Citation: Olsen v. Ontario (Superintendent Financial Services), 2016 ONFST 12 Decision No. M0655-2015-1 Date: 2016/04/14

IN THE MATTER OF the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c.29 (the “Act”), in particular sections 29, 38 and 39;

AND IN THE MATTER OF the Notice of Proposal to Impose an Administrative Monetary Penalty against Kelly Olsen, dated September 16, 2015, issued by the Executive Director, Licensing and Market Conduct Division by delegated authority from the Superintendent of Financial Services;

AND IN THE MATTER OF a request for hearing pursuant to subsection 39(5) of the Act.

and

BEFORE:

Denis Boivin Chair of the Panel and Vice-Chair (Acting) of the Tribunal

For the Applicant – Kelly Olsen, self-represented

For the Superintendent of Financial Services – Michael Spagnolo, counsel

DATE HEARD:

February 12, 2016

1Kelly Olsen is the Applicant in this matter. She is currently licensed as a mortgage agent under the terms of the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, C.29 (the “MBLA Act”) and its regulations. On September 16, 2015, an authorised delegate of the Superintendent of Financial Services (“Superintendent”) issued a Notice of Proposal (“NOP”) in which he proposes to impose an administrative monetary penalty (“AMP”) of $1,000 on her. In the NOP, it is alleged that Ms. Olsen failed to respond to a request for information, contrary to subsection 29(2) of the MBLA Act. This request for information relates to an online questionnaire administered by the Financial Services Commission of Ontario (“FSCO”) in the winter of 2014.

2For the following reasons, I conclude that Ms. Olsen has contravened subsection 29(2) of the MBLA Act and that an AMP is appropriate. However, after taking into account the prescribed circumstances, I am ordering the Superintendent to impose a monetary penalty in the revised amount of $500.

II. Issues

3The Prehearing Conference Memorandum and Notice of Hearing that were prepared for this matter identify three issues:

a. First, did Ms. Olsen fail to provide the Superintendent with the information requested via questionnaire initially sent on January 17, 2014, contrary to subsection 29(2) of the MBLA Act?

b. Second, if the answer to issue (a) is yes, is the imposition of the proposed AMP appropriate within the meaning of section 38 of the MBLA Act? Will it promote compliance with requirements established under the MBLA Act and/or prevent Ms. Olsen from deriving an economic benefit from her non-compliance?

c. Third, if the answer to issue (b) is yes, what is the appropriate amount for the AMP, taking into account the criteria contained in section 3 of Ontario Regulation 192/08?

III. FACTS

4The parties did not file any Agreed Statement of Facts or Agreed Book of Documents. Counsel for the Superintendent called one witness, Ms. Elena Schneider, a FSCO Regulatory Discipline Officer familiar with Ms. Olsen’s case. He introduced sixteen documents as exhibits to her testimony, but did not file any Affidavit. For her part, the Applicant testified and submitted one document to the Tribunal – a letter from her doctor. On the basis of the evidentiary record, I make the following findings of fact:

a. At all material times, Ms. Olsen was licensed as a mortgage agent under the terms of the MBLA Act and its regulations. As of the date of the Hearing, her licence was set to expire on March 31, 2016.

b. In an effort to gather information from the mortgage industry about the practices of brokerages, brokers and agents when formulating recommendations to clients, FSCO formulated the “Mortgage Brokering Questionnaire”, an online questionnaire to be directed to a large, randomly selected sample of mortgage brokers and agents.

c. On January 6, 2014, FSCO sent an email to all licensed mortgage brokerages, brokers and agents, including Ms. Olsen, informing them that FSCO would be launching the Mortgage Brokering Questionnaire on January 20, 2014, and that they may be selected as part of the sample to complete it. Recipients were informed that those selected would be notified by electronic mail and that, if selected, they would be required to complete the questionnaire no later than February 19, 2014. In addition, recipients were told that section 29 of the MBLA Act made their cooperation mandatory and that “[f]ailure to respond could result in regulatory action”.

d. Ms. Olsen was randomly selected as part of the sample required to complete the Mortgage Brokering Questionnaire.

e. On January 17, 2014, an email was sent by FSCO to Ms. Olsen. The subject-line of this message was as follows: “RESPONSE REQUIRED – FSCO’s Mortgage Broker/Agent Questionnaire”. The email informed Ms. Olsen that she had been randomly selected to complete the Mortgage Brokering Questionnaire and that her cooperation was mandatory, pursuant to section 29 of the MBLA Act. The Applicant was given a deadline of February 19, 2014, and she was told that failure to respond could result in regulatory action. A link to the questionnaire was provided for online access.

f. Three reminder emails were sent by FSCO to Ms. Olsen: the first on January 27th, the second on February 10th, and the third on February 14th. Each message had the following subject-line: “RESPONSE REQUIRED – FSCO’s Mortgage Broker/Agent Questionnaire”. In each message, Ms. Olsen was reminded that the Mortgage Brokering Questionnaire was mandatory and that her response was required by February 19, 2014. Also, each reminder contained a statement that failure to respond could result in regulatory action.

g. On February 20, 2014, the day after the February 19th deadline, FSCO sent another email to Ms. Olsen. Once again, the subject-line said: “RESPONSE REQUIRED – FSCO’s Mortgage Broker/Agent Questionnaire”. The Applicant was informed that the questionnaire was overdue, but that she was being given an additional opportunity to complete it by February 21, 2014, failing which regulatory action may be taken.

h. The electronic messages summarized in paragraphs 4(c), (e), (f) and (g) of these Reasons were all sent to the email address that Ms. Olsen provided to FSCO when she applied to renew her mortgage agent licence, on March 18, 2012 and March 26, 2014. This email address is identical to the one provided by Ms. Olsen to the Tribunal, on September 28, 2015, in her Request for Hearing.

i. Ms. Olsen did not respond to any of the six electronic messages summarized in paragraphs 4(c), (e), (f) and (g) of these Reasons.

j. On March 21, 2014, FSCO sent a registered letter to Ms. Olsen. The signatory of this letter was Anatol Monid, Director, Market Regulation Branch, Licensing and Market Conduct Division. The letter pointed out that Ms. Olsen had not replied to any of the six emails sent to her, but that FSCO was prepared to offer her a second opportunity to complete the Mortgage Brokering Questionnaire. The Applicant was told that the online questionnaire had been re-opened until April 7, 2014, and that this would represent her “final opportunity” to respond. She was also warned that failure to respond “will result in regulatory action”. [Emphasis added]

k. According to Canada Post tracking information, the registered letter mentioned in the previous paragraph was successfully delivered on March 26, 2014, and was accepted by someone named “Olsen”.

l. Ms. Olsen never responded to the registered letter sent to her by FSCO.

m. On September 16, 2015, the Executive Director of the Licensing and Market Conduct Division, by delegated authority from the Superintendent, issued a NOP to impose an AMP of $1,000 on Ms. Olsen for her alleged failure to respond to the request for information issued to her.

n. On September 28, 2015, Ms. Olsen filed a Request for Hearing. In this document, the Applicant says that she does not recall seeing any of the emails sent by FSCO regarding the Mortgage Brokering Questionnaire, and questions whether these messages may have ended-up in her junk folder – a folder that has now been deleted. Likewise, with respect to the registered letter, Ms. Olsen says that she does not recall receiving this letter, but adds that her husband is the person who picks up the mail in their household.

o. During the Hearing, Ms. Olsen gave testimony that is consistent with the statements made in her Request for Hearing; that is, she does not recall receiving the electronic messages or the registered letter sent by FSCO regarding the questionnaire.

p. Of significance, Ms. Olsen testified that she was going through a personal crisis at the relevant time and was suffering from depression. She presented a letter from her doctor to support her testimony on this point. According to this letter, Ms. Olsen “was being treated for significant anxiety and mood disorder including depression from November 2013 to April 2014 inclusive” and “she was under considerable stress” during this timeframe. Counsel for the Superintendent did not challenge Ms. Olsen’s evidence on this specific issue and I see no reason for rejecting either her testimony or the letter she presented to the Tribunal. Thus, I find that Ms. Olsen was suffering from depression and anxiety during the relevant timeframe.

5As discussed below, the finding made in paragraph 4(p) of these Reasons does not imply that the Superintendent has failed to establish a breach of subsection 29(2) of the MBLA Act or that an AMP would be inappropriate. In this particular case, the relevance of this finding is limited to the issue of whether Ms. Olsen’s contravention was intentional, reckless or negligent, a key factor that must be considered in assessing the amount of her penalty.

IV. analysis

a. Statutory Framework

6The authority to impose an AMP on a person or entity licensed under the terms of the MBLA Act is found in sections 38 and 39 of this Act. When these provisions are read together, they provide that the Superintendent or his authorised delegate may impose an AMP provided three conditions are met:

a. The licensee is contravening or not complying with or has contravened or not complied with a requirement established under the MBLA Act, other than a requirement for which a penalty is provided under section 40 or a requirement prescribed under subsection 55(5)(a) of the MBLA Act.

b. The penalty is aimed at promoting compliance with the requirements of the MBLA Act or at preventing the licensee from deriving any economic benefit as a result of contravening or not complying with a requirement established under the MBLA Act.

c. The Superintendent or his delegate has followed the procedural steps prescribed by subsection 39(2) of the MBLA Act regarding the notice that must be given to the person or entity who is facing the proposed penalty.

7In the present case, there is no dispute regarding the third condition; the only question is whether Ms. Olsen has contravened a requirement established under the MBLA Act and, if so, whether an AMP could accomplish either of the statutory purposes listed therein. With respect to the alleged contravention, counsel for the Superintendent relies on subsection 29(2) of the MBLA Act. Section 29, in its entirety, reads as follows:

(1) Every licensee shall give the Superintendent such information and documents as may be prescribed and shall do so in the prescribed manner and within the prescribed period.

(2) A licensee shall give the Superintendent such additional information and documents as the Superintendent may request and shall do so in the manner and within the period specified by the Superintendent.

8Pursuant to section 41 of the MBLA Act, the maximum penalty that may be imposed on a licensee such as Ms. Olsen for a contravention of subsection 29(2) is $10,000. In addition, Ontario Regulation 192/08 provides that the Superintendent is authorised to determine the amount of the AMP up to this limit, having regard only to the five criteria listed in section 3 of this Regulation. These criteria are discussed below, in paragraph 18 of my Reasons.

9One last provision is relevant to this proceeding. According to subsection 39(6) of the MBLA Act, when the Tribunal has held a hearing at the request of a licensee who is facing a proposal to impose an AMP, the Tribunal may, by order, direct the Superintendent to carry out the proposal, with or without changes, or substitute its opinion for that of the Superintendent. Thus, hearings held pursuant to subsection 39(5) of the MBLA Act are de novo hearings. The Tribunal need not show any deference to the Superintendent with respect to his determination of whether a proper basis exists for imposing a penalty on a licensee, or with respect to the amount of any penalty that is appropriate.

b. Issue 1: Was there a Contravention?

10The first issue is the following: did Ms. Olsen fail to provide the Superintendent with the information requested via questionnaire initially sent on January 17, 2014, contrary to subsection 29(2) of the MBLA Act?

11As noted, subsection 29(2) of the MBLA Act reads as follows: “A licensee shall give the Superintendent such additional information and documents as the Superintendent may request and shall do so in the manner and within the period specified by the Superintendent.” Generally speaking, this provision has two interrelated purposes. First, subsection 29(2) confers broad authority on the Superintendent to request information and documents from any person or entity licensed under the terms of the MBLA Act. Second, this provision imposes a statutory obligation on the licensee from whom said information is requested: this person must respond in the manner and within the timeframe specified by the Superintendent. This duty to respond is triggered once a request for information is made by the Superintendent and it constitutes a “requirement” within the meaning of subsection 39(1) of the MBLA Act, the breach of which may justify the imposition of an AMP.

12Turning to the facts of this case, there is no doubt that the questionnaire administered by FSCO in the winter of 2014 – the Mortgage Brokering Questionnaire – was an appropriate use of the authority conferred by subsection 29(2) of the MBLA Act. Likewise, it is clear that the Applicant failed to complete this questionnaire. Therefore, the only question is whether the steps taken by FSCO in order to convey this request for information were sufficient to trigger the duty imposed by subsection 29(2). In other words, was a “request” made from Ms. Olsen within the meaning of subsection 29(2)?

13Over a period of 1½ months, six separate electronic messages were sent to the email address that Ms. Olsen has on file with FSCO. This is the same address as the one used by the Applicant in her licence renewal applications and in her Request for Hearing. With the exception of the first email, each of these messages had a subject-line that conveyed the importance of the recipient’s cooperation: “RESPONSE REQUIRED – FSCO’s Mortgage Broker/Agent Questionnaire”. During the Hearing, Ms. Olsen never claimed that the emails were not delivered to her address. Instead, she said that she does not recall seeing them – testimony which is consistent with the fact that she was suffering from depression and anxiety during the relevant timeframe. More importantly, the registered letter dated March 21, 2014, was sent to the mailing address that Ms. Olsen has on file with FSCO and this letter was accepted by someone named “Olsen”. Even if this person were Ms. Olsen’s husband, as she insinuated, he had been authorised to pick-up this letter in her name. Indeed, according to her own testimony, Mr. Olsen would regularly collect the mail for both of them. Therefore, in light of these facts, I find that a request was made from Ms. Olsen within the meaning of subsection 29(2) of the MBLA Act. She was obliged to respond to the questionnaire and her failure to do so amounts to a contravention of subsection 29(2).

c. Issue 2: Is an AMP Appropriate?

14Having found that the Applicant contravened subsection 29(2) of the MBLA Act, the next question is whether the imposition of an AMP would be appropriate within the meaning of section 38 of the Act. In particular, will a penalty promote compliance with requirements established under the MBLA Act and/or prevent Ms. Olsen from deriving an economic benefit from her non-compliance?

15When the MBLA Act became the law of Ontario, the Superintendent was entrusted with a special mandate, namely, to regulate the mortgage industry in a manner that protects the public and enhances their confidence in the mortgage sector. Subsection 29(2) of the MBLA Act provides the Superintendent with an essential tool for carrying out this function, by allowing him to solicit information and documents from anyone licensed under the Act. However, the value of this tool depends on whether licensees comply with the requirement to respond promptly – the other purpose of subsection 29(2) – and whether they are given incentives to fulfil their duty. In my view, an AMP sends a message to those licensed to conduct business in the mortgage industry, a message that the statutory obligation recognised by subsection 29(2) is an important component of their professional responsibilities and must be viewed accordingly.

16Therefore, even though Ms. Olsen did not derive any real economic benefit from her contravention, my answer to the second question is “yes”; an AMP is appropriate within the meaning of section 38 of the MBLA Act, because it would promote compliance with a requirement imposed by this statute.

17In reaching this conclusion, I am mindful of the fact that Ms. Olsen was suffering from depression and anxiety during the relevant timeframe. However, the evidence presented by the Applicant falls short of establishing the type of rare and special circumstances that would be required to excuse or justify her failure to respond. In particular, there is no evidence that Ms. Olsen was incapable of replying to the registered letter that her household had clearly received on March 26, 2014.

d. Issue 3: What is the Appropriate Amount of the Penalty?

18In determining the amount of Ms. Olsen’s penalty, the Tribunal must consider the five criteria listed in section 3 of Ontario Regulation 192/08. Having reviewed the evidence, I make the following findings with respect to the application of the relevant criteria to the circumstances of this case:

a. To what degree was Ms. Olsen’s contravention intentional, reckless or negligent? The Applicant failed to respond to the Superintendent and an AMP is warranted. However, in light of the evidence adduced during the Hearing, her contravention cannot reasonably be described as being either “intentional” or “reckless”. Given the fact that she was suffering from depression and anxiety during the relevant timeframe, I find that her contravention was negligent at worst.

b. To what extent did Ms. Olsen’s contravention cause harm or potential harm to others? There is no evidence that Ms. Olsen’s contravention of subsection 29(2) of the MBLA Act caused harm or potential harm to any specific person or entity. Nevertheless, her failure to complete the Mortgage Brokering Questionnaire is not without consequence. As argued by counsel for the Superintendent, her non-compliance has entailed indirect costs for FSCO, the mortgage industry, and the public in general. Although this “harm” is relatively minimal, I have taken it into account in assessing the amount of Ms. Olsen’s penalty.

c. To what extent did Ms. Olsen try to mitigate any loss or take other remedial action? Strictly speaking, the Applicant did not take any remedial action in respect of her non-compliance with the Superintendent’s request for information. However, in light of her emotional condition during the relevant timeframe, I have given little weight to this consideration.

d. To what extent did Ms. Olsen derive or reasonably might have expected to derive, directly or indirectly, any economic benefit from her contravention? In his written submissions, counsel for the Superintendent acknowledges that any benefit gained by Ms. Olsen from her breach of subsection 29(2) would be minimal. I agree. Therefore, I have given little weight to this criterion.

e. Has Ms. Olsen committed any other contraventions during the previous five years? This criterion has no application in this case. There was no suggestion that Ms. Olsen has, in the past, failed to comply with any other requirement under the MBLA Act or with any other financial services legislation of Ontario or of any other jurisdiction.

19Based on these findings, I conclude that an AMP in the amount of $500 would be proportional to all relevant circumstances. In my view, this amount is substantial enough to promote compliance with subsection 29(2) of the MBLA Act, while also recognizing the fact that Ms. Olsen has not been found to have acted intentionally or recklessly in failing to respond to the Mortgage Brokering Questionnaire.

V. order

20The Tribunal orders the Superintendent to impose an administrative monetary penalty in the amount of $500 as against the Applicant, Ms. Olsen.

Dated at Toronto, this 14th day of April, 2016.

“Denis Boivin” Denis Boivin