Request for Comment - Proposed Supervision Approach for High-risk Syndicated Mortgage Investments

FSRA is taking the step to evaluate and improve the effectiveness of syndicated mortgage investments (SMI) disclosures, and provide more protection for investors in the sector. 

Proposed Approach

An analysis of past syndicated mortgage transactions revealed the three factors below as indicators of potential harm to retail investors: 

• High loan-to-value ratio
• Inclusion of a subordination clause
• Inherent conflict of interest among key participants 

The proposed supervisory approach will require brokerages to provide retail investors an additional summary disclosure for syndicated mortgage transactions that have one or more of the above-noted indicators. This will ensure that retail investors are more informed of the potential risks associated with the investment they are considering. The brokerage will also be required to file the form with FSRA. 

Request for Comments

We welcome your comments on the proposed changes by September 6, 2019. To provide your feedback, please visit Proposed Supervision Approach for High-risk Syndicated Mortgage Investments.