IA takes its first disciplinary actions against two broker companies for regulatory breaches
28 May 2021
The Insurance Authority (IA) has taken its first disciplinary actions against two licensed insurance broker companies. The disciplinary actions involve the failure by the broker companies to submit their audited financial statements and auditor’s reports (collectively, the “Financial Documents”) within six months following the end of their respective financial years. Both broker companies have been fined1 and one of the companies has had its licence suspended.
The IA took over the direct regulation of insurance intermediaries on 23 September 2019. Prior to this insurance intermediaries were subject to the self-regulatory regime. The contraventions of the two broker companies relate periods prior to 23 September 2019 so the IA has handled the matters as disciplinary actions in accordance with the transitional arrangements in Schedule 11 of the Insurance Ordinance (Cap. 41)(Ordinance), applying the relevant requirements in place at the time2.
Under the new regulatory regime in force since 23 September 2019, it remains a fundamental responsibility for every licensed insurance broker company to provide its Financial Documents to the IA within 6 months after the end of each financial year. These Financial Documents provide important information on a broker company’s financial status and compliance with key regulatory requirements and serve as an essential regulatory mechanism for ensuring that policy holder interests are safeguarded.
Failure by a licensed insurance broker company to submit its Financial Documents on time under the new regulatory regime can be prosecuted by the IA as an offence under Ordinance (rather than just taking disciplinary action). Given the importance of the requirement, the IA will not hesitate to take such action. If found guilty of such offence, the broker company will be liable to a fine at level 63, and in the case of a continuing offence, to a further fine of $500 for each day during which the offence continues. The commission of such offence may also adversely impact the fitness and properness of the broker company to continue to be licensed.
1Pecuniary penalties imposed by the Insurance Authority under the Insurance Ordinance are paid by the Authority into the general revenue.
2Pursuant to section 113(4)(d) of Schedule 11 to the Insurance Ordinance, in handling non-compliance cases unresolved by the Self-Regulatory Organizations (SROs), the IA may impose a disciplinary sanction on a specified person that could have been imposed by the SRO concerned had the case been handled by the body.
3Pursuant to Schedule 8 to the Criminal Procedure Ordinance (Cap. 221), a fine at level 6 is $100,000 at present.