Service NL

Financial Services Regulation Frequently Asked Questions

Insurance

  1. Can an insurance company refuse to insure my house?
  2. If I claim under my automobile insurance for damage to my vehicle, what can I do if I disagree with the repairs to be completed, or the amount of the loss?
  3. Is there an Internet site available which contains the regulations regarding the replacement of life insurance contracts?

Pensions

  1. When is the earliest date I may start receiving a pension income from my locked-in pension funds?
  2. May a person access their pension funds prior to being eligible to retire in a case of financial hardship?

Securities

  1. Why won't you tell me if a company or individual is under investigation?
  2. How do I pick a broker or advisor?
  3. Can you tell me if my investment firm and broker are registered and if they are reputable?
  4. I'm not happy with the level of service I'm getting from my broker. What should I do?
  5. I'm concerned about the way my broker is handling my account. How do I resolve the problem?
  6. I just discovered my broker has been making trades in my account without my permission. Is my broker allowed to do this?
  7. I believe I lost money because my broker was negligent. Can the Superintendent of Securities make him give my money back?
  8. I have been arguing with my broker over the administrative fees charged. Can the Superintendent of Securities help?
  9. I just got a call from a broker who wanted me to buy some stock over the phone. Is it legal to sell stock over the phone? Is the company selling it legitimate?
  10. What if the brokerage firm holding my cash or securities goes bankrupt?
  11. I have an old stock certificate. How do I find out if it's worth anything?
  12. How do I get information about a public company?
  13. How do I know if a certain company is a reporting issuer, and what its status is?
  14. I've been told that a company I own shares in has a cease trading order in effect. What does that mean and what can I do?
  15. A broker told me that the Superintendent of Securities had issued a "receipt" for a company's prospectus. Does this mean the stock is a good investment?
  16. Are mutual funds "securities" and are they regulated by the Superintendent of Securities?
  17. Are mutual funds protected by the Canada Deposit Insurance Corporation?
  18. I've just bought a security. Does it qualify as an RRSP investment?

Insurance


1. Can an insurance company refuse to insure my house?

Yes. Insurance companies set their own underwriting guidelines on what they are prepared to insure. They may not be prepared to insure property for many reasons which may relate to the condition of the property, the location of the property or to previous claims record.

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2. If I claim under my automobile insurance for damage to my vehicle, what can I do if I disagree with the repairs to be completed, or the amount of the loss?

These may be resolved by negotiations, by the owner of the vehicle providing information to substantiate that repairs are required or the vehicle is worth more, or by legal means. There is also a section within the automobile insurance policy, referred to as "Appraisal for Disagreement", which applies to a claim under your own insurance policy. Under the "Appraisal for Disagreement" both the claimant and the insurance company would have an independent appraisal completed, each paying for the cost of their appraisal. If these appraisals differ it would go to an umpire to decide, the umpire usually being an appraiser appointed by the two already involved and any cost of the umpire being divided between the claimant and the insurance company.

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3. Is there an Internet site available which contains the regulations regarding the replacement of life insurance contracts?

Part III of the Insurance Adjusters Agents and Brokers Regulations relates to 'Replacement of Contracts of Life Insurance'. It is now available on the following site: www.assembly.nl.ca/legislation/sr/regulations/rc960989.htm

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Pensions


1. When is the earliest date I may start receiving a pension income from my locked-in pension funds?

Pension legislation provides that a person must be permitted to receive a pension income at any time after attaining the age of 55 years. A registered pension plan may provide for a pension income to be received at an earlier age.

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2. May a person access their pension funds prior to being eligible to retire in a case of financial hardship?

The Pension Benefits Act, 1997 does not provide for the unlocking of pension funds in a case of financial hardship.

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Securities


1. Why won't you tell me if a company or individual is under investigation?

The Securities Act specifically prohibits us from commenting publicly as to the existence, status or nature of an investigation being conducted by staff until the matter becomes one of public record. The investigations we conduct are confidential in order to protect the integrity of an investigation; to ensure the complaint process is not used to affect the market; and to provide fairness towards those who are the subject of investigations, but against whom proceedings may never be taken because staff find no wrongdoing or find that a successful action can not be brought.

An investigation becomes public when the Superintendent of Securities brings a proceeding in court or a hearing before a Commission tribunal.

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2. How do I pick a broker or advisor?

Click on the link below, to read the CSA brochures concerning "Choosing Your Financial Advisors". These brochures will give you some tips to help choose the right investment advisor for your needs.

http://www.csa-acvm.ca/html_CSA/invinfo_publications.html opens new window.

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3. Can you tell me if my investment firm and broker are registered and if they are reputable?

Anyone who sells securities in Newfoundland and Labrador, or gives advice about investing in securities must be registered with this Division. There are different types of registration which may limit what a broker is licenced to sell. Staff of the Division can tell you if an individual person is registered and the category in which they are registered.

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4. I'm not happy with the level of service I'm getting from my broker. What should I do?

First, you have to know what kind of service you should expect from your broker. There are different types of brokerage firms and each type may offer a different type of service. For instance , a discount brokerage does not offer in-house research or advice, which are the specialties of a full-service firm. 

As well, a company or individual may be authorized (registered) to trade only certain kinds of securities. Sometimes professional restrictions are the source of misunderstandings. For example, you may think your financial advisor isn't providing the proper service. But in fact, she may be providing you with those services she is qualified and authorized to offer (even though they may not suit your needs or financial objectives).

To learn more about choosing a financial advisor that meets your needs, please refer to the online brochure Choosing Your Financial Advisers.
http://www.csa-acvm.ca/html_CSA/invinfo_publications.html opens new window.

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5. I'm concerned about the way my broker is handling my account. How do I resolve the problem?

If you encounter a specific problem with your broker or advisor, you should first try to solve it by talking with him or her, or if that is not possible, their branch manager. If the problem isn't settled in a reasonable period of time, contact the Compliance Department at the brokerage firm. They may ask you to provide them with a written complaint. Explain your problem clearly and tell the firm how you want the problem resolved. In most cases the compliance department will be able to resolve the situation.

If you are not satisfied with their response, a complaint to the appropriate regulatory agency would be the next step. Should your matter involve a member firm of the Investment Dealers Association of Canada (IDA), you should contact the IDA Central Complaint Bureau in writing at Suite 1600, 121 King Street West, Toronto, Ontario M5H 3T9 or by fax at 416-364-0753. The jurisdiction of the IDA is limited to the enforcement of its by-laws, regulations and policies. If you write to this Division concerning an IDA member firm, the Commission will forward your correspondence to the IDA for its review and direct response.

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6. I just discovered my broker has been making trades in my account without my permission. Is my broker allowed to do this?

No. As a rule, you must approve each trade made by your broker on your behalf.

But there is one key exception. You may set up a discretionary account which allows your broker to make trades at his or her discretion without having to seek your permission. When you establish such accounts, you set the rules that guide your broker's use of his discretion. Discretionary accounts are usually set up by investors who prefer to delegate decision-making to a professional investment manager.

If you find that your broker has been making trades in your account without your permission, call the investment firm's compliance department right away. Follow up with a written complaint and supporting documents. It's a serious offence for a broker to make trades without your permission. Be alert to potential fraud.

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7. I believe I lost money because my broker was negligent. Can the Superintendent of Securities make him give my money back?

The Commission does attempt to assist members of the investing public in reaching a satisfactory resolution to their matter. The Commission does not, however, have the power to force your broker/advisor to refund your losses. The Commission cannot act as your lawyer, or provide any legal or investment advice.

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8. I have been arguing with my broker over the administrative fees charged. Can the Superintendent of Securities help?

No. In general, unresolved disputes over fees must be dealt with privately. Regulatory bodies such as the Superintendent of Securities, TSE and IDA do not have the jurisdiction to set or dispute administrative-type fees. Administrative fees are a contractual issue between you and your broker. You should discuss such fees with your broker before doing business. Administrative fees are typically outlined in your account documentation.

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9. I just got a call from a broker who wanted me to buy some stock over the phone. Is it legal to sell stock over the phone? Is the company selling it legitimate?

A number of securities firms telephone investors they do not know to sell stocks and other investments. Known as "cold calling," these calls can serve as a legitimate way of reaching new customers. Certain brokers however may try to pressure you into buying a bad investment.

Although the Securities Act (Newfoundland) does not prohibit this activity, it is not advisable to buy stock over the phone without first finding out more about the securities firm and the investment being offered.

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10. What if the brokerage firm holding my cash or securities goes bankrupt?

The majority of brokerage firms are members of the Canadian Investor Protection Fund (CIPF). CIPF is a trust established by the sponsoring SROs (the IDA and Stock Exchanges) to protect customers in the event of the insolvency of a Member. Member firms pay into this fund. It should be noted that Mutual Fund companies are not CIPF members.

If your brokerage firm goes bankrupt and is a member of CIPF and your securities are registered in "street" name (ie. in the name of your broker), then your securities and money are protected for up to $1,000,000. CIPF does not cover customers' losses that result from other causes such as changing market values of securities, unsuitable investments or the default of an issuer of securities. Customers have 180 days to file a claim with CIPF. If you want to know whether your brokerage firm is a member of CIPF, you should ask your broker, or call CIPF at (416) 866-8366.

If your securities are registered in your own name customers can deal directly with issuers which hold their securities.

While each situation is unique, generally you will also need to contact the trustee-in-bankruptcy to obtain information about your status in the bankruptcy.

If a bankrupt brokerage firm is holding certificates registered in your name or if securities were held in an RRSP account, you should be able to transfer these securities without any difficulty. To do this you will need to open an account with another brokerage firm who will complete forms to transfer the securities.

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11. I have an old stock certificate. How do I find out if it's worth anything?

An old stock certificate may still be valuable even if the stock no longer trades under the name printed on the certificate. The company may have merged with another company or simply changed its name. You can use these resources to find out if an old stock certificate has value.

If you currently deal with an investment advisor, he or she may know if the security is still traded. Alternatively, there are a number of resources for people researching the history or current status of Newfoundland corporations or listed companies.

Federal Incorporation
Industry Canada, Corporations Directorate
Corporations Branch
365 Laurier Avenue West
9th Floor, Journal Tower South
Ottawa, ON, K1A 0C8
Bankruptcy Division: (613) 941-2863
Corporations Branch: (613) 941-9042

The Financial Post maintains a library of investor resources, including:

  • The Financial Post Survey of Mines and Energy Resources (annual publication)
  • The Financial Post Survey of Industrials (annual publication)
  • The Financial Post Corporate Card Service (tracking over 600 Canadian companies)

For older companies try: The Financial Post Survey of Predecessor and Defunct Companies

The Financial Post publications are available for review at your local "reference" library.

Southam offers a number of investment publications including:

  • The Corpus Almanac & Canadian Sourcebook;
  • Equity Value Service (monthly reports, summaries etc.), and;
  • Mutual Funds Sourcebook.

Northern Miner Press Limited, publishes the Canadian Mines Handbook aswell as the Canadian Oil and Gas Handbook.

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12. How do I get information about a public company?

You'll find information about a company in its quarterly reports, annual reports (with audited financial statements) and press releases of significant events for the company. Annual reports and quarterly reports are a wealth of information for investors: they tell you whether a company is making money or losing money and why. It is usually easy to find information about large companies from the companies themselves, brokerage firms, and media coverage. By contrast, it can be more difficult to find information about small companies.

You may obtain corporate reports from the following sources:

  • SEDAR (System for Electronic Document Analysis and Retrieval):
    This database contains all public documents filed by public companies with securities regulators in Canada since January 1997. This database can be accessed free of charge at www.sedar.com and is an excellent source of corporate information.
  • The Investor Learning Centre of Canada their Web-site: www.csi.ca opens new window
  • EDGAR -for company filings with the SEC at www.edgar-online.com opens new window
  • Hoover's Online Company Information at www.hoovers.com opens new window

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13. How do I know if a certain company is a reporting issuer, and what its status is?

A reporting issuer is, generally, a corporation that has issued securities to the public and is subject to continuous disclosure requirements of the Securities Act (Newfoundland). Staff of this Division can advise you if a company is currently a reporting issuer in Newfoundland and Labrador.

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14. I've been told that a company I own shares in has a cease trading order in effect. What does that mean and what can I do?

A cease trade order means that the company's shares cannot be traded while the order is in effect. This also means that you cannot sell those shares until the order has been lifted.

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15. A broker told me that the Superintendent of Securities had issued a "receipt" for a company's prospectus. Does this mean the stock is a good investment?

The Securities Act (Newfoundland) generally requires that a company issuing securities to the public provide a prospectus -- a document containing detailed information about the company and the securities for sale. The firm cannot sell the securities until we have received and receipted the prospectus. By accepting the prospectus for filing, the Superintendent of Securities is not endorsing or recommending the security in any way. It merely has stated that the prospectus meets its standards for disclosure of information. Potential investors have a responsibility to thoroughly read the prospectus and any ancillary materials provided in connection with the offering. Investors should NOT rely on only verbal statements made, and should obtain any additional material they feel necessary to make an informed investment decision.

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16. Are mutual funds "securities" and are they regulated by the Superintendent of Securities?

Mutual funds are securities. A mutual fund is simply a pool of savings contributed by many investors and invested on their behalf by a professional money manager. Mutual fund salespeople must hold a mutual fund licence. As well, a prospectus for each fund sold in Newfoundland must be filed with the Superintendent of Securities and provided to new investors.

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17. Are mutual funds protected by the Canada Deposit Insurance Corporation?

Since mutual funds are securities, not deposits, they are not covered by the Canada Deposit Insurance Corporation (CDIC).

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18. I've just bought a security. Does it qualify as an RRSP investment?

The following investments may be eligible for RRSP holdings:

  • Treasury bills
  • Canada savings bonds
  • Provincial savings bonds
  • federal and provincial bonds
  • municipal bonds
  • strip bonds
  • Mortgage-backed securities
  • corporate bonds
  • Canadian equities
  • foreign equities
  • income trust units
  • GICs
  • RRSP-eligible mutual funds
  • Canadian mortgages on your principal residence.

Investments that are not eligible as RRSP holdings include:

  • Gold and silver bars
  • Precious metals
  • personal property such as art, antiques and gems commodity futures contracts.

To determine whether a security is eligible for your RRSP, consult Canada Customs and Revenue Agency (formerly Revenue Canada) at 1-800-959-8281 or your financial advisor.

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