The Executive Officer’s Need to Ensure That His Staff Is Always Duly Certified
By : Carole Chauvin, B.Sc., A.I.B., C.Adm., Syndic
This article is based on actual cases that were brought before the syndic. Its purpose is to help you reflect on your professional practice, specifically with respect to your ethical obligations.
In follow up to the Dossier article, published in the winter 2013 edition of the ChADPresse [in French only], here are a few cases that led to disciplinary complaints involving non-certified staff.
In particular, these cases refer to the following professional obligations:
The Act respecting the Distribution of financial products and services (ADFPS)
A firm and its executive officers shall oversee the conduct of the firm’s representatives. They shall ensure that the representatives comply with this Act and the regulations.
The Code of ethics of damage insurance representatives and the Code of ethics of claims adjusters
A damage insurance representative/claims adjuster shall insure that he, his mandataries and his employees comply with the provisions of the Act respecting the distribution of financial products and services and the regulations thereunder.
Section 37 (12) and section 58 (14) of the above Codes:
Constitutes a breach of the Code of ethics, the fact that (…) acts contrary to the honour and dignity of the profession, including:
– carrying on activities with persons not authorized to carry on such activities by the Act or the regulations thereunder, or using their services to do so.
Negligence during the Transition Period1
Based on information from the firm’s register, the inspectors sent by the ChAD to conduct a firm inspection believed they were going to meet with two certified professionals. On site, the inspectors observed that four employees who were neither certified damage insurance professionals nor grandfathered under section 547 of the ADFPS were working directly with clients.
At her formal complaint hearing, the certified representative responsible admitted to having been negligent in 1999, during the transition period between the phasing out of the Act respecting market intermediaries and the introduction of the ADFPS. The representative admitted to not having ensured that certain employees’ certificates were renewed and that the grandfathered rights of other employees were formally recognized. The executive officer was punished with fines totalling $33,000, although the fines were subsequently consolidated in keeping with the “principle of globality” and reduced to $18,000 to avoid an unduly harsh sanction.
A Shortage of Certified Staff2
After the departure of a certified employee from the firm, an executive officer blew the whistle on him for having engaged in certain questionable professional practices. While we were at the office of the complainant firm conducting the investigation, we observed that a non-certified employee was working directly with clients. She openly informed us that she had been working in this capacity for the firm for the past three years. The firm’s certified executive officer said that “there was a certain level of tolerance in the region [for this practice], given the shortage of certified personnel.”
The firm’s executive officer pled guilty to what the Discipline committee described as “acts of negligence (…) stemming from his own actions or omissions (…).” The executive officer was punished with fines totalling $6,500. The Discipline committee took into account the fact that the firm had closed, that its registration had been cancelled and that the Bureau de décision et de révision (BDR) of the Autorité des marchés financiers (the Authority) had imposed $10,000 in fines.
Non-compliance with the Limits of One’s Certificate3
A personal-lines damage insurance claims adjuster who acted in business-lines damage insurance for eight years pled guilty. The executive officer responsible for the firm also pled guilty to the formal complaint lodged against him for having allowed the claims adjuster to act in a sector that did not appear on his certificate. Fines totalled $18,000. The firm was also sanctioned by the BDR of the Authority and required to pay an administrative penalty of $50,000.
The executive officers responsible pled guilty to charges of having allowed students to act directly with clients over a period of three summers. As the Discipline committee wrote: “Essentially, the complaints allege that the respondents allowed uncertified employees to directly collect from clients the information required to draw up an insurance contract and to perform tasks or activities reserved for duly certified representatives. “ In light of the fact that the business had been totally restructured and had made an undertaking to never commit such breaches again, sanctions imposed on the executive officers included fines totalling $15,000.
Participating in the Illegal Exercise of the Profession
This can no longer be tolerated. Here are a few excerpts from rulings handed down by the Discipline committee that set the tone:
“This is a serious breach since it directly endangers the protection of the public.”
“It is well known that being a member of a professional chamber and holding a valid certificate are a guarantee of competence and ensure the protection of the public. Failing to update one’s certificate is more than a simple technical error: this type of offence affects the very heart of the profession.”
“In keeping with traditional case law, exercising the profession is a “privilege” that brings with it the responsibility to comply with strict rules that have been established to protect the public.”
3 2011-06-01(E) and 2011-09-02(E)
4 2001-05-02(C) and 2011-05-03(C)