An independent panel of experts is calling for syndicated mortgages to be regulated in the same manner as securities.
“The government should require that documents issued to raise capital for syndicated mortgage investments be subject to the same level of regulation as the securities regulator applies to other offering documents used to raise capital in the province,” a FSCO report, entitled Review of the Mandates of the Financial Services Commission of Ontario, Financial Services Tribunal, and the Deposit Insurance Corporation of Ontario,
The report features the findings of panel members George Cooke, former president and CEO of The Dominion of Canada General Insurance Company, James Daw, former Toronto Star personal finance columnist, and lawyer Lawrence Ritchie.
The three were appointed by the Minister of Finance in 2015 to review three agencies; the Financial Services Commission of Ontario (FSCO), the Financial Services Tribunal (FST), and the Deposit Insurance Corporation of Ontario (DICO).
They released their findings -- which include the recommendations for syndicated mortgage regulation -- in the 92 page report, which can be accessed here
“During our review, we became concerned with what appears to be a regulatory gap regarding syndicated mortgages,” the report says. “All companies involved in raising money for property development through the sale of syndicated mortgages to small investors should be actively monitored to ensure compliance with relevant legislation and regulations in a manner that is consistent with the level of oversight and scrutiny applied by securities regulators.”
Due to the complexities of syndicated mortgages, the report reads, regulation would be best handled by the securities regulator.
“This would best ensure a consistent application of disclosure requirements across products and investments seen by investors as comparable,” the report says.
The recommendation comes on the heels of growing calls
from many industry professions for more stringent regulation for these increasingly popular investments.