Britain's top financial regulator has fined a division of Canadian insurance conglomerate Sun Life Financial Inc. the equivalent of almost $1 million for what it calls "failings" in the governance of its with-profits business.

The Financial Services Authority said governance at Sun Life Assurance Company of Canada (U.K.) Ltd. was "unclear and inadequate" and that cast doubt on policyholders' interests being protected.

Unlike other types of insurance deals, with-profits units give insurers more discretion in managing funds, which can give rise to potential unfair treatment of policyholders, the regulator said.

The company has been fined 600,000 pounds for its actions. The fine could have been as much as 750,000 pounds, but Sun LIfe was given a 20 per cent discount for co-operating in the matter.

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 — affected one its with-profits funds, holding about 114,000 policies and some $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," the regulator said.

"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."

With files from The Canadian Press