Following a FSCO warning about an unlicensed syndicated mortgage referral website, one industry leader suggests there needs to be more clarity when it comes to these arrangements.
In an official statement, the commission warned consumers that InTeg Financial is not licensed to broker mortgage business in Ontario. The company’s website does, however, link to a FSCO licensed brokerage named Marks & Associates. InTeg appears to be in breach of MBLAA guidelines
but what about the brokerage it links to?
It remains unclear.
“That’s a bit of a tough question. What should be the responsibility of the brokerage accepting the lead? From what I can see it doesn’t look like there is any prohibition on a brokerage doing that; there is a prohibition on the brokerage paying a referral fee to a company that should be licensed as a brokerage,” Joe White, president of the Association of Mortgage Investment Professionals (AMIPROS) told MortgageBrokerNews.ca. “That would be a contravention of the legislation. In that sense it would defeat the whole purpose of the company offering a referral.
“I wouldn’t call it a grey area; I would call it an area that needs more interpretation.”
The legislation White refers to is 188 44. (1) in the Mortgage Brokerages, Lenders and Administrators Act, which states:
A brokerage shall not pay a fee or other remuneration for dealing or trading in mortgages on its behalf to another person or entity that carries on the business of dealing or trading in mortgages unless the other person or entity either has a brokerage licence or is exempted from the requirement to have such a licence.
According to John Marks, president of Marks & Associates, his brokerage does not pay referrals to Integ; a company, he says, that is used merely for admin and educating the general public about syndication. He is currently working with FSCO to rectify the matter.
"We believed that the marketing being done by Integ was compliant; however after discussing with FSCO we now understand what changes need to be implemented not just by ourselves but the industry ,” Marks said. “I’ve been a broker for 38 years so, certainly, compliance is king with me.”
MortgageBrokerNews.ca also reached out to FSCO to query about these types of referral arrangements. This was its response:
“FSCO monitors the marketplace for areas where there may be a lack of clarity regarding whether a financial services practice is compliant with legislation, and in such areas, FSCO takes pro-active measures to ensure consumers and regulated persons and businesses are fully informed and educated,” Aisha Silim, media spokesperson for FSCO wrote in an email. “To maintain the integrity of all of our investigations, we can neither confirm nor deny the existence of any specific complaints or investigations against individuals or businesses.”