Ontario’s financial services regulator announced last week that it has revoked the licenses of 29 mortgage brokers for failing to meet key regulatory requirements.
The regulator says the brokers involved either failed to appoint a principal broker, failed to submit their Annual Information Return (AIR) for 2021, or failed to do both.
Licenses are first suspended by the FSRA if a brokerage is not compliant, but the regulator can go further if the situation is not remedied.
“It is unfortunate that FSRA has to take the step of revoking licenses,” Wendy Horrobin, FSRA’s head of licensing and risk assessment, said in a statement. “However, we believe that brokers have been given multiple opportunities to comply without ever providing a response.”
All licensed mortgage brokers and servicers in Ontario must file the Annual Information Return, a document containing information about business conditions, by March 31 each year.
A spokesperson for the FSRA told CMT that this information allows the regulator to better understand how the mortgage industry works, and alert it to the need for supervision or action if industry players break the rules.
The crucial role of a principal broker
As part of these rules, all brokers must have at least one principal broker whose job it is to monitor compliance. FSRA says the individual must be the owner of a brokerage if it is a sole proprietorship, a general partner if it is a limited partnership brokerage, a partner in a partnership brokerage, or an officer of a brokerage firm.
Principal broker licenses expire and must be renewed or transferred to another broker by March 31 each year. If no one at a brokerage can fill the position, the brokerage’s license will be suspended.
A spokesperson for the FSRA says the requirement to appoint a principal broker is legal and falls under the Mortgage Brokerages, Lenders and Administrators Act 2006.
“A PM [principal broker] is responsible for taking reasonable steps to ensure that each agent is authorized to transact or transact mortgages on behalf of the brokerage,” the spokesperson told CMT. “They must also ensure that all brokerage agents comply with all requirements of the law.”
It is possible for all 29 brokers to reapply for a new broker’s license. However, FSRA says any history of not following the rules will be taken into account when the regulator reviews such applications.
“The timeline for reviewing and completing the application varies depending on the complexity of the application and how quickly the applicant responds to FSRA’s requests for information,” FSRA told us. “For these reasons, we cannot provide an accurate estimate of the duration of the process.”