Guidance 

☑ Interpretation      ☑ Approach      ☐ Information      ☐ Decision

No. GR0013APP Active

Download a copy in PDF format

 

Purpose

This Guidance is intended to assist stakeholders in understanding how the Chief Executive Officer of FSRA (the “CEO”)[1] and the CEO’s delegates exercise discretion when imposing General Administrative Monetary Penalties (“General AMP” or “General AMPs”) and determining appropriate General AMP amounts. This will further support transparency, fairness, consistency, as well as better decision-making by persons/entities on whom General AMPs are imposed. 

FSRA has the power to impose General AMPs on licensees and other persons and entities under many of its Sector Statutes (defined below) if it is satisfied that a person or entity has contravened or is non-compliant with certain statutory requirements.

The Sector Statutes authorize FSRA to impose two types of Administrative Penalties (“AMP” or “AMPs”):

  1. General AMPs: These tend to be available for a broad range of contraventions under the Sector Statutes and the amounts are subject to significant regulatory discretion, within the statutory maximums. General AMPs have robust procedural protections including notice and a right to hearing before the Financial Services Tribunal (the “FST”). 
  2. Summary Administrative Penalties (“Summary AMP” or “Summary AMPs”): These are available under some of the Sector Statutes for more technical contraventions, including non-filing and inappropriate record-keeping, and the amounts are usually prescribed. Summary AMPs have an expedited process which includes notice, a right to make written submissions, and a right of appeal to the FST.

This Guidance sets out FSRA’s position on the interpretation of, and approach to the application of the statutory and regulatory provisions dealing with the following aspects of General AMPs:

  1. The prescribed purposes for which General AMPs can be imposed under the Sector Statutes, which are:
    1. To promote compliance with statutory requirements under the Sector Statutes.
    2. To prevent a person or entity from deriving, directly or indirectly, any economic benefit as a result of contravening or failing to comply with statutory requirements under the Sector Statutes (collectively, the “Statutory Purposes”).
  2. The criteria for determining the amount of General AMPs imposed under the Sector Statutes (the “Statutory Criteria”)
  3. The considerations for determining whether a General AMP is “punitive” and requires adjustment, or whether the amount of penalty imposed is consistent with the purposes for imposing AMPs[2]

FSRA takes a principles-based approach to enforcement which includes the imposition of General AMPs. General AMPs are imposed in a manner that is consistent with FSRA’s statutory objects, requirements laid out in relevant statutes, and desired regulatory outcomes.

Scope

This Guidance deals with General AMPs imposed under the following statutes (the “Sector Statutes”)[3]:

  • Insurance Act, R.S.O. 1990
  • Mortgage Brokerages, Lenders and Administrators Act, 2006
  • Pension Benefits Act, R.S.O. 1990
  • Credit Unions and Caisses Populaires Act, 2020[4]
  • Automobile Insurance Rate Stabilization Act, 2003
  • Compulsory Automobile Insurance Act, R.S.O. 1990

This Guidance applies to all persons and entities who engage in activities regulated by the Sector Statutes.

Rationale and background

The Sector Statutes and their respective AMP regulations empower FSRA to impose General AMPs for specified contraventions of and/or failures to comply with the Sector Statutes, related regulations, and any other rules or requirements established under such statutes.  

The regulations under the Sector Statutes also prescribe the Statutory Criteria to be considered when determining the amount of General AMPs, within the statutory maximums. FSRA is granted considerable discretion with respect to the imposition of General AMPs and the monetary amount of General AMPs to be imposed within the statutory maximums.  

The provisions which are the subject of this Guidance are listed in Appendix A.

FSRA exercises its discretion to impose General AMPs to achieve enforcement outcomes consistent with its statutory objects established under the Financial Services Regulatory Authority of Ontario Act, 2016 (the "FSRA Act"), including:

  1. To regulate and generally supervise the regulated sectors.
  2. To contribute to public confidence in the regulated sectors.
  3. To deter deceptive or fraudulent conduct, practices and activities by the regulated sectors.
  4. In respect of the financial services sectors, to promote high standards of business conduct and protect the rights and interests of consumers.
  5. In respect of pension plans, to promote good administration of pension plans and protect and safeguard the pension benefits and rights of pension plan beneficiaries.

Additionally, FSRA’s exercise of discretion is informed by the following principles, which are derived from FSRA’s statutory obligations under the Sector Statutes, legal precedent, and sound regulatory practices:

  1. Objectivity: FSRA assesses the Statutory Purposes and related factors based on the facts and circumstances of each case, ensuring fair and reasonable decisions that reflect outcomes consistent with FSRA’s statutory objects.
  2. Transparency: FSRA ensures that the rationale and findings relating to the imposition of General AMPs are communicated in a clear manner to the persons on whom such AMPs are to be imposed, consistent with the relevant Sector Statutes and considering the perspective of consumers, pension plan beneficiaries, and other stakeholders.[5]
  3. Fairness:  Decisions to initiate action to impose General AMPs are made after an investigation into the relevant facts and circumstances, usually with an opportunity for input from the subject person. FSRA ensures persons on whom General AMPs are proposed to be imposed have the opportunity to understand the basis and are advised of their right to request a hearing or appeal before the FST.
  4. Consistency: FSRA strives to apply the relevant Statutory Purposes and Statutory Criteria consistently and treat similar contraventions and/or failures to comply in a similar manner, recognizing that sanctions must fit the specific facts. FSRA takes into account previous General AMPs imposed on similar contraventions or failures to comply when imposing a General AMP.

This Guidance lays out FSRA’s consistent and uniform interpretation and application of General AMP-related provisions which are aligned with FSRA’s statutory mandate and strategic priorities, applicable case law, procedural fairness, and sound regulatory practices.[6]

Interpretation and Approach 

A. Determining whether a General AMP will be imposed

A.1 Interpretation: FSRA Imposes General AMPs in accordance with the Statutory Purposes 

FSRA exercises discretion when determining whether a General AMP is an appropriate response to a contravention or failure to comply with a Sector Statute. After determining that a contravention or failure to comply with a statutory requirement has occurred, FSRA may impose a General AMP for one or both of the Statutory Purposes.   

FSRA interprets the Statutory Purposes broadly in order to achieve the intended outcomes. FSRA must be satisfied that the General AMP will satisfy at least one of the Statutory Purposes as FSRA interprets those purposes. Not all of the considerations identified are present in every case, and the basis for determining whether one of the Statutory Purposes is met varies depending on the severity of the contravention or non-compliance and the unique circumstances of the case.

  1. To promote compliance with statutory requirements: The following considerations and objectives are relevant to this Statutory Purpose:
     
    1. General AMPs promote voluntary compliance by deterring non-compliance. This is necessary to reduce the cost of the relevant regulatory scheme while improving its effectiveness.[7]
    2. General and specific deterrence promote compliance with statutory requirements:
      • “specific” deterrence deters the person on whom an AMP is imposed from engaging in non-compliant behaviour in the future
      • “general” deterrence deters others in the sector from future non-compliance

         Both types of deterrence promote compliance with statutory requirements;
    3. A General AMP can be imposed when it is an effective method for addressing a contravention or failure to comply. A General AMP may be imposed in isolation or in combination with other regulatory sanctions.
    4. Every regulatory requirement serves a purpose. A licensed and/or regulated person or entity’s failure to comply with provisions that may seem “minor” or “technical”, including routine compliance, reporting, and education/training requirements, creates concerns that such person or entity lacks the minimum level of diligence and competence required in a regulatory regime.[8] As with all non-compliance, such contraventions are examined on a case-by-case basis and with consideration of other enforcement options and regulatory responses.
    5. A contravention need not be severe or cause consumer harm for a General AMP to be imposed. The relative amount of a General AMP is used to emphasize the importance of certain statutory requirements.[9]
    6. General AMPs and their deterrent effect re-enforce the importance of licenced roles, especially those with specific obligations to oversee compliance within a regulated entity, including Principal Brokers, Principal Representatives, Mortgage Administrators, Insurers, and Pension Plans, and emphasize to regulated persons and entities the sector standards associated with such roles.[10]
  2. To prevent a person or entity from deriving, directly or indirectly, any economic benefit as a result of contravening or failing to comply with statutory requirements: The following objectives and factors are taken into account when determining if economic benefit has been or may be derived by a non-compliant person or entity.
     
    1. Economic benefits include both actual and potential benefits that a person has a reasonable likelihood of obtaining and receiving.
    2. A General AMP is an effective method of disincentivizing regulatory misconduct by neutralizing the economic benefit.
    3. It is not necessary for the economic benefit to include some form of monetary gain. Expense avoided, such as not obtaining required Errors & Omissions insurance or not complying with the requirements to properly store client files, is an indirect economic benefit.[11]
    4. Similarly, time saved as a result of a contravention or failure to comply is an indirect economic benefit.[12]

A.2 Interpretation: Additional FSRA considerations for determining whether a General AMP will be imposed

The determination to impose General AMPs is made on a case-by-case basis consistent with the discretion granted to FSRA.       

When determining whether to impose a General AMP FSRA may, among other things, consider: 

  1. The Statutory Purposes for the imposition of AMPs described above.

  2. Severity of the contravention or failure to comply and its effect on consumers of financial services, pension plan beneficiaries, and the public.

  3. Availability and effectiveness of alternative enforcement options.[13]

  4. Pattern of non-compliant behaviour.

  5. Prevalence of similar contraventions or failures to comply in the regulated sector and the need for deterrence.

  6. Mitigating and/or remedial actions taken by the non-compliant person or entity.

  7. Sector-specific objectives and governance frameworks.

  8. Prior administrative history of the non-compliant person or entity.

  9. Level of intent, knowledge, and control over the non-compliant activity.

  10. Achievement of the objectives of the concerned Sector Statute(s).

  11. FSRA’s statutory mandate, priorities, and strategic enforcement objectives.

A.3 Imposing General AMPs where there is a pattern of misconduct

Interpretation:

General AMPs may be imposed in addition to any other enforcement sanction, including licensing actions, compliance orders, and Summary AMPs. FSRA considers sanctions cumulatively, where applicable, to ensure that the overall response to non-compliance is measured, proportionate, and achieves FSRA’s statutory objects by protecting the rights and interests of consumers and pension plan beneficiaries, promoting high standards of business conduct, and contributing to public confidence.

The Sector Statutes permit FSRA to impose a General AMP for every instance of a contravention or failure to comply to which the AMP applies. 

Where a person contravenes or fails to comply with multiple statutory requirements, FSRA may impose General AMPs for the contravention of, or failure to comply with, each statutory requirement, provided that the relevant factual circumstances and/or the harm caused are sufficiently distinct.   

Where there has been a pattern or overall scheme of misconduct resulting in multiple contraventions of, or instances of contravention or failure to comply with the same statutory requirement, FSRA may impose a single General AMP to address the pattern of conduct holistically. In such cases the amount of the AMP imposed takes into account the repetitive nature of the conduct and the overall consumer harm and economic benefit.

Approach: 

The above determinations are made on a case-by-case basis, taking all relevant facts and circumstances into account. FSRA endeavours to achieve consistency, where possible and appropriate, in cases where facts and circumstances are similar. 

B. Determining the amount of a General AMP

B.1 Interpretation: FSRA determines the amount of General AMPs in accordance with Statutory Criteria

The Sector Statutes provide the maximum of imposable General AMPs and the Statutory Criteria for determining the amount of General AMPs in the circumstances of each case.  

Unless the General AMP amount for a specific contravention is prescribed, FSRA determines the amount within the statutory maximums in accordance with the following Statutory Criteria, as interpreted in this Guidance. The Sector Statutes restrict FSRA to the Statutory Criteria and do not permit consideration of additional or alternate factors. 

  1. Degree to which the contravention or failure was intentional, reckless, or negligent: FSRA situates misconduct on a spectrum of the level of intention involved in a particular contravention or failure to comply, ranging from intentional disobedience to negligence.[14] FSRA takes all relevant and available evidence into account when situating such conduct:
     
    1. FSRA treats intentional disobedience of statutory or regulatory requirements with the most severity when determining the amount of a General AMP.[15] Evidence relating to prior knowledge of consequences, professional experience as a licensee in the relevant sector, selection of affected consumers who are harmed or could have been harmed by the non-compliance, and patterns of misconduct, are taken into account while determining intentionality.
    2. A reckless breach of a statutory requirement is treated as a more severe attitude of disobedience than a negligent one, and therefore attracts higher General AMPs. Negligence reflects a lack of the required degree of care and regard for the interests of the public. Recklessness involves acting in a manner that creates the risk of a contravention while disregarding or not considering the possibility of such risk.
    3. FSRA considers ignorance of statutory and regulatory requirements as reckless or negligent behaviour depending on the degree and reasons for the lack of knowledge or understanding of the regulatory requirements. Persons involved in regulated activities are responsible to inform themselves of the requirements and conduct themselves accordingly.[16]
    4. FSRA considers repeated contraventions to be an indicator of intentional conduct and not consistent with recklessness or negligence. This is particularly the case if the proposed subject has been sanctioned, warned, or cautioned in the past about their conduct.
    5. Situations of hardship do not excuse non-compliance with statutory and regulatory requirements. Regulated persons are expected to make alternative arrangements to meet regulatory requirements.[17] However, in extreme circumstances, demonstrated personal hardship may indicate that the non-compliance is lower on the spectrum of intent. 
  2. Extent of the harm or potential harm to others resulting from the contravention or failure to comply: FSRA takes into consideration the degree and extent of the harm caused or which may have been caused by a contravention or failure to comply when determining the amount of a General AMP. FSRA takes into account the following while assessing harm:
     
    1. Harm may be direct or indirect and may be caused to the public, consumers, pension plan members, other licensees, FSRA, and/or to the relevant sector as a whole
    2. Harm includes both actual and potential harm.  Both kinds of harm are assessed and, where possible, quantified by FSRA based on available evidence
    3. Harm includes both monetary and non-monetary harm. Non-monetary harm may include the loss of reputation and loss of consumer confidence in the regulated sectors. Non-monetary harm cannot be quantified, but can be considered on a spectrum of severity
    4. Harm includes adverse affects on FSRA’s ability to effectively regulate the sectors and to the potential for loss of public confidence in FSRA; and
    5. Where someone other than the subject of the proposed General AMP mitigates the harm by providing compensation or otherwise remediating the issue, this is not considered mitigating against the subject. The full extent of the reduced, mitigated, or avoided harm is included to determine the appropriate amount.
  3. Extent to which the person tried to mitigate any loss or to take other remedial action: Mitigation and remedial actions may result in the reduction of the amount of a proposed General AMP. This criterion applies to positive steps taken by the non-compliant person and not to unintended results or outside circumstances[18] and/or the efforts of others. FSRA examines relevant evidence and determines whether there has been an attempt to mitigate and the extent of mitigation based on the following factors:
     
    1. Nature of the mitigating/remedial action. For example, mitigating/remedial actions would include: 
      • compensating affected parties
      • voluntarily correcting non-compliant practices
      • immediately and fully self-reporting to FSRA after the discovery of a contravention or non-compliance
      • setting up business processes to avoid future contraventions and non-compliance
    2. Impact of the mitigating/remedial action on the harm caused or avoided.
    3. Timing of the mitigating/remedial action, including whether such action was initiated pro-actively by the wrongdoer, or after a complaint to FSRA, legal action, or other process.
    4. Whether the mitigating/remedial action was compelled by contractual or any other legal obligations.
    5. Co-operating with FSRA at any point, including during an examination or investigation is not usually considered to be a mitigating or remedial action as such compliance is statutorily required.
  4. Economic benefit derived or reasonably expected to be derived by person or entity from the contravention or failure to comply: FSRA takes into account all economic benefits, including indirect and potential benefits, when determining the amount of a General AMP within the statutory maximums. Furthermore,
     
    1. Economic benefits include the actual economic benefit and any benefit that the non-compliant person would be reasonably expected to derive, even if the benefit was not fully realized
    2. Economic benefits include costs avoided or time saved as a result of a contravention or failure to comply[19]
    3. The amount of economic benefit is based on the benefit obtained as a result of the contravention or non-compliant conduct. Future loss of such benefit is not taken into consideration while applying this criterion
    4. Economic benefit is assessed by FSRA in a manner consistent with the prescribed purposes for which General AMPs may be imposed, to prevent a person or entity from deriving, directly or indirectly, any economic benefit as a result of contravening or failing to comply with statutory requirements.
    5. A General AMP seeks to neutralize all economic benefits of a contravention, to the extent permitted within the statutory maximum. However, a General AMP should not simply negate the economic benefit arising from a contravention, as such an approach could lead to an AMP being considered a “cost of doing business”. The economic benefit is the starting point for the appropriate General AMP, since a General AMP that only puts a wrongdoer back on the same footing they would have been in, but for the sanction, does not adequately deter non-compliance. Subject to statutory maximums, a General AMP that exceeds the economic benefit, if any, is generally imposed to incentivize compliance. The degree of excess depends on the evidence applied to the other Statutory Criteria.
  5. Prior history of contraventions or failures to comply: FSRA takes into account the regulatory history of a person while determining the severity of a General AMP. A history of regulatory misconduct indicates greater need for specific deterrence and escalated consequences. Prior contraventions of all financial services legislation are taken into account. The following factors, among others, affect the severity of a General AMP:
     
    1. Whether the prior contravention involved the same statute as the present contravention.
    2. Severity of the prior contravention and if such contravention arose from the same or similar factual circumstances.
    3. Whether the person was aware of the prior contravention and had an opportunity to challenge the finding.
    4. Compliance with any sanction imposed for the prior contravention.

B.2 Interpretation: FSRA ensures that General AMPs are not punitive

The final stage of the General AMP amount determination is to ensure that the AMP is not punitive in nature.[20] A General AMP amount is punitive if it is disproportionate to the amount required to achieve the Statutory Purposes for imposing the General AMP, as described in Section B.1 of this Guidance.[21] The magnitude of the General AMP is not determinative, but the amount must reflect the Statutory Purposes, including the objective of promoting compliance and deterring non-compliance with regulatory requirements.

FSRA takes a holistic approach when making a determination on the proportionality of a General AMP amount. FSRA takes into account all relevant factors including the overall factual circumstances associated with the General AMP, the conduct of the non-compliant person or entity, and the totality of the sanctions imposed.   

If the amount of the General AMP is determined as punitive, FSRA reduces the General AMP to bring it in compliance with the Statutory Purposes described in Section B.1. of this Guidance in accordance with the Statutory Criteria discussed in Section C. of this Guidance. 

C. Approach: FSRA may reduce General AMP Amounts in settlements

FSRA may decide to add or remove a General AMP proposed, or modify the amount of such General AMP, as a result of a settlement. However, FSRA does so only when satisfied that the General AMP imposed by settlement is consistent with the Statutory Purposes and Statutory Criteria described above. FSRA may also consider:

  1. Actions of the concerned person or entity after the commencement of the enforcement action.

  2. Any new information or evidence brought to the notice of FSRA after the commencement of the enforcement action.

  3. The overall sanctions and outcomes that will be achieved through settlement.

Effective date and future review

This guidance became effective on March 11, 2024 and will be reviewed no later than March 11, 2029.

About this Guidance

This document is consistent with FSRA’s Guidance Framework. As an Interpretation guidance, it describes FSRA’s view of requirements under its legislative mandate (i.e., legislation, regulations and rules). Further, as an Approach Guidance it describes FSRA’s internal principles, processes and practices for supervisory action and application of Chief Executive Officer discretion.

Appendix A

Table of Relevant Sector Statute Provisions

Sector Empowering Statute and Relevant General AMP Sections Relevant AMP Regulation Maximum Imposable General AMP
Insurance Insurance Act, Ss. 441.2, 441.3, 441.5 (“Insurance Act”) Ontario Regulation 408/12
  1. Individual - $100,000
  2. Other than Individual - $200,000
Mortgage Brokers Mortgage Brokerages, Lenders and Administrators Act, , Ss. 38, 39,  41 Ontario Regulation 192/08
  1. Contravention/failure to comply by person/entity who is/required to be, licensed as a mortgage brokerage or a mortgage administrator - $500,000
  2. Contravention/failure to comply by individual who is/required to be, licensed as a mortgage broker or agent - $100,000
  3. Any other person - $500,000
Pensions Pension Benefits Act, Ss. 108.1, 108.2, 108.4 (“PBA”) Ontario Regulation 365/17
  1. Individual - $10,000
  2. Other than Individual - $25,000
Credit Unions and Caisses Populaires Credit Unions and Caisses Populaires Act, 2020, Ss. 268, 269, 271 Ontario Regulation 105/22, s. 125
  1. Individual - $100,000
  2. Entity - $500,000
Insurance – Rate Stabilization Automobile Insurance Rate Stabilization Act, Ss. 11.2, 11.3, 11.5 Ontario Regulation 410/12 $200,000
Automobile Insurance Compulsory Automobile Insurance Act, Ss. 14.3, 14.4, 14.6 Ontario Regulation 409/12
  1. Individual - $100,000
  2. Other than Individual - $200,000

Effective date: March 11, 2024


[1] Generally, under the Sector Statutes (defined below), the Chief Executive Officer of FSRA (“CEO”) is granted the regulatory authority to impose Administrative Penalties (“AMPs”). The CEO delegates the authority to impose AMPs to designated officers or employees of FSRA in accordance with subsection 10 (2.3) of the Financial Services Regulatory Authority of Ontario Act indoor management principles.  This guidance refers to the CEO and delegated authorities as “FSRA”.
[2] The proportionality analysis is specifically required under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (the “MBLAA”) and the Credit Unions and Caisses Populaires Act, 2020 (the “CUCPA”).
[3] Amendment to existing legislation or enactment of new legislation may result in the change of the scope of this Guidance.
[4] For the purpose of this Guidance AMPs imposed under Section 269 of the CUCPA, are referred to as General AMPs.
[5] Certain Enforcement actions imposing AMPs shall be transparently communicated to the public in accordance with FSRA’s guidance on Transparent Communication of FSRA Enforcement Action
[6] Note that in addition to this Guidance, FSRA has also separately introduced guidance with respect to the retention and use of AMP amounts received by FSRA. See FSRA Approach Guidance No. GR0012APP, Use of Retained Revenues under Regulation “Money Retained Outside the Consolidated Revenue Fund”
[7] Suthar v. Ontario (Superintendent Financial Services), 2018 ONFST 12 at Para 26
[8] Centum Coachwood Mortgage Corporation v. Ontario (Superintendent Financial Services), 2015 ONFST 15 at Para 14
[9] Gulati v. Ontario (Superintendent Financial Services), 2018 ONFST 4 at Para 105
[10] 2432396 Ontario Limited o/a Midland Wellness Centre and Thayaparan v. Ontario (Superintendent Financial Services), 2019 ONFST 8 at Para 35 (“Thayaparan”)
[11] Khan v. Ontario (Superintendent Financial Services), 2018 ONFST 3 at Para 19; Koya v. Ontario (CEO of FSRA), 2021 ONFST 3 at Para 41 (“Koya”)
[12] Saini v. Ontario (Superintendent Financial Services), 2018 ONFST 15
[13] FSRA is permitted to impose AMPs in addition to other available sanctions.
[14] Wong v. Ontario (Superintendent Financial Services), 2009 ONFST 10 at Pages 6,7
[15] Habibzi v. Ontario (CEO of FSRA), 2022 ONFST 7, 2022 ONFST 7 at Para 142
[16] La Souveraine, Compagnie d’assurance générale v. Autorité des marchés financiers, 2013 SCC 63, at Para 49; Reid v. Ontario (Superintendent Financial Services), 2018 ONFST 8 at Paras 13,14 [“Reid”]
[17] Srivastava v. Ontario (Superintendent Financial Services), 2017 ONFST 11 at Para 29
[18] Reid, Supra Note 16, at Para 23
 [19] Koya, Supra Note 11 at Para 41, Thayaparan, Supra Note 10 at Para 42.d 2019 ONFST 8
[20] The analysis is specifically required for AMPs imposed under the MBLAA and the CUCPA by virtue of sections 3(2) of Ontario Regulation 192/08 and 125(2) of Ontario Regulation 105/22 respectively.  FSRA generally ensures that AMPs are proportionate to the amount required to achieve the Statutory Purposes under all of its Sector Statutes, and not punitive.
[21] Guindon v. Canada, 2015 SCC 41 at Para 45