Britain's financial regulator has fined a subsidiary of Sun Life Financial Inc. the equivalent of about $950,000 for what it called "failings" in the governance of its with-profits business.
The Financial Services Authority ruling announced Thursday concerned the operation of Sun Life Assurance Company of Canada (U.K.) Ltd.
The FSA says the design and operation of the company's governance arrangements were "unclear and inadequate," resulting in a high risk that the interests of policyholders would not be properly protected.
The issue came to light following two significant transactions Sun Life executed in 2008 and 2009.
These transactions — which the FSA said were not adequately reviewed by the company's with-profits committee nor approved by its board of directors — impacted one its with-profits funds holding about 114,000 policies and some 1.2 billion pounds ($1.9 billion) in assets.
The FSA did not criticize the merits of the transactions, but found that the review and approval process followed by SLOC UK was deficient.
"This led to an unacceptable risk that proper independent judgement would not be applied to the transactions," it said.
With-profits business allows firms considerable discretion in managing funds, which can give rise to potential unfair treatment of policyholders.
"It is essential that insurers operating with-profits funds ensure policyholders are properly protected," said FSA director of enforcement Tracey McDermott.
"Independent judgment must be properly applied to issues that affect the interests of policyholders.
"The firm fell below the standard required. Its with-profits committee and board, who had primary responsibility for the fair treatment of policyholders, were not adequately consulted on two significant transactions. This was an unacceptable approach to protecting policyholders."
The FSA said Sun Life could have been fined almost $1.2-million but agreed to settle, qualifying for a 20 per cent discount.