Mortgage Broker is the magazine of the Canadian Mortgage Brokers Association and showcases the multi-billion dollar mortgage-broking industry to all levels of government, associated organizations and other interested individuals.
Issue link: http://digital.canadawide.com/i/254794
MortgageBroker mbabc.ca winter 2014 | 15 attention; the nature of the borrower; the context in which the action occurred; the complexity of the item being brought to the borrower's attention; and, perhaps the importance of the item or the harm caused if the person was not made aware of the item. Roles in principles-based regulation structures ere is no exclusive model to achieve a principles-based regulation structure; the broadness of the principles and the details of rules at any particular level of authority can vary with the industry being regulated, the specific conduct being addressed, and historical practice. However, in a principles-based regime the approach needs to be clearly directed away from higher authorities detailing procedural points and towards specifying the desired regulatory outcomes. Industries, through their professional bodies, firms and members are to take greater responsibility as to how they achieve the desired regulatory outcomes. Principles-based regulation does not alter the fact that practitioners being regulated are still subject to principles, rules and processes. e primary distinction is: who is making and enforcing these rules and how much say do the members of the regulated industry have in determining these components? Principles-based regulation is oen discussed in terms of higher authorities (e.g., legislatures) providing principles rather than detailed rules to regulate a particular industry. e broad principles are generally expressed in the legislation governing the industry. e preference is these provisions be expressed in terms of outcomes and behaviours rather than processes or procedures. e industry being regulated is le to provide more detailed standards and rules, generally by way of its professional association body (e.g., standards in a professional conduct handbook and guidelines in a professional standard guide). ese standards and rules are more detailed than the principles as to requirements, but still allow considerable freedom to the regulated firms and members as to the details and procedures by which they will comply with the requirements of the legislation and association. e professional body is generally given official recognition in accordance with the legislation governing the industry. e professional association decides to what degree and in which cases it wishes to take advantage of this opportunity to develop guidance material (e.g., recommended practice checklists). e professional association also generally covers items such as licensing, qualification requirements, discipline, continuing education, requirements of errors and omissions insurance and trust accounting requirements. e members of the industry being regulated (either at the firm or individual level) are given considerable latitude regarding the details of how they meet the principles. e firms are le to determine the details of how they will meet the more general principles and rules imposed by the legislature and their professional association. ey are expected to have detailed processes in place to satisfy the rules and principles and generally firms are expected to oversee compliance by members. Outcome-oriented approach in implementation In implementing a principles-based regulation structure, enforcement should focus on outcomes rather than processes. e concern should be on the prevention of harm, rather than necessarily the following of detailed rules. As an example, if mortgage brokers inaccurately describe their title on a business card by calling themselves mortgage professionals, a rule-based regime might categorize this as a breach of rules, but a principles-based approach would look at the harm caused to the public by the misdescription to decide a regulatory outcome. A trustworthy industry For principles-based regulation to succeed in a particular industry the industry must be trustworthy. It also requires the members be able to work together to determine the requirements and how to best meet them. ey must be willing to share practices, issues, and suggestions to best govern the industry; be prepared to act to keep the industry functioning at a standard meeting the legislated standard; and, act, if required by legislature, as do almost all self-regulations professions, in the public interest. Benefits of a principles-based self-regulating structure Mortgage brokers are provided with flexibility in how they deliver the outcomes required. Less time is spent on completing forms or following procedures that have no purpose. Mortgage brokers are motivated to efficiently meet the requirements imposed on them. Provided the professional association is diligent in detecting inadequate processes and using discipline and enforcement where appropriate, this search by mortgage brokers to seek efficiencies does not become an avenue by which to shirk responsibilities. Designated individuals will need to be involved in developing and enforcing key regulatory decisions. e cost of these steps is taken from government and put onto the profession, and the benefits of finding efficiencies are also delivered to the profession. Essentially, well controlled and managed brokerages will see the benefit of their processes and the weak practitioners will pay the greater portion of costs. is will allow the public to benefit from the lower overheads of more efficient brokerages that will compete more strongly in the business marketplace. shall file a Form 123 by March 15 of each calendar year is satisfied so long as the member files the form by the required date. Principles are generally expressed as standards and require consideration of the context in which a questionable conduct has occurred. For example, to establish whether a member who is required to reasonably ensure that a borrower is aware of a certain fact met that standard requires a review of a number of considerations including: the method used by the broker to bring the item to the borrower's MBABC and allied associations are poised to discuss the benefits of principles-based regulation Is There a Better Way t o Regulate Mortgage Brokers? industryregulation p14-19_Principle_Self Regulation.indd 15 14-01-27 11:40 AM