Participants in Ontario’s syndicated mortgage markets have had to address, and plan for, a lot of regulatory change in the past year. Among other things:
- In March, the CSA published for comment a revised, oversight framework for syndicated mortgages (2019 Proposals). Among other things, the prospectus and registration exemptions for securities that are syndicated mortgages (Mortgage Exemptions) will be eliminated in Ontario and various other jurisdictions once the rules are finalized. For unregistered market participants that are in the business of trading syndicated mortgages, this proposed regulatory change has meant that they have needed to determine if another registration exemption is available or if they need to become registered.
- In June, the Financial Services Regulatory Authority (FSRA) took over regulatory oversight of mortgage brokers from the Financial Services Commission of Ontario (FSCO). For mortgage brokers trading in “non-qualified” syndicated mortgages, being subject to FSRA’s oversight was supposed to be a short-term experience, since the CSA’s 2019 Proposals contemplated the transfer of oversight over this sub-sector from FSRA to the OSC. (But that “short” term is not so short after all. See below.)
- In August, FSRA proposed additional requirements for high-risk syndicated mortgages marketed to retail investors. That framework took effect in November.
- In December, the OSC and FSRA announced a delay in the transfer of regulatory oversight of non-qualified syndicated mortgages from FSRA to the OSC. The regulators now expect that the transition will occur in July 2020. For brokers dealing in non-qualified, high-risk syndicated mortgages, this means that these transactions continue to be subject to FSRA’s new disclosure requirements and oversight regime.
- FSRA, however, has taken steps to relieve some of that regulatory burden for mortgage brokers dealing with sophisticated investors. Specifically, in December FSRA introduced shorter versions of the required forms, which are complemented by information contained in the brokers’ own documents. FSRA currently does not have the kind of exemptive relief power that would enable it to completely eliminate the requirements for mortgage brokers to provide the required information to investors and get investors to sign the forms back. FSRA’s form amendments, however, should reduce the regulatory burden for mortgage brokers dealing with sophisticated investors, as an interim measure until regulatory oversight is transferred to the OSC in 2020.