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FSCO Issues Administrative Monetary Penalties Guideline

On November 13, 2018, the Financial Services Commission of Ontario (FSCO) issued a guideline that summarizes legislative provisions respecting Administrative Monetary Penalties (AMPs) under the Pension Benefits Act (the Act) and outlines the process that is to be followed for the imposition of AMPs. It also outlines how a person subject to a proposed AMP may dispute the proposed AMP and how AMPs are to be paid.

Background

AMPs became possible under the Act effective on January 1, 2018. AMPs are monetary penalties imposed directly by FSCO for non-compliance with specified provisions of the Act. A hearing is only provided if the person subject to the proposed AMP chooses to dispute the AMP. AMPs expand the enforcement options and tools available to FSCO to regulate registered pension plans in Ontario.

There are two types of AMP:

  1. A general AMP is issued by FSCO in a discretionary amount based on non-compliance with substantive provisions of the Act or failure to comply with obligations assumed by way of an undertaking to FSCO. Criteria determining the amount of a general AMP include the degree to which the contravention was intentional, reckless or negligent, and the extent of harm or potential harm to others resulting from the contravention.
  2. A summary AMP is a fixed penalty issued by FSCO based on late regulatory filings, such as late filing of an Annual Information Return, valuation report, Investment Information Summary, plan amendment or amendment to a Statement of Investment Policies and Procedures. Summary AMPs are subject to prescribed daily penalties of $100 or $200 for each day of non-compliance.

For individuals, the maximum AMP is $10,000 per contravention or failure to comply. For corporations or other groups such as board of trustees, the maximum AMP is $25,000 per contravention or failure to comply.

The Guideline states that the formal plan administrator remains ultimately accountable for the administration of the pension plan and investment of the pension fund, and is not relieved of those responsibilities by delegating to third party providers. The Guideline further states that FSCO may also impose AMPs on other entities besides plan administrators, such as pension fund trustees.

FSCO’s process for issuing an AMP

The process for issuing an AMP differs slightly for general and summary AMPs. A general AMP will be issued via a Notice of Intended Decision (NOID), although it is likely that FSCO would issue warnings and give opportunities for issues to be corrected before taking such a step.

A summary AMP for a missed deadline will follow a more specific process. If regulatory filings are late or incomplete, FSCO will automatically send two compliance letters (first the Letter of Warning and second the Letter of Proposed Action) to plan administrators. The Letter of Warning will be sent within a week or two of the overdue filing and appears to give the plan administrator a set amount of time to correct the issue without an AMP being issued.

Once a Letter of Proposed Action is issued, FSCO will give the person/entity a reasonable opportunity to make a written submission that the AMP should not be issued. A written submission must be made within 15 calendar days of the Letter of Proposed Action, which should explain mitigating circumstances and why no penalty should be levied. Some examples of mitigating circumstances may be the result of:

  • significant disruption to the computer system due to virus attacks, fire, or flood; and
  • business disruption caused by an industrial action, natural disaster or state of emergency.

Situations that will normally not be considered as mitigating circumstances include:

  • staff changes or absences;
  • minor computer problems, partial system disruption, lack of system backup or contingency plan; and
  • office closures.

FSCO will review the submission and determine whether an AMP should be issued.

Disputing an AMP

The person who has been issued an AMP will receive the NOID setting out details of the contravention, the amount of the AMP, payment requirements, and the process and deadlines to request a hearing before the Financial Services Tribunal (FST). There is a 15-day time limit to request a hearing before the FST.

The FST may, by order, direct the Superintendent to:

  • Make the intended decision pursuant to the NOID;
  • Vary the decision in the NOID (e.g., reduced or higher AMP or vary payment requirements); or
  • Substitute its opinion for the Superintendent (e.g. order no penalty or add AMPs).

Paying an AMP

AMPs cannot be paid out of a pension fund, regardless of the plan type. This includes multiemployer and jointly sponsored pension plans.

Payments are to be made within 30 calendar days after the person receives the invoice or as specified in the order of the Superintendent (if no FST hearing is requested). If a hearing is requested, then payment is due 30 calendar days after the matter is concluded or such time as specified in the order and invoice relating to the order. Interest is applied on nonpayments of AMPs.

After 90 days of non-payment, the overdue AMP may be sent to a collection agency. FSCO can also file the order with the Superior Court of Justice, and that it may be enforced as if it were an order of the court.

Funds collected from AMPs are directed to the Ontario government’s consolidated revenue fund.


Comment

The release of the Guideline provides more certainty about FSCO’s process for issuing AMPs, although it is still unclear as to how strictly such process will be applied. Plan administrators should be aware of the risk of receiving an AMP for noncompliance, and particularly for late regulatory filings. They should ensure that such deadlines are met and, if they cannot be met, that an extension can be obtained in line with FSCO policy.


News & Views - December 2018 (PDF)