Mortgage Broker

Caplink 38 | fall 2014 mbabc.ca MORTGAGEBROKER and distributed by Samji to two companies and was used to pay other investors. Regulatory and Court Proceedings Civil ProCeedings Several civil lawsuits resulted, including a class action against Samji, the Society of Notaries Public of BC (Society) and the financial institutions through which the investment cheques had been processed. e class action is being resolved by a bankruptcy trustee (on behalf of Samji), the Society's compensation fund and the financial institutions combining to restore to each investor the net principal lost. regulatory ProCeedings e British Columbia Securities Commission (Commission) found Samji to have committed fraud, contrary to the provincial securities legislation. e Commission made an order for Samji to: n disgorge $10,811,799 (the difference between the monies deposited by investors and the monies paid out to them) and n pay an AMP of $33 million as a "meaningful and substantial general deterrent to others who would engage in similar conduct." Samji did not appeal the Commission's order. Criminal ProCeedings Samji was charged with 14 counts of the and 14 counts of fraud in relation to 14 investors who had deposited a total of $16,503,397 into Samji's bank accounts in relation to the Ponzi scheme. She argued that because of the significant AMP already imposed by the Commission, it would be contrary to the Charter of Rights protections against double jeopardy and abuse of process for her to be punished further by the criminal courts (see centre graphic). e BC Court of Appeal disagreed. Double Jeopardy e Court of Appeal said double jeopardy did not apply in these circumstances. e Commission had not punished Samji for an "offence," as the AMP was not punishment for an "offence" but rather for a regulatory purpose. e Court of Appeal included the following in support of its conclusion: n the Commission had found Samji committed a regulatory wrong. e finding could not lead to the Commission imposing true penal consequences on Samji. n e AMP ordered by the Commission was not imposed for the purpose of redressing the wrong done to society at large but rather to maintain internal discipline within the limited sphere of activity; it had been imposed to ensure compliance with the regulatory requirement. e AMP amounted to an accounting to the limited audience of the regulatory body, but not to the public at large. n e AMP was not to be deposited with the government general revenues (as fines are generally deposited) but rather was to be used for the purposes of the regulating body (such as maintaining the regulatory scheme and educating the public). n A large sanction is not necessarily penal. It may be penal where the amount is out of proportion to what is required to achieve regulatory purposes; however, in some situations sizable penalties are necessary so as to not have the amount be simply considered as a cost of doing business. e relevant question is not the amount of the penalty "in absolute terms" but rather whether it serves regulatory, not penal, purposes. n e Commission could not imprison Samji for failure to pay the AMP and it was limited in the ability to seize her assets or garnish her wages. e Court of Appeal said that an administrative body cannot validly impose true penal consequences and so if one tries to do so, the correct response is to appeal the sanction, not to wait to claim double jeopardy in the criminal proceeding. Without a successful appeal, the sanction is presumed to be valid and hence not a true penal consequence. Samji had not appealed the AMP, and thus the sanction was presumed to be validly imposed. Accordingly, Samji was not a person charged by the Commission with an offence and so there was no double jeopardy. Abuse of Process e Court of Appeal said that, as Samji's conduct had not been redressed to society at large, a stay of proceedings would likely cause the public to lose confidence in the integrity of the justice system. Allowing the criminal prosecution to proceed would not offend society's fundamental notions of decency and fair play. e criminal investigation had started about the same time as the Commission's investigation and the charges had been laid before almost all of the proceedings before the Commission had started. Further, nothing in the regulatory statute (as is the case with some legislation) prohibits a criminal prosecution aer an AMP has been imposed. e Court concluded that allowing the criminal prosecution to proceed was not an abuse of process contrary to the Charter of Rights. Criminal Convictions Samji's appeal was dismissed and she was convicted of all 28 charges. Takeaways One case of misconduct can cause the broker to suffer civil liability, regulatory sanctions and criminal sentencing. An extremely large AMP does not necessarily amount to a true penal consequence and does not preclude criminal prosecution. If a mortgage broker believes the regulator has imposed a true penal consequence, the sanction should be appealed as being outside of the right of the regulator to impose. e mortgage broker should not wait to raise it as a consideration in a claim that there has been double jeopardy. A claim of double jeopardy is very difficult to support. cost of misconduct The ChARTeR of RighTs gives: • a person acquitted or found guilty of an offence the right not to be tried for it again. This is often referred to as the protection against double jeopardy. • everyone the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice [Samji argued that it would be an abuse of process, contrary to this protection, to allow a person to be assessed an AMP and subsequently face a criminal prosecution for the same conduct or vice versa].

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