The Ontario Superintendent of Financial Services has handed a one-month ban and imposed supervisory conditions on a life insurance agent who was permanently banned by the Mutual Fund Dealers Association of Canada (MFDA) for failing to cooperate with an investigation.
The Financial Service Commission of Ontario (FSCO) last week issued the Superintendent’s decision ordering that a life agent’s license be suspended for a month, and that he is required to be supervised by another agent for 24 months.
The decision follows a hearing to consider allegations about his suitability in the wake of a disciplinary hearing by the MFDA that resulted in a permanent ban along with other sanctions.
Back in 2012, the MFDA found that Michael Harvey failed to comply with his dealer’s directions regarding the supervision of leveraged accounts and failed to cooperate with its investigation by refusing to attend an interview with MFDA investigators. The MFDA permanently banned Harvey from the fund industry for his failure to cooperate; it also ordered a two-year ban for failing to follow his dealer’s directions; and it levied $60,000 in fines and ordered $10,000 in costs.
Insurance regulators then alleged that the circumstances of the MFDA case indicated that Harvey was unsuitable to maintain an insurance licence, too, and that he made a material omission in his application for licence renewal in 2011 by failing to disclose that he was the subject of an MFDA investigation.
However, the advisory board that was appointed to hear the allegations concluded that the charge of unsuitably was not proven. The Superintendent’s decision notes that, “That does not imply that there is a lesser standard of suitability under the Insurance Act.”
In its decision, the Superintendent says that it’s possible that an advisory board, “taking into consideration both the agent’s history in the insurance industry as well as the agent’s history in other financial services, might find conclude that any risk to the public is more specifically related to the non-insurance financial services and that the risk that such behaviour will recur in the insurance business can be managed.”
“Such a finding would not represent condoning the action by the individual or a diminution of the findings of the non-insurance regulator,” it adds. “This appears to be the conclusion of the advisory board in this case.”
The advisory board recommended a one-month suspension and that he be required to take an ethics course.
However, in the Superintendent’s decision, Grant Swanson, executive director, licensing and market conduct (by delegated authority from Superintendent of Financial Services), ruled, “I am not satisfied that a course in ethics is sufficient to deal with the risk of leveraged investing in insurance products such as individual variable insurance contracts.”
Instead, the Superintendent found that additional supervisory conditions, “are necessary to ensure that Mr. Harvey’s contraventions are isolated to the mutual fund business and that he does not pose a risk to insurance clients.”
Swanson agreed with the advisory board that a one month suspension was adequate to address the misrepresentation to the superintendent, saying, “I agree that the penalty should be at the lower end of the range and am prepared to accept the recommendation of the advisory board.”
In its decision, the Superintendent says that the advisory board noted that Harvey “had no previous contraventions, that he expressed remorse, and that he answered questions in a forthright manner.” It also said that the allegations did not involve dishonesty or harm towards clients, and that he provided letters of support from two companies.