FINANCIAL SERVICES TRIBUNAL

Citation: Martin v. Ontario (Superintendent Financial Services), 2016 ONFST 26 Decision No. M0696-2016-1 Date: 2016/12/16

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

AND IN THE MATTER OF the Notice of Proposal to Refuse Application dated June 9, 2016 against Lisa Martin, 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 Hearing in accordance with subsection 21(3) of the Mortgage Brokerages, Lenders and Administrators Act 2006, S.O. 2006, c. 29.

B E T W E E N:

LISA MARTIN

APPLICANT

and

SUPERINTENDENT OF FINANCIAL SERVICES

RESPONDENT

BEFORE:

Paul Farley Chair of the Panel and Member of the Tribunal

Jeffrey Richardson Member of the Panel and Member of the Tribunal

Patrick Longhurst Member of the Panel and Member of the Tribunal

APPEARANCES:

For the Applicant – Lisa Martin and her representative, Stacey Andrey, paralegal

For the Superintendent of Financial Services – Aisha Amode, Michael Spagnolo, Counsel

DATE HEARD: December 7, 2016

REASONS FOR DECISION

I. INTRODUCTION

1On January 19, 2016, the Applicant, Ms. Lisa Martin, made an application to the Superintendent of Financial Services (“the Superintendent”), pursuant to the Mortgage Brokerages, Lenders and Administrators Act, 2006 (the “Act”), for a mortgage agent’s licence.

2On June 9, 2016 the Superintendent issued a Notice of Proposal to Refuse Application (“NOP”) pursuant to sections 14 and 21 of the Act wherein the Superintendent proposed to refuse to renew the mortgage agent licence of Lisa Martin. Attached to the Notice of Proposal were reasons for the proposal which included the Superintendent’s opinion that: “…the fact that Ms. Martin has committed a crime involving a significant breach of client trust together with the brief period of time elapsed since completion of her criminal sentence provides reasonable grounds to believe that Ms. Martin is not suitable to hold a licence as a mortgage agent.”

3On June 29, 2016 Ms. Martin filed a Request for Hearing pursuant to section 21(3) of the Act, disagreeing with the Superintendent’s proposal and asking the Tribunal “…to grant me my Mortgage Agent Licence.” The matter came on for hearing before this Tribunal on December 7, 2016.

4As noted by the Tribunal in Patrice De-Ann Gooding¹, and acknowledged by the Superintendent in their written submissions in this case, the Tribunal has three options in cases like this:

a) It may decide that the applicant is not suitable to be licensed and confirm the Superintendent’s decision by directing the Superintendent to refuse to issue the licence;

b) It may decide that the applicant is suitable to be licensed and direct the Superintendent to issue the licence without conditions; or

c) It may decide that the applicant is suitable to be licensed on such conditions as it determines to be appropriate and direct the Superintendent to issue a conditional licence accordingly.

5After reviewing the documentary evidence filed by the parties and after considering the viva voce evidence called by the Applicant and the submissions of counsel for the Superintendent and the agent for Ms. Martin, this Tribunal has concluded that Ms. Martin should be licensed as a mortgage agent on conditions for the reasons given below.

II. The STATUTORY FRAMEWORK

6A person who wishes to be licensed as a mortgage agent must submit an application for a licence under section 13 of the Act. Upon receiving an application for a licence section 14 of the Act provides that 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.”²

7Section 10 of Ontario Regulation 409/07³ of the Act sets out the criteria for determining whether an individual is unsuitable to be licensed and provides that the Superintendent:

“…is required by sections 14(1) and 16(4) of the Act to have regard to the following prescribed circumstances:

1. 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.

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

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

8The Superintendent in this case argued, pursuant to the first prescribed circumstance set out in section 10(1) of Regulation 409/07 above, that Ms. Martin’s past conduct affords reasonable grounds for belief that she will not deal or trade in mortgages in accordance with the law and with integrity and honesty. There was no evidence with respect to the other two circumstances and they were not raised by the Superintendent as being relevant to this case. In the result the circumstances referred to in Regulation 409/07 section 10(2) and (3) were not considered by the Tribunal in its deliberations.

III. THE Facts

9The Parties filed a two page Agreed Statement of Facts and an Agreed Book of Documents consisting of 15 tabs of information. The agreed facts and documents disclosed that Ms. Martin was employed with a major Canadian Bank (the “Bank”) as a Financial Services Representative during the period 2008 through 2010. She was first employed by the Bank as a part time teller on October 22, 2007 and hired full time in February 2008. While with the Bank Ms. Martin obtained a mutual fund designation which allowed her to sell mutual funds.

10For almost six months, from October 22, 2009 to April 12, 2010, Ms. Martin accessed the personal identity information of 93 clients of the Bank and provided information, including names, driver’s licences, dates of birth and occupations, to a third party. The third party paid Ms. Martin $2,500 for this information. None of the affected clients suffered any monetary loss.

11Ms. Martin resigned from the Bank on May 13, 2010 and on May 18, 2010 she obtained a mortgage agent licence which she continued to hold until March 14, 2012. During that time, she worked with two mortgage brokerages, the last one being a mortgage brokerage operating as Total Mortgage Source 360.

12On August 30, 2011, Ms. Martin was arrested by Niagara Regional Police in connection with their investigation into a large-scale identity theft and identity fraud in the Niagara Region. No charges were laid at that time and she was not detained and not charged. The police continued their investigation and on February 20, 2012 Ms. Martin was re-arrested and charged with identity theft.

13On October 29, 2013 Ms. Martin was found guilty of the charge that she did “obtain/possess identity information with inference a fraudulent offence was intended, [contrary to] section 402.2(5) CCC”.

14On January 21, 2014 Ms. Martin was sentenced to a term of 12 months imprisonment in the community on conditions. For six months of the sentence she was subject to house imprisonment followed by six months probation.

15Ms. Martin complied with the terms of her sentence which was completed without incident in January 2015.

16Upon her arrest and being charged on February 20, 2012 Ms. Martin advised her employer, Total Mortgage Source 360. Ms. Martin was suspended by her employer without pay on March 14, 2012 and her principal broker, Mr. Sami El-Farram, notified FSCO of the suspension and the reasons therefore. Ms. Martin’s licence was terminated for cause on the same date. She has not worked in the financial services industry since that time.

17An internal investigation by Total Mortgage Source 360 and a three-day investigation by FSCO and the RCMP, carried out soon after Ms. Martin was charged, disclosed no evidence of misconduct during her time at the brokerage.

IV. The Issues

18The Superintendent, in written argument and in reliance on Gooding⁴, took the position that where there is a request for a hearing in which the Superintendent proposes to refuse a licence the Tribunal has three options as set out above. The Applicant did not disagree with the position of the Superintendent in this regard. To reiterate the options are:

a) It may decide that the applicant is not suitable to be licensed and confirm the Superintendent’s decision by directing the Superintendent to refuse to issue the licence;

b) It may decide that the applicant is suitable to be licensed and direct the Superintendent to issue the licence without conditions; or

c) It may decide that the applicant is suitable to be licensed on such conditions as it determines to be appropriate and direct the Superintendent to issue a conditional licence accordingly.

V. The Positions of the Parties

19The Superintendent takes the position that the paramount consideration in this case is protection of the public. Ms. Martin, while in a positon of trust, was found guilty by a criminal court of a serious criminal charge involving identity theft. The Superintendent argues that the criminal conviction demonstrates that Ms. Martin is not trustworthy. The public cannot be adequately protected, they say, should Ms. Martin be issued a mortgage agent licence.

20The Applicant takes the position that the public can be adequately protected if a mortgage agent licence is issued to Ms. Martin on conditions.

VI. Analysis

21The Superintendent and the Applicant both relied on the decision of this Tribunal in Henderson⁵ which set out the considerations that should be taken into account in determining whether the conduct of an individual affords reasonable grounds for belief that the individual will not deal or trade in mortgages in accordance with the law and integrity and honesty. While the Henderson case referred to misconduct established through an earlier disciplinary proceeding against an applicant, the same principles apply to conduct established through an earlier criminal court proceeding.

22The tribunal in Henderson set out the considerations that the Tribunal should have regard to as follows:

(i) the time that has elapsed since the conduct occurred;

(ii) the prolonged or repetitive nature of the conduct;

(iii) the advertent or inadvertent nature of the conduct;

(iv) the extent to which the conduct can be taken to call into question the integrity, honesty or law abiding nature of the individual;

(v) the closeness of the context of the conduct to the context of activities in which the individual would be engaged as a mortgage agent;

(vi) the fairness of the process followed in the disciplinary proceeding;

(vii) the seriousness with which the disciplinary body treated the conduct as reflected in the severity of the sanction it imposed;

(viii) any unusual and severe pressure the individual was under at the time of the conduct that would explain the conduct but is unlikely to reoccur;

(ix) any consistent and prolonged pattern of reformed or redeeming behaviour on the part of the individual since the conduct occurred.

23This Tribunal examined the conduct of Ms. Martin, and all of the circumstances of this case, and considered whether her application for a mortgage agent’s licence should be granted having regard to the Henderson criteria. The Tribunal notes that this is very much a fact-based enquiry and that every case will have to be considered in light of the unique facts found in that particular case.

(i) The time that has elapsed since the conduct occurred

24Of key importance to our decision was the amount of time that had elapsed since the criminal conduct of Ms. Martin occurred. The Agreed Statement of Facts put the misconduct in the period October 2009 to April 2010. Over six years and seven months have passed since the misconduct ended. There has been no evidence of any further misconduct by Ms. Martin, notwithstanding the fact that there had been opportunity because, after October 2010, Ms. Martin was engaged as a licensed agent in a brokerage firm or firms for approximately 22 months.

(ii) The prolonged or repetitive nature of the conduct

25With respect to the second Henderson criteria, while the misconduct was prolonged in that it took place over a period of almost six months, which is a substantial period of time, this is not a case, like Henderson, where the misconduct persisted for two and a half years or Gooding, where the misconduct continued for a period of six years.

26While every case is unique it is relevant to have regard to other, similar, cases. In Gooding the applicant was convicted of fraud over $5,000 as a result of criminal conduct while employed as a financial associate with a major bank. Ms. Gooding used personal information from family members to open accounts and lines of credit without their knowledge and used those accounts to pay her own personal expenses. She made use of the funds in those accounts for a period of six years. When her employer finally discovered her criminal activity she had accumulated over $100,000 of debt in her family member’s names. When Ms. Gooding submitted an application to the Superintendent for a mortgage licence she was still on probation as a result of her criminal conviction and sentence.

27In ordering that a licence be granted with conditions the Tribunal in Gooding noted that: “…an outstanding probation order is relevant to the issue of whether the applicant, after an initial misstep, has been able to demonstrate a pattern of redeeming behavior of sufficient length and consistency as to persuade the Tribunal that issuing her a licence no longer poses a hazard to the public interest.”⁶

28In this case, as noted above, there was no monetary loss to any person and the period of criminal conduct was much shorter. Ms. Martin has completed her criminal sentence including the period of probation imposed.

(iii) The advertent or inadvertent nature of the conduct

(iv) The extent to which the conduct can be taken to call into question the integrity, honesty or law abiding nature of the individual

29There is no question that the conduct was advertent and that it calls into question the integrity or honesty of Ms. Martin. The explanation given by Ms. Martin that she did not believe that the third party would use the information provided by her to the detriment of the Bank’s clients was simply not credible. The issue for the Tribunal was whether the passage of time, during which there was no further misconduct, coupled with all the other circumstances (including the level of supervision that Ms. Martin would be subject to if licensed as a mortgage agent) could offset this consideration to allow a licence to be issued with the reasonable expectation that the public would be protected.

(v) The closeness of the context of the conduct to the context of activities in which the individual would be engaged as a mortgage agent

30The conduct took place while Ms. Martin was in a position of trust with a financial institution. The context of that conduct is similar to the activities in which Ms. Martin can be expected to be engaged in as a mortgage agent if a licence is issued.

(vi) The fairness of the process followed in the disciplinary proceeding

[31]There is no dispute that the criminal process that Ms. Martin was involved in was fair.

(vii) The seriousness with which the disciplinary body treated the conduct as reflected in the severity of the sanction it imposed

32The penalty imposed by the criminal court (as distinct from a disciplinary body) upon convicting Ms. Martin of the criminal offence reflects the seriousness of the misconduct. A period of six months imprisonment followed by six months probation is a significant penalty even where the penalty is, as here, to be served in the community.

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

33Ms. Martin was under significant financial pressure at the time the offence occurred and she had taken on significant parental care responsibilities for both her father and her mother. This Tribunal is aware that many persons, including mortgage agents, will, from time to time, suffer from significant financial and personal pressures. While the Tribunal took into account the fact that Ms. Martin was under such pressure it gave little weight to this fact in its deliberations. The types of pressures suffered by Ms. Martin are not unusual and it is expected that mortgage agents will deal with these types of pressures without resorting to criminal activities.

(ix) Any consistent and prolonged pattern of reformed or redeeming behaviour on the part of the individual since the conduct occurred

34The Tribunal found that there was a consistent and prolonged pattern of reformed or redeeming behaviour since the conduct occurred. Ms. Martin served the sentence imposed by the criminal court successfully and without incident. There has been no evidence of criminal activity nor conduct suggesting dishonesty or other impropriety in the six and one half years since the last criminal conduct occurred. She returned to school and obtained a certificate of qualification as a hairstylist and launched two, apparently successful, businesses in the hair styling industry. During the 22 months that she was licensed as mortgage agent, after her criminal conduct and prior to being charged, there have been no complaints about her conduct as a mortgage agent or otherwise.

Protection of the public

35The Tribunal agrees with the position of the Superintendent that the Tribunal must be mindful of and balance two important considerations:

1. The underlying rationale of the Act to protect the public interest and enhance public confidence in the mortgage industry; and

2. The financial consequences of a decision to revoke a licence (or not grant a licence) including the preclusion of an applicant from earning a livelihood in a chosen line of work.

36The principal broker with the last brokerage Ms. Martin worked for, Mr. Sami El-Farram, gave evidence on behalf of Ms. Martin.

37Mr. El-Farram testified that Ms. Martin told him in October 2011 that she had been arrested but not charged and that he continued to employ her as a licensed agent although, he said, “…we did review her files a little harder.” When she told him in March 2012 that she had been charged with a criminal offence she was suspended on March 14, 2012 and her licence was terminated for cause. He said that an internal investigation conducted by the brokerage, Total Mortgage Source 360, after Ms. Martin’s termination, discovered no evidence of misconduct during her time at the brokerage.

38Mr. El-Farram testified that Ms. Martin began working with his brokerage in or about September 2010 and that she acted in a professional manner. He testified that his brokerage has thirteen agents and that Ms. Martin was “…a head above the crowd.” It was clear from his evidence that he held Ms. Martin in high regard notwithstanding his full knowledge of her criminal misconduct and criminal conviction.

39Mr. El-Farram testified that he had no concerns about Ms. Martin reoffending should she be licensed as a mortgage broker, in part because “…all my agents work under my supervision and we will not give her an opportunity”. He detailed for the tribunal the checks and balances that are in place at Total Mortgage Source 360 including the fact that this is a centralized office, that he has weekly meetings with agents and, as principal broker, he has access to all of the agents’ client files and email. Should Ms. Martin be issued a licence he testified that he will review her files and her emails on a regular basis and will report to FSCO on his findings. He testified that if he found anything suspicious in his review he would lock Ms. Martin out of the system and he would contact FSCO.

40In dealing with the issue of protection of the public the Tribunal is mindful of the Divisional Court decision in Joshi⁷ and the admonishment of Mr. Justice Lococo that the Tribunal should consider “…a range of penalties taking into account the seriousness of the misconduct and other relevant factors. In our view, separating consideration of revocation from other lesser penalties subverts this process.”

41While the Joshi case was dealing with a decision to revoke the licence of a mortgage broker (and not a refusal to issue a licence as here) the same principles expressed there apply here. This Tribunal should consider a range of alternatives, having regard to all of the circumstances, including whether it is appropriate to grant an agent’s licence to Ms. Martin, grant a licence on conditions or refuse a licence.

42After considering all the evidence we are of the view that Ms. Martin “…has been able to demonstrate a pattern of redeeming behavior of sufficient length and consistency as to persuade the Tribunal that issuing her a licence no longer poses a hazard to the public interest.”⁸ The public interest can be protected by granting an agent’s licence to Ms. Martin for a two-year term on conditions.

VII. ORDER

43The Tribunal, therefore, makes an Order that the Superintendent withdraw the NOP and issue a Mortgage Agent’s Licence to Practice for a two-year term to Lisa Martin on the conditions that:

1. Ms. Martin work as a mortgage agent only at the mortgage brokerage operating as Total Mortgage Source 360 and only while Mr. Sami El-Farram (FSCO licence #M08002359) continues as the Principal Broker and directly supervises her work and activities as a mortgage agent, including with respect to all of her clients and accounts.

2. Ms. Martin have access to files of her clients only and that she have no access to files of other clients of the brokerage.

3. Ms. Martin notify the Superintendent of Financial Services immediately if she is the subject of any criminal or quasi-criminal charge or if she is convicted of any offence.

4. Ms. Martin provide to the Superintendent of Financial Services every three months, from the date of issuance of a mortgage agent’s licence, a statement, signed by herself and by Mr. El-Farram that she is in continuing compliance with the conditions of her licence.

Dated at Toronto, this 16th day of December, 2016.

“Paul Farley” Paul Farley

“Jeffrey Richardson” Jeffrey Richardson

“Patrick Longhurst” Patrick Longhurst

Footnotes

1. 1Gooding v. Ontario (Superintendent Financial Services), 2008 ONFST 12
2. 2Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, CHAPTER 29 (the “Act”), section 14
3. 3Ontario Regulation 409/07, Mortgage Brokers and Agents: Licensing, section 10
4. 4Gooding, Supra.
5. 5Henderson v. Ontario (Superintendent Financial Services), 2008 ONFST 7
6. 6Gooding, Supra., p.9
7. 7Joshi v. Ontario (Superintendent of Financial Services) 2016 ONSC 4477, para. 14
8. 8Gooding, Supra., p.9