Rule 2019-002 Credit Union Deposit Insurance Advertising Rule

October 11, 2019

Introduction

The Financial Services Regulatory Authority of Ontario (FSRA or the Authority), under subsection 21(1) of the Financial Services Regulatory Authority of Ontario Act, 2016 (the FSRA Act), is proposing a Rule 2019-002 – CREDIT UNION DEPOSIT INSURANCE ADVERTISING RULE (the Advertising Rule) as a rule under the Credit Unions and Caisses Populaires Act, 1994 (the “CUCPA”) as more fully set out in this Notice.

The FSRA Act requires that a rule proposed by FSRA will be published on its website and that FSRA will invite interested persons to make written representations with respect to the proposed rule within a period of at least ninety (90) days after the publication. After consultation, FSRA’s Board may approve the Advertising Rule and submit it to the Minister of Finance (the Minister) for approval. Once submitted to the Minister, the Minister may approve or reject the Advertising Rule, or return it for further consideration. If the Minister approves the Advertising Rule, the Advertising Rule will come into force the 15th day following the Minister’s approval (Effective Date). If the Minister does not take any action with respect to the Advertising Rule, the Advertising Rule will come into force in a manner specified in Subsection 21(2) of the FSRA Act.

Background

FSRA was established under the FSRA Act and on June 8, 2019 assumed substantially all of the regulatory functions of the Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario (DICO). An existing DICO By-law #3 – Deposit Insurance Advertising (By-Law #3) was assumed by FSRA when it amalgamated with DICO. Upon amalgamation of DICO and FSRA, the CUCPA was amended to allow FSRA to enforce the By-Law #3 and make a rule to replace it. By-law #3 continues to refer to DICO as the deposit insurer and does not refer to FSRA. To ensure clarity for both credit unions and their members, FSRA has developed a draft rule that is intended to replace DICO By-law #3, in accordance with FSRA’s priorities of reducing regulatory burden and improving regulatory effectiveness.

By-Law #3 governs the advertising for credit unions including the requirement to display a decal for credit union deposit insurance which signifies to the members that their deposits are insured. As the newly amalgamated entity, FSRA is now responsible for administering deposit insurance and maintaining the Deposit Insurance Reserve Fund (DIRF) under the CUCPA.

Substance and Purpose of the Advertising Rule

The development of the Advertising Rule was achieved following a review of the existing By-Law #3 with critical view of providing clarity and to better inform credit union members with respect to deposit insurance. The substance and purpose of the Advertising Rule is to authorize, control and require the use by credit unions of marks, signs, advertisements or other devices indicating that deposits with credit unions are insured by FSRA through the DIRF.

Summary of the Advertising Rule

Similar to DICO By-law #3, the Advertising Rule requires credit unions to follow the advertising requirements as set out in Appendix A of this Proposed Advertising Rule. The Advertising Rule consist of two categories of requirements; credit unions will be required to post decals in their branches (or on their website) indicating that deposit insurance is administered by FSRA through the DIRF. Further, the Advertising Rule sets out a set of approved messages which may be included in advertising materials for the credit union members. These requirements are currently in place for credit unions and their members.

In accordance with the requirements of the FSRA Act, FSRA is seeking public comment on the Advertising Rule in accordance with Section 21(1) of the FSRA Act. Appendix A to this Notice is the proposed Advertising Rule. Within a period of ninety (90) days from the date of publication of the Notice, interested persons are invited to make written representations to FSRA with respect to the Advertising Rule.

Authority for the Advertising Rule

Subsection 21(1) of the FSRA Act authorizes the Authority to make rules in respect of any matter over which the Act gives the Authority rule-making authority. Clause (1) of subsection 321.0.4 (1) of the CUCPA provides the Authority with the rule-making authority for the Advertising Rule.

Unpublished Materials

In making the Advertising Rule, the Authority has not relied on any significant unpublished study, report, decision or other written materials, other than internal reports prepared by FSRA staff for FSRA management.

Alternatives Considered

In preparation of the Advertising Rule, FSRA staff has considered non-prescriptive alternative. However, the primary goal of the deposit insurance advertising requirements is to create clear and consistent credit union member and consumer understanding of the deposit insurance administered through FSRA. This goal would not be achieved if each Ontario credit union was permitted to implement the advertising requirements based on their interpretation of a less prescriptive rule. In addition, the sector and members of credit unions will be better informed regarding the insurance availability which will contribute to overall confidence in the sector.

To maintain clear and consistent communication with credit union members, it is important that all Ontario credit unions advertise deposit insurance in the same style, format and manner. These requirements are also consistent with the advertising requirements of other deposit insurers in Canada such as the Canadian Deposit Insurance Corporation (CDIC). In this case, an ambiguous rule, or maintaining By-Law #3, would be less effective and efficient in maintaining clear, accurate and consistent deposit insurance advertising for Ontario credit unions.

Anticipated Costs and Benefits

By-Law #3 governed the advertising of deposit insurance for Ontario credit unions including the requirement to display a decal for credit union deposit insurance which signifies to the members that their deposits are insured by DICO. DICO no longer exists as a separate legal entity and FSRA is now responsible for providing deposit insurance and maintaining the DIRF. The Advertising Rule requires that references in deposit insurance advertising material be changed from DICO to FSRA in order to ensure transparency for consumers.

The principal benefit of the Advertising Rule is that it supports important FSRA key objectives: to promote transparency and disclosure of information by the regulated sectors; and, to protect the rights and interests of consumers.

The principal costs of the Advertising Rule are associated with production of new decals and deposit insurance brochures. Consistent with the process in place previously at DICO, FSRA will be producing the new decals and deposit insurance brochures and providing them to Ontario credit unions, with costs being recovered by FSRA through its general credit union fee assessment under the FSRA Fee Rule. The expected cost for the production and distribution of decals and brochures is up to $50,000 (estimated at approximately $20,000-$25,000).

There should be minimal costs, if any, to the credit union sector as a result of these changes and may include costs for changes to their websites and any marketing materials. FSRA’s view is that the benefit of members being accurately informed about deposit insurance far outweighs the costs of implementing the Advertising Rule.

Text of Advertising Rule

The full text of the Advertising Rule is contained in Appendix A.

Questions

FSRA will be pleased to answer questions concerning the Fee Rule. Submit a comment or ask a question online.

Appendix A - Proposed Rule 2019-002 - Deposit Insurance Adverstising
Financial Services Regulatory Authority of Ontario
Fule 2019-002
Deposit Insurance Adverstising

Table of Contents

Part 1: Interpretation

1.1 Definitions
1.2 Interpretation

Part 2: Advertising Requirements

2.1 Office premises and brochure
2.2 Website and other electronic notices
2.3 Other forms of advertising
2.4 Deposit insurance cancelled
2.5 Effective date and transitional

Part 1 Interpretation

1.1 Definitions

(1) In this Rule,

  1. “Advertising Rule” means the Rule;
  2. “Authority” means the Financial Services Regulatory Authority of Ontario continued under subsection 2(1) of the FSRA Act;
  3. “Board” means the board of directors of the Authority;
  4. “Chief Executive Officer” or “CEO” means the Chief Executive Officer of the Authority appointed under subsection 10(2) of the FSRA Act;
  5. “credit union” means a credit union or caisse populaire to which the CUCPA applies;
  6. “CUCPA” means the Credit Unions and Caisses Populaires Act, 1994;
  7. "Deposit Insurance Reserve Fund” means the fund to which subsection 226 of CUCPA applies;
  8. “FSRA Act” means the Financial Services Regulatory Authority of Ontario Act, 2016;
  9. “Fund” means the Deposit Insurance Reserve Fund established under the CUCPA;
  10. “Minister” means the Minister of Finance or such other person as may be assigned the administration of the FSRA Act under the Executive Council Act;
  11. “Ministry” has the same meaning as in the FSRA Act;
  12. “Rule” means Authority Rule 2019-002.

1.2 Interpretation

  1. This is a rule is made under clause (1) of subsection 321.0.4 (1) of the CUCPA, authorizing, controlling and requiring the use by credit unions of marks, signs, advertisements or devices indicating that deposits with credit unions are insured through the Authority.
  2. References in this Rule to the Chief Executive Officer include a reference to an authorized delegate of the Chief Executive Officer.
  3. Words and phrases not defined in this Rule have the same meaning as ascribed thereto under Section 1 of the FSRA Act, unless a contrary intention appears.
  4. Every use of the words “including” or “includes” in this Rule is to be construed as meaning “including, without limitation” or “includes, without limitation”, respectively.
  5. Everything in this Rule shall be read in conjunction with the FSRA Act and the CUCPA. Nothing in the Advertising Rule shall affect or be interpreted to affect the rights or liabilities of any party thereunder, except as expressly provided in the Rule.  

Part 2 Advertising Requirements

2.1 Office premises and brochure

A credit union that holds member deposits that are insured through the Authority under the Fund shall display prominently in the premises:

  1. in a manner that is visible and clear, at least one printed sign or decal obtained from the Authority in the form attached or as approved by the CEO;
  2. the deposit insurance brochure provided by the Authority in the form approved by the CEO; and
  3. make copies of the brochure available to depositors and any other persons.

2.2 Website and other electronic notices

  1. A credit union that has its own website shall display an electronic version of the sign or decal referred to in subparagraph 2.1(a) of this Rule and a hyperlink to the deposit insurance brochure on the Authority’s website, on its home page or on a page containing information on deposit insurance through the Authority.
  2. When the sign or decal is displayed by a credit union in accordance with paragraph 2.1(a) of this Rule, changes may be made to its overall sizing for the purpose of the electronic display.

2.3 Acceptable forms of advertising

Pre-approved advertising material messages are restricted to the following form or to any other form approved by the CEO:

For registered products including, LIRA, LIF, RRSP, RRIF, RESP and TFSA:

  • Eligible deposits in registered accounts have unlimited coverage through the Financial Services Regulatory Authority (FSRA)
  • At {name} Credit Union, eligible deposits in registered accounts have unlimited coverage through the Financial Services Regulatory Authority (FSRA)
  • Eligible deposits in all registered accounts with Ontario Credit Unions have unlimited deposit insurance coverage through the Financial Services Regulatory Authority (FSRA)

For other eligible deposits:

  • Eligible deposits are insured up to $250,000 through the Financial Services Regulatory Authority (FSRA)
  • At {name} Credit Union, eligible deposits are insured up to $250,000 through the Financial Services Regulatory Authority (FSRA)
  • Eligible deposits with Ontario Credit Unions are insured up to $250,000 through the Financial Services Regulatory Authority (FSRA)

2.4 Deposit insurance cancelled

A credit union shall not use any statement or any mark, sign, advertisement or device to indicate that its deposits are insured by or through the Authority if the deposit insurance of the credit union under the Fund has been cancelled.

2.5 Effective date and transitional

Credit unions will have three months from the effective date of this Rule to complete the necessary changes to all decals, marks, signs, advertisements and marketing materials of a credit union regarding deposit insurance by or through the Authority and includes their distribution through any form of transmission.

This Rule applies to all decals, marks, signs, advertisements and marketing materials of a credit union regarding deposit insurance by or through the Authority and includes their distribution through any form of transmission.