Pitblado Law secured a favourable decision from the Manitoba Financial Services Agency (“MFSA”) on behalf of its clients in connection with their application for registration as authorized officials with a restricted mortgage broker firm (In The Matter Of The Mortgage Brokers Act -And- Seva Capital Canada Inc., Siddhartha Dewan Shreeraj Patel Reasons For Decision Of The Hearing Panel The Manitoba Securities Commission, the “Decision”). This marks the first time an applicant has been granted an exemption from the mortgage salesperson experience requirement for registration as an authorized official, based on equivalent experience, under section 55 of The Mortgage Brokers Act (Manitoba) (the “Act”).
A corporation and two individuals (the “Applicants”) submitted an application to the MFSA seeking registration of the corporation as a restricted mortgage broker, and the individuals as authorized officials under the Act. The individuals also requested an exemption from the requirement to have prior experience as registered mortgage salespersons based upon their years of equivalent experience gained through senior level employment in the banking sector.
However, the Registrar appointed under the Act refused the application on the grounds that the corporation did not have an authorized official as the two individuals did not have the required mortgage experience. The MFSA requires completion of a course and 24 months of experience as a registered mortgage salesperson, within 36 months before applying for registration as a mortgage authorized official.
Pitblado Law successfully presented an appeal to the MFSA on behalf of the clients. The main issue discussed by the panel on the appeal was the experience requirement.
The Reasons for the Appeal
The Decision to allow the appeal is noteworthy, as the standards for granting such an exemption are exceptionally stringent. Applicants must provide compelling and well-documented evidence to demonstrate that their experience is truly equivalent. This high threshold is appropriate, given that the underlying purpose of these requirements is to safeguard the public interest.
The panel accepted the arguments presented by Pitblado Law in the appeal.
In general, a person is not permitted to act as a mortgage broker unless they are registered or exempted from the requirement to be registered under the Act (S. 2(1)). In addition, a mortgage brokerage firm must have at least one authorized official pursuant to Section 8(2).
To be registered as a mortgage broker, the person must meet two main requirements: (1) the applicant must be, in the opinion of the registrar, suitable for registration and (2) registration must not be objectionable.
In this case, the issue was the suitability requirement for an authorized official. In this regard, when assessing suitability, among other things, the MFSA requires the applicant to have at least 24 months of experience as a registered mortgage salesperson within the 36 month period before applying for registration pursuant to a publication on the Manitoba Financial Services Agency’s website.
However, Section 55 of the Act grants the authority to the MFSA to “exempt any person or corporation from all or any provisions of this Act or the regulations”, provided that this is “not prejudicial to the public interest” in the opinion of the commission.
In addition, section 3(1) of the Act provides some situations where the registration is not required, and these “exemptions” are usually due to the person being subject to another regulatory regime or not posing a risk to the public interest. In this sense, the registration requirements do not apply to banks and the professionals working for banks, as they are subject to the Office of the Superintendent of Financial Institutions (“OSFI”).
Considering that the Applicants in this matter were employees of banks, they were never required to be registered as salespersons under the Act. The panel accepted the argument that the Applicants performed many activities that were equivalent to those of a salesperson and would require registration but for the fact the Applicants were employed by banks. The Applicants worked under the regulatory regime of OSFI, which is a very rigorous regulator that also provides supervision, guidance and oversight to mortgage brokerage.
Conclusion
This is the first known decision to grant an exemption from the experience requirements for registration as an authorized official based on the equivalent experience of the applicants in Manitoba. This case helps to provide some guidance on how section 55 of the Act may apply in similar cases, but it is noteworthy that exemptions would continue to be exceptional and dealt with on a case-by-case basis by the regulators, as the specific circumstances of the Applicants played a major role to achieve this extraordinary result. The public interest is paramount, and regulators will not grant exemptions easily.