Essential for the DR toolkit: The NEMA E&O Insurance Program
By Kuntie Kunan-Wright
E&O for Exempt Market Dealing Representatives (DRs) is not currently mandated, like it is in other registrant Adviser categories. This means that DRs are not required to purchase E&O Insurance. This in itself is a significant risk undertaken by the DR who choose not to purchase E&O Insurance. Some DRs are doing business without E&O are learning the hard way, often when it is too late.
The cost to defend a claim could be significant ranging anywhere from $100,000 to over $500,000. You do not want to be in this situation where you are paying your defense out of pocket. Also, someone does not have to commit a wrongful act to be named in a claim. Unfortunately, we have seen situations where financial professionals are named in claims even though they did not provide the service.
DRs need to be prudent, especially in this litigious environment, and protect themselves.
Things to know about the NEMA E&O Insurance Program.
1. In addition to the sale of exempt market securities, the policy also provides coverage for licensed Life, A&S and Mutual Funds activities at no additional premium.
2. The policy complies fully with all regulatory requirements in all provinces.
3. Corporate E&O Policy is also available at a preferred rate for Dealing Representatives (DRs) who are incorporated.
4. There is an additional limit of $100,000 for defense costs, in the event of a claim. This means in the event of a claim and the DR purchased a limit of $1M, he technically has $1.1M of limit to pay for damages and his defense.
5. Due to the increase in regulatory complaints, the policy provides a dedicated, sub-limit of $40,000 in case the insured needs to be present before a regulatory body.
6. Limit of Liability – Each Claim
$1,000,000 @$1,000 annual premium
$2,000,000 @ $1300 annual premium
NEMA selected BFL Canada as their broker because they provide their excellent service and expertise when responding to member queries. BFL firmly believes in educating our clients prior to purchasing an E&O policy. For more information, please contact Kuntie Kunan-Wright: firstname.lastname@example.org or Raed Shubbak: email@example.com, who can also be reached at 1-800-668-5901.