Mortgage Broker BcBc Mortgage Broker
The regulatory framework for syndicated mortgages is shifting.
Not surprisingly, both the Canadian Securities Administrators (CSA) and the Financial Services Commission of Ontario (FSCO) are making changes to the regulation of structured mortgage loans. On 8 March, the CSA issued guidance to improve investors' protections and improve the harmonisation of the regime for revolving mortgage loans.
Proposal for changes to the provisions concerning exceptions for prospectuses of National Instrument 45-106 (NI 45-106) and National Instrument 31-103 Regulatory requirements, exceptions and ongoing regulatory obligations (NI 31-103). Exemption from the listing requirements and registrations of mortgage-backed securities in Ontario, Newfoundland and Labrador, the Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island and the Yukon will be lifted.
In this way, the legal frameworks in these countries will be brought into line with the remaining Canadian frameworks. Exemptions from the listing particulars of issuers of private securities (private issues exemption) will also be waived for the distribution of revolving loans. Following these changes, Canadian exempted distribution of revolving mortgage loans must be based on another listing particular exemptions, such as AI ( "Accredited Investors' Exemption"), which offers OM ("Memorandum Exemption"), or FFBA ("Family, Friend and Partner Exemption").
For Ontario and other jurisdiction where mortgage exemptions currently exist for revolving loans, operators engaged in revolving loans must verify whether they are subject to mandatory registrations. Amendments to the exemptions from the obligation to register shall take effect one year after the date of the amendment to the exemptions from the listing particulars in order to give operators sufficient flexibility to do so.
In line with the present British Columbia policy for revolving loans granted under the OM exemption, the changes suggested will necessitate additional disclosures specific to revolving loans. Furthermore, mortgage intermediaries engaged in the allocation of syndicated loans must submit to the investor a statement that the Offer Memorandum does not contain any false representations with regard to any matter known to the broker and that the broker has done everything to make sure that any matter not known to him does not contain any false representations.
Comments on the changes will be submitted by 6 June 2018. Ontario's government, as we stated in our November 2017 bulletin, is planning to change the Securities Act to move supervisory supervision of mortgage syndication from the FSCO to the OSC. Meanwhile, it has modified Regulation 188/08 on mortgage intermediation:
Standard of Practice (the Regulation) to require brokers dealing with unqualified syndicated mortgage deals to comply with extended conditions from 1 July. In general, unqualified syndicated mortgage deals are more sophisticated, riskier and may not be appropriate for the typical investors. According to the new requirement, mortgage brokers dealing with such deals must do so:
Gather and record information about the prospective investor's or lender's finances, needs and appetite for risks; conduct and record an aptitude test for each prospective borrower or creditor; gather and record advanced disclosures; report within ten working days to the FSCO's Superintendent of FSCO Finance Services any complaint in writing about unqualified syndicated mortgage transactions submitted to the firm.