Neither regulator detailed why the deadline was being pushed back, but said 'additional details regarding the transfer will be provided next year.'Philip Cheung
A major anticipated change in the regulation of syndicated mortgage investments in Ontario is being pushed back six months to July, 2020.
The Ontario Securities Commission was expected to assume oversight in January for complex syndicated mortgage products from the Financial Services Regulatory Authority, the provincial regulator that oversees mortgage brokers. But in a news release Wednesday, the two regulators said the transfer has been delayed.
In March, the Canadian Securities Administrators, the umbrella organization for Canada’s provincial and territorial securities regulators, notified the public that its members were harmonizing the rules around syndicated mortgages in each jurisdiction and that those rules would go into effect at the start of 2020.
For Ontario, harmonization was supposed to bring the province in line with other jurisdictions, such as British Columbia, and meant that regulation of syndicated mortgages would fall to the OSC rather than the FSRA. The FSRA oversees, among other financial services, mortgage brokers and credit unions.
On Wednesday, however, in a joint statement, both the OSC and FSRA announced the deadline for the handover has been extended. In a release, the regulators said the new regime is expected to be in effect in July.
Neither regulator detailed why the deadline was being pushed back, but said “additional details regarding the transfer will be provided next year.”
In an e-mailed statement, Brian Jantzi, a spokesperson for the FSRA, said: “Shifts in timing are not unusual for an initiative this complex.”
The move has been in the works since at least 2016, when an expert panel recommended that the OSC was better equipped to regulate syndicated mortgages.
Syndicated mortgages surged in popularity over the past decade as retail investors hunted for alternatives to low-rate, fixed-income products. But the investments posed risks that many investors failed to understand, including the fact that their loans often ranked behind other secured creditors in the event of default.
In 2018, a trustee took control of a mortgage brokerage firm affiliated with Fortress Real Developments Inc., which was Canada’s largest arranger of syndicated mortgage loans for developers. Fortress helped developers raise $920-million from 14,000 Canadians, some of whom saw their investments wiped out when the projects failed.
Another company that arranged syndicated mortgage financing from retail investors, the Tier 1 group of companies, was placed into receivership. A group of Tier 1 investors has launched a proposed class-action lawsuit against the Ontario government, alleging that the now disbanded Financial Services Commission of Ontario, which had been responsible for regulating such investment products (and which was replaced by the FSRA), failed in its duty to protect investors.
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