A broker recently received a massive regulatory fine and the case serves as a good reminder for industry players to brush up on their compliance knowledge, according to one industry veteran.
The B.C. Securities Commission ordered a Lance Sanford Cook, a Victoria-based mortgage broker, to pay over $200,000 in fines for issuing interest-bearing promissory notes without filing a prospectus to clients – a breach of the securities act.
“CMBA has been following this proceeding as many mortgage brokers are not aware that it is unlawful for them to issue promissory notes without being registered under the applicable provincial Securities Act or relying on an available exemption,” Samantha Gale
, CEO of the Canadian Mortgage Brokers Association, said in an email to MortgageBrokerNews.ca. “Unlike mortgages, promissory notes are simple, uncomplicated documents – but the regulation behind promissory notes is anything but simple and is exceptionally complicated.”
Cook has been barred from trading and was forced to close her brokerage, along with the fines.
According to Gale, the case should serve as a reminder to brokers about importance of compliance awareness.
“In the case of Cook, the BC Securities Commission ordered Cook to pay the sum of $218,500 as disgorgement for wrongly taking monies without following the securities rules,” Gale said. “The disgorgement amount of $218,500 is higher than any amount paid under a mortgage broker regulatory regime that I am aware of.
“The important message here is that brokers need to be aware of the securities requirements when issuing promissory notes, as the costs for non-compliance can be profoundly significant.”
CMBA has published a note on promissory notes and the required compliance. Click here to read it
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