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/309414
casestudy MortgageBroker mbabc.ca spring 2014 | 45 Exceeding Expectations Earlier this year the Registrar of Mortgage Brokers, based only on materials provided by her staff (including a complaint), suspended the registration of a sub-mortgage broker (SMB) and ordered a corporate entity to cease and desist engaging in mortgage broker activities. e SMB was a director of a corporate entity (CEA). e complainant was a new director of CEA. e complainant's review of the financial records of CEA caused him to complain that the SMB had: • Misappropriated investor funds, altered a bank dra and failed in his fiduciary duty (as Director, designated individual, and sole sub- mortgage broker) to the CEA; and • Filed Form 17 wind-up documents (i.e. cancelling the registration with the Registrar) for CEA without consultation or endorsement of shareholders and the other Director of CEA. e complainant concluded that SMB underwrote a mortgage where some of the properties to secure the debt were not registered in the name of the mortgage applicant and the funding cheque was paid to someone other than the mortgage applicant. e complainant provided documentation including bank dras, receipts, and three Mortgage Commitments signed by SMB behalf of CEA supporting these points. Further, both the complainant and the Registrar's staff found no mortgage had ever been registered at the Land Title Office in favour of CEA. e Registrar described SMB's conduct as "serious misconduct". During the investigation, staff uncovered that SMB was a director of a further corporate entity (CEB). at entity in BC Securities Commissions filings, on its own website, and in a then-upcoming conference was holding itself out as a registered broker. e Registrar concluded that SMB was the controlling mind of CEB, CEB was engaged in activities requiring registration under the Mortgage Brokers Act, and CEB was not so registered. e Register formed the opinion that the SMB was unsuitable and his registration as a sub-mortgage broker was objectionable. Because of the time to hold a hearing not being available for some time, in the public interest: • SMB's registration was suspended pending a hearing; • CEB was issued an order to cease and desist: – holding itself out as a mortgage broker pending a hearing, and – engaging in unregistered mortgage broker activity until registered; • SMB was further ordered to cease promoting CEB until CEB was registered. It is difficult to see how the Registrar could come to any other conclusions on the material before her. Of interest is what would happen if SMB or CEB upon being served with the orders wanted to have the matter heard sooner than the Registrar could be available. A regulatory power to make interim orders pending a full hearing necessarily begs the question of how much delay, attributable to the regulating body, is acceptable. is question is of even greater importance when the interim order impacts the ability of the regulated parties to earn a livelihood. ese questions are what make for interesting future cases. — Ray Basi Time Matters What delay is acceptable? p44-45_CaseStudies.indd 45 14-05-08 2:25 PM