Purpose of consultation

FSRA currently regulates all syndicated mortgage investment (SMI) transactions in Ontario. FSRA is preparing to transfer regulatory oversight of non-qualified SMIs (NQSMIs) being sold to less sophisticated investors (Non-Permitted Clients) to the Ontario Securities Commission (OSC). The transfer will provide these investors with protections that are consistent with other securities sold to the public.

To support the transfer, FSRA consulted on its proposed Supervision Approach for NQSMIs with Permitted Clients and Legacy NQSMIs between August 6, 2020 and September 21, 2020.

FSRA’s Supervision Approach will apply to mortgage brokerages engaged in NQSMIs that remain under FSRA oversight after the transfer, as well as administrators of NQSMIs. The Approach does not apply to the supervision of Qualified Syndicated Mortgages (QSMs).

FSRA will focus its Supervision Approach on the identified highest-risk activities.

We sought feedback on the following questions:

  1. Does the Supervision Approach address burden reduction for NQSMI transactions with Permitted Clients?
  2. Does the data to be collected provide adequate supervision of high-risk Legacy NQSMIs?

We received 12 submissions on the Supervision Approach during the consultation period. The submissions and comments are available on FSRA’s website.

FSRA’s Approach was updated with stakeholder feedback, as appropriate. While not every stakeholder recommendation can be integrated into our Approach at this time, the feedback will inform FSRA’s decisions on an ongoing basis.

What we heard

FSRA would like to thank all commenters for their feedback. FSRA has carefully considered all comments received.

Based on the feedback, the government has extended the date of the transfer of regulation of NQSMIs with non-Permitted Clients to the OSC from March 1, 2021 to July 1, 2021.

The government has also expanded the exemption from licensing under the Mortgage Brokerages, Lenders and Administrators Act (MBLAA) to allow dealers registered with the OSC to:

  • deal and/or trade in NQSMIs with both Permitted or non-Permitted Client investors / lenders only; or 
  • deal and/or trade in NQSMIs with a Permitted or non-Permitted Client investor / lender and a borrower who is a Permitted Client. 

The definition of Qualified Syndicated Mortgage has also been adjusted to be substantially the same as, and to have the same effect as, the definition in OSC Rule 45-501.

Many comments went beyond the scope of the MBLAA and related to requirements under the securities regime. These comments were addressed by the OSC in its summary of comments and responses.

Below is a summary of all the comments received, grouped by themes, and FSRA’s responses to those comments.

Feedback highlights include:

  • “[Mortgage Professionals Canada] supports the Ontario Ministry of Finance, Financial Services Regulatory Authority of Ontario and the Ontario Securities Commission in a collective desire to improve consumer protections while ensuring minimal regulatory burden for transactions involving financially sophisticated entities that do not need the same protections as a retail investor.“ [Mortgage Professionals Canada]
  • “We believe treating retail investors and Permitted Clients differently from a regulatory perspective is absolutely required and the approach described in sharing the regulatory responsibilities between FSRA and the Ontario Securities Commission (OSC) for NQSMIs seems reasonable.” [MarshallZehr]
  • “I have heard from several industry participants that they were very pleased with the proposal to ensure that lending businesses which only deal with permitted clients will remain under the oversight of FSRA only.” [AUM Law]
  • “We appreciate the dialogue with all stakeholders involved and are encouraged by the efforts of policy makers and regulators to reduce the regulatory burden.” [Foremost Financial]
  • “We support FSRA’s principles-based approach, and how it intends to utilize data it gathers to target supervision of higher-risk brokerages and administrators.” [Canadian Advocacy Council]

FSRA’s response

FSRA issued its final Supervision Approach on March 10, 2021. It will become effective on July 1, 2021. This is the date that regulation of NQSMIs transactions with non-Permitted Clients will transfer to the OSC.

FSRA will use a data-driven, proactive, risk-based approach to supervise NQSMI transactions that remain under FSRA’s oversight. This Approach relies on data collection and analysis as well as targeted compliance reviews.

Industry and consumers expressed support for this approach during the consultation.

List of contributors

The following stakeholders provided feedback to FSRA during the consultation:

Commenters (alphabetical order)

  1. Arjun Saraf (New Haven Mortgage Corporation)
  2. AUM Law (Kevin Cohen)
  3. Batcher, Wasserman (Joseph Carrigan)
  4. Canadian Advocacy Council of CFA Societies Canada
  5. Firm Capital Corporation (Eli Dadouch)
  6. Foremost Financial (Evan Cooperman and Ricky Dogon)
  7. Gary Waddington (Ernst and Young)
  8. Gordon Sommerville (Home Value Inc.)
  9. Investor Advisory Panel (Neil Gross)
  10. MarshallZehr Group Inc. (Murray Snedden)
  11. Mortgage Professionals Canada (J.P. Boutros)
  12. Vector Financial Services Limited (Mitchell Oelbaum)

Summary of stakeholder feedback and responses


Permitted client threshold and definition 


Syndicated mortgage, qualified syndicated mortgage, non-qualified syndicated mortgage

Filing / data collection requirements


1 Unless otherwise specified, the use of Permitted or non-Permitted Clients in this document refers to investors / lenders.