Catala v. Superintendent of Financial Services, 2012 ONFST 21

FINANCIAL SERVICES TRIBUNAL

2012 ONFST 21

Decision No. M0497-2012-1

Date: 2012/08/02

IN THE MATTER OF the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c.29, and in particular sections 7 -10, 14 and 21;

AND IN THE MATTER OF Krystian Catala;

AND IN THE MATTER OF a request for hearing pursuant to subsection 21(3) of the Act.

BETWEEN:

KRYSTIAN CATALA

APPLICANT

• and -

SUPERINTENDENT OF FINANCIAL SERVICES

RESPONDENT

BEFORE:

Florence A. Holden Vice Chair of the Tribunal and Chair of the Panel

Denis Boivin Member of the Tribunal and of the Panel

Jennifer Brown Member of the Tribunal and of the Panel

APPEARANCES:

For the Applicant: Mr. Krystian Catala, the Applicant, in person

For the Superintendent of Financial Services: Mr. Robert Conway, Counsel

HEARD: July12, 2012

DECISION

This is a decision upon a hearing requested pursuant to s. 21(3) of the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c. 29 (the “Act”), with respect to a Notice of Proposal to Refuse Application (NOP) dated January 31, 2012, issued by the Executive Director, Licensing and Market Conduct Division, by delegation from the Superintendent of Financial Services (the “Superintendent”). The NOP proposed to refuse to issue a licence to the Applicant to act as a mortgage agent. Based on all of the circumstances we have determined that Mr. Catala should be granted a mortgage agent’s licence subject to conditions as discussed below.

The reasons for our decision follow.

A. Procedural Background

Mr. Catala made a prior application for a mortgage agent licence in May 2010 which was withdrawn in June of 2010. In the matter before us, we are treating the current application as his first application since the Act came into force on July 1, 2008. The Superintendent proposed to refuse the application on the basis that he is not suitable to be licenced because:

1. Mr. Catala’s past criminal conviction provide reasonable grounds for belief that he would not deal or trade in mortgages in accordance with the law and with honesty and integrity;

2. Mr. Catala made a false statement to the Superintendent with respect to his application; and

3. Mr. Catala’s maintenance of a “Linked in” profile on the internet which the Superintendent suggests portrayed Catala as a mortgage broker even though he is not licenced as a mortgage broker or agent.

B. Statutory Framework

The Act requires that mortgage agents be licensed by the Financial Services Commission of Ontario (s. 2(3)), operating on behalf of mortgage brokerages. Agents are generally licensed on two-year licensing cycles, at the end of which they must apply for a renewal of their licence and have their qualifications and suitability reassessed by the Superintendent. (O. Reg. 409/07, s. 8.1).

The legal basis for the proposed refusal of the licence is s.14(1) of the Act. That subsection provides:

The Superintendent shall issue a licence to an applicant who satisfies the prescribed requirements for the licence unless the Superintendent believes, on reasonable grounds, that the applicant is not suitable to be licensed having regard to such circumstances as may be prescribed and such other matters as the Superintendent considers appropriate.

This provision of the Act is supplemented by s. 10 of the O. Reg. 409/07, which provides:

10. In determining whether an individual is not suitable to be licensed as a mortgage broker or agent, the Superintendent is required by subsections 14(1) and 16(4) of the Act to have regard to the following prescribed circumstances:

11. Whether the individual’s past conduct affords reasonable grounds for belief that he or she will not deal or trade in mortgages in accordance with the law and with integrity and honesty.

12. Whether the individual is carrying on activities that contravene or will contravene the Act or the regulations if he or she is licensed.

13. Whether the individual has made a false statement or has provided false information to the Superintendent with respect to the application for the licence.

Section 11(4) of the Act provides:

(4) No person or entity shall use in Ontario a description that might reasonably be expected to lead to the belief that he, she or it is a mortgage broker unless he, she or it is licensed as a mortgage broker.

Prior jurisprudence makes it clear that the Tribunal hears these cases de novo; it must make its own independent determination as to the suitability of the applicant to be licensed and owes no deference to the Superintendent’s determination in coming to its own conclusions: see Henderson v. Superintendent of Financial Services, FST Decision No. M0319-2008-1, p.8; Alves v. Superintendent of Financial Services, FST Decision No. M0315-2008-1, p.10; Anandappa v. Superintendent of Financial Services, FST Decision No. M0320-2008-1, p.8; Glaude v. Superintendent of Financial Services, FST Decision No. M0325-2008-1, p.7; Patrice De-Ann Gooding v. Superintendent of Financial Services, FST Decision No. M0326-2008-1, p. 3.

C. The Facts

We find the following facts based on an Agreed Statement of Facts and Agreed Book of Documents filed with the Tribunal and on the basis of Mr. Catala’s own evidence. The Superintendent called no witnesses.

1. Past Conduct

a. Mr. Catala was charged on June 14, 2009 with eight counts of trafficking in a controlled substance namely cocaine and two counts of possession of a controlled substance, also cocaine. These offences took place between March and June 2009 at a family business managed by Mr. Catala. At the time, Mr. Catala was addicted to cocaine.

b. Mr. Catala pled guilty to the trafficking charges on May 27, 2011. He was given a conditional sentence of twelve months and two years’ probation following completion of the conditional sentence (expiring in June of 2014). Because the sentence was conditional there was no need to serve custodial time.

c. In the court’s reasons for judgment issued May 27, 2011, Justice Hogan took a positive pre-sentencing report into account, which recognized that Mr. Catala had made positive changes to his life since his arrest. He resumed his university studies, got married and completed substance abuse counseling in April 2011. He had followed the conditions of his bail and had not re-offended. Consequently the court felt a custodial sentence was not warranted in the circumstances.

d. Mr. Catala expressed remorse both during his criminal hearing and before this Tribunal and we accept that his actions were a serious event, but occurred as a result of his addiction over a short period of time, and were not a prolonged or repetitive pattern of behavior. It was clear to us that he is embarrassed by his conduct and the hurt caused to his family. He made no attempt to excuse or minimize the nature or seriousness of his offence. Since the offence in 2009 he has not re-offended and has completed his conditional sentence, but not his probation.

e. Mr. Catala also had a period of prior employment within the financial industry for five years in mortgages prior to the requirement to be licensed under the Act. There was no evidence before us that there were any problems with his job performance during that employment.

f. Mr. Catala has made arrangements to work with a licensed mortgage broker, Jonathan Chan of Mortgage Alliance Accumetrix in the event he obtains his mortgage agent licence. Mr. Catala indicated Mr. Chan is fully aware of these proceedings and of the Applicant’s past criminal conviction and provided a supporting letter from Mr. Chan. Mr. Catala’s job prospects will depend on the outcome of this hearing.

2. False Statement to the Superintendent in Relation to Licence Application

a. When questioned by FSCO staff as to his then pending charges of trafficking, Mr. Catala first responded on May 26, 2010 by email that he was not guilty of the charges and planned to plead not guilty, as was his right. He indicated in 2010 that he was charged as an owner of the establishment who was present when a patron was arrested for trafficking. Mr. Catala’s evidence before the Tribunal was that his response was based on legal advice he received at the time of the charge and advice not to self-incriminate. As the drugs he acquired were for his personal recreational use and not for personal financial gain, he did not believe at the time of his statement in May of 2010 that he was guilty of the offence of trafficking. He reiterated that he did not lie at the time and had no intention to deceive FSCO staff. Subsequently he learned that he could be convicted of the charge and changed his plea to guilty at trial. He did not try to hide his conviction on his application.

b. There appeared to be a lack of clarity in the evidence presented to the Tribunal as to when Mr. Catala made the licence application under review. He maintains it was in June of 2010 as a result of him changing the brokerage where he would be employed; counsel for the Superintendent suggests in the NOP that the application was on January 5 or 25, 2011. A photocopy of the Application printed on January 4, 2011 is unclear in our view as to establishing the date of application, but indicates it was at least made by that date. We accept the Applicant’s reasons for the withdrawal of the first application and make no finding of the date of filing of the application under review but do not believe anything turns on it. The Superintendent presented no evidence that the Applicant would otherwise be ineligible for a licence except on the bases outlined above.

c. When further questioned by FSCO staff on June 9, 2011 following his conviction, based on the transcript of the interview provided to the Tribunal, the Applicant indicated that he bought drugs for personal use, not financial gain. His evidence to FSCO staff on this date was consistent with the evidence he gave to the Tribunal in our view.

We find as fact that he did not give false statements to the Superintendent in relation to his licence application in respect to the criminal charges.

3. Carrying on Activity that Contravenes section 11(4) of the Act

a. The Applicant maintained a “Linked- in” profile on the internet that indicated under “Experience” listed the words “Mortgage Brokers” and “Mortgage Alliance” and the phrase “Mortgage brokers at Mortgage Alliance”. The Superintendent maintains that this description could be reasonably expected to lead to the belief that Mr. Catala is a mortgage broker. The account however equally lends itself to other interpretations. For example, a profile may indicate under “Experience” industry-related experience such as financial services without leading to the reasonable conclusion that the person is a banker, lender, accountant, or mortgage broker, etc. but simply that the employer of the person profiled is in that industry.

b. No clear evidence was presented to the Tribunal as to the date of the posting, but we accept the Applicant’s testimony that it was posted following his application to FSCO for a mortgage agent’s licence by his wife in May 2010. On the undated photocopy provided by counsel for the Superintendent the site indicates 11 connections. The Applicant indicated he did not know who those connections were and had been unaware that the account had been created.

c. Mr. Catala indicated that he was unaware of the Linked-in profile but upon learning of it in the NOP he shut it down immediately; at February 9, 2012 there was one connection and Mr. Catala indicate that it was his wife’s web designer. We accept his evidence that he was well aware of the difference between a mortgage broker and a mortgage agent and would not have knowingly represented himself as a licensed broker at the time of creation. Contrary to Mr. Conway’s vigorous assertions otherwise, we find it credible that Mrs. Catala may have acted of her own accord without her husband’s knowledge. As we find Mr. Catala did not post the profile, he is not in breach of s. 11 (4).

d. Further, we find that there is little information on the account as to Mr. Catala’s job or qualifications and no other evidence was presented to the Tribunal with respect to the posting that the Applicant was engaged in the business of mortgages or at any time represented himself to anyone as a licensed agent or broker.

Consequently we find that the Applicant did not contravene section 11(4) of the Act. Further, we give these facts no weight in our assessment as to whether or not Mr. Catala is suitable to be licensed.

D. DECISION

Based on our findings of fact, the only remaining issue for analysis is the first one, namely whether Mr. Catala’s past conduct affords reasonable grounds for belief that he will not deal or trade in mortgages in accordance with the law and with integrity and honesty. Mr. Catala requested that a licence be granted and was prepared to accept whatever conditions that the Tribunal sought to impose. Mr. Conway took the position that Mr. Catala’s criminal conviction for a serious offence did provide such grounds, mainly on the basis that insufficient time had passed to ensure that there would be no reoccurrence of criminal behavior. Further Mr. Conway suggested the Applicant was not an appropriate candidate for supervision and offered no suggestions to the Tribunal as to acceptable terms. With respect we disagree with the Superintendent. In so doing, the Tribunal does not downplay the seriousness of the offence of which the Applicant was convicted. He has paid the penalty of criminal conviction, restrictions on his freedom of movement while under sentence, and inability to pursue a career in mortgage agency due to the refusal to licence him.

In addition, as noted in Glaude, even when the applicant is on probation:

“the past conduct must still be evaluated on relevant considerations. Where an individual is on probation it may be unlikely that a sufficient time will have elapsed for an individual to have an opportunity to exhibit a sufficient degree of redeeming behaviour to allow a conclusion to be reached that unlawful behaviour will not reoccur, but each case must be considered on its own facts.” (p.9)

In considering the merits of each case, we look to the factors outlined in Henderson v. Superintendent of Financial Services, FST File No. M0319-2008 as relevant to a determination as to whether past misconduct continues to afford reasonable grounds for a belief that the applicant will not deal or trade in mortgages in accordance with integrity and honesty. As previously noted in prior cases by this Tribunal, that list of factors was not intended as the definitive checklist to be applied in all cased of past misconduct.

1The time that has elapsed since the conduct occurred.

The past conduct took place from March 8 to June 14, 2009, three years ago.

2The prolonged or repetitive nature of the conduct.

As noted previously, in our view and that of the trial judge in Mr. Catala’s criminal case, his actions occurred as a result of his addiction over a short period of time, and in our view did not represent a prolonged or repetitive pattern of behavior.

3The advertent or inadvertent nature of the conduct.

There is no question that Mr. Catala’s conduct was advertent.

4The extent to which the conduct can be taken to call into question the integrity, honest and law abiding nature of the individual.

Mr. Catala's conduct does call into question, to some extent, his honest and law abiding nature. However that conduct occurred in circumstances which suggest that his conduct was related to his addiction and not necessarily indicative of a propensity to act dishonestly and without regard for the law.

Factors in the Applicant’s favour include:

• The plea of guilty at trial;

• The Applicant has taken courses to satisfy educational requirements for the present licence sought, and in anticipation of growing responsibility should he be permitted to resume his career.

• Mr. Catala appears genuinely remorseful for his past conduct, did not seek to minimize his conduct before FSCO in January 2011 or before this Tribunal, and appears to accept full responsibility for it;

• He fully disclosed his criminal conviction to FSCO in the course of the application procedure under review;

• He appears to have fully disclosed his past conviction to his future broker and the broker, Mr. Chan, appears to be prepared to work with the Applicant to implement appropriate safeguards for reviewing his work; and

• While he continues to be on probation, Mr. Catala has, in our view, demonstrated a consistent pattern of reformed or redeeming conduct.

5The closeness of the context of the conduct in the context of activities in which the individual would be engaged as a mortgage agent.

Mr. Catala’s criminal offense is unrelated to the work of a mortgage agent.

6The fairness of any process involved in holding the individual to account for his or her conduct.

Mr. Catala has not challenged the fairness of the criminal process that led to his conviction and sentencing on the charges that arose out of his conduct. He was represented by legal counsel and appears to us to have understood the consequences of his guilty plea.

7The seriousness with which the court or other body holding him to account treated the conduct as reflected in the severity of the sanction it imposed.

He was given a conditional sentence of twelve months and two years’ probation following completion of the conditional sentence (expiring in June of 2014). Because the sentence was conditional there was no need to serve custodial time. The transcript of the sentencing process was provided to this Tribunal. It appears that the court took into account Mr. Catala’s drug addiction at the time of the offence, his subsequent substance abuse counseling, compliance with bail conditions over the prior two years, lack of prior criminal record, remorse and positive pre-sentence report in deciding to impose a conditional rather than custodial sentence, notwithstanding the serious nature of the offence.

8Any unusual and severe pressure the individual was under at the time of the conduct that would explain the conduct but is unlikely to reoccur.

We accept the Applicant’s evidence that at the time the offences were committed he was suffering from cocaine addiction and a certain level of depression at his limited future prospects. He was heavily engaged in a family business at the time and had the related pressure of familial expectation. With the exception of the addiction, the Tribunal does not consider the other circumstances unusual and severe or likely to reoccur in the event Mr. Catala remains in the mortgage business. We understand that he is otherwise self-employed in a joint catering business with his wife and operates vending machines. Of course we cannot predict with complete certainty the likelihood that Mr. Catala may become re-addicted to drugs. That possibility always exists, but we are prepared to rely on Mr. Catala’s recognition of his situation, drug rehabilitation program and on-going attempts to positively change his life, and hope that he does not regress.

9Any consistent and prolonged pattern of reformed or redeeming behavior on the part of the individual since the conduct occurred.

Since Mr. Catala’s arrest he has satisfied the conditional sentence and has testified that he remains drug-free and does not appear to have been the subject of any further charges. Three years have passed without incident during which Mr. Catala had taken the necessary course to qualify for his licence. Mr. Conway’s position is that it is too early to grant a licence as Mr. Catala is still on probation.

In our view, any public interest concerns about Mr. Catala’s past conduct, particularly in regard to public perception and public confidence as it relates to the integrity of the licencing system, can be adequately addressed by attaching conditions to his licence. We turn now to that issue.

E. CONDITIONS

We did not receive any submissions by counsel as to appropriate conditions but have reviewed the cases referred to by Mr. Conway as well as similar cases and determined, that it is appropriate to attach the following conditions to Mr. Catala’s licence, which licence we grant effective from the date of this decision:

1. Mr. Catala shall work as a mortgage agent only on the basis that his work shall be reviewed by a licensed broker for his employer.

2. Mr. Catala shall notify the Superintendent of Financial Services immediately in the event that he is the subject of any further criminal charges or convictions or his probation is revoked.

3. Once every six months from the date his licence is issued until its expiry, Mr. Catala shall provide to the Superintendent of Financial Services a statement signed by both himself and his supervising broker, certifying that he has complied with the conditions of this licence.

4. Mr. Catala shall continue to comply with the terms of the probation order imposed upon him by the Ontario Court of Justice as a result of his conviction on May 27, 2010.

5. Mr. Catala shall continue to meet all statutory conditions imposed on mortgage agents.

F. ORDER

Accordingly, we direct the Superintendent to withdraw the NOP and to issue a Mortgage Agent’s Licence to Krystian Catala, subject to the following conditions:

1. Mr. Catala shall work as a mortgage agent only on the basis that his work shall be reviewed by a licensed broker for his employer.

2. Mr. Catala shall notify the Superintendent of Financial Services immediately in the event that he is the subject of any further criminal charges or convictions or his probation is revoked.

3. Once every six months from the date his licence is issued, Mr. Catala shall provide to the Superintendent of Financial Services a statement signed by both himself and his supervising broker, certifying that he has complied with the conditions of this licence.

4. Mr. Catala shall continue to comply with the terms of the probation order imposed upon him by the Ontario Court of Justice as a result of his conviction on May 27, 2010.

5. Mr. Catala shall continue to meet all statutory conditions imposed on mortgage agents.