Networks to crack down on brokers' side businesses?

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The case of a recently deceased mortgage broker who is accused of committing fraud may trigger a shift among broker networks when it comes to allowing its brokers to operate independent MICs.

Tammy Robinson, a former Ontario mortgage broker with Dominion lending Centres, is accused of mismanaging mortgage investments attained independently and not through her broker network. Still, network head Gary Mauris was questioned by the media regarding the affiliation by local news outlet Northumberland News.

“None of these transactions were done on Dominion Lending Centre documentation and none of the funds were made payable to Dominion Lending Centres Canada,” Gary Mauris of Dominion Lending Centres told Northumberlandnews.com. “These were unsecured investments of a personal nature that the clients chose to partake in directly with Ms. Robinson.”

Brokers came to the defense of Canada’s largest network, realizing it is a case of a broker acting completely independently.

“It would not matter if this case was about someone associated with DLC or Verico or TMAC or Centum or any other firm,” Ron Butler of Verico Butler Mortgage said in the comments section of MortgageBrokerNews.ca. “These stories (and there is a variation on the same theme every quarter somewhere in Canada) represent individuals who may make wrong decisions and bad mistakes that have nothing to do with their networks.”

However, one of the men allegedly defrauded by Robinson doesn’t see it that way, which may lead to broker networks more tightly policing its brokers’ side businesses.

“She never disclosed it ran as a franchise or what she was doing was on the side,” Michael McArthur told Northumberlandnews.com. “I just assumed. And others did as well.”

Related:

Mortgage investors blame broker for $200K loss
  • Len Lane on 2014-04-28 10:41:14 AM

    Well you know what they say about the word assume.. would not these investors have been considered sophisticated investors in that they have financial knowledge and the means to invest. Sounds more like bad decisions by everyone involved.

  • Toronto Broker on 2014-04-28 11:24:45 AM

    I completely disagree with Ron Butler. Companies like DLC (Franchisor) and VERICO (Volume Bonus Network) are not brokerages.

    You live by your sword, you will die with your sword. Most of these big brokerages, would hire anyone without doing much due diligence on them.

    Companies such as Mortgage Intelligence, Invis, Mortgage Architects that provide full compliance, payroll and other regulatory support would have caught most of these acts.

  • A Broker on 2014-04-28 11:37:06 AM

    The agent was working under the name of Dominion. The broker is responsible for her actions. The client is correct.

  • Ron Butler on 2014-04-28 12:17:08 PM

    @ Anonymous TO Broker / A Broker, seriously wrong facts stated in these comments.

    If you bothered to investigate the story you would discover the alleged improper activities were bridge loans which we never processed under any compliance function so any agent or broker at any company; even the ones Toronto Broker mentioned would have the same outcome. If the individual had been working at a brokerage that reviewed all docs at their Head Office; Compliance would not have caught it because Compliance would never have seen it.

    As for recruitment practises, please let's not go there. The person (for which no wrong doing has been proven so far) had prior mortgage experience with a standard brokerage when she joined the super broker and once again if this case was (unproven as yet) a Ponzi scheme predicated on documents completely outside the compliance process, her previous broker would have had no negative comments when the registration was transferred. In short: any brokerage would have been in the dark no matter what their process was.

    Everyone of the companies that TO Broker mentions have had some agent or broker go rogue, that's just a fact of being in this business in a big way for many years.

    As far as the concept that every brokerage and network is totally financially responsible for every wrong action it's agents and brokers take with consumers; well........... that is just silly.

    The reason we all are required to have E & O insurance INDIVIDUALLY is that even FSCO recognises that when the individual agent or broker goes down the wrong path it is highly unlikely any brokerage will be aware of it until it is too late.

  • Victor Simone on 2014-04-29 11:03:48 AM

    A Mortgage Brokerage, by the letter of the MBLAA, is unjustly held up as the ultimate party responsible to the borrowers. Licensed agents or brokers writing under the licence issued to a brokerage, are really quit free of total responsibility.

    Sitting in a class for the Mortgage Brokerage course in Ontario, one quickly learns that being a principle broker is a huge responsibility in that the actions of the agents affect the entire operation.

    I suppose FSCO or the provincial ministry has to hold someone by the collar at the end of the day, and protect borrowers in the marketplace.

    The MBLAA 2008 is still a work in progress, in many ways. The sad part for brokerages playing by the rules, like Dominion and all the others in the marketplace, is that FSCO needs to make an example of someone when things like this supposed Ponzi scheme happen.

    FSCO needs to have an even hand in changes moving forward. Dominion was holding itself out as a trusted brand, and trusted they are. Rogue agents should bear more responsibility and that's what FSCO should really try and answer here.

    Who pays for the sins, the agent that commits the crime or the brokerage and stakeholders in the mortgage industry ?

    Don't punish the entire industry, just for the sins of a few.

    Hopefully justice will prevail and Brokerages will be limited to their own sins and not those of others outside their scope.

  • ON Consumer on 2014-04-29 11:05:24 AM

    Respectfully, Mr. Butlers comments are only partial correct in that vicarious liability would hold the brokerage liable for the actions (whether negligent or fraudulent) and franchisors would not be liable under this legal principal.

    Interesting enough I don’t recall the last time any of the big banks have been in the media for allegations of mortgage fraud only mortgage brokers and all the company executives never step up to the plate for the wronged consumer, rather state all industries have bad apples, and they would never have allowed such conduct. Further, William Priest-Phillips of Nackawic, and his company Priest Phillips Management which was also a franchise operating under the name of DLC was convicted of a ponzi scheme with similar allegations to the Collingwod broker, which while not proven, even the OPP described as ‘fraud.’

  • Ron Butler on 2014-04-29 11:27:26 AM

    @ ON Consumer, I think it is fair to believe that occasionally a bank's employee acts improperly or engages in fraud. There was a well publicized case in Vancouver with a BMO branch person and mortgage specialist that were sued by the bank with losses both to the bank and consumer involvement. It is fair to say that when bank employees deal improperly with clients the bank steps up to the plate with a remedy for the consumer. Sometimes litigation is needed to reach a conclusion.

    I believe a fair comparison here is the securities and mutual fund industries. Sometimes in the case of consumer losses the parent companies step up and sometimes they do not. Each case stands on its merits. I think when a broker or agent acts completely on their own to engage in a Ponzi scheme using documents totally outside the franchise or the networks knowledge or understanding there has to be a remedy that is directed at the perpetrator not the umbrella organization.

  • ON Consumer on 2014-04-29 11:38:59 AM

    I fully agree that it doesn't matter the company the morals (or lack theroe) occur anywhere. BMO eventually paid the customer ... several months later most likely with a confidentiality clause since the story went away. I also think the banks have more capital at their discretion to pay these matters off prior to any negative media exposure.

  • Paul F. on 2014-04-29 11:45:26 AM

    Toronto Broker, get real and get informed. DLC and Verico do more due diligence than the other brokerages you mentioned. Plus the individual offices do their own due diligence. I know many agents with the firms you promoted that should be run out of business due to fraud, unreasonable fees, etc. Every industry has bad apples, every brokerage is susceptible to bad apples at some point in time. Before you throw names out there in a negative way...first, be man enough or woman enough to show who you are and secondly, do your homework. I wish there was a 'Like' button to Ron's response.

  • John on 2014-04-29 2:48:24 PM

    @Paul F. Are you kidding me? obviously you have no clue what you are talking about!

    If you did, you would not make a stupid comment like this.

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