IFB plan would allow insurance advisors to repay Portus commissions to clients

Date: Tuesday, April 25, 2006
Author: Investmentexecutive.com

Independent Financial Brokers of Canada (IFB) has taken an initial step to develop a process allowing insurance agents, brokers and managing general agencies (MGAs) in Ontario to voluntarily refund commissions and fees paid to them by Portus Alternative Asset Management.

Earlier this year, mutual fund and securities dealers in Ontario announced they had reached agreement with the Ontario Securities Commission, Investment Dealers Association of Canada and the Mutual Fund Dealers Association to repay clients commissions and fees they had received from Portus, and to abide by certain terms and conditions. In return, the regulators agreed not to pursue further investigations or proceedings against those dealers with respect to certain specified issues related to Portus.

Following this announcement, IFB received a number of enquiries from its life-licensed members asking whether such an OSC-approved arrangement would be available to them and their clients. In order to determine the level of interest in such an arrangement, IFB surveyed its members. The results of the survey indicated enough interest to proceed.

Accordingly, IFB staff and legal counsel recently met with OSC representatives and are pleased that the OSC is interested in working towards developing similar terms and conditions for insurance licensees who referred clients either directly to Portus or through an MGA in Ontario.

IFB is facilitating these talks because of the interest expressed by these members and because it believes there is much public goodwill to be gained by those in the insurance industry developing a co-operative, voluntary response for their clients. Therefore, IFB is inviting any insurance agent, broker or MGA who referred Portus to participate, irrespective of whether they are currently a member of Independent Financial Brokers.

An important component of this initiative will be discussions with the OSC to seek the agreement of OSC staff that life-licensed individuals who agree to abide by the terms and conditions of a negotiated settlement will not be subject to investigation or proceedings for carrying out an “act in furtherance of a trade” by referring clients to Portus in return for commissions and fees.

The OSC has indicated that it would like any insurance industry response to be modeled on the terms and conditions agreed to by the mutual fund dealers. IFB expects that continuing education about the potential pitfalls of such referral fee arrangements may be a key part of any final terms and conditions.

Insurance agents, brokers and MGAs who are interested in participating should contact IFB directly by emailing portusupdates@ifbc.ca.