Mortgage Broker

MORTGAGEBROKER mbabc.ca fall 2015 | 19 fiduciaryobligation are a fiduciary. Some mortgage brokers may be fiduciaries and some may not be fiduciaries. We conducted a survey of our members to determine whether they act as fiduciaries. is is what we found: ■ 3% manage client assets or money – these brokers are acting as fiduciaries and currently obligated to provide detailed fee disclosure; ■ 4.5% make decisions on behalf of clients – these brokers are acting as fiduciaries and currently obligated to provide detailed fee disclosure; ■ 97.5% provide information to their client to assist the client in making informed decisions – these brokers are not acting as fiduciaries; ■ 27% provide advice to their client – these brokers may be acting as fiduciaries and may have an obligation to provide detailed fee disclosure. Mortgage brokers reported that a significant number of their borrower clients engage in "rate shopping." is is an important element in the analyses of whether mortgage brokers are fiduciaries, as borrowers who rate shop are treating the mortgage transaction like an ordinary retail transaction. ey are shopping around for a mortgage like they would a couch or a car, and are not dependent upon the expertise or advice of a single mortgage broker. ey may rate shop with different mortgage brokers, banks or other lenders and will then analyse the information about different products to make their own decision on mortgage options. Capital Markets Act Mortgage investment corporations and mortgage syndicators will all be impacted by the new regulatory structure surrounding capital-raising regulation. As most interested industry members know, the BC Securities Commission will be morphed into a regional office of the cross-national Capital Markets Regulatory Authority, and the BC Securities Act will be replaced by the Capital Markets Act. A dra of the Capital Markets Act and regulations has now been released for comment. e comment period will run until December 23, 2015. We anticipate that most of the exemptions which are currently available for industry members will continue in the new system. However, the details that will directly affect mortgage investment corporations and mortgage syndicators, including the Mortgage Investment Entity Exemption, have yet to published for comment. We asked, "Can you estimate what percentage of your clients rate shop with other lenders or mortgage brokers." is is the result: e common law fiduciary obligation to make detailed fee disclosure to clients rests upon the submortgage broker who acts as a fiduciary. e benefit of the common law here is that there are no gaps or inconsistencies, such as those which exist in section 17.3 of the Mortgage Brokers Act, which only places disclosure obligations on the mortgage broker but not the submortgage broker. e common law of fiduciary duty therefore provides important public protection to those mortgage broker clients who are vulnerable and dependant on the expertise of the broker. It does not touch the mortgage broker who deals with the retail client who is neither vulnerable nor dependant on the broker. We believe this to be a balanced approach to compensation disclosure. ■

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