Following the introduction in June 2023 of a ban on new sales of segregated funds with deferred sales charges (DSC), a regulatory review in Ontario has found that the insurance industry there is largely complying with the ban.
The Financial Services Regulatory Authority of Ontario (FSRA) reviewed 54 information submissions from 14 insurers in 2023 and found that the firms complied with the DSC prohibition, as well as prohibitions on adding a DSC option to existing SEG fund contracts and making an existing DSC contract less favourable to the customer.
“Consumers should not have to pay to withdraw their own money, which is why we have banned deferred sales charges,” Huston Loke, vice president of market conduct at FSRA, said in a statement. “I am pleased to report that, based on the information submitted, insurers are complying with the ban on deferred sales charges in new segregated fund contracts.”
Earlier this year, the regulator required insurers to remove DSC as an option from existing segregated fund contracts if such a change was possible. In cases where the DSC option cannot be removed, insurers must provide investors with information to help them decide whether to continue making contributions.
The FSRA also required companies to disclose to investors information about sales charge options for SEG fund contracts if the DSC fee was eliminated.
