial owners cannot be other corporations, trusts or other entities. They must be the individuals who are the owners or controllers of the entity.
TRUE
38
In regards to *FINTRAC* Identity verification, the insurance of persons representative must take **reasonable measures to make a third party determination** when he is required to...
- Report a large cash transaction or keep a large cash transaction record;
- Report a large virtual currency transaction or keep a large virtual currency (VC) transaction record;
- Keep an information record.
39
*Explain* Politically exposed person (PEP) and head of international organization (HIO)
**Individuals who are entrusted with a prominent position** *(position of power)* that typically comes with extensive access to considerable resources and the opportunity to **influence decisions.**
40
There are two types of Politically exposed persons (PEP) what are they?
Domestic & Foreign
41
*FILL IN THE BLANK!*
A _________ is a person who currently holds or has held within the last five years one of the following offices or positions:
- head of an international organization established by the governments of states; or
- head of an institution established by an international organization.
Head of international organization (HIO)
42
*TRUE OR FALSE?*
A person ceases to be a HIO ten years after leaving office.
FALSE
A person ceases to be a HIO **five years** after leaving office.
43
*TRUE OR FALSE?*
If a person is a PEP or a HIO, certain members of their family must also be considered PEPs or HIOs under the Act and its regulations.
TRUE
44
The insurance of persons representative must take reasonable measures to determine whether a person is a PEP, HIO or family member or close associate of a PEP or HIO with respect to the following transactions...
- Receipt of a **lump-sum payment** in the amount of **$100,000 or more** in funds or an amount of VC (Virtual Currency) equivalent to **$100,000 or more** in respect of an immediate or deferred annuity or a life insurance
policy; and
- Remittance of an amount of **$100,000 or more** in funds or an amount of VC (Virtual currency) equivalent to
**$100,000 or more** to a beneficiary over the duration of an immediate or deferred annuity or of a life insurance policy.
- ***Remittances** are the transfer of funds between parties as a bill, an invoice, or even a gift.*
45
*TRUE OR FALSE?*
ML or TF indicators are potential warning signs likely to trigger suspicions or indicate that something is unusual in the absence of a reasonable explanation.
TRUE
46
In regards to ML and TF, what are **some** indicators that could arouse suspicion or cause unease? *(name at least three)*
- The **client refuses to produce the required personal identification documents**, wants to establish
his identity through means other than his personal identification document or inordinately delays in presenting his corporate documents;
- The **client is accompanied and watched, secretive, nervous or over-justifies himself**;
- The **client displays uncommon curiosity** about internal controls or unusual knowledge about legislation regarding suspicious transaction reporting;
- The client **deposits large third‑party cheques**;
- The client **shows more interest in the cancellation** than in the long‑term benefits of the product;
- The **transaction is unnecessarily complex** for its stated purpose;
- The **transaction seems to be inconsistent** with the client’s apparent financial situation or usual
pattern of activities; or
- The **client gives a post office box address rather than the street address** of a residence.
47
*TRUE OR FALSE?*
The insurance of persons representative
should disclose to the client or beneficiary that an analysis has been completed regarding a suspicious transaction or that a report has been made to FINTRAC.
FALSE
Suspicious **transaction reports are confidential.**
In addition, the insurance of persons representative must **not disclose** to the client or beneficiary that an analysis has been completed regarding a suspicious transaction or that a report has been made to FINTRAC.
| [Ref. 4.1.4.2]
48
*TRUE OR FALSE?*
Failure to fulfill the obligation to report suspicious transactions may lead to financial administrative penalties and serious criminal sanctions.
TRUE
49
*FILL IN THE BLANK!*
In regards to reports on large cash transactions to FINTRAC obligations, the insurance of persons representative must submit a large cash transaction report to FINTRAC if he receives:
- an amount of $_______ or more in cash in the course of a single transaction; or
- two or more amounts that total $_______ or more within a consecutive _________*(hour(s))* window made by
or on behalf of the same individual or entity.
In regards to reports on large cash transactions to FINTRAC obligations, the insurance of persons representative must submit a large cash transaction report to FINTRAC if he receives:
- an amount of **$10,000** or more in cash in the course of a single transaction; or
- two or more amounts that total **$10,000** or more within a consecutive **24-hour** window made by
or on behalf of the same individual or entity
50
In regards to reports on large cash transactions to *FINTRAC* obligations, the **insurance of persons representative does not have to make a large cash transaction report** to *FINTRAC* if the **cash is received from**...
- **a financial entity** *(bank, credit union, caisse populaire, etc.)*; or
- **a public body or its agent** *(government department or ministry, hospital authority, etc.)*
51
*FILL IN THE BLANK!*
In regards to **reports on large cash transactions** to *FINTRAC* obligations, the insurance of persons representative must submit the large cash transaction report to *FINTRAC* within ______ days after the transaction.
In regards to reports on large cash transactions to *FINTRAC* obligations, the insurance of persons representative must submit the large cash transaction report to *FINTRAC* within **15 calendar days** after the transaction.
| [Ref. 4.1.4.2]
52
In regards to reports on large **virtual currency (VC)** transactions to FINTRAC obligations, the insurance of persons representative must submit a large VC transaction report to FINTRAC if he receives:
- an amount in VC equivalent to $_______ or more in a single transaction; or
- two or more amounts in VC that total $_______ or more within a consecutive ______*(hour(s))* window and the transactions were conducted by the same person or entity, or were conducted on behalf of the same person or entity, or are for the same beneficiary.
- an amount in VC equivalent to **$10,000** or more in a single transaction; or
- two or more amounts in VC that total **$10,000** or more within a consecutive **24-hour** window and the transactions were conducted by the same person or entity, or were conducted on behalf of the same person or entity, or are for the same beneficiary.
- *It is important to note that insurers rarely accept payments or transactions in VC.*
53
In regards to reports on large **virtual currency (VC)** transactions to FINTRAC obligations, the insurance of persons representative must submit a large VC transaction report to FINTRAC within
____ days after the day he receives the amount.
The insurance of persons representative must submit a large VC transaction report to FINTRAC within **five working days** after the day he receives the amount.
54
# *Ethics Terminology*
Assuris
“not-for-profit” organization that protects Canadian policyholders if their life insurance company should fail.
55
*TRUE OR FALSE?*
The insured is only covered under Assuris if provincially regulated companies are in complience.
FALSE
The insured is **automatically covered under Assuris** because **all federally regulated insurers, and most provincially regulated companies, must be part of Assuris**.
| [Ref. 4.1.4.3]
56
What are the benefit amounts regarding Assuris and it's protection?
85% depending on
- Death benefit
- Health expense
- Monthly income
- Cash value
- Accumulated Value
57
# *Ethics Terminology*
OmbudService for Life and Health Insurance (OLHI)
National independent complaint resolution organization providing clients with assistance to their enquiries and complaints pertaining to Canadian life and health insurance products and services.
58
# *Ethics Terminology*
Canadian Council of Insurance Regulators (CCIR)
Inter-jurisdictional association of insurance regulators.
Their mandate is “*to facilitate and promote an efficient and effective insurance regulatory system in Canada to serve the public interest*"
59
In regards to Canadian Council of Insurance Regulators (CCIR), what are **some** of their **regulatory authorities in managing key risks** to clients? *(name at least two)*
- **Strengthening the foundation** of market conduct;
- **Implementing an enhanced** market conduct supervisory **framework**;
- Making the **supervision of insurance intermediaries** more effective;
- **Assisting clients through targeted financial education programs**, such as fraud alerts and client information portals
60
What are the other professional associations that **encourage** the professionalism of life insurance agents, promote the obtaining of professional qualifications, continuous professional development, ethical behaviour within the industry and fair treatment of clients?
- Canadian Life and Health Insurance Association (CLHIA)
- Advocis
- The Independent Financial Brokers of Canada (IFB),
- Financial Planners Standards Council (FPSC).
*These promote the obtaining of professional qualifications, continuous professional development, ethical behaviour within the industry and fair treatment of clients.*
| [Ref. 4.1.5]
61
# *Ethics Terminology*
International Association of Insurance Supervisors (IAIS)
An **agency that globally provides consistent supervision of the insurance industry** and contributing to global financial stability.
62
What are the Insurance core principles (ICP) 18 and 19 of the IAIS?
- Insurance core principle **(ICP) 18**, entitled “*Intermediaries*,” **covers the supervision of life insurance agents**
- **ICP 19**, entitled “*Conduct of business*”, **covers the activities and behaviour of life insurance agents**
- *The rules emphasized in these ICPs are for the most part reflected in the existing codes of conduct of most of the regulatory authorities and insurance companies with the view to protecting clients and supporting their best interests.*
63
What are the differences between principles and rules under the Ontario Insurance Act regulations?
64
An agent’s conduct, practices and decisions are guided by principles and rules. Name **some**
- Acting in good faith;
- Managing conflicts of interest properly;
- Refraining from unfair or deceptive practices;
- Making full disclosure;
- Acting in compliance of regulation;
- Handling complaints in a timely and fair manner.
65
What are the components of
acting in good faith?
- Duty of care;
- Integrity;
- Competence.
66
*FILL IN THE BLANK!*
_________ is the responsibility and obligation of life insurance agents to avoid careless acts or omissions
Duty of care
67
*TRUE OR FALSE?*
If an agent encounters a situation where his knowledge and skills may not be sufficient to make a well-founded recommendation, then the agent has an ethical duty to not provide the service to the client.
FALSE
If an agent encounters a situation where his knowledge and skills may not be sufficient to make a well-founded recommendation, then **the agent has an ethical duty to either ask for technical assistance from a colleague or refer the client to someone who can provide the assistance.**
| [Ref. 4.2.1.3]
68
It is essential that life insurance agents act with **integrity**. These relate to qualities such as...
- Being honest, trustworthy and fair;
- Being reliable, dependable and respectful.
69
The combination of care, integrity and competence *(often referred to as acting in good faith)* will...
- Help build the life agent’s reputation
- Achieve the marketplace outcome
70
In regards to ethical practice, what is "conflict of interest?"
a situation in which a life insurance agent is motivated to take action by an interest other than that of the client.
Placing the interests of a client second to the agent’s interest.
ETHICS (OFFICIAL LLQP)
flashcards
Decks in class (11)
# Cards
-
OVERVIEW PREVIEW (LLQP Flashcards)1
-
OVERVIEW PREVIEW 2 (LLQP Flashcards)3
-
OVERVIEW PREVIEW 3 (LLQP Flashcards)3
-
OFFICIAL OVERVIEW (LLQP Flashcards)33
-
EXAM PRACTICE QUESTIONS36
-
CHAPTER 1 (Legal Framework Governing Life Insurance)66
-
CHAPTER 2 (Insurance Policy Provisions)83
-
Chapter 3 (Life Insurance, Accident & Sickness Insurance & Annuity Claims-Payment of Proceeds19
-
CHAPTER 4 (Rules And Principles Governing The Activities of Life Insurance Agents And Accident & Sickness Insurance Agents70
-
CHAPTER 4 (Part 2)29
-
Provincial & Territorial Regulation Authorities6
