Administrative Procedures for the Late and Erroneous Filing Penalty (LEFP) Framework

Type of publication: Instruction guide
Date: October 2023

Table of contents

    I. Background

    The Late and Erroneous Filing Penalty (LEFP) Framework was implemented in 2002. OSFI requires all federally regulated financial institutions (FRFIs)Footnote 1 to file a variety of financial and corporate information required by statute or that OSFI deems necessary to carry out its legislative mandate. Much of this information is required in accordance with a pre-determined schedule and is subjected to review for accuracy and completeness when received. FRFIs are expected to have appropriate policies and procedures in place to ensure that all regulatory returns are received by OSFI within specified timeframes and are error free.

    This guide is intended to provide an overview of the LEFP Framework in order to assist FRFIs with their responsibilities for providing timely and accurate information to OSFI.

    II. Overview of the Framework

    The LEFP framework is solely designed to encourage FRFIs to file accurate information with OSFI on a timely basis. While the Framework incorporates a system of monetary penalties, it does not generate any revenues for OSFI. All funds collected under the Framework are applied to the Consolidated Revenue Fund (i.e., the Receiver General for Canada) and are not available to reduce the amounts assessed to the industry in respect of covering OSFI's operating costs.

    General principles

    The LEFP Framework operates under the guiding principles of simplicity, transparency, consistency and fairness. However, the variety and complexity of OSFI's filing requirements requires flexibility in adhering to these principles.

    Simplicity in structure and administration of the Framework is essential to its effectiveness for both FRFIs and OSFI. The principle of transparency speaks to the extent to which the details of the Framework are communicated with and understood by all stakeholders. The Framework has been designed as much as possible to have a consistent impact, both within and across sectors. The Framework also attempts to recognize the interplay between accuracy and timeliness of information. Fairness is an element in both the structure and application of the Framework.

    Statutory authority

    Under the Office of the Superintendent of Financial Institutions Act (the Act) and the Administrative Monetary Penalties (OSFI) Regulations (the Regulations), the Superintendent has authority to impose penalties against financial institutions or natural persons in respect of the violations set forth in the Regulations. Section 5 of the Regulations sets out the levels of penalty (based on assets and explained below) as well as the legislative provisions to which the penalties apply (set out in more detail in the Schedule to the Regulations).

    Scope of application

    The LEFP Framework applies to most of the regulatory returns required by OSFI. The Appendix lists the returnsFootnote 2 subject to the Framework and the related due dates. In general, information that is collected by OSFI in standardized form and/or content and in accordance with a defined schedule or subject to the occurrence of a specific event (i.e., information that is collected via returns) is subject to the Framework.

    FRFIs in "run off" continue to be responsible for all filings and returns until such time as they cease to be FRFIs (e.g. until the issuance of Letters Patent of Dissolution or, in the case of a foreign branch, until the revocation of its order to commence and carry on business or its order to insure in Canada risks). Returns required by the Superintendent may be waived by the FRFI's Relationship Manager or other responsible authority within OSFI. However, OSFI does not have authority to waive returns required by statute. FRFIs should therefore ensure that all regulatory returns, as listed in the Appendix, continue to be filed unless notified to the contrary.

    The LEFP Framework applies only to regulatory returns required by OSFI and not to those Filings required by other federal agencies, such as the Bank of Canada and Statistics Canada.

    Penalties – Amounts and related information

    A late return attracts a penalty at the prescribed per diem rate. The table below outlines the penalty structure as established in section 5 of the Regulations, which is designed to establish penalties that act as a meaningful deterrent but that also recognize the significant differences in the size of FRFIs. As such, the penalties that may be levied are tiered according to a FRFI's total assets. The penalties are per diem charges that are assessed in respect of individual returns that are not received by OSFI in an error free state by the applicable due date.

    FRFI total assetsFootnote 3 Per diem penaltyFootnote 4
    Greater than $10 billion $500
    Greater than $250 million but less than or equal to $10 billion $250
    Less than or equal to $250 million $100

    It is important to note that the Superintendent does not have authority to reduce or increase the amount of a per diem penalty set under the LEFP Framework, because the per diem rates, as set out in the table above, are prescribed by the Regulations.

    The Regulations specify that $25,000 is the maximum penalty that may be imposed against a FRFI in respect of a specific violation.

    Definition of "late"

    A return or filing that is subject to the LEFP Framework must be:

    • made in the form and manner prescribed in the relevant filing instructions,
    • complete,
    • error free, and
    • received by OSFI by the required due date.

    As such, where a FRFI does not meet all of the above criteria in regard to any particular return or filing, it may be subject to a per diem penalty for each day beyond the required due date.

    The due dates for some returns are prescribed by statute, while others are prescribed in various reporting manuals and memoranda. In most cases, a due date is defined in terms of a specified number of days following a given date, such as the last day of a fiscal or calendar quarter, or a specified number of days after the occurrence of a specific event. The Appendix summarizes the prescribed due dates for each return that is subject to the LEFP Framework. Where there is any doubt, however, the relevant statute (as applicable), filing instruction, reporting manual, or OSFI memorandum is the final authority.

    In general, the prescribed due date is the date used for determining whether a return is late. As such, the Framework does not provide for a grace period. For example, an error-free return that is received before the end of the first day following the due date is considered one day late.

    The following guidelines apply for the purpose of calculating the number of days a return is late:

    • Where the prescribed due date for any return that must be filed electronically (i.e., via RRS) in accordance with OSFI's filing instructions, falls on a federal holiday or on a Saturday, the due date (for LEFP purposes) is the prescribed due date. (Sundays are defined as holidays under the Interpretation Act);
    • When a return is not received by the end of the day on which it is due, federal holidays and Saturdays are included in the number of days the return is late;
    • For returns filed electronically the date the return is received is the date recorded by the RRS system;
    • A day ends at 11:59:59PM;
    • Return with status 'No Data, In Draft and Ready to Submit' are considered not filed;
    • Returns which fail validation are considered not filed;
    • In the case of returns with cross return validation (validation between two returns), if the second return to be submitted does not agree with the return already filed it will fail validation and continue to be in 'Ready to Submit' status. (ie. not filed)
    • Corporate returns contain features (validation rules which are active on the form) designed to reduce the possibility of entering incorrect information
    • An incomplete return, where completeness is determined in relation to the requirements of the relevant instructions or validation rules, is considered "not filed" until OSFI receives all necessary elements of the return; and
    • FRFIs are reminded that it is their responsibility to provide OSFI with the returns listed in the Appendix. This includes taking reasonable measures to ensure they are received by OSFI by the prescribed due date, and not merely dispatched by the prescribed due date.

    FRFIs are requested to review OSFI Guideline E‑13 Legislative Compliance Management for an outline of OSFI's compliance management expectations.

    Most financial returns are subjected to a variety of validation rules when they are received by OSFI. Most of OSFI's validation rules are mathematical rules that test the data for internal consistency, with very narrow tolerance levels.

    The validation process may identify errors in a single return, or in two or more returns, and these errors would result in Violations in respect of each affected return. However, these errors should be avoidable because they are the result of a failure to comply with the validation rules. In addition, every FRFI has the ability to apply OSFI's validation rules against the information reported in its financial returns to identify such errors. OSFI posts all the validation rules in the process of validating data in financial returns on the RRS website.

    OSFI acknowledges that its validation process cannot identify all errors and does not want to discourage FRFIs from correcting errors that the validation process does not detect. A FRFI may file corrections to previously submitted returns (that had passed validation rules) without penalty;
    A revision containing an error (i.e. fails a validation rule) continues to attract a per diem penalty at the prescribed rate until such time as OSFI receives an error-free corrected return;

    OSFI discretion in applying penalties

    Given that the per diem amount of each penalty is prescribed in the Regulations, OSFI has no authority to waive or reduce the per diem amount of a penalty once it has been incurred. OSFI may exercise discretion as to whether a penalty should be imposed. However, OSFI exercises this discretion judiciously so as not to undermine the integrity of the Framework. As such, few penalties are dealt with in this mannerFootnote 5. Please refer to the "Administrative review process" outlined below for further information.

    Monitoring, Notices of Violation, Notices of Decision and invoicing

    Because of the important role these returns play in OSFI's supervisory and regulatory responsibilities, OSFI normally follows up, where possibleFootnote 6, with FRFIs to ensure that we collect the correct information we are legally obliged to receive and process. However, OSFI does not guarantee that a reminder will be issued for all or for any particular return or filing.

    FRFIs have sole responsibility for ensuring that returns reach OSFI on time and error free. Further, OSFI has not committed to issue reminders within any specified time period. A decision to impose a penalty will be unrelated to whether OSFI issued a reminder, as it is the FRFI's responsibility to file on time and error free.

    Where a FRFI has sent an error free return or filing that would otherwise meet the due date, but does not meet it due to an issue with OSFI's ability to record it as "received," or where OSFI makes an error that affects the correct recording of the filing date, any penalty that the LEFP system would automatically assess will either not be imposed (i.e., a Notice of Violation will not be issued), or corrected accordingly if a Notice of Violation was issued in error.

    OSFI will provide each FRFI that files returns late (in a particular calendar quarter) with a Notice of Violation setting out late returns recorded in that quarter. Notices of Violation are issued and mailed on or about the middle of the month following each calendar quarter, and are addressed to the Chief Compliance Officer. Note that Notices of Violation only list returns that were received by OSFI during the period and do not list returns that were due and not received during such period.

    A Notice of Decision and invoice are issued 40 days after the date on the applicable Notice of Violation, unless a FRFI has requested an administrative review of the penalty. When the administrative review is complete, a Notice of Decision will be issued, and subsequently an invoice will be issued if the review concludes that imposing the penalty, or some portion thereof, proposed in the Notice of Violation is appropriate. (Please refer to "Administrative review process" below for further information).

    Additional information

    For additional information or explanation, please contact the Regulatory Data Management Division at (613) 991-0609.

    III. Administrative review process

    A FRFI that has a compelling reason(s) for objecting to a penalty (penalties) set forth in a Notice of Violation may make representations to OSFI. A "compelling" reason for making representations is something over which the FRFI had little or no control. Examples could include a major systems failure, a major power outage, an emergency office closure, or a similar situation or business interruption that prevented the FRFI from producing or delivering the return to OSFI on time and error free. (Examples of situations that will not be considered compelling by OSFI include: breakdowns in internal controls, staff shortages and vacations; the FRFI's previous good filing record/first time offence; and similar situations within the control of the FRFI.)

    Representations must be made in writing and must be received by OSFI no later than 35 days after the date of the Notice of Violation. Requests must be addressed to:

    OSFI
    Attn: Senior Director
    Legislation and Approvals Division
    255 Albert Street, 15th floor
    Ottawa, ON  K1A 0H2

    The request must clearly articulate why the review is being requested and the facts OSFI should take into consideration as part of its review. The letter must be signed by an appropriate senior officer of the FRFI, such as: the Chief Compliance Officer, the Corporate Secretary, the Chief Accountant (DTIs), the Chief Financial Officer (Insurers), or the Chief Agent or Principal Officer (branches of foreign companies and authorized foreign banks, respectively). Representations received after the above deadline will normally not be considered.

    After receiving representations from the FRFI, OSFI will review the representations and consult with the Relationship Manager of the FRFI and any other appropriate stakeholders. OSFI will normally issue a Notice of Decision to the FRFI within 30 days of receiving the representations. The Notice of Decision will indicate either that 1) the proposed penalty is withdrawn, 2) the penalty is reduced, or 3) the original penalty is upheld. In the latter two cases, an invoice will be issued to the FRFI.

    IV. OSFI'S disclosure of financial information

    Neither the timing nor content of OSFI's disclosure of financial regulatory information, pursuant to the various financial institutions statutes, influences the operation of the LEFP Framework, or vice versa.

    Appendix - Returns and related documents subject to LEFP

    I. Financial returns: Deposit-taking institutions

    Name of return Return code # of days to file /
    due dates
    Allowance for Impairment C3 45
    Basel Capital Adequacy Reporting BA 30
    Charge for Impairment C1 45
    Consolidated Balance Sheet M4 30
    Consolidated Statement of Income P3 30
    Deposit Liabilities Classified by Institutional Sector K4 30
    Interest Rate Risk and Maturities Matching Return I3 45
    IRB Wholesale Portfolio Credit Data – Part 1 BB 30
    IRB Wholesale Portfolio Credit Data – Part 2 BC 30
    IRB Retail Portfolio Credit Data – Part 1 BD 30
    IRB Retail Portfolio Credit Data – Part 2 BE 30
    Leverage Requirement Return LR 30
    Liquidity Coverage Ratio Return LA 14
    Market Risk Monthly Data Call BK 8 business
    Market Risk Quarterly Data Call BL 8 business
    Market Risk Quarterly Supplemental Data BM 8 business
    Mortgage Loans Report E2 45
    Net Cumulative Cash Flow DT2 14
    Non-Mortgage Loans Assets Classified by Institutional Sector A2 45
    Operational Risk Event Data L3 120
    Pledging Report U3 45
    Quarterly Supplementary Return for Foreign Bank Branches K3 30
    Return of Non-Mortgage and Mortgage Loans in Arrears N3 45
    Return of Impaired Assets E3 45
    Standardized Institutions Credit Monitoring Data Call BH 30

    II. Financial returns: Life insurance companies, insurance holding companies, non-operating life companies and fraternal benefit societies

    Name of return Return code # of days to file /
    due dates

    Canadian Life & Fraternal (Q4) Annual

    • Core Financial Statement / Supervisory
    • Life Insurance Capital Adequacy Test (LICAT)

    LF1/LF2/LF3/972

    LCA/LCQ/911

    60

    60

    Canadian Life & Fraternal (Q1-Q3) Quarterly

    • Core Financial Statement / Supervisory
    • LICAT

    LF1/LF2/972

    LCQ/911

    45

    45

    Foreign Life & Fraternal (Q4) Annual

    • Core Financial Statement / Supervisory
    • Life Insurance Margin Adequacy Test (LIMAT)

    LF1/LF2/LF3/972

    LCA/LCQ/911

    60

    60

    Foreign Life & Fraternal (Q1-Q3) Quarterly

    • Core Financial Statement / Supervisory
    • LIMAT

    LF1/LF2/972

    LCQ/911

    45

    45

    Auditor's Report to Superintendent - Canadian Life & Fraternal 625

    60

    90 for Reinsurance Co's

    Auditor's Report to Superintendent - Foreign Life & Fraternal 625 May 31
    Foreign Life & Fraternal – Quarterly 10Q 45
    Foreign Life & Fraternal – LIMAT - Quarterly LCQ 45
    Auditor's Report to Superintendent – Canadian Life & Fraternal 625 60
    90 for Reinsurance Co's.
    Auditor's Report to Superintendent – Foreign Life & Fraternal 625 May 31
    Appointed Actuary’s Report (AAR) - Annual Return 605 60
    AAR – Excel File 600 60
    AAR – Financial Condition Testing (FCT) 610 Earlier of: 30 days after presentation to Board of Directors/Chief Agent, and one year after fiscal year-end
    FCT Template - Life 951 Earlier of: 30 days after presentation to Board of Directors/Chief Agent, and one year after fiscal year-end
    Auditor's Report on LICAT – Canadian Life 630 90
    Auditor's Report on LIMAT – Foreign Life 635 May 31
    External Review Report – AAR 615 90
    External Review Report – FCT 608 December 31
    Own Risk and Solvency Assessment (ORSA) - Key Metrics Report OL Submitted to OSFI at least annually and within 30 days of report being reviewed by the Board of Directors / signed off by the Chief Agent

    III. Financial returns: Property and casualty insurance companies

    Name of return Return code # of days to file /
    due dates

    Canadian P&C (Q4) Annual

    • Core Financial Statement / Supervisory
    • Minimum Capital Test (MCT)

    PC1/PC2/PC3/971

    PC4/974

    60

    60

    Canadian P&C (Q1-Q3) Quarterly

    • Core Financial Statement / Supervisory
    • MCT

    PC1/PC2/971

    PC4/974

    45

    45

    Foreign P&C (Q4) Annual

    • Core Financial Statement / Supervisory
    • Branch Adequacy of Assets Test (BAAT)

    PC1/PC2/PC3/971

    PC4/974

    60

    60

    Foreign P&C (Q1-Q3) Quarterly

    • Core Financial Statement / Supervisory
    • BAAT

    PC1/PC2/971

    PC4/974

    45

    45

    Auditor's Report to Superintendent – Canadian P&C 625 60
    Auditor's Report to Superintendent – Foreign P&C 625 May 31
    Auditor’s Report for the MCT 650 90
    Auditor’s Report for the BAAT 655 May 31
    Appointed Actuary's Report (AAR) - Annual Return 605 60
    AAR Supplementary Tables – P&C 987 60
    AAR Discount Curve PC6 60
    AAR – Financial Condition Testing (FCT) 610 Earlier of: 30 days after presentation to Board of Directors/Chief Agent, and one year after fiscal year-end
    FCT Template - P&C 952 Earlier of: 30 days after presentation to Board of Directors/Chief Agent, and one year after fiscal year-end
    External Review Report – AAR 615 90
    External Review Report – FCT 608 December 31
    Earthquake Exposure Data Return 659 May 31
    Unpaid Claims and Loss Ratio Analysis Exhibit PC5 60
    Own Risk and Solvency Assessment (ORSA) - Key Metrics Report OP Submitted to OSFI at least annually and within 30 days of report being reviewed by the Board of Directors / signed off by the Chief Agent

    IV. Financial returns: Federally regulated mortgage insurers

    Name of return Return code # of days to file /
    due dates

    Canadian MI (Q4) Annual

    • Core Financial Statement / Supervisory
    • Mortgage Insurance Capital Adequacy Test (MICAT)

    MI3/MI4/MI5/973

    MI/937

    60

    60

    Canadian MI (Q1-Q3) Quarterly

    • Core Financial Statement / Supervisory
    • MICAT

    MI3/MI4/973

    MI/937

    45

    45

    Auditor's Report to Superintendent 625 60
    Auditor’s Report for the MICAT 632 90
    Appointed Actuary's Report (AAR) - Annual Return 605 60
    AAR Supplementary Tables – MI 987 60
    AAR Discount Curve PC6 60
    AAR – Financial Condition Testing (FCT) 610 Earlier of: 30 days after presentation to Board of Directors/Chief Agent, and one year after fiscal year-end
    FCT Template – P&C 952 Earlier of: 30 days after presentation to Board of Directors/Chief Agent, and one year after fiscal year-end
    External Review Report - AAR 615 90
    External Review Report – FCT 608 December 31
    Earthquake Exposure Data Return 659 May 31
    Unpaid Claims and Loss Ratio Analysis Exhibit PC5 60
    Own Risk and Solvency Assessment (ORSA) - Key Metrics Report OP Submitted to OSFI at least annually and within 30 days of report being reviewed by the Board of Directors

    V. Corporate returns

    This list applies to Canadian and foreign entities, including banks, trust and loan companies, life insurance companies, property and casualty insurance companies, fraternal benefit societies and co-operative credit associations, including retail associations, as applicable.

    For Filing Instructions applicable to Corporate Returns, please refer to OSFI's website.

    Name of return Return code # of days to file /
    due dates
    By-Laws (Canadian entities only) 599 Within 30 days of the effective date of change
    Copy of Power of Attorney for Appointment of Principal Officer (Foreign Bank Branches) OSFI-512 Within 30 days of effective date of appointment
    Copy of Power of Attorney for appointment of Chief Agent and change of address (Foreign Insurance Companies) OSFI-25 Within 30 days of effective date of appointment
    Notice of Annual or Special Meeting of Shareholders, Proxy Circular/ Dissidents' Proxy Circular, Form of Proxy (Canadian entities) 565 Must be received by OSFI no later than 15 days prior to Annual Meeting.
    Organization General Contact Information Return 657 Within 30 days of the effective date of change
    Report of the Conduct Review Committee (Canadian entities only) 598 Within 90 days after the end of financial year
    Required Roles and Contact Information Return 658 Within 30 days of the effective date of change

    Footnotes

    Footnote 1

    The LEFP Framework applies to all FRFIs, including banks, federally-regulated trust and loan companies, life insurance companies, fraternal benefit societies, property and casualty insurance companies, co-operative credit associations, cooperative retail associations and all authorized foreign banks, foreign insurance companies and foreign fraternal benefit societies operating in Canada. Federally regulated pension plans are not currently subject to the Framework.

    Return to footnote 1

    Footnote 2

    References in this Guide to "returns" include regulatory returns and related documents.

    Return to footnote 2

    Footnote 3

    As at December 31 of the preceding year.

    Return to footnote 3

    Footnote 4

    Pursuant to section 35 of the OSFI Act - Per violation, for each day the violation continues.

    Return to footnote 4

    Footnote 5

    For purposes of administrative efficiency, a penalty will usually not be imposed for a violation if the total amount of the penalty would be less than $250.

    Return to footnote 5

    Footnote 6

    As an example, OSFI cannot issue reminders in the case of some returns such as a change in corporate information, which is not based on the occurrence of a recurring or periodic event.

    Return to footnote 6