I’ve watched the mortgage industry grow over many years, and I’ve always been an advocate and supporter of those who possess the true entrepreneurial spirit and who have tried to make it on their own under their own brand – legitimately, that is. That said, there are many in our industry who have been grossly misinformed as to what’s legitimate and within the confines of the law versus what they’ve been told by those more focused on serving their own interests.
I’m here to set the record straight for those who care to listen and abide by the law: the law that serves to protect the consumer, the insurers, the regulator, our lender partners – and yes, even the proprietor who likely believes they’re operating above board.
There are far too many groups in our industry today that advertise their own brand without having a registered brokerage licence number, and often it’s because they’ve been led to believe that it’s OK to do so as long as they place the actual brokerage licence number or network they’re technically affiliated with on their web page. This is simply not the case, and if you fall into this category, you’re not only breaking the law, but you’re also exposed to serious liability that most brokers don’t see coming.
To offer up just one example, let’s suppose your ‘unlicensed’ entity has an issue with a lender loss based on either fraud, a misrepresentation, an error or just plain ignorance, for that matter. If you are not a properly licenced brokerage with the regulator in your jurisdiction, and you’ve put yourself out there to the public as a registered brokerage, you are now exposed to the exclusion clause overriding the coverage you may have thought you had under an E&O policy that, frankly, doesn’t recognize your brand.
In a case like this, some would argue that they were misled when told that carrying their own brand without being properly licensed was perfectly legal and that they were operating within the confines of their jurisdictional act. Unfortunately, they would lose this argument in a court of law should a resulting liability lead to claim, because in most cases, they would have either been misinformed or not bothered to take the time to carefully review their contract with their affiliate brokerage or network, which would make them solely responsible to follow any and all regulatory requirements.
For instance, if Prime Rate Mortgage Broker was the legally licenced brokerage entity through the regulator, and a number of its agents chose to create an unlicensed entity called the Best Rate Mortgage Group, this entity would technically be operating in contravention of the law, regardless of whether or not it displays the brokerage number of the licenced entity on its marketing material.
The Mortgage Brokers Lender and Administrators Act [MBLAA] covers this very issue and more under the ‘Public Relations’ heading, stating that “a brokerage licence is issued either in the legal name of the corporation, partnership or sole proprietorship, or in the legal name and one other name that is registered to the corporation, partnership or sole proprietorship under the Business Names Act.” The MBLAA goes on to say that “a brokerage shall not carry on business in a name other than its authorized name,” including “use of name, etc., in public relations materials.”
As a member of the advisory group of the newly formed Ontario regulatory body FSRA, I can tell you that one of the items placed on the agenda in an effort to better protect the public is how to address the mass misconception in the industry that agents can use and advertise sub-company names not registered as the brokerage of record.
Should you fall in this category, do yourself a favour: Do your research, read your contracts carefully, and better yet, know the law in your jurisdiction. If your goal is to operate under your own brand, the right way to do it is to officially register your own firm with the regulator and start your own brokerage.
John Bargis is executive vice-president of Mortgage Edge and a founding member of the Coalition of Independent Mortgage Brokers of Canada [CIMBC].