Financial Consumer Agency of Canada
www.fcac-acfc.gc.ca
Common menu bar links
News and Information
Third-Party Outsourcing: Sales Versus Compliance, Where the Two Collide
When a financial institution uses a third party to promote or solicit the sale of a financial product or service through an outsourcing arrangement, it is important that the institution makes sure that the third-party service provider is informed of, and meets, the financial institution's regulatory obligations.
By implementing and maintaining a rigorous system of control and oversight, financial institutions can ensure that they are practising due diligence, and that the third party is providing consumers with reliable, comprehensive and timely information. This will allow consumers to make an informed decision before they enter into an agreement for a product or service.
In response to FCAC's annual examination of the financial institutions this year, the Agency has received a number of questions about third-party agreements and sales.
FCAC's Deputy Commissioner Jim Callon explains the Agency's concerns and recommendations, as follows:
This year, we asked the federally regulated financial institutions (FRFIs) to provide us with information about the sale of products on their behalf by third-party agents or parties. We are seeking assurances that the regulatory obligations placed upon the FRFI in terms of the sale of a product, continue to be met when sold through a third party.
In some cases, it would seem that third-party sales agents are not providing the required disclosure to consumers, on behalf of the FRFIs, when consumers sign a sales or credit agreement with these agents.
It would also appear, in these cases that the FRFIs are not providing the required disclosure either, since they believe that the third-party sales agent has already provided it. FCAC wants to make sure that the FRFIs are exercising appropriate due diligence, and are respecting their regulatory obligations; specifically, when selling their products through a third party.
In other words, institutions that use a third party to act on their behalf should perform due diligence when entering into a service agreement. Policies, procedures and testing must be in place to ensure that third parties are held to the highest standards when providing Canadian consumers with regulatory disclosure.
