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/354755
MORTGAGEBROKER mbabc.ca summer 2014 | 29 RECENTLY THE Ontario Securities Commission (OSC) proposed that individual investors who qualify as eligible investors (but do not meet the accredited investor defi nition), should be capped at $30,000 on the amount that they can invest every year under an off ering memorandum exemption. is proposal sent shock waves to many mortgage lender participants at an April 2014 meeting of the MBABC Private Lender's Council when a member raised it. Why does an Ontario proposal make such an impact on B.C. industry members? If this proposal were adopted in B.C. it would have a profound impact on mortgage investment companies ( MICs). e majority of MIC contributions from individual investors greatly exceed the proposed $30,000 per year investment limit. Implementation of the proposal would essentially prevent MICs from raising the bulk of the funds they currently receive from investors, thereby rendering them fi nancially anemic and potentially destroying their businesses by cutting off their funding supply. e loss of MICs in B.C. would have a dramatic impact on mortgage brokers by eliminating a much-needed source of private mortgage funds. Now this is an OSC proposal, so how and why could it be adopted in B.C.? e late, former Federal Finance Minister Jim Flaherty had been on a quest for years to form a U.S.-style national securities regulator in Canada. is, of course, is no easy feat since control over securities regulation rests within provincial power and not under federal control. Flaherty's quest was fraught with constitutional challenges and objections from provinces asserting a need to protect their own regional interests. At the end of the day, only the provinces of Ontario and B.C. agreed to a regulatory securities merger. e new regulator is called the Cooperative Capital Markets Regulators, with the head offi ce to be located in Toronto and a regional offi ce in Vancouver. ere will no longer be a BC Securities Commission. e goal of the new regulator will be to administer a single set of regulations between Ontario and B.C. MBABC understands that the goal is to pass a new B.C. Securities Act and implement the new structure sometime in 2015. e goal of harmonizing B.C. rules with those of Ontario is what has triggered the need for B.C. MICs, investors and others to speak out against the proposed OSC investor cap. Accordingly, the MBABC wrote to the OSC to outline the problems with its investor cap proposal. No harmonization with B.C. e rationale for the introduction of the OM exemption in Ontario is stated in the proposal as follows: We are proposing the OM Prospectus Exemption because we think that it may support the capital raising needs of issuers that are moving beyond the early stages of development. In order to facilitate harmonization, we have based this exemption on the existing OM Prospectus Exemption in section 2.9(2) of NI 45- 106, which is currently not available in Ontario. We have worked closely with staff of the Alberta Securities Commission, the Autorité des marchés fi nanciers, the Financial and Consumer Services Commission (New Brunswick) and the Financial and Consumer Aff airs Authority (Saskatchewan) in formulating the OM Prospectus Exemption. In B.C., as you are likely to be aware, there is currently no investment limit on the OM exemption. While the creation of an OM exemption with a $30,000 investor cap in Ontario may facilitate the capital raising needs of a constricted Ontario exempt market, the same exemption in B.C. would cripple the exempt markets and investors would lose an opportunity for a highly demanded product. Capital markets will not work as effi ciently as MICs play a vital role in capital raising and facilitation that the banks do not fi ll. When looking to harmonize the Ontario OM exemption with other provinces, why not examine the exemption that is currently in place in B.C., instead of Quebec, MBABC protests limit on the amount eligible investors can invest under an off ering memorandum exemption BY SAMANTHA GALE oscproposal OSC Cap Proposal Creates Shock Waves