IFB working on Portus fee repayment plan for insurance advisors

Independent Financial Brokers is developing a plan to allow insurance agents, brokers and managing general agencies in Ontario to voluntarily return fees paid to them by Portus Alternative Asset Management.

The proposal will follow an agreement struck earlier this year between the Ontario Securities Commission, the IDA and MFDA. In January, 57 investment and mutual fund dealers agreed to return more than $12 million in Portus referral fees to investors by May 31. As part of the agreement, those firms will not be subject to further investigations and disciplinary action in certain cases related to defunct hedge fund.

The IFB hopes the OSC will extend a similar exemption towards insurance agents, says Susan Allemang, who heads up the regulatory and government policy work for the insurance industry association. A preliminary meeting with the commission suggests it is willing to develop similar terms and conditions for insurance licensees in Ontario.

The high level of public interest in Portus as well as the large volume of requests from IFB members for information prompted the association to take this unusual step. A recent survey of IFB members confirmed this, with about 80% saying they support hammering out a plan with the OSC. However, insurance advisors do not have to be members of the IFB to participate in the plan.

“Most of the people who didn’t think this was a good idea were concerned that of the kind of precedent that was being set and they were concerned it would imply some sort of guilt on their part,” Allemang says. “That is certainly not the intent. The intent is to find a balance so that our members or other people who distributed Portus can find ways to resolve things with their clients.”

Allemang couldn’t say how many insurance agents referred Portus or how much they collected in fees, but she believes the amount distributed through the insurance side was much smaller, compared to mutual fund dealers.

The IFB is going through the industry papers on Portus and expects to have a meeting with the Canadian Association of Independent Life Brokerage Agencies to finalize the plan and to set a deadline on returning fees. IDA and MFDA firms, meanwhile, have about a month to return fees to clients.

In related news, AIG Life of Canada will be sending out termination notices to Portus investors who purchased BancLife Trust Series I and II. These products included a death benefit payable to a maximum of $20,000 in the event of the investor’s death.

According to the IFB website, the policy required a monthly premium to be paid to AIG which KPMG has not done. AIG will be notifying each investor of the termination of this coverage by letter.

Filed by Mark Brown, Advisor.ca, mark.brown@advisor.rogers.com

(04/26/06)