An inspection is a structured process conducted with professionalism and transparency. Here’s how an inspection is conducted and how you can prepare for it.

Before the inspection

Courtesy call

The lead inspector will contact you by e-mail, videoconference or phone to begin the process.

Inspection notice

You will receive an official notice stating the location of the inspection and the names of the inspectors.

Access to the File Transfer Service (FTS) site

You will receive instructions on how to use the AMF’s file transfer service, including your user ID and password, so that you can transmit certain documents in advance.

You may need to provide the following documents: list of sales, separate accounts and employees; transaction records; policies and procedures; accounting registers, etc.

During the inspection

Reception and setup (in-person inspections)

Appoint someone to receive the inspectors on your premises and plan specific access measures (entrances and exits, access cards, Wi-Fi, etc.). Plan for a visit of your workspaces (workstations, computer hardware, access to files).

Interviews

The inspectors will hold an initial meeting with the officer or respondent to explain the inspection process. The inspectors may subsequently identify other individuals to discuss various aspects of their professional practices (officers, representatives, employees, etc.).

Document analysis

The inspectors will ask you for supporting documents to verify their findings (books, registers, selected files, etc.).

Exit interview

A summary of the preliminary findings will be presented to you before the final report is issued.

Your role: Facilitate access to information, answer questions and actively cooperate. A particular responsible person must be available throughout the inspection.

Throughout the process, you will be able communicate with the AMF’s contact persons and the inspectors handling your file. They will be available to provide you with answers to your questions and support.

After the inspection

Inspection report

A few months after the visit, an inspection report will be sent summarizing the inspectors’ findings and the breaches to be addressed. Inspection reports remain the property of the AMF and are strictly confidential.

  • The inspection report is intended for internal use only.
  • The report may not be distributed, in whole or in part, or used for commercial or promotional purposes without the AMF’s written authorization except as otherwise required by law.

Action plan

In the event of non-compliance, you may be required to propose corrective actions and sign an undertaking.

Follow-up inspection

The AMF may return to validate that the actions have been taken.

Forwarding the file

In more serious cases of non-compliance, the file may be forwarded to another team, such as AMF Litigation, in order to have that team evaluate additional legal options available to the AMF.

You must be available to answer any questions. The inspectors may verify the provided information and answers during a follow-up inspection to ensure that the corrective actions have been implemented.

Closing the inspection file

In general, the inspection file will be kept open until the AMF receives a response to the inspection report from you that confirms that you will implement the corrective actions indicated in the report within the required time.

Warning

Refusing to implement the corrective actions may result in specific procedures.. The AMF reserves the right to take any legal or administrative action necessary to ensure compliance with laws and regulations.

End of the warning

Considerations specific to each sector

The AMF inspects individuals and entities registered in the following sectors:

  • Insurance of persons (life and health)
  • Group insurance of persons
  • Financial planning
  • Damage insurance (property and casualty)
  • Claims adjustment
  • Mortgage brokerage
Insight

Compliance self-assessment

Thematic questionnaires are a tool you can use to self-assess compliance and support the continuous improvement of your practices. The questionnaires also include useful references to assist you in strengthening your practices.

Test your compliance approach and self assess

End of the insight

The scope of the inspection can vary depending on the type of inspection. The primary goal of the inspection is to validate overall compliance with the requirements set out in the Act respecting the distribution of financial products and services and its regulations.

Elements analyzed during an inspection

Here are the main elements that may be reviewed during an inspection.

Organizational structure

Supervision

  • Supervision of representatives, employees and officers
  • Probationary periods
  • Professional conduct
  • Way of carrying on business, conditions and/or restrictions attached to the right to practise
  • Qualification of the responsible officer

Conduct of business

  • Retention and destruction of books, records and registers
  • Complaint processing policy
  • Processing of complaints received by the firm
  • Keeping of client records
  • Business continuity plan (BCP)
  • IT security and protection of personal information
  • Outsourcing

Transactions and suitability

  • Financial needs analysis
  • Risk profile
  • Policy replacement
  • Illustrations
  • Leveraged loans
  • Bulk transfers of client files/acquisitions of books of business
  • Insurance products offered via the Internet
  • Compensation disclosures

Transactions

  • Mandate
  • Report
  • Group marketing
  • Third-party administrator (TPA) activities
  • Third-party payer (TPP) activities
  • Compensation disclosure

Transactions

  • Mandate
  • Financial needs analysis
  • Report
  • Compensation disclosure.

Ownership interests and various disclosures

  • Ownership interests
  • Disclosure of business relationships (including concentration in personal-lines insurance)
  • Compensation disclosures
  • Disclosure under section 83.1 – Broker or agency
  • Broker concentration disclosure

Offering damage insurance products

  • Handling of new business
  • Handling of business during the contract term
  • Handling of renewals
  • Transfer of business from one insurer to another
  • Bulk transfers of client files
  • Reduction or cancellation of coverage
  • Replacement cost
  • Agency/broker verification

Commercial practices

  • Availability and claims handling
  • Concept of mandate
  • Crediting of insureds
  • Loans extended to the firm by an insurer
  • Outsourcing of premium financing

Distribution practices

  • Claims management
  • Special distribution arrangements
  • Wholesaler activities
  • Special brokerage

Transactions

  • Functions of the claims adjuster
  • Other persons performing one or more functions of the claims adjuster
  • Service offering
  • Worksheet
  • Compensation disclosure

Offer of mortgage services and products

  • Analysis of mortgage needs and financial situation
  • Identification of stakeholders
  • Handling of new business
  • Handling of subrogations
  • Handling of refinance transactions
  • Handling of high-risk mortgages

Various disclosures

  • Disclosure of method of remuneration, compensation and sharing of commissions
  • Lender-related disclosures

Key findings from inspections

Inspections carried out by the AMF in the financial products and services distribution sectors have proven to positively impact the culture of compliance. Here are the main points noted during our work.

Supervision and regulation

  • Inadequate supervision
  • Missing or incomplete policies and procedures
  • Failure to fulfill obligations during the probationary period
  • Product suitability not verified (audit of client records)

Conduct of business

  • Deficient client-record keeping
  • Missing or incomplete notes in client records
  • Inadequate IT security
  • Non-compliant representations

Specific breaches

Insurance of persons

  • Incomplete financial needs analysis
  • Incomplete or incorrect notice of replacement form

Damage insurance

  • Late processing of renewals
  • Inadequate recordkeeping

Mortgage brokerage

  • Incomplete analysis of mortgage needs and financial situation
  • Excessive or unjustified brokerage fees
  • Incomplete or missing disclosures

The AMF inspects and regulates individuals and entities registered in the following categories:

  • Scholarship plan dealers
  • Exempt market dealers
  • Portfolio managers
  • Derivatives portfolio managers
  • Restricted portfolio managers
  • Investment fund managers
  • Development capital investment funds

Scope of inspection work

The scope of the inspection can vary depending on the type of inspection. The inspection is primarily intended to validate overall compliance with the requirements set out in the Securities Act and the Derivatives Act and their regulations.

Here are the main component that may be analyzed during an inspection.

  • General and financial control environment:
    • Organizational structure, compliance with regulatory requirements
    • Supervision, business continuity, outsourcing, complaint management
    • Identification and management of conflicts of interest
  • Safekeeping of assets, financial situation, administration
  • Client relations and record-keeping:
    • Know your client, know your products
    • Suitability
    • Transactions
  • Account statements and marketing practices (for dealers and portfolio managers, for example)
  • Activities specific to registration categories
  • Dealers:
    • Supervision of representatives and oversight of branches
    • Delivery of information about transactions
    • Knowledge of clients’ financial situation and risks specific to leveraging strategies;
  • Portfolio management:
    • Compliance with management agreements and investment policies
    • Risk management and compliance with specific restrictions
    • Supervision of associate advising representatives and sub-managers
    • Dealer selection and trade execution
    • Fair allocation of investment opportunities
    • Monitoring of personal and insider trading
    • Calculation and presentation of returns
  • Investment fund management activities:
    • Communications with security holders
    • Supervision of portfolio managers
    • Fees and expenses charged to funds
    • Calculation of net asset values
    • Distribution of units
    • Calculation of commissions paid to distributors
    • Soft dollars
    • Securities lending, repurchase and reverse repurchase transactions
Insight

Two key tools to enhance transparency and predictability

Two key tools are available to you. Use them now to be prepared at all times.

 

List of documents and information frequently requested during inspections

Prepare these documents without delay; they are usually requested at the beginning of an inspection. Keep your documents so you can provide them quickly.

This list is not comprehensive; other documents may be requested depending on the nature and context of the inspection.

Download the list and check your files today.

List of documents and information frequently requested during inspections(pdf - 246 KB)This link will open in a new window (in French only)

Questionnaire on the activities of the registered firm

Complete this questionnaire to provide us with up-to-date information on your activities and business model. This essential tool helps us:

  • Plan inspections effectively
  • Monitor changes
  • Anticipate impacts on future mandates

This questionnaire may be sent periodically, at varying intervals.

Questionnaire on the activities of the registered firm(pdf - 585 KB)This link will open in a new window (in French only)

End of the insight

Inspection fee

The inspection fee is determined by the Securities Regulation and is revised on an annual basis.

The inspection fee covers the preparation and planning of an inspection, the on-site visit, the subsequent analyses at the AMF’s offices, the preparation of the inspection report and the review of the case by an inspection coordinator. Once the response to the inspection report is received and analyzed, the case is usually closed and the invoice issued.

Key findings of inspection activities

Most AMF inspection findings in the securities sector have related to KYC, suitability, conduct of business, supervision and the entity’s financial situation. The following have been most frequent among those findings:

Know your client

  • Incomplete account opening form
  • Vague, incomplete or inconsistent investor profile
  • No appropriate process to demonstrate that staff assessed compliance prior to opening accounts
  • No adequate process to ensure that investor profiles are regularly updated

Disclosure to clients

  • Description of potential conflicts of interest

Suitability

  • Portfolio not consistent with client’s needs and objectives
  • Portfolio not consistent with client’s risk tolerance

False or misleading advertising

  • Exaggerated or unsubstantiated claims
  • Failure to properly present the risk associated with a product or strategy
  • Missing or unclear references

Annual compliance report (the report is missing or does not discuss an important topic)

  • Performance of oversight functions
  • Capital and insurance
  • Regulatory reviews and investigations
  • Legal and disciplinary proceedings
  • Client complaints

Policies and procedures manual (written procedures are missing, superficial or incomplete)

  • Obligation to inform the AMF
  • Oversight of financial obligations
  • Supervision of commercial practices

Complaint examination policy (incomplete policy)

  • Name of person responsible for applying the policy
  • Description of a complaint
  • Description of complaint handling process
  • Description of process for transferring a case to the AMF
  • Instructions for submitting complaint reports to the AMF

Supervision (insufficient supervision of)

  • Promotional material
  • Tasks requiring registration
  • Outsourcing (service agreements)
  • Duties related to financial obligations

Financial position and environment

  • Financial statements are not compliant with regulatory accounting principles
  • Auditor’s report accompanying the financial statements does not comply with Canadian Auditing Standards (CASs)
  • Firm does not adequately monitor its working capital

The AMF inspects individuals and entities registered in the following sectors:

  • Insurance of persons (life and health)
  • Group insurance of persons
  • Financial planning
  • Damage insurance (property and casualty)
  • Claims adjustment
  • Mortgage brokerage
Insight

Compliance self-assessment

Thematic questionnaires are a tool you can use to self-assess compliance and support the continuous improvement of your practices. The questionnaires also include useful references to assist you in strengthening your practices.

Test your compliance approach and self assess

End of the insight

The scope of the inspection can vary depending on the type of inspection. The primary goal of the inspection is to validate overall compliance with the requirements set out in the Act respecting the distribution of financial products and services and its regulations.

Elements analyzed during an inspection

Here are the main elements that may be reviewed during an inspection.

Organizational structure

Supervision

  • Supervision of representatives, employees and officers
  • Probationary periods
  • Professional conduct
  • Way of carrying on business, conditions and/or restrictions attached to the right to practise
  • Qualification of the responsible officer

Conduct of business

  • Retention and destruction of books, records and registers
  • Complaint processing policy
  • Processing of complaints received by the firm
  • Keeping of client records
  • Business continuity plan (BCP)
  • IT security and protection of personal information
  • Outsourcing

Transactions and suitability

  • Financial needs analysis
  • Risk profile
  • Policy replacement
  • Illustrations
  • Leveraged loans
  • Bulk transfers of client files/acquisitions of books of business
  • Insurance products offered via the Internet
  • Compensation disclosures

Transactions

  • Mandate
  • Report
  • Group marketing
  • Third-party administrator (TPA) activities
  • Third-party payer (TPP) activities
  • Compensation disclosure

Transactions

  • Mandate
  • Financial needs analysis
  • Report
  • Compensation disclosure.

Ownership interests and various disclosures

  • Ownership interests
  • Disclosure of business relationships (including concentration in personal-lines insurance)
  • Compensation disclosures
  • Disclosure under section 83.1 – Broker or agency
  • Broker concentration disclosure

Offering damage insurance products

  • Handling of new business
  • Handling of business during the contract term
  • Handling of renewals
  • Transfer of business from one insurer to another
  • Bulk transfers of client files
  • Reduction or cancellation of coverage
  • Replacement cost
  • Agency/broker verification

Commercial practices

  • Availability and claims handling
  • Concept of mandate
  • Crediting of insureds
  • Loans extended to the firm by an insurer
  • Outsourcing of premium financing

Distribution practices

  • Claims management
  • Special distribution arrangements
  • Wholesaler activities
  • Special brokerage

Transactions

  • Functions of the claims adjuster
  • Other persons performing one or more functions of the claims adjuster
  • Service offering
  • Worksheet
  • Compensation disclosure

Offer of mortgage services and products

  • Analysis of mortgage needs and financial situation
  • Identification of stakeholders
  • Handling of new business
  • Handling of subrogations
  • Handling of refinance transactions
  • Handling of high-risk mortgages

Various disclosures

  • Disclosure of method of remuneration, compensation and sharing of commissions
  • Lender-related disclosures

Key findings from inspections

Inspections carried out by the AMF in the financial products and services distribution sectors have proven to positively impact the culture of compliance. Here are the main points noted during our work.

Supervision and regulation

  • Inadequate supervision
  • Missing or incomplete policies and procedures
  • Failure to fulfill obligations during the probationary period
  • Product suitability not verified (audit of client records)

Conduct of business

  • Deficient client-record keeping
  • Missing or incomplete notes in client records
  • Inadequate IT security
  • Non-compliant representations

Specific breaches

Insurance of persons

  • Incomplete financial needs analysis
  • Incomplete or incorrect notice of replacement form

Damage insurance

  • Late processing of renewals
  • Inadequate recordkeeping

Mortgage brokerage

  • Incomplete analysis of mortgage needs and financial situation
  • Excessive or unjustified brokerage fees
  • Incomplete or missing disclosures

The AMF inspects and regulates individuals and entities registered in the following categories:

  • Scholarship plan dealers
  • Exempt market dealers
  • Portfolio managers
  • Derivatives portfolio managers
  • Restricted portfolio managers
  • Investment fund managers
  • Development capital investment funds

Scope of inspection work

The scope of the inspection can vary depending on the type of inspection. The inspection is primarily intended to validate overall compliance with the requirements set out in the Securities Act and the Derivatives Act and their regulations.

Here are the main component that may be analyzed during an inspection.

  • General and financial control environment:
    • Organizational structure, compliance with regulatory requirements
    • Supervision, business continuity, outsourcing, complaint management
    • Identification and management of conflicts of interest
  • Safekeeping of assets, financial situation, administration
  • Client relations and record-keeping:
    • Know your client, know your products
    • Suitability
    • Transactions
  • Account statements and marketing practices (for dealers and portfolio managers, for example)
  • Activities specific to registration categories
  • Dealers:
    • Supervision of representatives and oversight of branches
    • Delivery of information about transactions
    • Knowledge of clients’ financial situation and risks specific to leveraging strategies;
  • Portfolio management:
    • Compliance with management agreements and investment policies
    • Risk management and compliance with specific restrictions
    • Supervision of associate advising representatives and sub-managers
    • Dealer selection and trade execution
    • Fair allocation of investment opportunities
    • Monitoring of personal and insider trading
    • Calculation and presentation of returns
  • Investment fund management activities:
    • Communications with security holders
    • Supervision of portfolio managers
    • Fees and expenses charged to funds
    • Calculation of net asset values
    • Distribution of units
    • Calculation of commissions paid to distributors
    • Soft dollars
    • Securities lending, repurchase and reverse repurchase transactions
Insight

Two key tools to enhance transparency and predictability

Two key tools are available to you. Use them now to be prepared at all times.

 

List of documents and information frequently requested during inspections

Prepare these documents without delay; they are usually requested at the beginning of an inspection. Keep your documents so you can provide them quickly.

This list is not comprehensive; other documents may be requested depending on the nature and context of the inspection.

Download the list and check your files today.

List of documents and information frequently requested during inspections(pdf - 246 KB)This link will open in a new window (in French only)

Questionnaire on the activities of the registered firm

Complete this questionnaire to provide us with up-to-date information on your activities and business model. This essential tool helps us:

  • Plan inspections effectively
  • Monitor changes
  • Anticipate impacts on future mandates

This questionnaire may be sent periodically, at varying intervals.

Questionnaire on the activities of the registered firm(pdf - 585 KB)This link will open in a new window (in French only)

End of the insight

Inspection fee

The inspection fee is determined by the Securities Regulation and is revised on an annual basis.

The inspection fee covers the preparation and planning of an inspection, the on-site visit, the subsequent analyses at the AMF’s offices, the preparation of the inspection report and the review of the case by an inspection coordinator. Once the response to the inspection report is received and analyzed, the case is usually closed and the invoice issued.

Key findings of inspection activities

Most AMF inspection findings in the securities sector have related to KYC, suitability, conduct of business, supervision and the entity’s financial situation. The following have been most frequent among those findings:

Know your client

  • Incomplete account opening form
  • Vague, incomplete or inconsistent investor profile
  • No appropriate process to demonstrate that staff assessed compliance prior to opening accounts
  • No adequate process to ensure that investor profiles are regularly updated

Disclosure to clients

  • Description of potential conflicts of interest

Suitability

  • Portfolio not consistent with client’s needs and objectives
  • Portfolio not consistent with client’s risk tolerance

False or misleading advertising

  • Exaggerated or unsubstantiated claims
  • Failure to properly present the risk associated with a product or strategy
  • Missing or unclear references

Annual compliance report (the report is missing or does not discuss an important topic)

  • Performance of oversight functions
  • Capital and insurance
  • Regulatory reviews and investigations
  • Legal and disciplinary proceedings
  • Client complaints

Policies and procedures manual (written procedures are missing, superficial or incomplete)

  • Obligation to inform the AMF
  • Oversight of financial obligations
  • Supervision of commercial practices

Complaint examination policy (incomplete policy)

  • Name of person responsible for applying the policy
  • Description of a complaint
  • Description of complaint handling process
  • Description of process for transferring a case to the AMF
  • Instructions for submitting complaint reports to the AMF

Supervision (insufficient supervision of)

  • Promotional material
  • Tasks requiring registration
  • Outsourcing (service agreements)
  • Duties related to financial obligations

Financial position and environment

  • Financial statements are not compliant with regulatory accounting principles
  • Auditor’s report accompanying the financial statements does not comply with Canadian Auditing Standards (CASs)
  • Firm does not adequately monitor its working capital
Information

Supervision of financial institutions and credit assessment agents

The AMF uses a supervisory approach with efforts focused on risks having the most significant potential impact on financial stability and the protection of client interests.

Refer to the applicable framework:

End of the Information