23 August, 2017 07:00
Photo : Freepik
How the financial market Authority determines that a brokerage firm is free of control from any insurer ? Each case is a case, responded to the regulator of the insurance Journal. Several elements allow us to determine this, adds the Authority.
In 2007, the Authority published a staff Notice relating to the ownership of firms in damage insurance. It is an opinion of interpretation by which the Authority indicates how it interprets certain provisions of the Act respecting the distribution of financial products and services (distribution ACT).
This opinion has no force of law, said Diane Langlois, director general of public affairs and communications at the Authority. She said that the staff Notice is intended to guide the firms and the financial institutions so that the limit of 20 % with respect to the holding of the voting shares or voting rights relating thereto respected. Ms. Langlois adds that the Authority considers that the financial institutions may not acquire more than 20 % of the shares to control a firm in damage insurance, the control was exercised usually through the exercise of voting rights.
«In its interpretation of articles 147 and following of the ACT, the Authority therefore considers that it is possible for a financial institution to hold up to 50 % of the shares non-voting shares of a firm without contravening the rule of 20 %, given that the shares usually the control of the voting shares. The voting shares may only be held at more than 20 %. The Authority considers that the holding of participating shares, but non-voting, up to a limit of 50 %, does not give the financial institution a check on the cabinet. Of course, each case is a case and the Authority may consider that there is control if the holding of shares non-voting was accompanied by other control measures, » says Ms. Langlois. The other control measures mentioned are detailed in the Notice of the staff.
Michel Servant, a partner for the law firm Lavery, pointed out that the Opinion of the staff just clarify what the Authority is going to tolerate in the matter. «Brokers and insurers must take this into account. «
Is it arguable before the courts ? «This is something that could be challenged. It has never been done. It would, however, be unwise to say that the Authority is wrong. It would be very good arguments for the challenge. The rules that we have there are before any of the guidelines, aimed at helping insurers and brokers to interpret the rule of 20 %. The Authority expects the industry to follow it, » he says.