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 | 17 industryregulation THE MBABC HAS PRESENTED A PROPOSAL for the self regulation of mortgage brokers in British Columbia to Bill Bennett, Minister for Core Review. Two very important goals of this core review are to reduce red-tape and unnecessary regulations that hinder economic development, and restructure government program delivery and governance models where costs can be reduced and outcomes improved for the public. e MBABC proposes that the British Columbia government eliminate the current licensing system for mortgage brokers administered by the Ministry of Finance under the Financial Institutions Commission ( FICOM) and replace it with new legislation creating a self-regulatory organization (SRO) for mortgage brokers. The bad fit with FICOM Currently mortgage brokers in B.C. are regulated under the Mortgage Brokers Act by the Registrar of Mortgage Brokers and her staff under the umbrella of a government agency, FICOM. FICOM is established by the Financial Institutions Act, which is legislation mandating the prudential regulation by FICOM of credit unions, trust companies and insurance companies. Technically FICOM and the Financial Institutions Act play no role in the licensing of mortgage brokers other than the Superintendent of Financial Institutions is, and historically has always been, the same appointee as the Registrar of Mortgage Brokers. ere is of course a shared overhead and cost savings rationale for absorbing a small program like mortgage broker licensing into a significantly larger and more resourceful program involving the regulation of provincial financial institutions. However, the regulation of mortgage brokers within FICOM is a bad fit. FICOM is set up as a prudential regulator, and employs staff with accounting and finance backgrounds, whose role it is to ensure the stability of financial institutions. Mortgage broker licensing on the other hand, is clearly not prudential in nature, and requires a market-conduct approach to regulation, which focuses on rules applied against individuals and rigorous enforcement of those rules. e enforcement function requires specially trained investigation staff and can tax the resources of an organization. ere is no other licensing program like that of mortgage broker regulation housed in FICOM. However, FICOM does have a real estate department which provides oversight of the Real Estate Council of BC, a self-regulatory organization for real estate licensees. The right regulatory model As industries mature and grow both in size and the sophistication of their participants, it is common for regulation of the industries to transfer from government to the industries themselves. ere are a number of reasons why self-regulation for mortgage brokers in B.C. is the right regulatory model and why now is the right time to implement it. e industry in B.C. has grown to more than 3,300 individuals and 1,000 entities. In addition, the industry has matured and developed its own ethical codes and standards of conduct. e expertise and resources to support a self-regulatory program exist within the industry. Both the industry and public want protection of consumers to be paramount and standards raised – this can be accomplished through self-regulation. While there is always a challenge to finding the balance between a fair and open competitive environment and ensuring the fair treatment of and prevention of harm to consumers, a system of self regulation will position B.C.'s mortgage brokers to do exactly that. For many years B.C. has had labour mobility reciprocity with Alberta under the requirements of the New West Partnership Trade Agreement ( NWPTA). Alberta currently has self-regulation of mortgage brokers. Harmonization of industry structures between B.C. and Alberta makes sense and will help fulfill the goals and requirements of NWPTA. Self-regulation provides an opportunity for government to reduce its burden by appropriately transferring that burden to the Most importantly, without foregoing protection, the public is spared the burden of paying for a rule-oriented, regulatory authority. Shortcomings of a principles-based self-regulating structure A broad rule makes it less certain in determining when there has been compliance. A practitioner knows in advance when a detailed rule has been satisfied, but only finds out aer the fact when a decision maker determines his conduct did not meet a broad standard. is shortcoming can of course be leveled against much of the system of justice employed in both criminal and civil law across the common law world. Decision makers determine cases before them by applying legislation in accordance with precedent cases. It is rare for the application or non- application of a principle or standard to be totally surprising. e few cases that truly fall within the grey area are offset by the fact prac titioners are not let off by technically adhering to a detailed requirement, but not meeting the spirit of the requirement. Whereas principles and standards are generally inter- preted in terms of avoiding underlying harms, technical observance may be excused without consideration of the underlying harm. e pub lic is better served by decision makers applying requirements in the spirit of avoiding harm. Not an all-or-nothing exercise In reality, principles-based self-regulating structures are not an all-or-nothing exercise. A model to be applied to the mortgage brokers in British Columbia can be structured taking into account our communities, our needs, and past experiences. As with almost all legislation, any legislation providing such a regime will forever be a work in progress capable of adaption to changes and arising needs. n Proposes Self Regulation MBABC BY saMaNTHa GaLE e expertise and resources to support a self-regulatory program exist within the industry p14-19_Principle_Self Regulation.indd 17 14-01-27 11:40 AM