ARCHIVED - Compliance framework: Compliance and enforcement toolbox

From: Financial Consumer Agency of Canada

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The Compliance Framework is archived.  The Supervision Framework came into effect on October 1, 2018.

Compliance and enforcement toolbox

Tools to promote compliance

The tools that are used to promote compliance will not form part of a FRFE’s compliance history as described in Section 20 of the FCAC ACT; however, they will be considered in the Risk Assessment Model when establishing the risk level of a FRFE.  

Non-substantive letter

A non-substantive letter is an administrative compliance tool used to inform a FRFE of a possible breach of the legislative provision, voluntary code of conduct or public commitment. This letter is signed by the Senior Compliance Officer and sent to the FRFE as a notification that the Agency is aware of possible contravention, but will not pursue the issue further for the time being.

CEB continues to monitor the issue to identify any trends that may develop. It expects that the FRFE will review the issue noted and assess the practice concerned to ensure compliance.

Letter of concern

A letter of concern is an administrative compliance tool used to raise a FRFE’s awareness of a possible compliance issue. The Agency may issue a letter of concern in a case involving an apparent contravention of a legislative provision, voluntary code of conduct or public commitment. A letter of concern may also be issued in a situation where there is significant consumer impact and the Agency believes that the FRFE’s disclosure, procedures or practices may not be adequate or may be misleading to consumers.

This type of letter will inform the FRFE of CEB’s concerns regarding its investigative findings and will advise the FRFE that it possibly will take stronger regulatory actions in the event of another contravention. In addition, CEB will continue to monitor the issue to identify any trends that may develop.

There is an expectation that the FRFE will also review the issue noted, assess the practice to ensure compliance and report to FCAC when changes are made.

Letter of concern with an action plan

A letter of concern with recommended measures (i.e. an action plan) is an administrative compliance tool used to ensure that a FRFE improves its level of compliance with an identified legislative provision, voluntary code of conduct or public commitment within a specific time frame. This letter will also advise the FRFE that stronger regulatory action may be taken in the event of another similar contravention. In addition, CEB continues to monitor the issue to identify any trends that may develop.

An action plan requires the FRFE to provide information on the cause of non-compliance, as well as measures it plans to undertake to prevent recurrence. There is an expectation that the FRFE will review the issues noted, assess the practice to ensure compliance and report back to CEB within an established time frame on how it is addressing the issue.

Non-compliance letter

A non-compliance letter is an administrative compliance tool used to inform a FRFE of a possible non-adherence to a voluntary code of conduct or public commitment that CEB monitors. This letter is signed by the Director of Compliance and Enforcement and notifies the FRFE that CEB is aware of possible non-adherence to a code or commitment and that it will close the case as non-compliant.

In some cases, CEB will request a FRFE to take appropriate measures in order to work toward full adherence with the code or commitment. The FRFE has the right to make representations to the Commissioner to contest the non-compliance letter if it deems necessary.

Tools to implement compliance

The tools that are used to implement compliance will not form part of a FRFE’s compliance history as described in Section 20 of the FCAC Act; however, they will be considered in the Risk Assessment Model when establishing the risk level of a FRFE. Furthermore, results from the use of tools that are designed to implement compliance are reported to the Minister of Finance.

Compliance Agreement

As an enforcement tool, a Compliance Agreement is an official agreement entered into by the Commissioner and the senior management of the FRFE. It specifies corrective measures designed to further compliance with the legislative provisions, and sets out the time frame for their implementation. CEB normally works with the FRFE when setting out the agreement parameters and the timelines for the FRFE to address the key measures identified.

Failure to meet the terms and conditions of the Compliance Agreement may lead to enforcement actions, including possible Notices of Violation and the assessment of an administrative monetary penalty.

Administrative monetary penalties are not applicable to ECBs as per the legislation.

On-site examination

An on-site examination is a formal compliance tool. It is a complete and thorough examination that is used when CEB has identified more than one compliance deficiency within the FRFE, or a particularly egregious deficiency in one or more areas. In order to gather information to proceed with this type of examination, CEB may request specific documents, including but not limited to disclosure documents, policies and procedures, as well as training materials. CEB may also interview employees of the FRFE at their place of business to assess the internal compliance knowledge.

Following the examination process, a written examination report is prepared that highlights the compliance deficiencies identified within the organization and sets out specific recommendations for compliance actions to be taken by the FRFE to achieve full compliance. FCAC will work with the FRFE to establish an appropriate time frame to address all the recommendations.

FRFEs are expected to address all recommendations and advise CEB how they will ensure compliance moving forward. If recommendations from an on-site examination are not addressed by the FRFE, the issues could be escalated for potential enforcement actions (e.g. Notice of Violation).

Desk review

A desk review is a formal compliance tool that is used when multiple compliance deficiencies are identified within the FRFE. A desk review follows the same process used for an on-site examination, except that the review of information takes place at the office of the Agency.

Following the review process, CEB prepares a written examination report that identifies the compliance deficiencies found within the organization and sets out specific recommendations for compliance actions to be taken by the FRFE to achieve full compliance. FCAC will work with the FRFE to establish an appropriate time frame to address all the recommendations.

FRFEs are expected to address all recommendations and advise CEB how they will ensure compliance. If recommendations from a desk review are not addressed by the FRFE, the issues could be escalated for potential enforcement actions (e.g. Notice of Violation).

Tools to enforce compliance

The tools that are used to enforce compliance will form part of a FRFE’s compliance history as described in Section 20 of the FCAC Act, and will be considered in the Risk Assessment Model when establishing the risk level of a FRFE. Results from the use of enforcement tools will be reported to the Minister of Finance.

Notice of Violation

A Notice of Violation is an enforcement tool set out in Section 22 of the FCAC Act. It informs a FRFE that there are reasonable grounds to believe they have breached a legislative provision.

The FCAC Act requires that the Notice state the name of the institution that committed the violation, the nature of the violation and the proposed amount of any proposed administrative monetary penalty to be levied against the institution by FCAC. Within 30 days of the Notice of Violation having been served, the FRFE must pay the administrative monetary penalty (if applicable) or make representations to the Commissioner with respect to the violation and the proposed administrative monetary penalty.

If a FRFE does not make representations and/or pays the administrative monetary penalty, in accordance with the Notice of Violation, it is considered to have committed the violation.

Notices of violation are typically issued by the Deputy Commissioner through a delegated authority from the Commissioner of FCAC.

Administrative monetary penalties are not applicable to ECBs as per the legislation.

Notice of Decision

A Notice of Decision is an enforcement tool issued by the Commissioner informing a FRFE of the Commissioner’s decision regarding a violation, and confirming the amount of any administrative monetary penalty, if applicable, as set out in section 23 of the FCAC Act.

The Notice of Decision is issued following the Commissioner’s review of the facts of a compliance investigation, as well as any representations made by the FRFE in response to the Notice of Violation. If the FRFE is deemed to have committed the violation, the Commissioner will decide the administrative monetary penalty and inform the FRFE of the decision through the Notice of Decision.

Subject to section 31 of the FCAC Act, the Commissioner may make public the nature of the violation, who committed it and the amount of any applicable administrative monetary penalty. The Notice of Decision also states that the FRFE may appeal the decision to the Federal Court, subject to section 24 of the FCAC Act.

Administrative monetary penalties are not applicable to ECBs as per the legislation.

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