Mortgage Broker

letters to the editor update Compensation disclosure: Can I waive goodbye? Aer reading the "news" about our compensation disclosure, I would just like to ask if there is a possibility that we can have our clients sign a form stating that they DO NOT want to know the compensation earned. I have asked a few of my clients and they have NO desire to know what I make on the deal. So, I wonder if it would be legally OK to have a "Refusal" form created for a client to sign. K.L. Fraser Valley, B.C. Reply: K.L., ere is no provision in the Mortgage Brokers Act for a client to waive their entitlement to receive conflict of interest disclosure. Section 17.3 states, "Every mortgage broker who acts in a mortgage transaction in which there is an interest as described in … must … provide to every person who is a borrower under a mortgage in that transaction a written disclosure statement that meets the requirements of subsection (2)." We have emphasized the word "must" – which indicates that the obligation to provide disclosure is a requirement and cannot at the option of the borrower be waived. Leaky sub In B.C., a mortgage brokerage can have a sub who transfers to another mortgage brokerage, and the original brokerage may not be notified of the transfer by your office, the sub or the new mortgage broker. is means that the brokerage may still be acting as the supervisor of the sub and not cutting the sub off from the brokerage data and client files when it should. It eventually discovers that the sub is registered to another mortgage broker. Is there some resolution which can be provided here? C.C. Vancouver, B.C. Reply: We canvassed this issue with the Registrar's office. We were advised that the mortgage brokerage has access to information about subs who are registered to it through the online mortgage broker registration system. e brokerage should make use of that system routinely to check for any changes to a submortgage broker's registration status with the brokerage, which will list all of the subs who are registered to it. Testing the limit [Concerning investments in a mortgage investment corporation,] what constitutes a prohibited investment (or conversely, a qualified investment) for registered plans, in particular around the 10 per cent shareholdings maximum? Are you aware of any information that makes the 10 per cent holdings limit issue clear as to whether it involves the non-voting preferred shareholders/investors (that are not related to company management)? Al Kelly Westwood Mortgage Corp. B.C. Reply: Although we can suggest some points for you to discuss with your legal or financial adviser, we cannot provide you with legal or financial advice. We highly recommend you consult a tax lawyer. You may want to consider obtaining an advance ruling from the Canada Revenue Agency. eir website provides information regarding obtaining the same. Your question involves considerations as to the meanings of "not less than 10 per cent" and "arm's length", who bears the onus to prove having met or not met the requirements, the threshold of proof required, and the nature of evidence required. You may want to include the following points in your discussion with your adviser. What does "not less than 10 per cent" mean? A specified shareholder of a corporation in a taxation year is a taxpayer who owns, directly or indirectly, at any time in the year, not less than 10 per cent (so 10 per cent or more) of the issued shares of any class of the capital stock of the corporation (or of any other corporation that is related to the corporation). Arm's length and deemed ownership? e calculation of the 10 per cent threshold must take into account that a taxpayer is deemed to own shares owned by a person with whom the taxpayer does not deal with at arm's length. Prohibited investments and arm's length A prohibited investment is one where the holder of a TFSA or the annuitant of an RRSP or RRIF is not at arm's length. Non-arm's-length investments are generally prohibited, however certain equity investments qualify for an exemption from the prohibition. To qualify, the investment must meet all of the components of the following seven-part test: l e total of all arm's-length individuals hold at least 90 per cent of the fair market value of all equity of the issuer. l e total of all arm's-length individuals hold at least 90 per cent of the total fair market value of all equity and debt of the issuer. letters CMBA MeMBers' views 10 | spring 2016 cmba-achc.ca CMB MAGAZINE

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