REGARDING the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c.29 (the “Act”), in particular sections 2 and 35
AND REGARDING Mortgage Lenders Ltd. and Ralph Iacono
INTERIM COMPLIANCE ORDER
Sections 35(1) and (2) of the Act provide that if, in the opinion of the Superintendent of Financial Services ("Superintendent"), a person or entity is committing any act or pursuing any course of conduct that contravenes or does not comply with a requirement established under this Act, or has committed or pursued any course of conduct that contravenes or does not comply with a requirement established under this Act, the Superintendent may propose to order the person or entity to cease committing an act or cease pursuing a course of conduct identified by the Superintendent or to perform such acts as, in the Superintendent’s opinion, are necessary to remedy the situation.
Section 35(3) of the Act provides that where the Superintendent proposes to make such an order, he shall give written notice of the proposal to the person or entity, including reasons for the proposal.
Section 35(7) of the Act provides that, if in the Superintendent’s opinion the interests of the public may be adversely affected by any delay in making an order as result of the steps required by section 35, the Superintendent may, without notice, make an interim order and may do so before or after giving the notice required by section 35(3).
In the Superintendent’s opinion, the interests of the public may be adversely affected by any delay in making a compliance order against Mortgage Lenders Ltd. (“Mortgage Lenders”) and Ralph Iacono (“Iacono”) for the following reasons:
- The Act states that “No person or entity shall carry on the business of dealing in mortgages in Ontario unless he, she or it has a brokerage licence or is exempted from the requirement to have such a licence.” (section 2(2)).
- The Act at section 2(3) also states that “No individual shall deal in mortgages in Ontario for remuneration, whether direct or indirect, as an employee or otherwise, unless he or she has a mortgage broker’s or agent’s licence and is acting on behalf of a mortgage brokerage or is exempted from the requirement to have such a licence.”
- No exemptions apply in this case.
- Iacono does not hold a mortgage brokerage, broker’s or agent’s licence. Iacono previously held a mortgage broker licence under the Act but his licence was revoked effective December 8, 2012 by Order of the Superintendent dated December 5, 2012.
- Effective December 8, 2012, the licence of the brokerage Terra Nova Financial Services Inc. (“Terra Nova”, of which Iacono was, prior to the revocation, the Principal Broker) was also revoked by Order of the Superintendent dated December 5, 2012.
- The Superintendent has received information and evidence that Iacono is dealing in mortgages at another brokerage named Mortgage Lenders Ltd.(“Mortgage Lenders”), located at the same address, 5225 Orbiter Drive, Unit 12, Mississauga, Ontario, L4W 4Y8, from which Terra Nova formerly operated and has unlawfully assumed control of Mortgage Lenders’ operations.
- Mortgage Lenders is licenced as a mortgage brokerage under the Act and, as is required by the Act, has a principal broker in place who is also licenced under the Act (“Principal Broker”). Shortly prior to or upon the revocation of Terra Nova’s licence, the book of business of Terra Nova was transferred to Mortgage Lenders. Iacono is not a shareholder, director or officer of Mortgage Lenders.
- Mortgage Lenders continued the business formerly conducted by Terra Nova, including continuing to service the mortgage-related needs of Terra Nova’s former borrower and lender clients.
- However, the Superintendent has information and evidence that the Principal Broker has, for several weeks or months, been a principal broker in name only, and that Iacono is acting as de facto principal broker of Mortgage Lenders and otherwise managing the brokerage.
- Specifically the Superintendent has information and evidence in respect of the following:
a) After ensuring that he, along with the Principal Broker, has signing authority on Mortgage Lenders’ bank accounts, Iacono assumed sole responsibility for signing cheques, opening and dealing with the operating accounts and dealing with Mortgage Lenders’ financial matters;
b) Iacono attends at the Mortgage Lenders’ office regularly;
c) Iacono attended meetings and engaged in business-related conversations with mortgage lenders, including both institutional and private lenders;
d) Iacono discussed mortgages and mortgage-related matters with mortgage clients of Mortgage Lenders;
e) Iacono comported himself within the brokerage as if he were in charge as the principal broker, including by bringing in mortgage business, assigning portions of the mortgage work to agents in the office, and engaging in supervision of those agents;
f) Iacono’s name appears on a register of agents of the brokerage to whom commissions were paid;
g) The Principal Broker informed Iacono that he no longer intended to continue in business with Iacono at Mortgage Lenders on or about July 15, 2013. On July 16, when the Principal Broker attended at Mortgage Lender’s premises, he discovered that he was locked out from the premises and that his email address had been removed from Mortgage Lenders’ email system;
h) On July 17, 2013, a FSCO investigator attended at Mortgage Lenders’ premises and observed that Mortgage Lenders’ offices were open to the public and that it appeared that its business operations are continuing;
i) On July 17, 2013, Iacono filed an application with the Financial Services Commission of Ontario to attempt to change the Principal Broker by purporting to terminate the designated Principal Broker and designate another mortgage broker in his place. Iacono had and has no authority to act on Mortgage Lenders’ behalf for this purpose.
- Accordingly, the Superintendent has grounds to believe that Mortgage Lenders is operating without its named Principal Broker and is in fact doing business under the control of Iacono.
- The Act states that a person or entity is “dealing in mortgages” when he, she or it engages in the following activities, or holds themselves out as doing so:
- Soliciting another person to borrow or lend money on the security of real estate;
- Providing information about a prospective borrower to a prospective mortgage lender;
- Assessing a prospective borrower on behalf of a prospective mortgage lender;
- Negotiating or arranging a mortgage on behalf of another person or entity.
- Accordingly, on the basis of the above information and evidence, the Superintendent also has grounds to believe that Iacono is dealing in mortgages without a licence, in connection with an ongoing book of business, on behalf of, and using the business vehicle of, Mortgage Lenders. The clients of Mortgage Lenders are at risk because Iacono’s dealings with them are not within the sphere of the regulatory regime established by the Act. Further, Iacono’s ongoing mortgage activities are in defiance of the Order of the Superintendent dated December 5, 2012, by which Iacono’s broker licence was revoked.
- The Superintendent has also issued as of this date an Interim Order to Suspend the Licence of Mortgage Lenders suspending the mortgage brokerage licence of Mortgage Lenders
- Pursuant to section 17(3) of the Act, the licences of mortgage brokers and agents authorized by the mortgage brokerage to act on its behalf are also suspended when the brokerage’s licence is suspended. During the suspension of the licence of Mortgage Lenders, its brokers and agents are not authorized to carry on the business of mortgage brokering in Ontario.
- For the above reasons, the interests of the public may be adversely affected by any delay in making a compliance order against Mortgage Lenders Ltd. and Ralph Iacono.
It is ordered that Ralph Iacono, Mortgage Lenders Ltd. and the mortgage brokers and agents authorized by Mortgage Lenders Ltd. to act on its behalf:
- Immediately cease in Ontario soliciting persons or entities to borrow money on the security of real estate or holding himself out as doing so;
- Immediately cease in Ontario providing information about a prospective borrower to a prospective mortgage lender or holding himself out as doing so;
- Immediately cease in Ontario assessing a prospective borrower on behalf of a prospective mortgage lender or holding himself out as doing so;
- Immediately cease in Ontario negotiating or arranging a mortgage on behalf of another person or entity or holding himself out as doing so;
- Immediately cease in Ontario accepting any fees or funds in connection with the solicitation, negotiation, or arrangement of a mortgage;
- Not communicate with existing clients for a purpose related to dealing, trading, lending or administering mortgages or carrying on any mortgage brokering business, except for the express purpose of transferring their files and business to another licensed broker, agent and/or brokerage.
The Interim Order takes effect immediately and will remain in effect until the expiry of the period for requesting a hearing about the Superintendent’s proposal to make a permanent order; or if before the end of such period the Superintendent does not give a notice of the proposal to make a permanent order, the Interim Order expires at the end of 21 days after the date of this Interim Order.
Pursuant to sections 48(4) and 49(1) and (2) of the Act, every person who fails to comply with an order made under this Act is guilty of an offence and every individual convicted of an offence under the Act is liable to a fine of not more than $100,000.00 or imprisonment for a term of not more than a year or both a fine and imprisonment. Every corporation convicted of an offence under the Act is liable to a fine of not more than $200,000.00.
Pursuant to section 48(5) of the Act, every director or officer of a corporation that commits an offence under this Act who directed, authorized, assented to, acquiesced in or participated in the commission of the offence, or who failed to take reasonable care to prevent the corporation from committing the offence, is guilty of an offence, whether or not the corporation is prosecuted or convicted.
Section 48(6) provides that every partner of a partnership and every individual who is a member of the directing body of an entity, other than a person or partnership, who directed, authorized, assented to, acquiesced in or participated in the commission of an act or omission by the partnership or entity which, if committed by a person, would be an offence under the Act, is guilty of an offence.
DATED at Toronto, Ontario, July 29, 2013.
Original signed by
Superintendent of Financial Services