COMMERCIAL PRACTICES GUIDELINE

Transcription

1 COMMERCIAL PRACTICES GUIDELINE Nvember 2009

2 TABLE OF CONTENTS Page Part Sectin Preamble 3 Intrductin 4 Apprach adpted fr the guideline 5 Scpe 6 Cming int effect and updating 7 Supervisin f cmmercial practices 8 GENERAL EXPECTATIONS Rles and respnsibilities f the bard f directrs and senir management Design, selectin, prmtin and distributin f financial prducts and services Advice Cmplaint examinatin and dispute reslutin Prtectin f infrmatin btained frm cnsumers SPECIFIC EXPECTATIONS Depsits and insurance Depsits Insurance Financial services cperatives Trust cmpanies and savings cmpanies Damage insurers Insurers f persns (life and health) A B A1 A2 A3 A4 A5 B1 B2 B3 B4 B5 B6 B7 Cmmercial Practices Guideline Autrité des marchés financiers Nvember 2009

3 Preamble The Autrité des marchés financiers ( AMF ) has established this guideline setting ut its expectatins with respect t financial institutins legal requirement t fllw sund cmmercial practices. The guideline cvers the executin, interpretatin and applicatin f this requirement. In setting ut its expectatins, the AMF favurs a principles-based apprach rather than a specific rules-based apprach. This guideline differs frm existing guidelines in that it is based in part n rules set ut in the laws and regulatins in frce. 1 Nnetheless, the guideline prvides financial institutins with the necessary latitude t determine the requisite strategies, plicies and prcedures needed t implement the principles fr sund cmmercial practices and t apply such practices based n the nature, size and cmplexity f their activities. The AMF cnsiders crprate gvernance, integrated risk management and cmpliance (GRC) as the fundatin stnes fr sund cmmercial practices and, cnsequently, as the basis fr the prudential framewrk prvided by the AMF. This guideline is part f this apprach and sets ut the AMF s expectatins regarding financial institutins sund cmmercial practices. 1 Fr example, An Act respecting the distributin f financial prducts and services, R.S.Q., c. D-9.2 ( Distributin Act ) and its regulatins. Cmmercial Practices Guideline 3 Autrité des marchés financiers Nvember 2009

4 Intrductin A number f factrs have cntributed t creating a higher-risk envirnment fr financial institutins, including the glbalizatin f financial markets, the integratin f financial prduct and service fferings, cmplex rganizatinal structures, a reliance n financial engineering and changes in infrmatin technlgies. Ethics, integrity and cmpetence are als imprtant issues in an industry that relies n cnfidence. Cnsequently, the firm cmmitment f directrs and fficers t manage all risks, and thereby reputatinal risk, is a significant factr in ensuring the prper cnduct f an institutin s affairs. This cmmitment invlves versight f cmmercial practices, since these can affect an institutin s reputatin and cnstitute a threat t its slvency. As a regulatr, the AMF must prtect the interests f Québec cnsumers f financial prducts and services 2 and maintain the public s cnfidence in the industry and, in this way, fster the stability f ur financial system. With this in mind, the AMF believes that financial institutins, as a prducers, prmters r distributrs f financial prducts and services, have the respnsibility t act in the best interests f their clients. Pursuant t the authrity cnferred upn it 3 under the varius sectr-based laws it administers, the AMF is issuing this guideline t infrm financial institutins f its expectatins regarding the legal requirement t fllw sund cmmercial practices. 4 The expectatins set ut in this guideline are based n cre principles and guidance issued by internatinal rganizatins 5 with a view t fstering sund cmmercial practices, as well as n numerus dcuments published by varius regulatrs, self-regulatry rganizatins and industry assciatins The use f the generic term cnsumer in this guideline refers bth t cnsumers f financial prducts (insureds, savers, investrs and brrwers) and users f financial services. An Act respecting insurance, R.S.Q., c. A-32, ss and ; An Act respecting financial services cperatives, R.S.Q., c. C-67.3, s. 565; An Act respecting trust cmpanies and savings cmpanies, R.S.Q., c. S-29.01, s An Act respecting insurance, R.S.Q., c. A-32, s ; An Act respecting financial services cperatives, R.S.Q., c. C-67.3, s. 66.1; An Act respecting trust cmpanies and savings cmpanies, R.S.Q., c. S-29.01, s Bank fr Internatinal Settlements, Cre Principles fr Effective Banking Supervisin, Octber Internatinal Assciatin f Insurance Supervisrs, Insurance Cre Principles and Methdlgy, Octber Cmmercial Practices Guideline 4 Autrité des marchés financiers Nvember 2009

5 Apprach adpted fr the guideline In rder t develp a cmmercial practices framewrk that is cnsistent and fsters the fair treatment f cnsumers, this guideline is divided int tw parts. Part A emphasizes an intersectrial apprach and sets ut the AMF s general expectatins with respect t the design, selectin, prmtin and distributin f financial prducts and services. Part B is subdivided based n the specific financial sectr r type f institutin being discussed. It sets ut mre specific expectatins with respect t a given prduct, service r activity, elabrating n the elements cvered in Part A r n the prvisins cntained in existing laws and regulatins. This structure allws fr amendments r additins t the guideline as needed, in particular t deal with specific situatins. Cmmercial Practices Guideline 5 Autrité des marchés financiers Nvember 2009

6 Scpe This cmmercial practices guideline is intended fr insurers f persns (life and health), damage insurers, prtfli management cmpanies cntrlled by an insurer, mutual insurance assciatins, financial services cperatives as well as trust and savings cmpanies, which are gverned by the fllwing Acts: An Act respecting insurance, R.S.Q., c. A-32 An Act respecting financial services cperatives, R.S.Q., c. C-67.3 An Act respecting trust cmpanies and savings cmpanies, R.S.Q., c. S This guideline applies t financial institutins perating independently as well as t financial institutins perating as part f a financial grup. 6 As regards financial services cperatives and mutual insurance assciatins that are members f a federatin, the standards r plicies adpted by the federatin shuld be cnsistent with and even cnverge n the principles f sund cmmercial practices prescribed by law and the expectatins set ut in this guideline. The generic terms financial institutin and institutin refer t all entities cvered by the scpe f this guideline. 6 Fr purpses f this guideline, financial grup refers t any grup f legal persns cmpsed f a parent cmpany (financial institutin r hlding cmpany) and legal persns affiliated therewith. Cmmercial Practices Guideline 6 Autrité des marchés financiers Nvember 2009

7 Cming int effect and updating This cmmercial practices guideline will cme int effect n mnth xx, 201X. With respect t the legal requirement f institutins t fllw sund cmmercial practices, the AMF expects each institutin t develp strategies, plicies and prcedures based n its nature, size, cmplexity and risk prfile, t ensure cmpliance with the expectatins underlying this guideline by mnth xx, 201X (2 years after the date f cming int effect). Where an institutin has already implemented such a framewrk, the AMF may verify whether it enables the institutin t satisfy the requirements prescribed by law. This guideline will be updated based n develpments in best cmmercial practices and in rder t address the mst crucial prblems related t the prtectin f the interests f Québec cnsumers. The guideline will als be updated in light f the AMF s bservatins in the curse f its supervisin f financial institutins, the data cllected frm cmplaints and the surveys carried ut amng institutins and cnsumers. Cmmercial Practices Guideline 7 Autrité des marchés financiers Nvember 2009

8 Supervisin f cmmercial practices T fster the establishment f sund cmmercial practices within financial institutins, the AMF, acting within the scpe f its activities, intends t assess the degree f cmpliance with the expectatins set frth in this guideline in light f the specific attributes f each institutin. Cnsequently, it will examine the effectiveness and relevance f the strategies, plicies and prcedures adpted by financial institutins in rder t achieve the expected results in respect f sund cmmercial practices as well as the quality f independent versight exercised by their bard f directrs and senir management t ensure peratinal cmpliance therewith. Mrever, there are a large number f cmmercial practices and these practices are cnstantly evlving. The AMF therefre expects decisin makers at financial institutins t remain current with best practices and t adpt such practices, t the extent that they address their needs. Cmmercial Practices Guideline 8 Autrité des marchés financiers Nvember 2009

9 PART A GENERAL EXPECTATIONS Sectin Rles and respnsibilities f the bard f directrs and senir management Design, selectin, prmtin and distributin f financial prducts and services Advice Cmplaint examinatin and dispute reslutin Prtectin f infrmatin btained frm cnsumers A1 A2 A3 A4 A5 Cmmercial Practices Guideline Autrité des marchés financiers Nvember 2009

10 Rles and respnsibilities f the bard f directrs and senir management A1. Rles and respnsibilities f the bard f directrs and senir management The AMF expects the members f the bard f directrs and senir management t participate actively in designing and implementing sund cmmercial practices aimed in particular at prtecting the interests f cnsumers. In light f the rles and respnsibilities incumbent upn them under the Gvernance Guideline, 7 the bard f directrs and senir management shuld, in particular: demnstrate their firm cmmitment t achieving the expected results with respect t cmmercial practices, namely, by: develping strategies and implementatin plans in rder t achieve said results with respect t cmmercial practices; identifying a senir fficer respnsible fr carrying ut the initiatives aimed at establishing and prmting sund cmmercial practices; develping a cmpensatin structure fr senir fficers geared twards achieving lng-term results; establishing internal reprts that include the mst useful infrmatin and indicatrs t allw them t measure the institutin s perfrmance with respect t cmmercial practices; ensure that the institutin s framewrk supprts the achievement f the expected results in matters f sund cmmercial practices, namely, by: reducing the risk f sales inapprpriate t cnsumers needs; ensuring, as needed, that any advice given is f a high quality; examining cnsumer cmplaints in a fair manner; prtecting infrmatin btained frm cnsumers; establish a cde f ethics and prfessinal cnduct and cmmunicate t staff the imprtance f understanding and cmplying with the cde; establish mechanisms and cntrls t ensure that all departures frm plicies and prcedures as well as all ther situatins that jepardize the prtectin f the interests f cnsumers are given special attentin by decisin makers. 7 Autrité des marchés financiers, Gvernance Guideline, April Cmmercial Practices Guideline A1.1 Autrité des marchés financiers Nvember 2009

11 Design, selectin, prmtin and distributin f financial prducts and services A2. Design, selectin, prmtin and distributin f financial prducts and services The AMF expects financial institutins t develp a framewrk t reduce the risk f sales inapprpriate t cnsumers needs, frm the pint f selectin r design f financial prducts and services t distributin. Regardless f the institutin s rganizatinal r peratinal structure, its status and relatinship within a grup and whether r nt it relies n third parties 8 r independent and certified distributin netwrks, the AMF expects the institutin t act in the best interests f its clients. The AMF expects a financial institutin t establish plicies and prcedures and implement cntrls allwing it t ffer cnsumers financial prducts and services which meet their needs and prvide disclsure that is apprpriate fr infrmed decisin making as well as quality advice, as the case may be, t reduce any incidence f inapprpriate sales. Befre marketing a financial prduct r service, the institutin shuld carry ut a diligent review f the prduct r service in relatin t its business mdel, the existing rules and regulatins and its risk management apprach. In particular, the plicies, prcedures and cntrls put int place shuld allw the institutin t: ffer a viable prduct r service which allws the cnsumer t benefit frm a healthy level f cmpetitin in the financial markets; target the cnsumers fr whm the prduct r service is likely t be suitable in meeting their needs, as well as the clients fr whm the prduct r service is likely t be unsuitable; analyze financial, accunting and taxatin issues and assess the risks resulting frm the prduct r service 9 by cnsidering, amng ther things, changes (threats r pprtunities) assciated with the envirnment r stemming frm the institutin s plicies that culd harm cnsumers; ensure that distributin methds suitable t the prduct r service, particularly in light f the laws and regulatins in frce 10 and whether r nt advice shuld be prvided; anticipate the infrmatin that cnsumers will need in rder t make an infrmed decisin, keeping in mind that cnsumers d nt all have the same infrmatinal needs; Fr example, fr the design f prducts and services, the preparatin and disseminatin f disclsure dcuments r advertising materials, the recruitment r training f persns prviding advice, etc. Fr example, credit risk, market risk, liquidity risk, insurance risk, reputatinal risk and cmpliance risk. Distributin f insurance prducts in Québec subject t An Act respecting the distributin f financial prducts and services, R.S.Q., c. D-9.2 and its regulatins. Cmmercial Practices Guideline A2.1 Autrité des marchés financiers Nvember 2009

12 Design, selectin, prmtin and distributin f financial prducts and services if applicable, prvide fr the disclsure t cnsumers f any situatin based n circumstances likely t limit r cmprmise the impartiality f the advice given; ensure that infrmatin intended fr cnsumers can be prvided t them upn request and in a timely manner; ensure that infrmatin intended t be delivered t cnsumers electrnically can als be made available in hard cpy; plan fr the infrmatinal and training needs f staff prviding advice in rder t ensure they are adequately acquainted with, and have sufficient understanding f, the characteristics and risks f the prduct r service in questin, and are able t identify all relevant infrmatin t be prvided t cnsumers; prvide fr a meticulus assessment f the main characteristics f a new prduct r service and f the disclsure dcuments related theret by cmpetent persns within every apprpriate department f the institutin, 11 including a prduct r service riginating frm a third party; ensure that the infrmatin abut the prduct r service is clear, relevant, truthful and nt misleading and that it cmplies, as the case may be, with applicable laws and regulatins; prvide fr an independent review f advertising materials and ther cmmunicatins intended fr cnsumers ther than by the persn r rganizatin that prepared r designed them; ensure that cnsumers can have access t additinal infrmatin after the initial purchase f a prduct r service; prvide fr systems and cntrls t ntify cnsumers f any remedial actin taken with respect t a prduct r service; maintain a file regarding the diligent review carried ut by the institutin with respect t a prduct r service; mnitr the prduct r service after its launch t ensure it still meets the needs f target cnsumers, assess the perfrmance f the varius methds f distributin used with respect t sund cmmercial practices and, if necessary, take the necessary remedial actins. 11 Cmpliance, risk management, finance, sales, etc. Cmmercial Practices Guideline A2.2 Autrité des marchés financiers Nvember 2009

13 Advice A3. Advice The AMF expects financial institutins t ensure the delivery f quality advice. Certain financial prducts and services ffered n the market present few risks fr cnsumers and d nt require advice. Other prducts and services, which may be cmplex, difficult t understand r assess r may affect a cnsumer s financial situatin, d require advice. Whether advice is given directly r independently, 12 the AMF expects an institutin t ensure that the best pssible advice is prvided. Accrdingly, institutins shuld set up plicies, prcedures and cntrls t ensure the delivery f quality advice, in accrdance with any legal and regulatry requirements. 13 Advice shuld include, in particular : a fair and equitable analysis f the relevant elements; the timely cmmunicatin f infrmatin in light f the cnsumer s degree f knwledge and experience with respect t financial prducts and services, s as t allw fr infrmed decisin making; the disclsure f any situatin liable t cmprmise the impartiality f the advice given, limit the advice given r place the interests f the institutin r a third party abve thse f the cnsumer; the elements that shuld be included in the client files s that the institutin can exercise independent cntrl after the fact n the quality f the advice given, take any necessary remedial measures with respect t the delivery f advice and, if applicable, be in a psitin t examine fairly any cmplaints submitted t it. In rder t ensure the delivery f quality advice, the institutin shuld, in particular: establish recruitment practices thrugh which it can identify behaviur that raises dubts regarding a persn s ethics, integrity, cmpetence, judgment r sense f respnsibility, all f which are essential criteria fr prviding quality advice. Such practices culd include: initial and peridic cntrls; qualificatins sught; Directly by the institutin r thrugh a certified independent distributr. Fr example, An Act respecting the distributin f financial prducts and services, R.S.Q., c. D-9.2 ( Distributin Act ) and its regulatins. Cmmercial Practices Guideline A3.1 Autrité des marchés financiers Nvember 2009

14 Advice btaining infrmatin; prcedures t respnd t the infrmatin btained; rules fr determining whether an individual is still qualified t perfrm his functins; 14 establish a cntinuus training prgram that allws the persns giving advice t: keep abreast f market trends, ecnmic cnditins, innvatins and mdificatins made t the prducts and services; maintain an apprpriate level f knwledge abut their industry segment, including the characteristics and risks f the prducts and services; knw the applicable legal and regulatry requirements; knw the requirements fr the cmmunicatin f infrmatin regarding the prducts and services and fr apprpriate disclsure f any situatin liable t cmprmise the impartiality f the advice given r limit such advice; be familiar with the dcumentatin regarding the prducts and services and answer reasnably freseeable questins; prvide a cnsumer with sund advice fllwing a fair and equitable analysis f the relevant elements, including the cnsumer s needs; establish and peridically review the system fr evaluating the perfrmance f persns prviding advice and their remuneratin structure, s as t fster sund cmmercial practices Under the Distributin Act, an insurer wh gives advice directly (an insurer firm ) must regularly verify that its representatives are still certified. Furthermre, under sectin 104 f the same statute, an insurer wh gives advice directly must infrm the AMF when it terminates its assciatin with a representative. If the firm terminates its assciatin with the representative fr reasns relating t the representative s activities, it must infrm the AMF f thse reasns. Perfrmance shuld nt be determined slely n the basis f advice resulting in sales. Cmmercial Practices Guideline A3.3 Autrité des marchés financiers Nvember 2009

15 Cmplaint examinatin and dispute reslutin A4. Cmplaint examinatin and dispute reslutin The AMF expects financial institutins t examine cnsumer cmplaints fairly, in accrdance with a plicy and with straightfrward, accessible and effective prcedures. Pursuant t the legislative prvisins set frth in the laws administered by the AMF, 16 every institutin shuld prvide equitable examinatin f cmplaints submitted t it in rder t maintain cnsumer cnfidence. T this end, the institutin shuld establish an independent prcess and designate a persn in charge f examining cmplaints and reslving disputes. In particular, the institutin shuld adpt a plicy and prcedures allwing it t: examine cmplaints made in cnnectin with a prduct r service, regardless f its means f distributin, and reslve any disputes arising therefrm; dcument data regarding cmplaints; prmte and disclse its cmplaint examinatin and dispute reslutin prcess and facilitate access theret by cnsumers, in persn, by phne r n-line; prvide written cnfirmatin as sn as a cmplaint has been received; infrm the cnsumer frthwith and in writing that he can ask fr a cpy f his file t be sent t the AMF if he is dissatisfied with the examinatin f his cmplaint r its utcme; set a maximum time limit fr the examinatin f a cmplaint and fr a written answer clearly summarizing the reasns fr its psitin; ensure that the persns wh prvide advice are familiar with the cmplaint examinatin and dispute reslutin prcess and that they cmmunicate this infrmatin t cnsumers; establish internal reprts allwing it t pinpint trends, highlight aspects that need imprvement, target the distributin methds and the prducts and services in questin, identify thse parties wh have failed t cmply with the principles f sund cmmercial practices and take the apprpriate measures t remedy any deficiencies. 16 An Act respecting insurance, R.S.Q., c. A-32, sectins t and ; An Act respecting financial services cperatives, R.S.Q., c. C-67.3, sectins 131.1, and 131.4; An Act respecting trust cmpanies and savings cmpanies, R.S.Q., c. S-29.01, sectins 153.1, and Cmmercial Practices Guideline A4.1 Autrité des marchés financiers Nvember 2009

16 Prtectin f infrmatin btained frm cnsumers A5. Prtectin f infrmatin btained frm cnsumers The AMF expects financial institutins t handle infrmatin btained frm cnsumers with the apprpriate degree f cnfidentiality. The theft, lss r inapprpriate use f infrmatin btained frm cnsumers and all unethical cmmercial practices represent a risk t cnsumers and a threat t the reputatin f institutins and the financial sectr as a whle. These events can result in significant financial lsses fr bth cnsumers and institutins. In the curse f cntinuusly assessing and managing its infrmatin security risks, the institutin shuld take the apprpriate measures t lessen the likelihd that such incidents will ccur. The financial institutin shuld implement a plicy and prcedures with respect t the prtectin f infrmatin btained frm cnsumers in accrdance with the applicable laws and regulatins. 17 All the necessary measures, including awareness prgrams with respect t infrmatin security intended fr staff at all levels f the rganizatin and fr cnsumers, shuld be taken t ensure that infrmatin btained frm cnsumers: is nt disclsed r used fr purpses ther than that fr which it was gathered, unless the cnsumer cnsents t such disclsure r use and is in a psitin t understand the scpe f his cnsent r unless the applicable laws and regulatins require such disclsure r use; and is nt used fr the purpse f harming cnsumers r benefiting frm such infrmatin. These measures shuld be endrsed by the bard f directrs and senir management. They shuld evlve in light f rganizatinal changes at the institutin and new emerging threats t the security f infrmatin. If the cnfidentiality f infrmatin abut cnsumers has been vilated, the institutin shuld prmptly disclse this fact t cnsumers. It shuld als infrm the AMF f any significant vilatins invlving the prtectin f infrmatin btained frm cnsumers. 17 An Act respecting the prtectin f infrmatin btained frm cnsumers in the private sectr, R.S.Q., c. P-39.1; An Act t establish a legal framewrk fr infrmatin technlgy, R.S.Q., c. C-1.1. Where applicable, An Act respecting the distributin f financial prducts and services, R.S.Q., c. D-9.2; See als the Regulatin respecting the keeping and preservatin f bks and registers (n. 10); An Act respecting the distributin f financial prducts and services, (S.Q. 1998, c. 37, s. 223, par. 1, subpars. (11), (12); M.O , , G.O Cmmercial Practices Guideline A5.1 Autrité des marchés financiers Nvember 2009

17 PART B SPECIFIC EXPECTATIONS Sectin Subsectin DEPOSITS AND INSURANCE B1 DEPOSITS B2 Principal prtected nte fferings B2-1 INSURANCE B3 Examinatin and settlement f claims B3-1 FINANCIAL SERVICES COOPERATIVES B4 TRUST COMPANIES AND SAVINGS COMPANIES B5 DAMAGE INSURERS B6 Blck transfers f business B6-1 Financial activities f insurers with brkerage firms B6-2 INSURERS OF PERSONS (LIFE AND HEALTH) B7 Cmmercial Practices Guideline Autrité des marchés financiers Nvember 2009

18 Principal prtected nte fferings Depsits B2-1. Principal prtected nte fferings Backgrund Over the past few years, principal prtected ntes ( PPNs ) have becme mre and mre cmplex, with varius risk/return prfiles. At present, a brad range f underlying assets is assciated with PPNs, such as unmanaged investments (e.g.: baskets f shares, bnds, stck market indices, currencies) and actively managed funds (e.g.: mutual funds). Cnsumers may therefre have truble understanding the risks, csts and return assciated with them. T ensure that cnsumers have all the infrmatin they need t make infrmed decisins when they cnsider purchasing such prducts, the AMF is setting ut its expectatins regarding the cntent f the infrmatin which institutins shuld disclse accrding t varius sales channels (in persn, by telephne and n-line), as well as the manner in which they shuld d s and when. The AMF als expects institutins t prvide cnsumers wh s request with certain ther current infrmatin t help them mnitr their investments. Fr the sake f cnsistency, the AMF s expectatins presented in subsectin B2-1 are harmnized with federal regulatins ( Principal Prtected Ntes Regulatins ). 18 The AMF expects all disclsures prvided by an institutin t a cnsumer in accrdance with this subsectin t take place in a language that is clear and simple and in a manner that is nt misleading. Definitins Fr the purpses f subsectin B2-1: a principal-prtected nte is a financial instrument that is issued by an institutin t a cnsumer and that: prvides fr ne r mre payments t be made by the institutin that is determined, in whle r in part, by reference t an index r reference item, including the market price f a security, cmmdity, investment fund r ther financial instrument; r the exchange rate applicable between any tw currencies; and prvides that the principal amunt that the institutin is bligated t repay at r befre the nte s maturity is equal t r mre than the ttal amunt paid by the cnsumer fr the nte. The term interest, in relatin t a principal prtected nte, includes any return payable under the nte by an institutin in respect f the principal. 18 SOR/ (Canada Gazette Part II) Cmmercial Practices Guideline B2-1.1 Autrité des marchés financiers Nvember 2009

19 Principal prtected nte fferings Depsits 1. Disclsure befre purchase The AMF expects cnsumers t have any infrmatin that is likely t influence their decisin t invest in PPNs. Subject t the specific cnditins set ut in item 2 f this subsectin, the AMF expects an institutin t prvide the cnsumer with a synpsis, at least tw days befre entering int an agreement fr the issuance f a PPN, f the fllwing infrmatin rally, by means f a persn wh is knwledgeable abut the terms and cnditins f the nte, and in writing: the term f the nte, and hw and when the principal is t be repaid and the interest, if any, is t be paid; any fees and their impact n the interest payable; the manner in which interest is t be accrued, and any limitatins in respect f the interest payable; any risks assciated with the nte, including, if applicable, the risk that n interest may accrue; the distinctin between PPNs and fixed-rate investments with respect t the levels f risk and return; the circumstances in which a PPN culd be an apprpriate investment; the terms f any secndary market ffered by the institutin; if applicable: the fact that the ntes relate t depsits that are nt guaranteed by the depsit insurance fund within the meaning f the Depsit Insurance Act 19 r eligible fr depsit insurance cverage by the Canada Depsit Insurance Crpratin; the fact that the nte may be redeemed befre maturity and, if applicable, that redemptin befre maturity may result in the cnsumer receiving less than the amunt invested; the fact that the cnsumer has the right t cancel the agreement fr the purchase f a PPN, and the terms fr exercising such right; the fact that the nte allws the institutin t amend the nte and the circumstances under which it can d s; and the fact that the manner in which the nte is structured r managed culd place the institutin in a cnflict f interest; 19 R.S.Q., c. A-26. Cmmercial Practices Guideline B2-1.2 Autrité des marchés financiers Nvember 2009

20 Principal prtected nte fferings Depsits any infrmatin that is likely t influence a cnsumer's decisin t invest in PPNs; and the fact that the infrmatin referred t in item 3.1 f this subsectin is available n request and that the disclsure referred t in item 3.2 will als be available after the PPN is issued. If the institutin sends the infrmatin by mail, the AMF will cnsider the written disclsure t have been prvided five business days after the pstmark date. 2. Specific cnditins 2.1 Agreement entered int in persn Any ral and written disclsure set ut in item 1 f this subsectin may be prvided at any time befre entering int the agreement fr the issuance f a PPN if the institutin and the cnsumer expressly cnsent t it and the agreement is entered int in persn. 2.2 Agreement entered int by electrnic means Agreement withut right f cancellatin The agreement fr the issuance f a PPN entered int by electrnic means may take place withut the ral disclsure referred t in item 1 f this subsectin. Hwever, the institutin shuld, at least tw days befre entering int the agreement, prvide the written disclsure referred t in item 1 f this subsectin and give the cnsumer the telephne number f a persn wh is knwledgeable abut the terms and cnditins f the nte. Agreement with right f cancellatin If the agreement t issue a PPN is entered int by electrnic means and it prvides the cnsumer with a right f cancellatin within tw r mre days after the agreement is entered int, the AMF expects the institutin t make the minimum written disclsure referred t in item 1 f this subsectin at least tw days befre entering int the agreement. Furthermre, the AMF expects the institutin t prvide the cnsumer, befre entering int the agreement r withut delay thereafter, with the telephne number f a persn wh is knwledgeable abut the terms and cnditins f the nte. Hwever, if disclsure f the cntact infrmatin fr such persn is prvided after entering int the agreement, the time perid f at least tw days given t the cnsumer fr cancelling the agreement shuld nly begin t elapse starting n the day fllwing such disclsure. 2.3 Agreement entered int by telephne with right f cancellatin If the agreement t issue a PPN is entered int by telephne and it prvides the cnsumer with a right f cancellatin within tw r mre days after the agreement is entered int, the AMF expects the institutin t make the ral disclsure referred t in item 1 f this subsectin at least tw days befre entering int the agreement. Cmmercial Practices Guideline B2-1.3 Autrité des marchés financiers Nvember 2009

21 Principal prtected nte fferings Depsits As well, the AMF expects the institutin t prvide, befre entering int the agreement r withut delay thereafter, the written disclsure referred t in item 1 f this subsectin. Hwever, if such written disclsure is prvided after entering int the agreement, the time perid f at least tw days given t the cnsumer fr cancelling the agreement shuld nly begin t elapse starting n the day fllwing such disclsure. 3. Additinal disclsure 3.1 Detailed infrmatin regarding PPNs The AMF expects the institutin t prvide the disclsure referred t in item 1 f this subsectin in a full and cmplete manner abut the PPNs ffered by it by psting such disclsure n its websites and in written frmat t be sent t any persn wh requests it. 3.2 Additinal infrmatin, fllwing the issuance f a PPN Infrmatin abut the value f the nte Further t a cnsumer's inquiry cncerning the value f his PPN n a specified day, the AMF expects the institutin t disclse t him the fllwing infrmatin withut delay: either the net asset value f the PPN n the specified day and hw that value is related t the interest payable under the PPN; r the last available measure, befre the specified day, f the index r reference item n which the interest n the PPN is determined and hw that measure is related t the interest payable under the PPN. Infrmatin abut early redemptin f the nte Prir t purchasing r redeeming a PPN befre maturity at the request f a cnsumer, the AMF expects an institutin t disclse the fllwing t the cnsumer: (a) the value f the nte n the last business day befre the day that the investr requests the redemptin r purchase, r the value f the nte based n the last available measure f the index r reference item n which the interest is determined; (b) the amunt f any penalty r charge; (c) the net amunt that the investr wuld have received fr the redemptin r purchase, after deducting the amunt referred t in paragraph (b) frm the value f the nte referred t in paragraph (a); and (d) when and hw the value f the PPN will be calculated, and the fact that the value f the nte may differ frm the value referred t in (a) abve. Cmmercial Practices Guideline B2-1.4 Autrité des marchés financiers Nvember 2009

22 Principal prtected nte fferings Depsits Infrmatin abut amendments t the nte Befre making an amendment t a PPN that may have an impact n the interest payable under the nte, the AMF expects the institutin t disclse details f the amendment, and its ptential impact n the interest payable, in writing t the cnsumers cncerned. If it is nt pssible t disclse this infrmatin in advance, the AMF expects the institutin t make such disclsure withut delay after the amendment is made. Infrmatin abut the reference item If a PPN ceases t be linked t an index r reference item that was t be used t determine the interest payable under the PPN and, as a result, n interest will be paid, the AMF expects the institutin t disclse that fact t the cnsumer withut delay. 4. Advertisement cntent In each f its advertisements fr PPNs, the AMF expects an institutin t disclse clearly hw the public may btain infrmatin abut the PPNs. In any advertisement that refers t features f PPNs r the interest payable under them, the AMF expects an institutin t als disclse the fllwing: the manner in which interest is t be accrued, and any limitatins in respect f the interest payable; if the advertisement gives an example f a situatin in which interest wuld be payable, an example f anther situatin in which n interest wuld be payable; if the advertisement gives an example f a situatin in which interest wuld be payable that is in additin t any guaranteed minimum interest, an example f anther situatin in which nly the minimum interest wuld be payable; and if applicable, the fact that the ntes relate t depsits that are nt guaranteed by the depsit insurance fund r eligible fr depsit insurance cverage by the Canada Depsit Insurance Crpratin. The AMF expects an institutin that uses past market perfrmance in an advertisement fr a PPN t represent that perfrmance fairly and, if hypthetical examples are used, the underlying assumptins must be realistic and must be disclsed in the advertisement. The AMF als expects the institutin t disclse in the advertisement that past market perfrmance is nt an indicatr f future market perfrmance. Cmmercial Practices Guideline B2-1.5 Autrité des marchés financiers Nvember 2009

23 Examinatin and settlement f claims Insurance B3-1. Examinatin and settlement f claims The AMF expects insurers t interpret plicy clauses cnsistently and settle claims in a prmpt and fair manner, accrding t a straightfrward, accessible and effective prcess. The AMF cnsiders the examinatin and settlement f claims t be essential fr prtecting the interests f cnsumers. Cnsequently, the insurer shuld designate an fficer r emplyee t be in charge f the examinatin and settlement f claims. The insurer shuld implement a plicy and prcedures that: prvide that claims will be dealt with fairly, as sn as pssible and in a manner that is transparent t the cnsumer; create an envirnment that helps the claims adjuster, where applicable, t abide by his bligatins under An Act respecting the distributin f financial prducts and services 20 and his cde f ethics, amng ther things; prvide that plicy clauses will be interpreted cnsistently and with a view t arriving at a fair settlement; enable the insurer t disclse its claims examinatin prcedure, including the rules fr paying benefits, and facilitate access theret by the cnsumer, at the insurer s place f business r n-line; d nt aim t refuse a claim withut a reasnable examinatin, t cnceal plicy clauses that are relevant t the claim, t dissuade the cnsumer frm retaining the services f a lawyer r claims adjuster, where applicable, r t settle fr a lwer amunt than he is entitled t receive, in particular thrugh remuneratin incentives fr the emplyees in charge f claims; use reasnable methds fr evaluating claims and lsses, where applicable, such that, fr example, a claim is nt rejected due t the cnsumer s failure t disclse a risk factr that the cnsumer culd nt reasnably have expected t have t disclse; prvide that the reasns fr the ttal r any partial rejectin f a claim must be clearly and prmptly cmmunicated t the cnsumer; prvide fr the measures that the cnsumer can take if he is dissatisfied with the examinatin r prpsed settlement f his claim; 20 R.S.Q., c. D-9.2. Cmmercial Practices Guideline B3-1.1 Autrité des marchés financiers Nvember 2009

24 Examinatin and settlement f claims Insurance prvide that the persns r cmpanies that act n its behalf knw and respect: the institutin s claims examinatin and settlement plicy and prcedures s that they can prvide apprpriate infrmatin t the cnsumer and assist him adequately when he is preparing his claim and thrughut the entire claims management prcess; the prcedure t be fllwed t file a cmplaint with the insurer and are able t infrm the claimant r beneficiary f the measures the claimant r beneficiary can take if he is dissatisfied with the examinatin r prpsed settlement f his claim; prvide fr the dcumentatin f claims files; prvide fr management reprts that shw the insurer s perfrmance regarding claims examinatin times and the degree f satisfactin f claimants and beneficiaries with respect t the settlement f claims, and highlight what must be imprved. Cmmercial Practices Guideline B3-1.2 Autrité des marchés financiers Nvember 2009

25 Blck transfers f business Damage Insurers B6-1. Blck transfers f business The AMF expects any new cntract issued by a damage insurer benefiting frm a blck transfer t prvide the same r greater cverage than that ffered in the previus cntract, insfar as such cverage still meets the needs f the insured. Furthermre, the AMF expects the blck transfer t include a right allwing the insured t review and cancel the cntract within 10 days f the date the cntract cmes int effect. The blck transfer f business ( blck transfer ) is a practice whereby a firm, independent representative r independent partnership transfers a vlume f business subscribed fr with ne r mre insurers t ne r mre ther insurers. The blck transfer results in the issuance f a new insurance cntract by the insurer benefiting frm the transfer, such that it des nt invlve a cntract renewal. The AMF expects insureds affected by such transfers t be treated fairly and be given all the necessary infrmatin and time t make an infrmed decisin. An insurer benefiting frm a blck transfer shuld: require the firm, independent representative r independent partnership t send a ntice t the cnsumers affected by the blck transfer. The ntice must cmply with any regulatry requirements; 21 nt require the transfer f a minimum vlume f business r a cmmitment regarding the perid f time during which the vlume f business must remain n its balance sheet; accept all the insureds frming part f a blck transfer, the whle fr a term equal t a renewal; 22 undertake t prvide the insured with the mst advantageus cverage between the cverage prvided fr in the previus cntract and the cverage prvided fr in the new cntract, the whle fr a definite perid equal t a renewal, unless there has been a change in the declared risk; undertake t send the dcumentatin relating t the new cntract as sn as pssible, s that the insured has the infrmatin at least 30 days and nt mre than 60 days befre the effective date f the new cntract; Refer t the draft Regulatin t amend the Regulatin respecting Infrmatin t be Prvided t Cnsumers published in the AMF Bulletin n September 4, This regulatin is nt yet in frce. Fr purpses heref, the term f an insurance cntract is nt limited t the current ne (1) year; it crrespnds t the term f the cntract being transferred. Cmmercial Practices Guideline B6-1.1 Autrité des marchés financiers Nvember 2009

26 Blck transfers f business Damage Insurers undertake t prvide the insured with a right t cancel the insurance cntract under cnditins that are nt detrimental t the insured: a right t cancel the cntract within 10 days f its effective date; if the ntice f cancellatin was given in writing within 10 days after the effective date f the cntract, the insurer must refund t the insured the prtin f the premium cllected fr the perid subsequent t the cancellatin; the insured must nt assume ther csts related t the cancellatin f the cntract when the cntract is cancelled during the review perid available t the insured; and the usual cancellatin cnditins apply if the cancellatin ccurs after the 10-day perid; and keep all infrmatin relating t each blck transfer agreement entered int, including the cnditins f transfer. Cmmercial Practices Guideline B6-1.2 Autrité des marchés financiers Nvember 2009

27 Financial activities f insurers with brkerage firms Damage Insurers B6-2. Financial activities f insurers with brkerage firms The AMF expects damage insurers t disclse t cnsumers, where applicable, any business relatinship they have with brkerage firms that culd undermine the advisry rle that brkers assume with respect t cnsumers. Cnsumers generally expect damage insurance brkers t prvide them with the best insurance prduct fferings available n the market. The existence f financing activities between an insurer (r persns assciated with the insurer) fr the benefit f a brkerage firm (r individuals r legal persns assciated with the firm) can cause the firm t be subject t incentives that are likely t limit its latitude fr prviding cnsumers with the best insurance ffering available n the market. These relatinships can cnstitute a significant surce f financing fr firms. As such, the AMF cnsiders it advisable t prvide a framewrk fr such relatinships rather than prhibit them. In additin t the central ntin f a framewrk based n the disclsure t cnsumers f any business relatinship between firms and insurers, the AMF wishes t set ut its expectatins with respect t financing activities. The AMF expects the disclsure f direct r indirect financing activities fr the benefit f brkerage firms t include activities such as the granting f lans t firms r individuals r legal persns assciated therewith, investments in preferred financing shares, cntingent cmmissins and the supply f cmputer equipment. The AMF expects the lans granted by insurers r their investments in preferred financing shares t be made under cnditins that wuld have been impsed by any lender that des nt have a business relatinship with the brkerage firm. Furthermre, the AMF expects financing activities t cmply with the prvisins under sectins 147 and fllwing f An Act respecting the distributin f financial prducts and services 23 and the interpretatin theref set ut in the staff ntice issued by the AMF regarding wnership f damage insurance firms R.S.Q., c. D-9.2 AMF Bulletin, February 16, Cmmercial Practices Guideline B6-2.1 Autrité des marchés financiers Nvember 2009