After extensive consultation with stakeholders, the Financial Consumer Agency of Canada (FCAC) recently published its new Supervision Framework, which looks to regulate financial institutions such as insurance companies.
The new framework will take effect November 01, 2017, to replace the FCAC’s current Compliance Framework.
Learn more about finance and insurance here.
In addition to the announcement of a new framework, the FCAC said that certain internal processes and functions will be overhauled and implemented over time to facilitate the launch of the supervisory system.
The new framework highlights the FCAC’s proactive efforts to assess emerging risks before they even affect consumers, Lexology commented. Under the Supervision Framework, all supervisory activities and decisions of the FCAC will be driven by the four guiding principles of transparency, proactivity, proportionality and accountability.
The FCAC will implement a risk-based approach to supervision. Regulated entities will be classified as either tier one or tier two, depending on the level of market conduct risk inherent in their activities.
Tier one regulated entities include FRFIs offering retail products and services to consumers, PCNOs whose participants offer payment services to merchants, and ECBs offering dispute resolution services to their member banks.
On the other hand, tier two regulated entities include banks and trust companies that do not offer retail products and services, as well as insurance companies that restrict their business to the sale of insurance. According to the FCAC, tier two entities will be monitored less intensively then tier one entities, but can be reclassified into the other if their business models expand into products or services that increase their federal market conduct risk.
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