ASSOCIATION OF CANADIAN                                                       ASSOCIATION DES COMPAGNIES
FINANCIAL CORPORATIONS                                                        FINANCIERES CANADIENNES

            Sussex Centre, Suite 401, 50 Burnhamthorpe Rd. West, Mississauga, Ontario L5B 3C2
            Telephone: (905) 949-4920 ● Fax: (905) 896-9380 ● E-mail:

By email
                                                                                          March 24, 2006

Carol Shevlin
Policy Manager (A)
Canadian Council of Insurance Regulators Secretariat
5160 Yonge Street, P.O. Box 85
Toronto, ON M2N 6L9
Tel: (416) 226-7895, Fax: (416) 590-7070

Dear Ms. Shevlin:

            Re: Managing Conflicts of Interest: A Consultation Paper on Enhancing and
                                   Harmonizing Best Practices

       The member companies of the Association of Canadian Financial Corporations (ACFC)
have been serving Canadians for more than 70 years.

        Membership in the ACFC is open to companies that act as financial intermediaries, or
that finance retail installment sales and inventory, make or purchase unsecured and secured loans
to consumers or industrial and commercial enterprises, own and lease property, and factor and
finance industrial and commercial accounts receivable.

             The current members of the Association are1 :

                        •    CitiFinancial Canada, Inc.
                        •    HSBC Financial Corporation Limited 2
                        •    Wells Fargo Financial Corporation Canada 3

       Finance companies provide important financial services to Canadians including such
products as small balance loans, private label retail sales financing and mortgages. Combined,
the member companies serve 1.74 million customers and have $6.3 billion in assets.
CitiFinancial Canada, Inc.’s parent company is Citigroup Inc., HSBC Financial Corporation
Limited’s parent company is HSBC Holdings plc, and Wells Fargo Financial Corporation
Canada’s parent company is Wells Fargo and Company.
    The ACFC has five associate members: Assurant Solutions, Equifax Canada Inc., First Canadian Title Company Limited,
    Sykes Canada Corporation, and Trans Union of Canada Inc.
    Formerly Household Financial Corporation Limited
    Formerly Trans Canada Credit Corporation.

Ms. Carol Shevlin                                                                           Page 2
March 24, 2006

       The ACFC is responding to the Canadian Council of Insurance Regulators (CCIR) and
the Canadian Insurance Services Regulatory Organizations (CISRO) invitation for comments on
the Industry Practices Review Committee (IPRC) recommendations for the insurance industry
with respect to managing conflicts of interest. The ACFC supports the IPRC’s efforts to
harmonize best practices within the insurance industry across various jurisdictions.

        The IPRC’s second recommendation in the consultation paper is to require brokers or
agents to disclose to consumers any conflict or potential conflict of interest associated with a
transaction or recommendation. This includes the following:

1. The name of the insurer with which a significant volume of business is in place.

    The ACFC would like clarification as to how “a significant volume of business” will be
    defined (e.g., quantitative test based on volume of sales or revenue). This type of disclosure
    may become lengthy and complex if the broker or agent has several substantial relationships
    with a number of insurers.

2. The extent of the search by the broker/agent for a competitive price/suitable product.

    The ACFC would like clarification as to what type of details will be required in the
    disclosure to the client (e.g., number of quotes obtained; list of all potential insurers
    contacted). Since the search for each client may vary widely according to the type of product
    and individual circumstances, the ACFC is of the view that disclosing details of the search to
    the client will not enhance or facilitate the client’s decision-making process, but may actually
    be confusing to the client if contractual terms or differences need to be explained. The client
    may not understand a broker/agent’s selection process. The client should be able to rely on a
    broker/agent’s professionalism and competence. An acknowledgement by the broker/agent
    that he or she has sought the best price/product for the client based on professional industry
    standards should be sufficient for this purpose.

3. Relationships that may create actual or potential conflicts of interest, including ownership,
   loans and other financial links and non-monetary benefits.

    The ACFC requires clarification as to what would constitute “potential conflicts of interest”
    and “non-monetary benefits” as these are broadly defined and would be difficult to readily
    identify, quantify and disclose. Disclosing ownership and financial links or arrangements
    may also be too complex to describe, particularly in the case of large multi-nationals with a
    complex corporate structure or intricate arrangements with affiliates. Moreover, this type of
    information may not necessarily enhance the decision-making process of clients, but may
    instead be confusing and provide meaningless information. The emphasis, from a policy
    perspective, should be on substantive disclosure of actual conflicts of interest and direct
    benefits flowing to the brokers/agents through commissions or bonuses.

                                                     ASSOCIATION OF CANADIAN FINANCIAL CORPORATIONS
Ms. Carol Shevlin                                                                                          Page 3
March 24, 2006

4. Insurers to provide on their websites or make publicly available clear and concise
   information about their relationships with intermediaries, such as:

      •      ownership, financial links or arrangements with intermediaries, such as loans;
      •      methods of compensation, including percentage range of compensation, for each major
             line of business or type of product, and
      •      non-monetary benefits and contingent profit commission or bonus.

      Again, these disclosure requirements may be onerous and problematic for multi-nationals
      that have a complex corporate structure and intricate arrangements with affiliates. The focus
      should be on meaningful, substantive disclosure that will enhance a client’s decision-making
      process. Moreover, it may be administratively onerous for insurers to continually update this
      type of information.

       With respect to implementing any of the finalized recommendations of the IPRC, the
ACFC is of the view that these should be achieved through industry initiatives, as the insurance
industry is already highly regulated at the federal and provincial levels.

      We look forward to participating in any further consultations on these industry practice

                                                                             Yours truly,

                                                                             Rita Minucci

                                                                             Rita Minucci
                                                                             Corporate Secretary


cc: ACFC’s Legal and Legislative Committee
    CitiFinancial Canada, Inc.: Elizabeth Moulden
    HSBC Financial Corp. Ltd.: Richard Henderson
    Wells Fargo Financial Corp. Canada: Carol Bell, Nick Scarfo
    Assurant Solutions: Gabe Czar
    Equifax Canada Inc.: Joel Heft, Debbie McCartney, Jeff Kendall
    First Canadian Title Co. Ltd.: Barbara Locke Geier, Jennifer Harris
    Sykes Canada Corp.: James Almost
    Trans Union of Canada Inc.: Chantal Banfield

SUB/CCIR/Recommendations for the Insurance Industry 032406 -F

                                                                     ASSOCIATION OF CANADIAN FINANCIAL CORPORATIONS

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