Consultation period March 6 – May 6, 2024

Comments were provided by the following stakeholders:

  1. Canadian Association of Mortgage Brokers – Ontario (CMBA-Ontario)
  2. Mortgage Professionals Canada (MPC)
  3. Real Estate and Mortgage Institute of Canada Inc. (REMIC)

Below is a summary of the stakeholder comments received during the consultation and FSRA’s responses.

Topic

Stakeholder comments

FSRA response

Support for Guidance

Commenters indicated strong support for FSRA guidance to protect consumers and maintain integrity in the sector by helping mortgage brokers and agents ensure their recommendations for mortgage products are suitable for a client.

FSRA thanks the commenters for their support.

Regulatory citation correction

One commenter indicated that the quoted section on activities related to real property loans does not match any specific section in the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA) and asked FSRA to remove the quotes for accuracy, as the quoted section seems to combine parts of sections 2 and 3 of the MBLAA.

The quotation marks have been removed from the noted section.

Strengthening clarification of consequences for false / misleading statements to the regulator

One commenter suggested FSRA should strengthen the Guidance to state that false statements are grounds for licence refusal unless a valid reason is provided, since a contravention of section 45(1) is considered an offence per section 48(1) of the MBLAA.

The Guidance currently includes the statement, “A false statement or false information (including nondisclosure on an application), or other dishonesty to FSRA in the application is a basis for FSRA to determine that an applicant, agent or broker is not suitable.” This reflects O. Reg, 409/07, s.10 prescribed circumstance number 3 regarding unsuitability for licensing.

 

MBLAA section 45(1) also notes the general prohibition against any person or entity providing false or misleading information to the Chief Executive Officer or their designate. We have added reference to MBLAA s. 45(1) and s. 48(1) to footnote 18, which also cites O. Reg. 409/07 s. 10.

Ongoing brokerage oversight to ensure suitability for licensing

One commenter suggested the Guidance clarify that brokerage monitoring of brokers and agents and reporting of individuals unsuitable for licensing to FSRA is an ongoing requirement not limited to the time of licensing or renewal.

The sentence, “Broker and agent oversight by the brokerage is an ongoing responsibility” was added to emphasize the importance of continuous oversight by brokerages to ensure licensee suitability.

Fair implementation of Guidance

One commenter noted:

  • Implementation of the guidance will inevitably have to change the licence renewal process on FSRA's part as well as the mortgage agent/broker's part.
  • It's important to ensure that the renewal process is smooth to avoid any unjust interruption to an agent's licence as well as the ability to challenge before a renewal deadline.

The Guidance clarifies FSRA’s interpretation and application of existing requirements. The only change to FSRA’s approach for licensing/renewal applications is that applicants must now obtain the criminal record check. This announcement was made in late 2023.

Clarification of terms “flexible” and “reasonable”

One commenter asked if brokerages are allowed to selectively omit actions set out by FSRA as examples of reasonable steps, and if so, how would FSRA handle disagreements with an applicant/licensee during reviews or investigations.

 

The commenter also noted that the Guidance should include clearer examples to ensure consistent and fair compliance with the principles-based and outcomes-focused Guidance.

The concept of “reasonableness” in the MBLAA regulations allows for evaluating and addressing a situation based on circumstances. This guidance articulates FSRA’s intended policy outcomes and provides examples of reasonable steps we would generally expect to see.

 

These examples of reasonable steps are meant to be demonstrative and not exhaustive or prescriptive. They do not indicate what reasonable steps means for any given brokerage, as compliance is determined on a case-by-case basis.

 

In certain situations, a brokerage that has taken all steps identified in the guidance may have still not complied with the requirement to undertake reasonable steps. Similarly, in other situations a brokerage may not take all the steps identified and still have complied with the requirement to undertake reasonable steps.

Several examples of licensing suitability issues and enforcement outcomes are included on pages 14 – 17 of the presentation for the licensing suitability webinar, which was held on April 17, 2024.

 

If an applicant/licensee takes a different position than FSRA on an issue relating to their suitability to be licensed, the MBLAA provides for avenues of appeal and due process (e.g., dependent on the proposed outcome, the applicant or licensee has the opportunity to make written submissions or request a hearing before the Financial Services Tribunal).

Eliminating redundancy re criminal record checks

One commenter noted the proposed Guidance suggests redundancy/duplication of criminal record checks, if required by both FSRA and the brokerage, and seeks guidance on FSRA's stance in such scenarios, aiming for increased alignment between regulatory expectations and brokerage practices.

As per FSRA’s new criminal record check (CRC) process, FSRA requires all new licensing applicants and certain renewal or reinstatement applicants, where the applicant has past or current criminal charges and/or convictions, or other suitability concerns to provide FSRA with a criminal record check obtained through FSRA’s approved vendor, Triton.

 

While FSRA does not require brokerages to obtain their own CRCs for their intended hires, FSRA requires brokerages to take reasonable steps to screen their applicants for suitability for licensing. Such steps should go beyond simply confirming the individual has a licence and should include screening for and consideration of any criminal record.

Preventing privacy breaches when licensees transfer brokerages

One commenter noted the current policy allows for the transfer of a licensee to a new brokerage before the full off-boarding process is completed at the original brokerage. This poses serious challenges because the transferring licensee still has access to all the files and client information that belong to their old brokerage.

FSRA does not have authority to prevent the transfer of licensees between brokerages.

 

FSRA encourages:

  • the brokerage to which the licensee is transferring to promote good behaviour and ensure the new hire has appropriately concluded business with their previous brokerage
  • brokerages to incorporate best practices for onboarding and offboarding individuals into their policies and procedures