Actuarial Notes

Sound Commercial Practices Guideline

By Autorité des marchés financiers · 2022

The AMF's guideline on the fair treatment of clients (FTC) that sound commercial practices require of Québec's financial institutions. Dated November 2022, it covers an institution's relationships with clients from before a contract is entered into until all its obligations under the contract are fulfilled: business culture, the institution's responsibility for intermediaries acting on its behalf, and the expected FTC outcomes at each stage of a product's life cycle — governance, conflicts of interest, product design, marketing and advertising, disclosure, claims examination and settlement, complaint processing and the protection of personal information.

1 Commercial practices and the fair treatment of clients

  • Financial institutions have a legal obligation to adhere to sound commercial practices (for insurers, sections 50 and 51 of the Insurers Act); adhering to them entails treating clients fairly.
  • FTC encompasses ethical behaviour, acting in good faith and the prohibition of abusive practices, and manifests itself at every stage of a product's life cycle.

2 Business culture

  • A financial institution with an FTC-centric business culture places clients' interests at the centre of its decisions, recognizes and manages risks that could compromise FTC, demonstrates FTC outcomes through indicators, and communicates them at all levels.

3 Responsibility of the financial institution

  • The AMF expects institutions to fulfill their FTC obligation at all stages of the product life cycle; the obligation continues to apply although intermediaries offering the products may have their own obligations, and institutions remain fully responsible for outsourced activities.

4 Financial institutions' relationships with intermediaries

  • The AMF expects selection criteria for intermediaries, agreements setting out the institution's FTC expectations, and reporting, indicators and controls adjusted to each intermediary's risks and characteristics.

5 Expected FTC outcomes

  • 5.1 Governance
    • The board of directors promotes an FTC-centric business culture — including compensation and incentive programs that take FTC into account — and senior management ensures it is reflected in the risk management framework.
  • 5.2 Handling conflicts of interest
    • Real or potential conflicts of interest are avoided or managed in a manner that ensures FTC; disclosure to the client is not sufficient in and of itself for a conflict to be considered properly managed.
  • 5.3 Product design
    • Products are designed with the common needs and interests of the target client group in mind; the approval process defines the target client group, and product monitoring checks that the product's main features continue to suit it.
  • 5.4 Product marketing
    • Distribution strategies take into account the target client group's needs and interests and are tailored to the product's complexity.
  • 5.5 Product advertising
    • Advertising materials are accurate, clear and not misleading, and are reviewed before dissemination by persons other than those who prepared them.
  • 5.6 Disclosure to clients before or when a product is offered
    • Disclosure is up to date, in clear and plain language, and gives prominence to the product's main features — for insurance, the type of contract, coverages, eligibility, perils covered, restrictions, limitations, deductible and premium.
  • 5.7 Offers of product by deposit institutions
  • 5.8 Disclosure to clients after a product is purchased
    • Clients are notified of events such as renewal, changes to the contract, replacement or early termination, and a portfolio transfer.
  • 5.9 Claims examination and settlement
    • Claims are examined diligently and settled fairly through a simple, readily accessible process; reasons for a total or partial denial are explained and confirmed in writing, with the opportunity to request a review.
  • 5.10 Complaint processing and dispute resolution
    • Complaints are processed fairly and diligently; the institution designates a complaints officer and develops an overall picture of complaints received to identify common causes.
  • 5.11 Protection of personal information
    • Institutions put in place measures to comply with their privacy obligations, including those under the Act respecting the protection of personal information in the private sector.

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