FINANCIAL SERVICES TRIBUNAL
2009 ONFST 39
Decision No. M0404-2009-1
IN THE MATTER OF the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c.29 (the “Act”), in particular sections 7-10, 14, 19, 21, 38 and 39;
AND IN THE MATTER OF Gavriel Yacubov;
AND IN THE MATTER OF a request for hearing pursuant to subsection 21(3) of the Act.
BETWEEN:
GAVRIEL YACUBOV
Applicant
- and -
SUPERINTENDENT OF FINANCIAL SERVICES
Respondent
BEFORE:
Mr. John M. Solursh Chair of the Tribunal and Chair of the panel
APPEARANCES:
Mr. Gavriel Yacubov, Applicant Mr. Joe Nemet, counsel, representing the Respondent, the Superintendent of Financial Services
HEARD:
December 2, 2009
REASONS FOR DECISION
A. Background and Relevant Facts
The Act requires persons and entities engaged in certain dealings and mortgages to be registered as provided therein. These provisions came in to force on July 1, 2008.
The following summary of facts is based on the testimony of Ms. Yen Quan Low Sin, Senior Registration Specialist, Licensing Registration and Analysis Unit of the Financial Services Commission of Ontario (“FSCO”), the book of documents filed by the Superintendent with the consent of Mr. Yacubov and identified during Ms. Yen Quan Low Sin’s testimony and the testimony by Mr. Yacubov including his responses to questions put to him during cross examination by the Superintendent’s counsel.
Mr. Yacubov accepted as accurate the book of documents filed by the Superintendent. It is clear from the documents and Mr. Yacubov’s testimony that he submitted an application as a sole proprietor for a mortgage brokerage licence under the Act. In his application Mr. Yacubov stated that he would have in place by July 1, 2008 the required errors and omissions insurance (“E&O Insurance”) in accordance with the Act and related regulations. That application was received by FSCO on May 28, 2008 and Mr. Yacubov was granted a brokerage licence effective on July 1, 2008.
Mr. Yacubov testified that he was a licensed real estate broker. The business of his real estate brokerage declined significantly due to the economic downturn after the date of the application for his mortgage brokerage licence. He had intended to become active in the mortgage brokerage business but eventually decided to defer activity in that business until economic circumstances improved. He did not do any mortgage brokerage transactions on or after July 1, 2008 until the date of the hearing and he does not have any current plans to do any such deals.
Mr. Yacubov was aware as a real estate broker that obtaining a mortgage brokerage licence by July 1, 2008 would enable him to qualify for an initial exemption from the educational requirements under the Act and related regulations granted to licensed real estate brokers. He was not focused on making long term use of that exemption and instead took a course required to meet the educational requirements under the Act sometime following July 1, 2008 at a cost of approximately $400.00.
Mr. Yacubov acknowledged that he was aware of the need to obtain the requisite E&O insurance. He obtained an estimate prior to November 1, 2008 as to the potential cost of that insurance in the range of $700.00. However, he did not intend to do any mortgage brokerage business due to the economic slow down. He had concluded that in view of the low level of activity in his real estate brokerage he lacked sufficient income or other assets to pay the premium required to obtain the requisite E&O insurance. Accordingly, he decided to defer purchasing the insurance until he had sufficient cash to cover that estimated cost. He also decided to defer incurring what he anticipated were other costs required to start up a mortgage brokerage business.
Mr. Yacubov stressed that he never intended to carry on a mortgage brokerage business prior to obtaining the requisite E&O insurance. He still hoped to get into the business at a future date.
On November 26, 2008 FSCO sent an urgent, standard form message addressed to Mr. Yacubov’s email address. This email message stated that:
the principal broker was responsible for insuring that the mortgage brokerage complies with every requirement of the Act,
advised that the mortgage brokerage was found, as a result of an audit to have failed to obtain E&O insurance as of October 15, 2008,
emphasized the importance of the requirement to have E&O insurance and that a failure to obtain such insurance could lead to enforcement action, including an administrative penalty and revocation of licence,
noted that the only acceptable insurance was specific E&O mortgage broker insurance secured from one of five FSCO-approved insurance providers, which were listed,
advised that E&O insurance coverage that might be held through RECO only applied to transactions under the