EXPLANATORY NOTE
This Explanatory Note was written as a reader’s aid to Bill 65 and does not form part of the law. Bill 65 has been enacted as Chapter 29 of the Statutes of Ontario, 2006.
The Bill repeals the Mortgage Brokers Act and enacts in its place the Mortgage Brokerages, Lenders and Administrators Act, 2006.
The Mortgage Brokers Act currently regulates mortgage brokers. Persons who carry on the business of lending money on the security of real estate or who carry on the business of dealing in mortgages are required under the Act to be registered with the Superintendent of Financial Services. Certain financial institutions and employees acting on behalf of an employer are not required to be registered under the Act. Individuals authorized to deal in mortgages on behalf of a mortgage broker (commonly called mortgage agents) are not required to be registered under the Act. Real estate brokers are deemed to be registered under the Act.
Under the Mortgage Brokerages, Lenders and Administrators Act, 2006, the following activities are regulated: dealing in mortgages in Ontario, trading in mortgages in Ontario, carrying on business as a mortgage lender in Ontario and carrying on the business of administering mortgages in Ontario. The new Act provides for four types of licences to be issued by the Superintendent of Financial Services: a brokerage licence, a mortgage broker’s licence, a mortgage agent’s licence and a mortgage administrator’s licence.
Corporations, partnerships, sole proprietorships and prescribed entities that carry on the business of dealing in mortgages, trading in mortgages or lending money on the security of real property are required to have a brokerage licence. Corporations, partnerships, sole proprietorships and prescribed entities that carry on the business of administering mortgages in Ontario are required to have a mortgage administrator’s licence.
Individuals who are remunerated for dealing in mortgages or trading in mortgages in Ontario, as employees or otherwise, are required to have a mortgage broker’s or mortgage agent’s licence. Brokers and agents are restricted to acting on behalf of the brokerage specified in their licence. Agents may only deal or trade in mortgages under the supervision of a mortgage broker. The new Act does not deem real estate brokers to be licensed.
All licensees are required to comply with their licence conditions and with the standards of practice that are prescribed by regulation.
A brokerage is required to ensure that brokers and agents authorized to deal or trade in mortgages on its behalf comply with the Act, and to appoint a principal broker to perform prescribed duties.
Financial institutions and their employees are exempted from the requirement to be licensed. Persons and entities that provide simple referrals are exempted from the requirement to be licensed if they provide specified information to the prospective lender and prospective borrower and comply with additional requirements that may be prescribed by regulation. Other exemptions from the requirement to be licensed, including exemptions for lawyers, may be prescribed by regulation.
The Act restricts the use of the titles “mortgage brokerage”, “mortgage broker”, “mortgage agent” and “mortgage administrator” and their French equivalents to persons and entities licensed as such under the Act.
The Superintendent is empowered to issue or refuse to issue a licence, to impose or amend conditions on a licence, to renew or refuse to renew a licence, to suspend or revoke a licence, to allow or refuse to allow the surrender of a licence and to impose conditions on the surrender of a licence. The Superintendent must first give notice of his or her proposal and give the applicant or licensee an opportunity to request a hearing on the proposal before the Financial Services Tribunal. If it is in the public interest to act immediately, the Superintendent may suspend a licence before a hearing can be held before the Tribunal. In certain circumstances, a licence is automatically suspended without any action being taken by the Superintendent. Also, if an applicant or licensee fails to pay a fee or administrative penalty under the Act or if an applicant does not give the Superintendent information or documents required under the Act, the Superintendent may revoke or refuse to issue or renew a licence without making a proposal first or giving the licensee or applicant an opportunity to request a hearing.
Sections 7.1 to 7.8 of the Mortgage Brokers Act, which are not currently in force, impose disclosure obligations concerning the cost of borrowing on mortgage brokers. These obligations are carried forward to the new Act, but are imposed on brokerages.
The Mortgage Brokers Act imposes foreign ownership restrictions on mortgage brokers. That Act also requires a prospectus to be filed with the Superintendent in respect of mortgage transactions involving land outside of Ontario. The new Act does not include such provisions.
Under the new Act, the Superintendent has several tools to enforce compliance: in addition to orders to freeze assets or trust funds, which are available under the current Mortgage Brokers Act, the Superintendent is authorized to issue compliance orders, to make applications to court to appoint a receiver or trustee and to impose administrative penalties. If the Superintendent proposes to issue a compliance order, the affected party may request a hearing before the Financial Services Tribunal. However, where the Superintendent believes that the interests of the public may be adversely affected by a delay in issuing a compliance order, he or she may issue an interim compliance order that takes effect immediately.
The Superintendent may impose administrative penalties for contraventions of or failures to comply with the Act in amounts determined in accordance with the regulations. If the Superintendent proposes to impose an administrative penalty, the affected party may request a hearing before the Financial Services Tribunal. A summary process is provided for administrative penalties imposed on licensees who fail to provide information to the Superintendent in accordance with the regulations. An administrative penalty may not exceed $10,000 in the case of a contravention or failure to comply by a mortgage broker or agent or $25,000 in the case of a contravention or failure to comply by a brokerage, mortgage administrator or any other person or entity, or such lower amounts as may be prescribed.
The maximum penalty for an offence committed by an individual is a fine of $100,000 or imprisonment for up to one year, or both. The maximum penalty for a corporation is a $200,000 fine.
The Minister of Finance is required to appoint one or more persons to review the operation of the new Act and the regulations every five years.
Consequential amendments are made to the Capital Investment Plan Act, 1993, the Consumer Protection Act, 2002, the Development Corporations Act, the Financial Services Commission of Ontario Act, 1997, the Licence Appeal Tribunal Act, 1999, The Mortgage Brokers Act, 1968-69 and the Securities Act.