December 15, 2022 Organization

Montréal – The Autorité des marchés financiers (the “AMF”) today published for comment its draft regulation  respecting the prohibition on requiring certain fees from holders of individual variable insurance contracts relating to segregated funds (the “Draft Regulation”). Subject to Ministerial approval, the AMF expects the regulation to come into force on June 1, 2023.

This consultation is related to work conducted by the AMF in collaboration with the other members of the Canadian Council of Insurance Regulators (“CCIR”) and the Canadian Insurance Services Regulatory Organizations (“CISRO”) with a view to supporting the fair treatment of consumers of insurance products.

In February 2022, the AMF announced that it was following up on the announcement by the CCIR and CISRO This link will open in a new window (in French only) and asked insurers that carry on activities in Québec to stop using deferred sales charges (“DSCs”) as of June 1, 2022, specifying that it would undertake regulatory work intended to prohibit their use as of June 1, 2023.

Accordingly, the Draft Regulation prohibits requiring certain fees from a contract holder on a withdrawal or transfer of segregated funds or a change of purchase option. It applies to insurers authorized under the Insurers Act and firms, independent representatives and independent partnerships registered under the Act respecting the distribution of financial products and services. It applies only in respect of individual variable insurance contracts relating to segregated funds entered into as of June 1, 2023. 

The AMF reiterates that the sales practice of using DSCs is contrary to FTC. Therefore, the AMF is counting on insurers to cooperate in offering holders of contracts entered into before June 1, 2023 an alternative so that they may avoid such charges on amounts invested in such contracts after that date.

Lastly, the Draft Regulation provides that the AMF may impose monetary administrative penalties on authorized insurers that do not comply with the regulatory provisions.

Comments regarding this Draft Regulation may be made in writing by January 31, 2023. The consultation material can be found on the AMF’s website.

The Autorité des marchés financiers is the regulatory and oversight body for Québec’s financial sector.

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