Market Conduct Code

Market Conduct of CodeThe Path to Implementation in 2021

May 18, 2021

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Presenters

Market Code of Conduct for B.C. Credit Unions – May 18, 2021

Canadian Credit Union Association (CCUA)

• Victoria Mainprize, Senior Counsel, Legislative Policy

• Henry Han, Regional Director

• Morgan Paulgaard, Policy Advisor

BC Financial Services Authority (BCFSA)

• Chris Carter, VP, Deputy Registrar of Mortgage Brokers, and Deputy

Superintendent FI Market Conduct

• Peta Wales, VP, Sector Liaison

• Marina Makhnach, Director, Financial Institutions Market Codes

• Angel Yau, Manager, Compliance

Ombudsman for Banking Services and Investments (OBSI)

• Sarah Bradley, the Ombudsman and Chief Executive Officer (CEO)

• Mark Wright, Director, Communications and Stakeholder Relations

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Presentation Agenda


• CCUA• Short Q&A

• BCFSA• Short Q&A

• OBSI • Short Q&A

• Closing Comments• Long Q&A

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Victoria Mainprize

Senior Counsel, Legislative Policy

Morgan Paulgaard

Policy Advisor


1. Background

2. Legislative Requirements

3. Code Elements & Tools

CCUA Agenda

6Market Conduct Code for B.C. Credit Unions – May 18, 2021

Background

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ConsumerProtection& MarketConduct

• Increased regulatory focus on consumer protection and financial institution market conduct

• Federal government implemented a Financial Consumer Protection Framework for federally regulated FIs.

• Provincial governments and regulators signalled the need for better consumer protection for provincially regulated FIs; some indicated that they would impose a code if credit unions didn’t adopt one ‘voluntarily’.


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A Market Code for Canadian Credit Unions

• In collaboration with credit unions and centrals, CCUA developed a voluntary Market Conduct Code for the Canadian CU system (the “MCC”).

• The MCC is principles-based and designed to be flexible and adaptable in its application to a particular credit union.

• National Market Conduct Code Working Group (MCCWG) includes Government Relations and Compliance representatives from the five provinces/regions and Centrals.


Benefits

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Create Financial Consumer Protection

Coordination across the Canadian Credit Union

System

Better Understand Consumer Protection

Risk

Ensure Compliance with Financial Consumer Protection Measures

Better Position Credit Unions that Decide to Pursue the Federal

Option

Alternative to Government Imposed Regulation/Legislation

Opportunity for Credit Union Differentiation and

Marketing


Contents

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The MCC codifies credit union market conduct best practices in the following areas:

• Business Practices: fair treatment is a core principle of credit union business practices and

a hallmark of our corporate culture.

• Fair Treatment Practices: credit unions treat all individuals fairly, do not discriminate, and

demonstrate fair sales practices in all business relationships.

• Access to Banking Services: ensuring that people have access to fundamental banking

services is an essential part of our mission as credit unions.

• Transparency and Disclosure: credit unions will provide suitable products and service

information that is easy to understand and considers the member’s financial need.

• Complaint Handling: credit unions will have fair and transparent processes for dealing with,

resolving, recording and reporting on complaints.


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A Market Code for B.C. Credit Unions

• The customized Market Conduct Code for British Columbia Credit Unions - technical version (the “BC MCC”) was drafted by CCUA in partnership with the British Columbia Market Conduct Code Working Group

• The BC MCC reflects financial industry best practices and regulatory expectations nationally and in British Columbia.

• BCFSA has reviewed the BC MCC and supports its use by any B.C. credit unions wishing to adopt it.


Timeline

• National Credit Union Market Conduct Code approval

• Technical version development

• Bill 37 – Financial Institutions Amendment Act introduction2019

• Technical version review

• Self-assessment and attestation development

• OBSI discussion2020

• Technical version finalization

• BC FSA reporting and supervisory model determination

• Credit Union implementation and internal self-assessment2021

• Financial Institutions Amendment coming-into force

• Self-assessment and Attestation to BCFSA (Dec)2022

13Market Code of Conduct for B.C. Credit Unions – May 18, 2021

Working Group

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Representative Credit Union

Ann Tuck Vancity

Deb Melnyk Kootenay Savings Credit Union

Charlene Reinisch First Credit Union

Emma Millar BlueShore Financial

Evan Jamieson First West Credit Union

Gene Creelman Interior Savings Credit Union

Greg Sol Osoyoos Credit Union

Patti Lambo Aldergrove Credit Union

Peter Polikot G&F Financial

Sam Lundy Stabilization Central Credit Union

Randi Northeast Salman Arm Savings Credit Union (SASCU)

Sheri Greeno Salman Arm Savings Credit Union (SASCU)

Legislative Requirements

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Bill 37: FIA Amendments

Bill 37 – 2019: Financial Institutions Amendment Act, 2019 amendments to the Financial Institutions Act (BC) outline regulatory expectations re. a code of market conduct and complaint handling for credit unions:

Code of Market Conduct:

• Credit unions must adopt and comply with a code of market conduct that is filed with BCFSA (FIA s. 94.2)

Complaint Resolution:

• Credit unions must establish, implement and publish complaints resolution procedures and designate an officer or employee responsible for receiving complaints (FIA s. 94.3)

• Credit unions must disclose to BCFSA prescribed information related to receiving complaints (FIA s. 209.1)

• Credit unions must be a member of a prescribed organization to deal with complaints that are not dealt with to the satisfaction of complainants under section 94.3 – e.g. OBSI (FIA s. 289 (p.31))


Code Elements & Tools

Elements

The Market Conduct Code consists of four elements:

1. Market Conduct Code – Public-facing (National)

2. Market Conduct Code – Technical (B.C.)

3. Credit Union Self-assessment

4. Attestation


Market Conduct Code – Public (National)

• The national Market Conduct Code (MCC) was developed for use across the Canadian credit union industry.

• The MCC is principles-based and designed to be flexible and adaptable in its application to credit unions.

• Principles drafted to generally reflect current credit union practices.

• Intended as public-facing version


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Market Conduct Code – Technical (B.C.)

• Outlines the technical requirements and recommendations for market conduct at BC credit unions.

• Drafted with the intention of creating few new obligations – however, some credit unions may have to draft new policies and procedures.

• Requirements are ‘mandatory’: must be fulfilled to be compliant with the MCC.

• Recommendations are ‘optional’: included as a guide to best practices.

• Note: Inclusion of provisions re. protection of Vulnerable Members

• Credit Union Boards may need to review, amend and/or approve new

corporate policies to ensure alignment with the BC MCC.


Self-Assessment

• The BC MCC requires that Senior Management reports to the Board at least annually on the credit union’s adherence to the principles and results of the annual self-assessment (s. 1.3)• The self-assessment follows the technical MCC and simplifies the credit union’s assessment of its

implementation of and compliance with the MCC.

• Designed to identify exceptions to full implementation and compliance - i.e. where the credit union isn’t yet fully compliant (doesn’t document proof of compliance). This reduces reporting requirements year over year.

• Self-assessment rating assesses four elements: policies, procedures, training, compliance testing. These should be proportional for each CU. The level of detail and complexity should reflect the size and scope of your credit union of your verification process and its operations.

• Completed self-assessments are to be provided to BCFSA in December 2022 and on an ongoing annual basis thereafter.


Attestation

• Your credit union’s Board of Directors must be familiarized with the requirements of the BC MCC and your credit union’s degree of implementation and compliance.• The BC MCC requires that Senior Management reports to the Board at least annually on the credit

union’s adherence to the principles and results of the annual self-assessment (s. 1.3)

• The Attestation confirms to BCFSA that:• the credit union has completed a Self-Assessment;

• the Board of Directors has received and reviewed a report on the status of the Credit Union’s compliance with the Code; and

• the Credit Union is either fully compliant with each of the requirements set out in the Code or has identified any exceptions to compliance and developed an action plan to address those exceptions.

• Attestations are to be filed with BCFSA annually (Dec)


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Chris Carter

VP, Deputy Registrar of

Mortgage Brokers, and Deputy

Superintendent FI Market

Conduct

Peta Wales

VP, Sector Liaison

Marina Makhnach

Director, Financial

Institutions Market Codes

Angel Yau

Manager, Compliance


BC Credit Unions - Market Conduct Code BCFSA Supervisory Framework

May 18 2021

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• The Code is an industry led initiative, however, BCFSA has an

important oversight role under FIA

• BCFSA’s monitoring and supervision approach: o Leverages self assessment, attestation, and reporting templates and

processes developed by industry

o Characterized by alignment, coordination, and consistency

o Applies the principle of proportionality, with expectations that reflect the

size, complexity, and risk profile of the credit union

• Together with industry, BCFSA will undertake a periodic review of the

Code and supervisory approach

Market Conduct Code - Supervisory Approach

Filing Document Frequency Date Comments

Market Conduct Code

Once January 1st 2022 1 January to 30 June 2022 - Forbearance period 2024-2025 – Review and revise (CU, CCUA, BCFSA)

Self-Assessment Annually December 31st 2022 2022 Full self-assessment2023+ Review and update controls, focus on key controls self-assessment 2024-2025 – Review and revise (CU, CCUA, BCFSA)

Attestation Annually December 31st 2022

Reporting

Monitoring Review and analyze information

Consult, align, integrate with BCFSA Prudential Supervision

Identify and assess risks

Conduct reviews

Follow up

Compliance Action plan Letter of expectationsVoluntary compliance agreement Input into BCFSA Prudential Supervision

Market Conduct Code - Supervisory Framework

Q&A

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Sarah Bradley

Ombudsman and Chief Executive

Officer (CEO)

Mark Wright

Director, Communications and Stakeholder

Relations


OBSI | Q&A

Timeline


DATE COLLABORATOR CU ACTIVITY

May 2021 CCUA & BCFSA System Webinar

July OBSI Assessment for 2022 Dues

CCUA Gap Analysis w/ CCUA

Aug Stabilization Central Policy Document Support

Sept

BCFSA Regulatory Statement

CU Governance Committee Amend Policies, As Needed

OBSI Sign Terms of Reference

Oct CCUA & BCFSA Progress Check

Dec CU Board Adoption

CU Staff External Communication: Post MCC on Website

Jan 2022 OBSI Dues Charged

Questions

CCUA

Morgan Paulgaard

Policy Advisor

(604) 345-2174

[email protected]

Victoria Mainprize

Senior Counsel,

Legislative Policy

(343) 571-5228

[email protected]

BCFSA

Peta V. Wales

Vice President, Sector Liaison

(604) 418-2332

[email protected]

Marina Makhnach

Director,

Financial Institutions Market

Conduct

(778) 869-2921

[email protected]

OBSI

Mark Wright

Director, Communications &

Stakeholder Relations

1.888.451.4519 x 2225

[email protected]

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mailto:[email protected]





Documents

Market Conduct Code