Life and Health Insurance
Comment Due Date

The Financial Services Regulatory Authority of Ontario (FSRA) is taking steps to better protect customers by proposing to eliminate deferred sales charges (DSC) on new segregated fund contracts, and restricting their use on existing ones. DSCs are sales charges that customers pay if they withdraw their own money from a segregated fund contract before the end of a time period specified in the contract.

FSRA is proposing two separate amendments to the Unfair or Deceptive Acts or Practices (UDAP) Rule. If approved, the proposed amendments would ban sales of new individual segregated fund contracts with DSCs effective June 1, 2023. This would bring the regulation of segregated funds in Ontario in line with securities regulators across Canada, who ended DSCs for mutual funds effective June 2022, and the expectations of insurance regulators across the country.

The proposed UDAP rule amendments would:

  • prohibit insurers from issuing new individual segregated fund contracts that use DSCs on or after June 1, 2023
  • introduce customer protections that address the use of DSCs for all individual segregated fund contracts, regardless of when the customer purchased them, including customer disclosure and limits on the use of existing DSC options

FSRA is now seeking feedback on its two proposed rule amendments. The consultation will close on February 23, 2023. You can provide your feedback on both amendments together if you prefer.

The first amendment would prohibit DSCs on contracts issued on or after June 1, 2023, and prevent insurers from adding DSCs to contracts after that date or making DSCs less favourable for customers:

The second amendment would protect customers who have DSCs on individual segregated fund contracts that were issued before June 1, 2023 by limiting their use and requiring new disclosure:

For your convenience, we attach a copy of the existing UDAP rule with changes identified to show the effects of these two amendments together:

We also attach a flow chart that explains how the proposed amendments would affect contracts that exist before they take effect:

As required under the FSRA Act, here are the formal notices of the proposed rule amendments:


Before we begin, please make sure you do not include any personal or private financial information. If your inquiry does require this information be shared with us, please call us at 1-800-668-0128 or email us at [email protected] for instructions.

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Financial Planners and Advisors
[2022-013] David McGruer - Investia Financial Services Inc.
Rather than a direct commentary of the proposals I offer the attached essay that was written in response to a media article on the proposals. I believe it thoroughly addresses the harms the proposals will do if implemented and offers a perspective unlikely to be well expressed in other comments.
December 2, 2022
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