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IN THE MATTER OF the Insurance Act, R.S.O. 1990, c.I.8, as amended (the “Act”), in particular sections 441.2 and 441.3;
AND IN THE MATTER OF Kostyantyn Poshtarenko.
NOTICE OF PROPOSAL TO IMPOSE ADMINISTRATIVE PENALTIES
TO: Kostyantyn Poshtarenko
TAKE NOTICE THAT pursuant to section 441.3 of the Act, and by delegated authority from the Chief Executive Officer of the Financial Services Regulatory Authority of Ontario (the “Chief Executive Officer”), the Director, Litigation and Enforcement, (the “Director”) is proposing to impose an administrative penalty in the amount of $100,000 on Kostyantyn Poshtarenko for contravening section 392.2(6) of the Act and section 2(1) of Ontario Regulation 347/04 by acting as an insurance agent while not being duly licensed.
Details of these contraventions and reasons for this proposal are described below. This Notice of Proposal includes allegations that may be considered at a hearing.
SI VOUS DÉSIREZ RECEVOIR CET AVIS EN FRANÇAIS, veuillez nous envoyer votre demande par courriel immédiatement à: contactcentre@fsrao.ca.
YOU ARE ENTITLED TO A HEARING BY THE FINANCIAL SERVICES TRIBUNAL (THE “TRIBUNAL”) PURSUANT TO SECTIONS 441.3(2) AND 441.3(5) OF THE ACT. A hearing by the Tribunal about this Notice of Proposal may be requested by completing the enclosed Request for Hearing Form (Form 1) and delivering it to the Tribunal within fifteen (15) days after this Notice of Proposal is received by you. The Request for Hearing Form (Form 1) must be mailed, delivered, faxed, or emailed to:
Address: Financial Services Tribunal
25 Sheppard Avenue W, Suite 100
Toronto, ON M2N 6S6
Attention: Registrar
Fax: 416-226-7750
Email: contact@fstontario.ca
TAKE NOTICE THAT if you do not deliver a written request for a hearing to the Tribunal within fifteen (15) days after this Notice of Proposal is received by you, orders will be issued as described in this Notice of Proposal. TAKE FURTHER NOTICE of the payment requirements in section 5 of Ontario Regulation 408/12, which states that the penalized person or entity shall pay the penalty no later than (thirty) 30 days after the person or entity is given notice of the order imposing the penalty, after the matter is finally determined if a hearing is requested or such longer time as may be specified in the order.
For additional copies of the Request for Hearing Form (Form 1), visit the Tribunal’s website at www.fstontario.ca
The hearing before the Tribunal will proceed in accordance with the Rules of Practice and Procedure for Proceedings before the Financial Services Tribunal (“Rules”) made under the authority of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22, as amended. The Rules are available at the website of the Tribunal: www.fstontario.ca. Alternatively, a copy can be obtained by telephoning the Registrar of the Tribunal at 416-590-7294, or toll free at 1-800-668-0128 extension 7294.
At a hearing, your character, conduct and/or competence may be in issue. You may be furnished with further and or other particulars, including further or other grounds, to support this proposal.
REASONS FOR PROPOSAL
I. INTRODUCTION
1. These are the reasons for the proposal by the Director to impose an administrative penalty in the amount of $100,000 on Kostyantyn Poshtarenko (“Poshtarenko”).
II. BACKGROUND
A. Poshtarenko
2. Poshtarenko is not, and has never been, licensed as an insurance agent under the Act or as an insurance broker under the Registered Insurance Brokers Act, R.S.O. 1990, c. R.19.
3. On January 18, 2017, The Superintendent of Financial Services (the “Superintendent”) issued a Notice of Proposal proposing to issue a Permanent Cease & Desist Order on account of Poshtarenko acting as an auto insurance agent while not being duly licensed.
4. On March 3, 2017, the Superintendent issued a Permanent Cease & Desist Order (the “Cease and Desist Order”) to Poshtarenko ordering that he cease and refrain from conducting insurance business in the Province of Ontario, including advertising, soliciting, offering, selling, and adjusting auto insurance.
B. Unlicensed Insurance Agent Activity
Complaints from Insurers
5. On or around March – April 2023, the Financial Services Regulatory Authority of Ontario (“FSRA”) received complaints and information from Équité Association (“Équité”), Aviva Insurance Company of Canada (“Aviva”), and TD Insurance (“TDI”) alleging that,
a) Between 2021 and 2023, Poshtarenko applied for at least 20 auto insurance policies on behalf of consumers, with or without their knowledge;
b) Poshtarenko provided false and/or misleading information when applying for the auto insurance policies;
c) Poshtarenko impersonated consumers while arranging auto insurance policies for them; and
d) Poshtarenko used 2 email accounts (collectively, the “Email Accounts”) and a phone number (the “Phone Number”) while engaging in the alleged unlicensed activity.
FSRA Investigation – Overview
6. Between August 2019 and October 2023, Poshtarenko arranged or attempted to arrange for the issuance and placement of auto and home insurance policies for a large number of consumers, while not being licensed to do so.
7. All of these policies were issued by TDI or Aviva. Poshtarenko by himself, or through an intermediary, acted as an insurance agent while arranging the insurance policies for consumers. Poshtarenko appears to have impersonated consumers on binding calls over the telephone while applying for and arranging the policies.
8. “VC”, a consumer who acquired insurance through Poshtarenko, was named as the principal operator on numerous auto insurance policies arranged by Poshtarenko for consumers, without VC’s knowledge or consent.
9. The consumers paid between $100 - $350 to Poshtarenko or to Poshtarenko’s intermediaries as remuneration for the arrangement of their policies (the “Service Fees”). In certain cases, the Service Fees were paid to intermediaries who forwarded the fees to Poshtarenko.
10. The Service Fees were paid by consumers using Interac e-transfer service and sent to one of the two Email Accounts. The Service Fees were then transferred to either a TD Canada Trust bank account (“TD Account”), or a Bank of Montreal bank account (“BMO Account”), collectively, the “Bank Accounts”, both of which were operated by “AS”.
11. The Phone Number was used by Poshtarenko to communicate with consumers and intermediaries while arranging the policies.
12. Most of the consumers who acquired insurance through Poshtarenko were newcomers to Canada, had limited English communication skills, and little or no knowledge about obtaining insurance policies in Canada.
The VC Insurance Policies
13. In August 2019, VC contacted Poshtarenko to arrange auto and home insurance policies. Poshtarenko represented himself as an insurance agent/broker and collected VC’s details, including a picture of his driver’s licence which VC sent to the Phone Number. Subsequently, Poshtarenko arranged home insurance for VC and charged $250 for his services. This money was transferred to one of the Email Accounts and subsequently transferred to one of the Bank Accounts.
14. In June 2022, VC contacted Poshtarenko on the Phone Number to obtain an auto insurance policy. Poshtarenko advised VC that he would charge $280 for arranging a policy and asked VC to provide a photograph of VC’s driver’s licence. Poshtarenko failed to arrange a policy.
15. VC was subsequently, without their knowledge or consent, added as the primary driver on 51 TDI auto insurance policies (the “VC Insurance Policies”). Statements from 4 consumers who held VC Insurance Policies and information and records provided by TDI reflect the following general course of conduct by Poshtarenko:
a) Consumers contacted Poshtarenko on the Phone Number or one of two intermediaries of Poshtarenko for the arrangement of the VC Insurance Policies;
b) Consumers provided personal details and documents to Poshtarenko or to Poshtarenko’s intermediaries which Poshtarenko used to arrange the VC Insurance Policies;
c) Consumers paid between approximately $280 - $380 per policy to Poshtarenko or to Poshtarenko’s intermediaries as Service Fees for the arrangement of the VC Insurance Policies;
d) Poshtarenko’s intermediaries confirmed that they transferred a portion of the fees received by consumers to Poshtarenko; and
e) Poshtarenko impersonated consumers while applying for and arranging the VC Insurance Policies. He falsely identified VC as the primary driver and provided VC’s driver license information, even though VC had no connection to or knowledge of the VC Insurance Policies.
Consumers Identified through Payment Information
16. Bank statements of the TD Account for the period between November 2021 and October 2023 reflects transfers of payments from consumers which appear to be Service Fees relating to the arrangement of auto insurance policies by Poshtarenko (the “TD Payments”). The TD Payments made to Poshtarenko amount to approximately $22,000. 11 consumers whose payments to Poshtarenko were among the TD Payments confirmed to FSRA that:
a) Between 2020 to 2023 they had procured one or more auto insurance policies, arranged by Poshtarenko, from TDI or Aviva;
b) All of them contacted Poshtarenko on the Phone Number and sent their relevant details and documents to the Phone Number;
c) All of them made payments ranging from $100 - $280 to Poshtarenko as a fee for Poshtarenko’s services through one of the Email Accounts.
d) The voice on the audio recordings of the binding calls for their policies, provided by the relevant insurer to FSRA, was not theirs even though the person on the call claimed to be the consumer.
17. Poshtarenko failed to comply with a summons issued by FSRA under section 444.1 of the Act thereby obstructing FSRA’s investigation into the complaints made against him. FSRA has stated a case to the Divisional Court in accordance with section 444.1(6) of the Act to address Poshtarenko’s non-compliance.
III. CONTRAVENTIONS OR FAILURES TO COMPLY WITH THE ACT
A. Unlicensed Activity
18. As per section 1 of the Act, an “agent” means a person who, for compensation, commission or any other thing of value, solicits insurance on behalf of an insurer or transmits, for a person other than himself, herself or itself, an application for, or a policy of insurance to or from such insurer, or offers or assumes to act in the negotiation of such insurance or in negotiating its continuance or renewal with such insurer.
19. Section 392.2(6) of the Act provides that every person who acts as an insurance agent in Ontario without the licence required by Part XIV of the Act is guilty of an offence.
20. Section 2(1) of Ontario Regulation 347/04 provides that no individual, partnership, or corporation shall act as an agent unless the individual, partnership or corporation is licensed under the regulation.
21. As described above, Poshtarenko, while not being licensed as an insurance agent under the Act, applied for, arranged, or attempted to arrange auto and home insurance policies for a large number of consumers. Poshtarenko’s unlicensed activity was conducted systematically and repeatedly over a sustained period of time.
22. Poshtarenko did so despite being ordered by the Superintendent to cease and desist from carrying out unlicensed insurance agent activity.
23. In view of the above, the Director is satisfied that Poshtarenko contravened section 392.2(6) of the Act and section 2(1) of Ontario Regulation 347/04 by acting as an insurance agent while not being duly licensed.
IV. GROUNDS FOR IMPOSING ADMINISTRATIVE PENALTIES
24. The Director is satisfied that imposing administrative penalties on Poshtarenko under section 441.3(1) of the Act will satisfy one or both of the following purposes under section 441.2(1) of the Act:
1) To promote compliance with the requirements established under the Act.
2) To prevent a person from deriving, directly or indirectly, any economic benefit as a result of contravening or failing to comply with a requirement established under this Act.
25. In determining the amount of the administrative penalties below, the Director has considered the following criteria as required by section 4(2) of Ontario Regulation 408/12:
1) The degree to which the contravention or failure was intentional, reckless, or negligent.
2) The extent of the harm or potential harm to others resulting from the contravention or failure.
3) The extent to which the person or entity tried to mitigate any loss or take other remedial action.
4) The extent to which the person or entity derived or reasonably might have expected to derive, directly or indirectly, any economic benefit from the contravention or failure.
5) Any other contraventions or failures to comply with a requirement established under the Act or with any other financial services legislation of Ontario or of any jurisdiction during the preceding five years by the person or entity.
26. The Director is satisfied that an administrative penalty in the amount of $100,000 should be imposed on Poshtarenko for contravening section 392.2(6) of the Act and section 2(1) of Ontario Regulation 347/04 by acting as an insurance agent while not being duly licensed.
27. In respect of the first criterion, the Director is satisfied that Poshtarenko knowingly, intentionally, and repeatedly engaged in unlicensed insurance agent activity over a sustained period of time. Poshtarenko carried out the unlicensed activity despite the Cease and Desist Order issued to him.
28. Poshtarenko’s conduct exhibits a deliberate and systematic effort to contravene the Act. Poshtarenko developed a scheme, which included using intermediaries, to arrange auto and home insurance policies for a large number of consumers using false information and impersonating consumers. Poshtarenko also set up a payments system which efficiently funnelled the proceeds of the unlicensed activities to the Bank Accounts.
29. In respect of the second criterion, the Director is satisfied that Poshtarenko’s unlicensed insurance agent activities have caused and had the potential to cause significant harm to insurers and consumers and has harmed the public interest.
30. The affected consumers were deceived into relying on an unlicensed person for arranging their insurance and paying money for doing so. Being unlicensed, Poshtarenko had no regulatory oversight and arranged insurance by using deceptive means. The insurers took Poshtarenko’s false representations into account and have incurred the risk of providing insurance coverage and determining incorrect premiums on that basis.
31. Further, the insurance coverage of the consumers who had acquired insurance through Poshtarenko had the potential to be cancelled or denied by the relevant insurer putting the consumer, other members of the public, and other insurers at the risk of financial harm.
32. The auto insurance regime in Ontario is a public good. As auto insurance is mandatory, the harm arising from any irregularity or avoidance of premiums is ultimately borne by other consumers.
33. The insurance agent licensing regime provided in the Act and its regulations is a critical and necessary component in protecting the public interest. The public and industry participants rely on the regime and are entitled to have confidence that regulated activities are carried out by persons who are duly licensed to do so.
34. The conduct of Poshtarenko has resulted in a significant and repeated subversion of the licensing regime which not only put the interests of consumers and insurers at the risk of potential harm, but also undermined the integrity of the regime and harmed the public interest.
35. In respect of the third criterion, The Director is not aware of any steps taken by Poshtarenko to remedy or mitigate the contraventions identified in this Notice of Proposal.
36. In respect of the fourth criterion, the Director is satisfied that Poshtarenko repeatedly gained financial benefit from the above-described unlicensed activity. Poshtarenko earned at least $34,000 as Service Fees for applying for and arranging insurance for consumers.
37. In respect of the fifth criterion, the Director has taken into account the Cease and Desist Order issued to Poshtarenko in 2017. The order was issued to Poshtarenko to address contraventions similar to those addressed in the present Notice of Proposal. Poshtarenko has intentionally and flagrantly disregarded the order.
38. Such further and other reasons as may come to the attention of the Director.
DATED at Toronto, Ontario, March 11, 2025.
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Elissa Sinha
Director, Litigation and Enforcement
By delegated authority from the Chief Executive Officer