Mortgage Broker

title insurance companies are not. e Department of Finance's report on the Assessment of Inherent Risks of Money Laundering and Terrorist Financing in Canada noted that this industry is highly vulnerable to money laundering and terrorist financing. In Canada, the mortgage sector extends beyond banks into a variety of non-federally regulated businesses, such as private equity companies, mortgage finance companies, real estate investment trusts, mortgage investment corporations, mutual fund trusts, syndicated mortgages or individuals acting as private lenders. Both the Assessment of Inherent Risks of Money Laundering and Terrorist Financing in Canada and the Financial Action Task Force's most recent Mutual Evaluation Report identified complex loan and mortgage schemes, such as mortgage fraud, as areas of money laundering risk." What is curious and unclear about this report is that, while private mortgage lenders are identified as being highly vulnerable to money laundering, the Committee has not recommended that private mortgage lenders be subject to the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Under Recommendation 9, the Committee recommends "at the Government of Canada amend the PCMLTFA to extend the requirements for real estate brokers, sales representatives and developers to mortgage insurers, land registry and title insurance companies." Neither mortgage brokers nor private mortgage lenders are included in Recommendation 9. It remains to be seen which of these recommendations will be reflected in dra legislation. In the meantime, regulated entities and others affected by the report are wise to stay tuned for further developments. CO-OPERATIVE PAN- CANADIAN SECURITIES REGULATOR BACK ON TRACK On November 9, 2018, the Supreme Court of Canada (SCC) ruled that the proposed cooperative capital markets regulatory system (Cooperative System) is constitutional. e court's unanimous decision opens the door to a proposed pan-Canadian securities regulator that will exercise delegated authority from participating jurisdictions. Under the proposed Cooperative System, a single regulator – the Capital Markets Authority (Authority) – would receive delegated powers from the federal government and the governments of Ontario, British Columbia, Saskatchewan, New Brunswick, Prince Edward Island and Yukon (Participating Jurisdictions). e Authority would administer the proposed federal Capital Markets Stability Act (CMSA) and a uniform Capital Markets Act (CMA). e CMA would be adopted by the Participating Jurisdictions to replace their respective securities acts. ere have been changes in government at the federal level and in various Participating Jurisdictions since the Participating Jurisdictions first opted into the Cooperative System. It remains to be seen whether each of the Participating Jurisdictions provinces will continue to sign on to the Cooperative System. NEW BANK FRAMEWORK GOVERNING INTERNAL MORTGAGE ORIGINATIONS In October 2018, the federal government introduced Bill C-86, Budget Implementation Act, 2018, No. 2 (Bill C-86). If passed, Bill C-86 will, among other things, amend the Bank Act to provide for a financial consumer protection framework for banks. Under the proposed legislation, the independence of bank oversight committees has been strengthened, so that a majority of committee members must be independent from the bank. Bank committees are charged with establishing complaint handling procedures for consumer complaints. ere are some significant new provisions governing the sales practices of banks, which include: n sales activity utilizing undue pressure will be prohibited (undue pressure includes any practice or communication that could be reasonably considered to be excessive or persistent) n a prohibition against banks using false or misleading information to sell products or services n a prohibition against tied selling and imposing undue pressure or coercion against consumers for any purpose n ensuring that compensation paid to staff does not interfere with a person's ability to comply with requirements n mandatory training for employees and third parties who offer or sell the bank's products or services e framework also creates a new cooling-off period for the sale of products and services (14 days if sold by mail or telephone; three days if sold by any other means). It is not clear when regulations needed to fully implement the proposed changes will be passed. 12 | winter 2019 cmba-achc.ca CMB MAGAZINE updates&news

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