A former Winnipeg life insurance agent was allowed to keep selling insurance after he was found unsuitable for selling securities, in a case that an investor advocate says points to gaps in the regulatory system.
“Unfortunately in too many cases, individuals who have been sanctioned by one regulator may be permitted to carry on financial services activities without any intervention by another regulator,” said Frank Allen, executive director of FAIR Canada — the Canadian Foundation for the Advancement of Investor Rights.
“I think it’s a gap in the system that needs to be closed.”
Former life insurance agent William MacKay was assessed $21,000 in fines and investigation costs by the Insurance Council of Manitoba in November 2017. The council found MacKay breached Manitoba’s Insurance Actin an instance of incompetence.
A client complained about MacKay’s handling of a life insurance policy, claiming the policy was meant to be issued in the client’s name, rather than in his corporation’s name.
The client believed that doing so could have created significant income tax benefits.
But that wasn’t the first time MacKay ran into trouble with the insurance regulator. In 2016, he was fined $10,000 plus $2,000 in costs in a case involving a client who purchased a BMO Maximizer Elite life insurance policy.
According to the discipline report, the council found MacKay violated the Insurance Act and the life insurance agent code of conduct by making false or misleading statements, misrepresentation, incompetence and selling the client a product not suited to his needs.
The BMO policy had a planned annual premium of $250,000, the report said, and involved the client borrowing money to pay for it.
The council found the client had equity in properties but was “cash poor.” The plan was to purchase the policy with the ability to borrow money from it.
But the policy as described by MacKay “did not exist,” and the “product was half-baked — or not fully formed” and “should not have been recommended, pursued or settled,” the decision said.
MacKay acknowledged “his errors and poor practices,” the council’s decision said, and characterized it as a case of “confusion, misunderstanding and incompetence.”
In his submission to the council, MacKay called the penalty “unjustified” and said he “disputes any wrongdoing whatsoever.” He also told council he repaid to BMO the $15,856 in commission he received for sale of the policy.
The two discipline cases by the insurance council followed a 2012 decision by the Manitoba Securities Commission, posted on the MSC’s website.
That decision denied MacKay registration to sell securities. It was the director’s opinion that his past conduct raised questions about his integrity, judgment and due diligence, and had demonstrated a pattern of “placing his own self-interest ahead of others.”
FAIR Canada’s Frank Allen said the insurance regulator should have reviewed MacKay’s insurance licence once the securities commission report was issued.
“I believe the decision by the director of the Manitoba Securities Commission does raise serious issues and at a minimum it would have been prudent for the life insurance [council] to at least review Mr. MacKay’s licence to sell life insurance products,” Allen said in an interview from Toronto.
ICM cites privacy rules
The insurance council would not say whether or not it reviewed MacKay’s licence after the 2012 decision by the securities commission, citing regulations around privacy obligations.
“Investigations of complaints or concerns regarding licence holders are sensitive,” said the insurance council’s executive director, Barbara Palace Churchill, in a statement to CBC News.
“The mere fact that an investigation is occurring can impact the reputation of an individual and, therefore, their livelihood,” she said.
“The ICM does not comment publicly on any licensing matters, investigations or disciplinary matters other than a published decision that is posted to our website.”
The securities commission would not say if it discussed its 2012 decision with the insurance council.
“We do not have any publicly available documentation of contact between MSC and ICM regarding Mr. MacKay,” said Manitoba Securities Commission spokesperson Jason Booth.
But both the securities commission and the Insurance Council of Manitoba said they share regulatory information formally and informally.
“Our methods of communication with other regulators continues to improve, as we are always working to find new methods and efficiencies to regulate Manitoba’s capital markets and protect investors,” Booth said in an email.
MacKay denies allegations
MacKay had been licensed as a life insurance agent in Manitoba since 2002.
He denies many of the allegations in both the 2016 and 2017 decisions against him by the insurance council. He accused the ICM of making unsubstantiated allegations.
I honestly feel that I have not been treated fairly by these former clients and certain staff members at the Insurance Council in particular.– Frank MacKay
“There were multiple instances in those cases where the accusing parties made blatantly false claims about my conduct and the advice I gave.
“I honestly feel that I have not been treated fairly by these former clients and certain staff members at the Insurance Council in particular,” MacKay said in an email to CBC.
“I simply do not have the resources to continue to fund the legal expense when the internal investigator of the ICM does not appear to be acting in a manner which is objective, fair or balanced,” MacKay told CBC.
“It feels pointless to argue with a group that seems to have made up their mind before I presented my recount of the events,” he said.
“It feels to me there is an intent to destroy my ability to earn a living and serve my existing clients.”
‘Small number’ of negative relationships
Although MacKay ceased to be licensed as an insurance agent last March, he wrote to the insurance council in November 2017 asking to reapply.
“I have applied for my insurance licence to be reinstated in order that I can service my existing clients. I am essentially semi-retired at this point and I am not looking to actively pursue new insurance clients however I feel it is important that I am able to provide a quality service level to my existing client base,” MacKay wrote.
The number of clients I have that appreciate the advice I have given them over the years, and that I continue to have close personal relationships with far outnumber the clients that are dissatisfied.– Frank MacKay
“Currently I am not receiving any compensation for my existing client base which has caused me a great deal of financial hardship,” he told the council.
“I am discouraged by the fact that I have had a small number of client relationships turn negative over the years. The reality is that the number of clients I have that appreciate the advice I have given them over the years, and that I continue to have close personal relationships with far outnumber the clients that are dissatisfied,” MacKay wrote.
“In many cases those positive clients have utilized the same financial strategies that the clients that are now dissatisfied utilized.”
Two other financial regulators — the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada — both say they share information with regulators across the country.
But the Insurance Council of Manitoba said it does not yet have formal information sharing agreements in place with either of those regulators.
The insurance council does require its licensees to report annually any discipline decisions by other regulators when renewing their licenses.
“These renewals are good faith applications, and the ICM places reliance upon the statements of our licence holders,” said the insurance council’s Barbara Palace Churchill.
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Published at Thu, 18 Jan 2018 06:00:00 -0500