Easy Way Financing Inc. v. Superintendent of Financial Services
FST Decision No.: M0390-2009-1
Date of Decision: July 14, 2009
Panel Member: Colin McNairn
Parties to hearing: Easy Way Financing Inc.
The Superintendent of Financial Services
Subject: Order to Pay Administrative Monetary Penalty
The Superintendent issued a Notice of Proposal to Impose an Administrative Monetary Penalty of $1,000 on account of the failure of Easy Way Financing Inc. (“EWF”) to obtain and maintain errors and omissions liability insurance (“E&O insurance”) as required pursuant to O. Reg. 188/08, section 42 of the Mortgage Brokerages, Lenders and Administrators Act, 2006 (“Act”).
The Tribunal directed the Superintendent to carry out his proposal to impose an Administrative Monetary Penalty upon EWF in the amount of $1,000.
In its application for a mortgage brokerage licence, EWF checked the box indicating that it understood that it was required under the Act to have E&O insurance in place by July 1, 2008. Checking that box indicated that EWF must have known, or should have known, that it would require E&O insurance by July 1, 2008. Furthermore, EWF must have known, or should have known, about the requirement because of the Superintendent’s extensive communications to the mortgage brokerage community about the requirements of the Act.
EWF’s claim that it was under the misconception that its E&O insurance through the Real Estate Council of Ontario (“RECO”) would satisfy the requirement for E&O insurance under the Act was lacking in credibility. If EWF believed that its E&O insurance through RECO satisfied the E&O insurance requirement under the Act, it would have checked the box that stated that EWF already had the E&O insurance required under the Act. Instead, it checked the box that said it would have the required E&O insurance by July 1, 2008.
The Tribunal also found that EWF’s claim of a misconception about the E&O insurance through RECO was lacking in credibility, because EWF gave a different explanation later on. It said that it did not obtain the required E&O insurance coverage under the Act because of financial difficulties.
The Tribunal did not consider the difficult financial circumstances of EWF and its Principal Director to be sufficient reason for refraining from ordering the Superintendent to impose an administrative penalty on EWF.
The Tribunal concluded that $1,000 was an appropriate administrative monetary penalty based on the criteria in section 3 of the Administrative Monetary Penalties Regulation:
• EWF failed to comply with the E&O insurance requirement because it acted recklessly in not informing itself about the nature of the requirements imposed on mortgage brokerages under the Act;
• it did not take the necessary steps to ensure that it would receive email communications from the Superintendent’s staff about those requirements;
• it did not actively pursue E&O insurance even after the Principal Broker was fully aware of that requirement;
• it undertook several mortgage transactions while it was without E&O insurance, and thereby exposed its clients to potential harm for lack of any insurance to reimburse the clients for any losses they incurred through EWF’s fault;
• it did not take any remedial action to rectify its non-compliance until around 3 weeks after the Superintendent issued a Notice of Proposal to Revoke Licence, a Notice of Proposal to Impose an Administrative Monetary Penalty of $1,000, and an Interim Order to Suspend Licence;
• it received an economic from its failure to comply with the E&O insurance requirement in that it saved the expense of the insurance while carrying on a mortgage brokerage business.
Cases referred to:
Chen v. Superintendent of Financial Services (FST Decision No. M0359-2009-1)
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