FSRA’s webinar on mortgage agent and mortgage broker licensing suitability (April 17, 2024)

Moderator

00:06  Hello, everyone, and welcome to today's webinar, Mortgage Broker and Agent Licensing Suitability Guidance webinar. Before we get started, I would like to go over a few items so you know how to participate in today's event. You have the opportunity to submit text questions to today's presenters by typing your questions into the questions pane of the control panel. You may send in your questions at any time during the presentation. We will collect these and address them during the Q&A session at the end of today's presentation. I would now like to introduce Rocca D'Angela from FSRA. Rocca?

Rocca D’Angela

00:51  Good morning, everyone. Thank you for attending FSRA's webinar on our proposed guidance for Mortgage Agent and Mortgage Broker Licensing Suitability. My name is Rocca D'Angela, Senior Manager of Mortgage Brokering Policy at FSRA, and I'm joined by my colleague, Jelena Pajic, Head of Licensing and Risk Assessment Market Conduct. We will be your hosts for today. The guidance will be open for consultation until May 6th. Again, the webinar is being recorded and will be posted on our website in the coming weeks. We encourage you to think about questions and ask your questions at the end of the presentation. I hope you find today's webinar informative. But just before we get started, it's also important to acknowledge the land we are on is the traditional territory of many nations. Thank you. Therefore, we acknowledge the land we are on is the traditional territory of many nations, including the Mississaugas of the Credit, the Anishinaabeg, the Chippewa, and the Haudenosaunee, and the Wendat peoples, and is now home to many diverse First Nations, Inuit, and Métis peoples. We acknowledge that Toronto is covered by Treaty 13 with the Mississaugas of the Credit, and the Williams Treaty signed with multiple Mississaugas and Chippewa bands. At this point, I would like to turn to my colleague, Jelena, who will take you through the presentation today. Thank you.

Jelena Pejic

02:22  Thank you, Rocca, and good morning, everyone. In today's presentation, I'll start by providing you with a background on why this guidance is being published and the sections of the Ontario law that apply. I'll spend the majority of the presentation discussing the licensing process and how FSRA assesses an applicant or licensee's suitability during the licensing process. I'll also share a few examples of licensing outcomes that FSRA has completed. We'll wrap up the presentation with next steps and then spend time answering the questions you submitted during your presentation. As Rocca just mentioned, if you do have any questions, you can answer them-- ah, sorry, ask them at any time during the presentation using that Q&A icon on your screen. So let's get started.

Jelena Pejic

03:06  Next slide, please. To better protect consumers, FSRA has proposed guidance that clearly sets out the requirements to be suitable to hold a mortgage agent or mortgage broker license in Ontario. The proposed guidance provides a reference for applicants, mortgage agents, mortgage brokers, and their principal brokers to understand how past and current conduct may affect their suitability to hold a mortgage agent or broker license in Ontario. The guidance also reiterates oversight responsibilities for principal brokers and mortgage brokerages. FSRA wants to ensure that all mortgage agents, mortgage brokers, and including their principal brokers have the skills necessary to be licensed and will comply with the law, treat consumers fairly, and adhere to all legal and regulatory obligations. The guidance has three overarching goals noted here on the screen, which includes to confirm the standards for licensing suitability, to better protect consumers, and to communicate FSRA's gatekeeping role. Moving on to the next slide. I just mentioned that licensing is a fundamental control for protecting consumers. Next. All agents and brokers and applicants who-- sorry, in the licensing process, both agents and brokers and principal brokers and brokerages have a role to play. Agents and brokers must provide complete and accurate information to FSRA when applying for a license, renewing their license, or whenever they are providing information to FSRA, for example during a desk review, an examination, or an inquiry received from FSRA. On the other hand, brokerages and principal brokers have an obligation to screen and monitor agents and brokers. This screening and monitoring occurs when they initially apply for a license or when they initially join the brokerage, but must also be done on an ongoing basis while they are sponsored by the brokerage.

Jelena Pejic

05:05  Next slide. FSRA will issue a license to an applicant who satisfies the requirements for the license unless FSRA believes that the applicant is not suitable to be licensed. The Mortgage, Brokerages, Lenders, and Administrators Act provides FSRA with broad authority to determine matters that are relevant when assessing an agent or broker's suitability to be licensed. The Regulation 409/07 under the Act sets out the eligibility requirements, which would include things like education or experience, and also outlines the circumstances that FSRA considers when assessing licensing suitability. FSRA is also guided by its statutory mandate under the FSRA Act when assessing licensing suitability. This includes protecting the rights and interests of consumers, contributing to public confidence in the mortgage broker sector, promoting high standards of business conduct, deterring deceptive or fraudulent conduct, practices, and activities, and finally, cooperating and collaborating with other regulators.

Jelena Pejic

06:08  Next slide. Now let's dive into the licensing process. FSRA performs an important gatekeeping role to ensure that only suitable applicants can become licensed as a mortgage agent or broker, and similarly, that only suitable agents or brokers remain licensed. Through the licensing process, FSRA's guiding principles are consumer protection and risk-based licensing. Lower-risk applications can be approved in full based on a less intensive review, whereas moderate or high-risk applications may be approved with conditions or they may be denied a license if the applicant is not suitable or if requirements are not met. The gatekeeping role allows FSRA to assess the risk that a licensed agent or broker will not comply with requirements, commit prohibited acts, or act in ways that lead to unfair outcomes for consumers. With over 13,000 mortgage agents and 3,000 mortgage brokers here in Ontario, strong gatekeeping is necessary to ensure agents and brokers remain suitable and qualified, which reduces the risk of noncompliance.

Jelena Pejic

07:15  Next slide. The licensing process begins with an application for a license, or it may be an application to reinstate a license or perhaps renew a license. Through the application process, the onus is on the applicant themselves to fully read, complete, and review the application before it's submitted to FSRA. The sponsoring brokerage or their principal broker will need to certify that they have taken steps to screen the applicant and that they are satisfied that the applicant is suitable to carry on business as a mortgage agent. The applicant will complete the application. This includes reviewing their own information to ensure it's accurate and providing information to satisfy any licensing requirements such as education. The applicant will also be asked a series of questions. These questions are used to assess their suitability to be licensed. For example, they may be asked about their criminal record, any bankruptcies, or insolvencies, as well as enforcement by other regulators or lawsuits or claims against them. When an applicant discloses information that impacts their suitability, such information should fully and accurately detail the surrounding circumstances, including when the conduct occurred, what led to the conduct, and the corrective steps undertaken. At the conclusion of the application process and before they submit the application to FSRA, the applicant has an opportunity to review all the information and make corrections as needed. They will also be required to attest that the information they've provided is complete and accurate, and similarly will be asked to acknowledge that any false or misleading information could result in an application being refused. Once FSRA receives the application, it will review the application along with any history related to the applicant. We may require additional information or documents during the application process.

Jelena Pejic

09:10  During its review, FSRA will make a determination about whether the license can be issued or may determine that a suitability issue exists and therefore it will take various actions. I'll speak a little later about those actions. Finally, in number six here, it's important to note that a suitability assessment can take place at any time during the licensing term. If FSRA becomes aware of potential misconduct, including any misleading or false statements on previous applications, FSRA may take actions against the license or the licensee.

Jelena Pejic

09:41  Next slide. I touched on the last slide about questions on the application that are intended to facilitate the suitability review process. So the questions that are asked on the application are intended to allow FSRA to perform its gatekeeping role. The onus is on the applicant to review each question and ensure that they respond accurately and in full. In the guidance, as well as on the slide, we've provided examples of circumstances that we will ask about on the licensing application. This includes information about criminal records, including any convictions or ongoing charges, any breaches of law, breaches of regulation, or FSRA rules, which includes actions taken by regulators here in Ontario, in Canada, or even internationally. We'll also ask about insolvencies, such as bankruptcies or consumer proposals, and whether they have been discharged or not, that those are required to be disclosed. The last item that I want to highlight here is non-disclosure on an application or dishonesty to FSRA or others. This includes failing to provide information on an application, making reference to a past disclosure, or providing false or fraudulent information to the regulator. A key factor in our gatekeeping role is to assess the risk that an agent may not conduct themselves with honesty and integrity. A non-disclosure or lack of honesty when interacting with the regulator is a key indicator that will cause concern and may lead to refusal of an application.

Jelena Pejic

11:12  Next slide. So we've discussed the circumstances that may lead to a suitability concern, and you may be wondering how FSRA assesses those in order to make a licensing decision. First, it's important to note that making a disclosure on an application does not immediately mean that the individual will not be suitable to be licensed. Upon a disclosure on the application, FSRA will assess a number of factors, including the nature of the conduct, the time since the conduct occurred, and whether there's a pattern of misconduct or poor behavior. FSRA will also assess any redeeming behavior or steps taken by the agent to rectify the issue. Once again, I really want to reiterate that a full and accurate disclosure is a key component of this assessment. If a non-disclosure occurs, the non-disclosure in and of itself may negatively impact suitability and may result in a license refusal, revocation, or other sanction, even if the undisclosed information does not justify such a sanction.

Jelena Pejic

12:14  Next slide. I'll now spend a couple minutes speaking about the obligations that mortgage brokerages and principal brokers have. So mortgage brokerages and principal brokers have a legal obligation to screen and monitor mortgage agents and brokers that are applying to work or are already working within its brokerage. They are required to establish and implement and review policies and procedures that ensure that brokerages and its agents and brokers comply with the law. Mortgage brokerages are accountable for these obligations but have flexibility in deciding how they comply with the outcomes-focused requirements that are outlined in the guidance. In addition, mortgage brokerages and principal brokers are required to report to FSRA when there are concerns or circumstances that may impact the licensing suitability of a mortgage broker or agent.

Jelena Pejic

13:07  Next slide. Now let's talk about the outcomes of licensing suitability issues. A number of outcomes can result from a review of a license application. First is that the license may be issued. Alternatively, the license may be issued with conditions or restrictions added to the license. In more egregious circumstances, the application may be refused, the license may be revoked or suspended, or there may be an agreement to surrender the license. It's important to note that the outcomes may be a combination of these that are listed on the screen, including a monetary penalty in certain circumstances.

Jelena Pejic

13:47  Next slide. In some cases, FSRA may attempt to address a suitability concern by resolving the issue with the applicant and their principal broker on a cooperative basis. Some examples of this listed here on the screen include conditions on the license to be supervised, a restriction from acting in a supervisory capacity such as, as a principal broker or a director of a brokerage, a monetary penalty for failing to disclose information to FSRA, or an undertaking with an agreement to report outcomes or changes in circumstances to FSRA. Actions resolved on a cooperative basis are generally not published as actions on FSRA's website. Nevertheless, conditions or restrictions are generally reflected on the license on FSRA's public registry. FSRA retains discretion to publish such actions consistent with its statutory objectives and the need to protect consumers.

Jelena Pejic

14:43  I'll now move into sharing a few examples on the next slide. So the first two examples will be instances where FSRA has issued a notice of proposal. In these circumstances, the information is available on FSRA's website. If you navigate to the section titled Enforcement, you will be able to review the relevant notice of proposal, and in these situations, the applicant does have the opportunity to request a hearing before the Financial Services Tribunal. The latter two examples will be ones where we have achieved the outcome on a cooperative basis with the applicant.

Jelena Pejic

15:15  So Next slide, please. So in this first example, an individual applied to FSRA for a Level 1 mortgage agent license. The applicant provided false information to FSRA on their licensing application. Specifically, they failed to disclose that they were disciplined and received a $7,000 penalty from the real estate regulator. They also failed to disclose ongoing criminal charges and breaches of court orders at the time of their application. Following a review of their licensing suitability, FSRA determined that this individual was not suitable to be licensed and issued a notice of proposal to refuse the license of the individual.

Jelena Pejic

15:53  Next slide. In this next example, a mortgage agent applied to reinstate their license. They failed to provide information on multiple licensing applications in the past. In the past, they had received a warning letter from FSRA requiring them to provide full disclosure on future applications. Despite that letter, the applicant failed to disclose information once again on the reinstatement application. This included an outstanding default judgment as well as a past bankruptcy that had been discharged. Following a review of the applicant's licensing suitability, FSRA determined that this individual is not suitable to be licensed and, as a result, issued a notice of proposal to refuse to issue the license.

Jelena Pejic

16:39  Next slide. In this third example, an individual applied for a Level 1 mortgage agent license. They disclosed a recently discharged bankruptcy. FSRA conducted a suitability assessment of the applicant and determined that the license could be issued with supervision conditions. FSRA was able to achieve this outcome on a cooperative basis with the applicant and with their principal broker.

Jelena Pejic

17:06  Next slide. In this fourth and last example, an individual had applied for a Level 1 mortgage agent license. They disclosed that they were subject of an investigation with another regulatory agency. Once again, FSRA conducted a licensing suitability review and determined that the license could be issued with some supervision conditions and restrictions. Specifically, FSRA placed supervision conditions on the license and had an obligation for the licensee to report to FSRA the outcome of the disciplinary matter within five days of its conclusion. This outcome was also reached on consent or on a cooperative basis with the applicant and their principal broker.

Jelena Pejic

17:48  Next slide. So now I'll discuss next steps. We spoke that we've published a piece of guidance, and it has already been posted on our website for a few weeks. You do have an opportunity to comment on this guidance. Submissions will be accepted through FSRA's website until May 6th, so that leaves roughly three weeks left to respond to the guidance. After that May 6th date, FSRA will collect and consider the feedback received and then it will in turn publish final guidance.

Jelena Pejic

18:20  Next slide. So this concludes the formal presentation. And I'd like to thank you for attending today's session. I'll invite Rocca back to assist with the next portion. We're going to take time to answer the questions that we've received from you. If you do have any questions you haven't yet had a chance to submit, you can still enter them using the Q&A icon on your screen. So over to you, Rocca.

Rocca D’Angela

18:45  Great. Thank you for that, Jelena. We do have a number of questions that have come in. So we'll do our best to respond to all the questions, but for those that were not able to answer today, we'll issue an email to those in attendance with the answers. In some circumstances where the questions are similar, we'll respond once. Okay, let's get started. The first question, what are examples of previous actions that might impact mortgage agent and broker suitability?

Jelena Pejic

19:17  Thank you for the question. So I spoke on in the presentation today that there's a number of questions on the licensing application that are intended to facilitate FSRA's ability to perform our gatekeeping role. The onus is on the applicant to ensure that they're reviewing each question and they're responding accurately and in full. In the guidance and in today's presentation, we provided examples of circumstances that we'll consider as part of the licensing suitability assessment. Some of the more common ones include criminal records, right, including any past convictions or ongoing charges, any breaches of law, regulation, or FSRA rules. So this can include any actions taken by another regulator, whether the regulator is located here in Ontario, in Canada, or internationally. And another common one is insolvency. So this will include any bankruptcies or consumer proposals that the individual has filed, whether the individual has been discharged or not, these are going to be asked on the licensing application, and it's very important that the individual reviews the question and then answers in full.

Rocca D’Angela

20:22  Great. Thank you. You did mention bankruptcy. So another question asks specifically, are agents and brokers still eligible to apply if they have a past bankruptcy or insolvency record?

Jelena Pejic

20:35  Okay, yes, the short answer is yes, they are able to apply if they have any sort of past bankruptcy or insolvency. Once again, it's very important that they do provide that full disclosure on the application, as a nondisclosure can have negative impacts. Whenever a disclosure is made on the application, FSRA will take time to review and assess the information against some of those factors that we discussed. So that includes things like the type of activity, the time since it occurred, whether there's a pattern of the similar behavior, and then also any redeeming behavior or steps that the individual may have taken to rectify the matter.

Rocca D’Angela

21:18  Great, thank you. Our next question. What does FSRA do with those individuals or entities it may consider unsuitable to be licensed?

Jelena Pejic

21:33  That's a good question, thank you. So FSRA, through its assessment of licensing suitability, will consider any ongoing, pending, or past actions, sanctions, investigations, or proceedings. So really we are looking at all of the information available in addition to the disclosures that the applicant has made on their licensing application. Where there is a determination that the individual is not suitable to be licensed, FSRA will issue a notice of proposal to either refuse to issue the license or revoke the license. Once such a notice is issued, it is served on the applicant, and the applicant then does have an opportunity to request a hearing before the Financial Services Tribunal if they wish to appeal the decision. Similarly, anytime FSRA issues a notice of proposal, those are posted on our website in the enforcement section of the website.

Rocca D’Angela

22:27  Great, thank you again. The next question. Can there be any repercussions for a brokerage that supports or sponsors applicants that may be unsuitable?

Jelena Pejic

22:41  Okay, repercussions for a brokerage. So we discussed today that licensing and suitability assessments are a key component of consumer protection, and we also discussed that the guidance, and really encourage everyone to review it, reiterates the role of brokerages and principal brokers in the licensing process. So FSRA does rely on brokerages and their principal brokers to screen and monitor the agents and brokers on an ongoing basis in addition to when they apply for that initial license. So we do hold the brokerages and principal brokers accountable for these obligations.

Rocca D’Angela

23:18  Thank you. The next question may be somewhat similar to the question we had about bankruptcy or insolvency. So the question is, are agents and brokers still eligible to apply for license if they have current or past criminal charges, court orders, or court judgments?

Jelena Pejic

23:38  Thanks, Rocca. The answer is really the same. So they are still eligible to apply for the license. Once again, I'll reiterate, it's very important that they provide full and accurate disclosure on the application. I'll add that they can expect that FSRA will need some time to review their application and that we may require additional documents or information to support our review. So it's very important, whenever a disclosure is made on the application, FSRA does generally communicate via email, and we do keep the principal broker involved in those communications as well. So would really be expecting that FSRA will contact you and likely will look to either obtain additional information or have a conversation with you. I'll also reiterate, whenever we're assessing a suitability concern, we're looking at it against those factors that we discussed today, which includes the nature of the conduct, the time since the conduct occurred, whether there's a pattern of misconduct or poor behavior, as well as any redeeming behavior. And so sometimes we will ask some additional questions to really ensure that we've obtained sufficient information to address those various factors that we're assessing.

Rocca D’Angela

24:46  Thank you. Our next question. So our process for reviewing suitability, is this process different from the current process? And if yes, how?

Jelena Pejic

24:58  That's a very good question. So this guidance supports the existing process, and it does not introduce any new obligations. The guidance is intended to be a reference for any applicants, prospective applicants, as well as current mortgage agents, mortgage brokers, principal brokers, and their brokerages. So that everyone can understand how past and current conduct may affect their suitability to either obtain a license or to continue to hold a license. The guidance also reiterates the oversight responsibilities for the principal brokers and the mortgage brokerages. So once again, encourage folks to review the guidance, ensure they've read it in full, but to answer the question, it doesn't introduce any new obligations. This is the current process.

Rocca D’Angela

25:41  Thank you. And another question that came through the chat, somewhat related. Why is the process repeated at renewal?

Jelena Pejic

25:50  So it's important for FSRA-- and thanks for that question. It's important for FSRA to be continuously assessing the suitability to be licensed. We spoke today that licensing is a key component of consumer protection. And so through the lifetime of a licensee, there can be changes in circumstances. And so through the renewal process, FSRA has an opportunity to reassess that suitability, to obtain any additional information from the licensee. And really at the end of the day, we're looking to ensure that the person who is being licensed in this sector is suitable and therefore reducing the possible non-compliance that can occur.

Rocca D’Angela

26:26  Thank you, Jelena. And this question is somewhat related as well. An individual is asking, what are the brokerages ongoing screening obligations after a license has been issued?

Jelena Pejic

26:40  So we do take a principle-based approach to the obligations of the brokerage. I would encourage the brokerages to review the guidance in full, as well as the legislation that's referenced within the guidance. Certainly FSRA is open to having discussions with the brokerage if there are any specific questions, but generally what we're looking for the brokerage to do is to review the requirements, review those principles, and then to look how best to implement those policies and procedures within their own brokerage to ensure screening.

Rocca D’Angela

27:10  Thank you. One more, perhaps along the principles-based approach. The question is, why would FSRA grant a license to an individual only for the brokerage to later identify them as unsuitable during the brokerage's own screening processes?

Jelena Pejic

27:30  Thank you. And probably a similar response to the last question, but I'll reiterate here. Mortgage brokerages do have that legal obligation to screen and monitor their agents that are applying to work, but also on an ongoing basis. And so what sometimes happens is at the point of initial application, there may not be any circumstances that prevent the person from becoming licensed, but later through the life cycle of the licensee, there are some new circumstances or new issues that arise, which affect their suitability to be licensed. And so this is where it's very important for the brokerage to have those processes in place where they're able to monitor their agents and brokers on an ongoing basis with respect to suitability. So for example, if somebody becomes subject to a lawsuit, right? That is something that the brokerage should become aware of at the point that that occurs. And then the brokerage should be assessing to determine whether that has an impact on their suitability to be licensed.

Rocca D’Angela

28:29  Thank you, Jelena. Another question through the chat. Again, dealing with, I believe bankruptcy. So let's see, or insolvency. Does becoming insolvent while holding a license automatically mean that you will not be renewed on the next renewal? Furthermore, will they be immediately disqualified?

Jelena Pejic

28:56  Thank you. And it's a common question that we receive. So bankruptcy and insolvency is not an automatic refusal or revocation of the license. It's important for the licensee to fully and accurately disclose that information first and foremost to their brokerage or their principal broker, but also anytime they're asked from FSRA for that information. So the most common one where they'll be asked for that information is really on their annual renewal. And so disclosure is very important there. In terms of how FSRA assesses that bankruptcy and insolvency, we will look at those factors we've discussed today. So looking at the type of activity, the time since it occurred, and whether there's a pattern of similar misconduct or behavior. I did share today an example where an individual had been the subject of a bankruptcy in the past and had been since the discharge. And in that case, FSRA had made a determination to issue the license, but to add supervision conditions on their license. So it's really going to depend on the circumstances, but first and foremost, it's important to disclose it to the brokerage as well as to FSRA on the application. And from there, FSRA will assess and make a determination.

Rocca D’Angela

30:05  Thank you. Next question. If an agent is refused, is that public information? Is it posted on the FSRA website?

Jelena Pejic

30:16  Thanks for the question. So where an agent is refused via a notice of proposal to refuse, that is posted on the website. So that would be available through FSRA's enforcement section on the website. I do want to note that sometimes what happens is an agent's license may expire or the agent may surrender their license, and then that surrender may be accepted by FSRA. In those cases, the information would be available through the public registry based on the agent's licensing status. So it does depend. But where an agent is being refused, that is done through a notice of proposal to refuse, and those are available publicly on FSRA's website.

Rocca D’Angela

30:57  Thank you. The next question deals with some conditions. So our attendee is asking, what are examples of supervision conditions?

Jelena Pejic

31:16  Oh, sorry, I wasn't sure if you had more to that question. So some supervision conditions, really what happens when there's supervision conditions is that there is an undertaking that the agent themselves has to sign along with their appropriate supervisor. And FSRA does go through a process where we assess the proposed supervisor. We're looking to ensure that the supervisor, first and foremost, is within the same brokerage as the agent or broker, that the supervisor is generally a broker who's able to supervise others, and then also looking at the supervisor's history themselves, right? We want to understand whether there are any conduct issues, any history with the supervisor that may prevent them from being an adequate supervisor. In terms of the supervision conditions themselves and what's expected, generally what will be required is that the supervisor will be monitoring on an ongoing basis the agent's activities. And so that can include the supervisor, for example, joining the agent when they're meeting with clients, or it can mean the supervisor being required to sign off on the agent's activities, whether that's their deals that they're completing or other activities. So when a supervision agreement is required, it is something that FSRA's staff here will support and provide explanation of, and we're happy to answer any questions that anybody has on those specific ones.

Rocca D’Angela

32:35  Thank you, Jelena. And are those conditions public? Are they posted?

Jelena Pejic

32:41  Yeah, that's a great question. So generally speaking, the supervision agreement is a, call it a lengthier document, a few pages long. What FSRA does is that we do post a summary of the conditions that are placed on the licensee on the public registry. So when you look up an individual's license on the public registry, you will be able to see that they are, for example, subject to supervision conditions.

Rocca D’Angela

33:06  Great, thank you. And back to a question about a brokerage's obligation or the PB obligation to help ensure suitability. So the question is, can you speak to the importance of the principal broker involvement in the licensing process and responding to FSRA's emails in a timely manner when suitability issues are present?

Jelena Pejic

33:29  Thank you. Thank you for that question. So whenever there is a suitability issue that is raised by FSRA, FSRA will generally be in contact with the agent or broker. And anytime we're in contact with the agent or broker, we do include the principal broker on their email as well on that interaction. And so what we're looking to ensure is that, first of all, the principal broker is aware of our communications with the agent and broker. But a further step to that is ensuring that they are aware of the suitability issues or concerns that are being raised. And generally, what our team members will do is once we've collected the additional information that may be required, we will actually look back to the principal broker to confirm their awareness of the matter and also to ensure that they continue to certify that they believe that the individual is suitable to be licensed. So the principal broker does play quite an active role whenever there is a suitability assessment being completed. And that's very important that they're in touch with FSRA and being responsive to our emails. I'd also just like to add, we appreciate that some principal brokers go through this process more regularly than others. And if at any point there are questions about the process or clarification needed, our staff and our managers are very happy to have discussions with principal brokers to help support them through that process.

Rocca D’Angela

34:46  That's great. Thank you, Jelena. I encourage our attendees to continue to send on questions. It looks like we have covered the majority, if not all, of the questions or topics that people had questions on. So we'll just wait for a few more minutes, see if any other questions come in. We'll do our best to respond. Otherwise, we take this opportunity to thank you for joining us for this webinar. We want to remind you that the webinar is recorded and will be posted on our website in the coming weeks, as well as responses to questions that we see through the chat. As always, we're here to help you. So FSRA is always available to answer your questions. Let me just see if we have any more coming in. We have one more. Okay. Jelena, you're not off the hook yet. If an applicant did not complete their declaration honestly, and clearly the brokerage would not have known, what then is the accountability of the brokerage if the situation came forward?

Jelena Pejic

36:08  Yeah, it's a great question. So we spoke quite a bit today about nondisclosure and hopefully, you've heard that I've stressed that point quite a bit, right? We expect that all agents and brokers do review the questions asked on the application and provide full and accurate disclosures. Where a nondisclosure is identified, generally FSRA's approach is to reach out to the applicant themselves and including their principal broker to request an explanation, right? To understand first and foremost why the nondisclosure occurred and then also to seek more information about the matter themselves. So for example, if somebody had failed to disclose a lawsuit, we would be looking to understand first why the lawsuit was not disclosed. And then second of all, looking to gather more information about the lawsuit itself in order to assess the suitability. The question I think asked more so about the principal broker's role in that process. So it really does relate back to my prior response, which is the principal broker is going to be included in communications through the process. We do expect that principal brokers are aware of this guidance and particularly the importance of disclosure on the application. And so where a nondisclosure has occurred, when we request that the principal broker confirm that they continue to certify that the individual is suitable, we will be looking for them to address the nondisclosure as well to understand why that matter may not have been disclosed. For example, whether they had a conversation with the applicant, whether there are additional information they can provide, which will help us assess against those factors that we discussed today.

Rocca D’Angela

37:45  Thank you so much, Jelena. And thank you for the presentation today. That was a lot of information, hopefully very helpful for our stakeholders. At this point, I think we are through the questions. So in terms of closing remarks, if you have anything to add, otherwise we would like to thank everybody for attending and look for our webinar online shortly.

Jelena Pejic

38:11  Thank you. And I just want to reiterate, thank you very much for being with us today. I hope that you did find this session helpful. And as always, if you do have any other questions, you can contact FSRA directly. Thank you and have a great day.

Rocca D’Angela

38:23  Bye, everyone.

1. What does FSRA consider unsuitable?

The following are examples of conduct and circumstances that may make an applicant, agent or broker unsuitable. They include, without limitation:

• criminal charges, convictions or guilty pleas (ongoing, pending or past)
• breaches of laws, regulations or rules administered by FSRA or other regulatory or licensing bodies (particularly if there are ongoing, pending or past regulatory enforcement actions, sanctions, investigations or proceedings)
• bankruptcy, consumer proposals or other insolvency matters (ongoing or previously discharged)
• acting in a manner inconsistent with FSRA Interpretation Guidance, including any harmonized multi-jurisdictional principles/guidance/codes that FSRA has adopted through its Guidance (e.g., the Mortgage Broker Regulators' Council of Canada’s (MBRCC’s) Code of Conduct for the Mortgage Brokering Sector, where any requirements align with the MBLAA, regulations or FSRA Rules
• making false statements or providing false information (including nondisclosure on an application), or other dishonesty to FSRA
• failure to diligently carry out the individual’s duty to the authorizing brokerage — for example, an agent or broker must not do or omit to do anything that might reasonably be expected to result in the brokerage contravening or failing to comply with a requirement established under the MBLAA
• any other behaviour relevant for the purposes of assessing licensing suitability

We encourage you to review FSRA’s proposed guidance on this matter, which provides more detail about the type of conduct that may demonstrate that an applicant, agent or broker is not suitable for licensing.

2. Do I have to disclose a criminal charge from over 20 years ago?

FSRA asks about criminal records on the applications, and applicants are expected to review the question and provide accurate information in response.

3. What is the impact of a bad credit score, consumer proposal, or bankruptcy in assessing suitability of a corporation or individual? Does this mean you will automatically be declined?

When considering an applicant's suitability, FSRA assesses whether applicants, agents and brokers are suitable for licensing in accordance with the MBLAA, its regulations, and FSRA guidance and rules, and takes appropriate action where they are not suitable.

FSRA has broad authority to determine matters that are relevant to whether a mortgage agent or broker is suitable to be licensed under s. 14(1) and 16(4) of the MBLAA. Under s. 14(1) and s. 16(4) of the MBLAA, FSRA issues or renews a licence to applicants who satisfy the requirements for licensing, including whether the applicant is suitable to be licensed.

If FSRA has become aware of an applicant's negative financial history, including a Consumer Proposal or Bankruptcy, FSRA assesses several factors depending on the specific individual and circumstances that led to the insolvency. We expect that all insolvencies related to the regulated entity (whether a corporation or an individual) be report to FSRA, especially at the time of the licence application or renewal application.

An insolvency does not automatically mean that the licence will not be renewed. However, FSRA will review the licence application and begin communication with the licensee to determine their suitability and determine the best course of action to mitigate any risks that might be posed to consumers.

4. Will the Bankruptcy question on the renewal be updated to include the wording consumer proposal?

We are actively working on updating our application forms and will be including the “consumer proposal” wording in the suitability questions. 

5. Will FSRA licence convicted criminals and give them their own brokerage, which allows them to supervise other brokers/agents?

In assessing an applicant’s, agent’s or broker’s suitability, FSRA will consider whether the individual’s conduct or activities, past or present, may make them unsuitable to be licensed. Conduct or activities that create a risk that an agent or broker may fail to comply with the law or to treat customers fairly, contrary to legal and regulatory obligations, may demonstrate that an applicant, agent or broker is not suitable for licensing.

If, as a result of the suitability assessment at the initial or renewal licence application stage, FSRA believes on reasonable grounds that the applicant is not suitable to hold a licence, FSRA may take action to refuse or impose conditions on the licence.  FSRA may, in its discretion, advise the applicant of the decision and offer the opportunity to voluntarily withdraw the application. In some cases, FSRA may also seek to impose monetary penalties or take other enforcement action. This can be instead of or in addition to licensing action. An applicant's suitability to be licensed is assessed on a case-by-case basis.

6. Why are the licence conditions not public, and would publishing them protect the public? If they are not published, how does FSRA place the conditions on the licence?

Licence conditions are public and available through the public registry; however, FSRA retains discretion when to publish the conditions in their entirety as guided by its mandate of consumer protection. The level of detail published in relation to licence conditions is done in accordance with FSRA's transparency guidance.

7. Are all Notices to refuse licences posted on FSRA website even if the person is applying for a licence for the first time?

Every Notice of Proposal (NOP) to refuse a licence is posted publicly on our website.  

8. If an applicant appeals a Notice of Proposal to the Financial Services Tribunal (FST) and are successful, how does FSRA still mitigate risk?

If an applicant appeals FSRA's decision to refuse or revoke their license application to the FST, the FST may determine that the applicant is indeed suitable to hold a licence. In such cases, FSRA may be ordered to impose conditions on the licence if the FST feels conditions will mitigate any potential risks of consumer harm; however, FSRA is tasked with upholding an order of the FST as they may deem appropriate. 

9. Why is a suitability assessment conducted for every renewal if agents were already previously licenced?

FSRA reviews renewal applications based on risk to consumer protection. It is important to conduct a thorough review every year as the licensee's circumstances could have changed or there might be new information to note about the licensee. Additionally, if there has been a previous suitability concern, the risk associated with that licensee is higher, and FSRA must take the necessary steps to mitigate risks and protect consumers.

1. How do you confirm an applicant is eligible to work in Canada?

FSRA requires the applicant to attest that they are legally entitled to work in Canada and that they are an Ontario resident.

2. What does FSRA expect the Principal Broker to include in the screening process and what are the ongoing screening obligations?

Brokerages and Principal Brokers have legal obligations to screen and monitor agents and brokers for suitability. These obligations include:  

• Recruitment and hiring practices that formally assess an individual’s professional competence (including compliance with education requirements) and conduct history
• Leveraging multiple sources of available information to make recruitment decisions, including but not limited to consideration of:
  • previous brokerages / employers
  • background check
  • regulator websites
  • criminal record check

The brokerage has a duty to ensure ongoing suitability by its agents and brokers by taking actions, such as including appropriate onboarding, periodic training, and supervision of licensed individuals.

To find out more about a brokerage's initial and ongoing screening obligations, please visit the proposed guidance for Mortgage Brokerage and Principal Broker responsibilities.

3. How can Principal Brokers know the previous misconduct of the agent or broker they are hiring into the brokerage?

Brokerages must take reasonable steps to satisfy themselves that the individuals they authorize to deal or trade in mortgages on their behalf are eligible to be licensed as an agent or broker. Principal brokers are responsible for initiating and renewing each of their agents’ and brokers’ licences, and for verifying their suitability for licensing. A brokerage is required to report to FSRA if it believes there may be reasonable grounds that a broker or agent is not suitable to be licensed under the MBLAA.

4. Is the PB responsible for reporting suspected bad behavior or can they let it go without reporting?

According to Ontario Regulation 188/08, s. 43(3), Principal Brokers are required to report suspected bad behavior to FSRA. Failure to report such behavior may result in enforcement action, and more importantly, could potentially harm consumers.

5. If an agent is reported, does that mean an automatic review by FSRA on the brokerage activities?

FSRA examines the information it receives about an agent's behavior or suitability to determine if there are any breaches of the legislation or pose a risk to their suitability to hold a licence.

6. What is the general timeline for an application to be reviewed and licence issued where there are no issues? If it's taking a longer than usual time for an application to be processed, should the Principal Broker be worried?

FSRA has a dedicated webpage for application processing times which gets updated on a weekly basis.

In certain cases, FSRA may need to review applications further which might take a longer time to process. If an application was submitted before the date posted and the applicant's information has not been updated on the public registry, it's because FSRA might require further review.

If there is a suitability concern with an applicant, a licensing specialist will reach out to both the Principal Broker and the applicant to discuss the next steps.

7. If an applicant did not complete their declaration honestly, and clearly the brokerage would not have known, what then is the accountability of the brokerage if the situation came forward?     

The brokerage and principal brokers have legal obligations to screen and monitor agents and brokers for suitability. FSRA expects the brokerage to review the application and confirm accuracy in its entirety. We also expect brokerages to review when a non-disclosure has been identified and respond appropriately. The brokerage must be able to demonstrate the steps taken to determine the applicant's suitability to show that it has taken reasonable steps to ensure compliance and has properly discharged their duty under section 2 of O. Reg. 410/07.

8. As a PB, can you rescind an agent approval application to FSRA afterwards if new suitability issues arise?

A PB can withdraw and application to FSRA at anytime due to suitability issues. If the individual becomes licensed before the PB can withdraw an application, the PB may terminate the agent from their brokerage through this licensing link on our website, if necessary. 

1. I was licensed as a level 2 mortgage agent until March 31st of this year. I decided not to write my level 2 licence prior to the deadline. Can I pass it now and get my licence issued during the current year, or do I have to wait till the next renewal?

In accordance with Ontario Regulation 409/07, brokers (including principal brokers) and level 2 agents who don’t pass the private mortgage course on or before March 31, 2024, will transition to a level 1 agent licence on renewal or reinstatement in the 2024 licensing period.

Individuals who complete the private mortgage course after March 31, 2024, will not be able to immediately upgrade their licence. For the annual licensing period from April 1, 2024, to March 31, 2025, Ontario Regulation 409/07 prohibits permitting brokers and level 2 agents to keep their licences at the level they were at prior to April 1st, 2024, if those licensees did not complete the private mortgage course by March 31, 2024.

As such, if a level 2 agent was transitioned to level 1 for failing to complete the private mortgage course by March 31, 2024, they will need to fulfil 12 months as a level 1 agent and complete the private mortgage course before applying to upgrade their licence back to the level 2 class.

2. I've been a Level 1 agent for under a year and have passed the Private Mortgage Course (PMC). When can I apply to upgrade my Licence to Level 2?

To upgrade to a level 2 licence, you are required to be licensed as an agent or level 1 agent for 12 months of the past 24 months and successfully complete the Private Mortgage Course (PMC). Although you have completed the PMC, you are still required to complete the 12-month requirement. You will be eligible to apply for an upgrade to a level 2 licence after being licensed as a level 1 agent for 12 months.

3. Can I renew my licence in May after completing my continuing education?

Renewals only occur during February 1 to March 31 annually. If a licence renewal application is not received in this time period, the licence will be expired on March 31st. This means you will not be authorized to deal in mortgages in Ontario.  In order to reinstate your licence before June, you will be required to take the appropriate continuing education courses and apply to reinstate your licence.

If you are a level 2 agent or broker, you may reinstate your licence at your current level only if you completed the Private Mortgage Course (PMC) prior to March 31, 2024. If you have not completed the PMC, you may reinstate your licence as a level 1 agent.

1. The webinar focused on bad or poor behaviour. I'm sure the industry depends on members with good behaviour to influence consumer protection. So why not make more effort to discus good behaviours and codes of conduct?

FSRA recognizes that there are many agents and brokers that are compliant and do their best to protect consumers. We also strive to protect consumers, and it is important to address the conduct that could impact that mandate, which is why we addressed those behaviours on the webinar.

2. Can someone take a leave of absence if they have an illness, and do they have to be part of a brokerage during that absence?

If a licensee maintains their licence but is not dealing in mortgages for a period of time, they must still comply with all the obligations outlined in the MBLAA. Licensees can also choose to voluntarily surrender their license or have it terminated by the brokerage through this licensing link on our website. In either case, the licensee will have two years from the date of surrender or termination to reinstate their license without needing to requalify for licensing.

3. Who can we contact for further questions?

We'd love to hear from you!  You may call us at 1-800-668-0128 or email us at [email protected] with any further questions.