Gulati v. Ontario (Superintendent Financial Services), 2018 ONFST 4

FINANCIAL SERVICES TRIBUNAL

Citation: Gulati v. Ontario (Superintendent Financial Services), 2018 ONFST 4 Decision No. M0734-2017-1, M0768-2017-1 Date: 2018/03/19

IN THE MATTER OF the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c.29 (the "Act"), in particular sections 18, 19, 20, 21, 38 and 39;

AND IN THE MATTER OF the Notice of Proposal to Revoke Licence and Notice of Proposal to Impose an Administrative Penalty dated June 2, 2017 against Girish Gulati, issued by the Executive Director, Licensing and Market Conduct Division by delegated authority from the Superintendent of Financial Services;

AND IN THE MATTER OF the Notice of Proposal to Refuse Application for Surrender of Licence dated November 6, 2017 against Girish Gulati, issued by the Director, Licensing Branch by delegated authority from the Superintendent of Financial Services;

AND IN THE MATTER OF requests for hearing pursuant to subsections 21(3) & 39(5) of the Act.

B E T W E E N:

GIRISH "GEORGE" GULATI

APPLICANT

and

SUPERINTENDENT OF FINANCIAL SERVICES

RESPONDENT

BEFORE:

Denis Boivin, Chair of the Panel and Vice-Chair of the Tribunal

Ian McSweeney, Member of the Panel and Chair of the Tribunal

Jill Wagman, Member of the Panel and Member of the Tribunal

APPEARANCES:

For the Applicant – Girish Gulati, self-represented

For the Superintendent of Financial Services – Brendan Forbes and Deborah McPhail

DATES HEARD:

January 8, 10 and 19, 2018

REASONS FOR DECISION

I. INTRODUCTION

1Girish "George" Gulati is the Applicant in this matter. He is currently licensed as a mortgage broker under the terms of the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, C.29 ("MBLA Act"). He was first granted a mortgage broker licence on July 1, 2008, when the MBLA Act came into force, and subsequently renewed his licence in 2010, 2012, 2014 and 2016. His current licence is due to expire on March 31, 2018.

2On June 2, 2017, the Executive Director, Licensing and Market Conduct Division, by delegated authority from the Superintendent of Financial Services ("Superintendent"), issued a Notice of Proposal ("NOP") to the Applicant. In this notice, the Executive Director proposes to revoke the licence of Mr. Gulati and to impose five administrative monetary penalties totalling $25,000 on two grounds, namely, that Mr. Gulati (1) has contravened a number of requirements under the MBLA Act and its regulations and (2) is no longer suitable to be licensed.

3On June 8, 2017, the Applicant requested a hearing before the Financial Services Tribunal of Ontario ("Tribunal"). Shortly thereafter, he applied to the Superintendent for permission to surrender his mortgage broker's licence, pursuant to section 20 of the MBLA Act. On November 6, 2017, a delegate of the Superintendent issued a Notice of Proposal to refuse the application on the ground that allowing the surrender of Mr. Gulati's licence would not be in the public interest. Mr. Gulati requested a hearing with respect to this second NOP, and during a pre-hearing teleconference, it was determined that both proceedings would be consolidated.

4Having reviewed the evidence adduced during the Hearing and the submissions made by both parties, we have come to the following conclusions. First, on the basis of clear, cogent and convincing evidence, Mr. Gulati has contravened numerous key requirements of the MBLA Act and its regulations. Second, he is no longer suitable to be licensed under the MBLA Act, given his past contraventions and the fact that he made multiple false statements on his licence renewal application forms. Third, in light of the circumstances of this case, the sanctions proposed by the Executive Director are entirely proportional to the risk – past and future – created by the misconduct of Mr. Gulati.

5On the basis of these findings, we order the Superintendent to revoke the mortgage broker licence of Mr. Gulati and to impose administrative monetary penalties on him in the total amount of $25,000. As a result, the surrender of the Applicant's licence is moot.

6Our reasons for issuing this order are as follows.

II. ISSUES

7With respect to the proposal to impose administrative monetary penalties, the issues are the following:

a. Did Mr. Gulati give or assist in giving or induce or counsel another person or entity to give or assist in giving any false or deceptive information or document when dealing with mortgages, contrary to subsection 43(2) of the MBLA Act?

b. Did Mr. Gulati deal in mortgages not on behalf of a brokerage, specifically his specified brokerage, contrary to subsections 2(3) and 8(2) of the MBLA Act?

c. Did Mr. Gulati receive fees from individuals other than his brokerage, contrary to subsection 4(1) of Ontario Regulation 187/08?

d. Did Mr. Gulati carry on business as a mortgage lender in Ontario without having a brokerage licence or being exempted from the requirement to have such a licence, contrary to subsection 4(2) of the MBLA Act?

e. Did Mr. Gulati do or omit to do anything that might reasonably be expected to result in the brokerage on whose behalf he is authorized to deal or trade in mortgages to contravene or fail to comply with a requirement established under the MBLA Act, contrary to section 3 of Ontario Regulation 187/08?

f. For matters (a), (b), (c), (d) or (e), if the answer to any of these questions is yes, should an administrative monetary penalty be imposed in relation to each violation?

g. If an administrative monetary penalty is imposed in relation to matters (a), (b), (c), (d) or (e), what amount should be imposed individually for each violation?

8With respect to the proposal to revoke the licence of Mr. Gulati and to refuse his application to surrender his licence, the issues are the following:

a. Does Mr. Gulati's past conduct afford reasonable grounds for the belief that he will not deal or trade in mortgages in accordance with the law and with integrity and honesty, as described under paragraph 1 of section 10 of Ontario Regulation 409/07?

b. Was Mr. Gulati carrying on activities that contravened the MBLA Act or Regulations while licensed, as described under paragraph 2 of section 10 of Ontario Regulation 409/07?

c. Did Mr. Gulati make a false statement or provide false information to the Superintendent with respect to his licence, as described under paragraph 3 of section 10 of Ontario Regulation 409/07?

d. For matters (a), (b) and (c), if the answer to any of these questions is yes, does this afford reasonable grounds for the belief that Mr. Gulati is not suitable to be licensed?

e. If the answer to question (d) is yes, should Mr. Gulati's licence be revoked or should another penalty be imposed by the Tribunal?

f. If the Tribunal orders the Superintendent to carry out an action other than revocation under question (e), should the Superintendent allow the surrender of Mr. Gulati's licence?

III. FACTS

A. General Observations

9At the beginning of the Hearing, the Superintendent and Mr. Gulati jointly submitted a five-page Agreed Statement of Facts ("ASF"), as well as an Agreed Book of Documents ("ABD") containing thirty-four tabs. The Applicant confirmed that he had reviewed the documents in the ABD and he agreed that they were authentic and relevant to the proceedings. He also agreed that the ASF was accurate. In the absence of the panel, the parties spent the first day scheduled for the Hearing – January 5th – reviewing the evidence that they agreed upon and the ASF and ABD are the products of their joint efforts. The Tribunal accepts both documents and we have incorporated their contents within our findings of fact.

10During the remaining three days of the Hearing, the Superintendent called seven witnesses, namely, three former clients who made complaints against Mr. Gulati with the Financial Services Commission of Ontario ("FSCO"), a FSCO investigator, a FSCO Regulatory Discipline Officer, and two principal brokers for brokerages on whose behalf Mr. Gulati was authorized to deal or trade in mortgages during the relevant timeframe. Fourteen additional exhibits were introduced into evidence during the testimony of these witnesses.

11Mr. Gulati, who was accompanied by his wife (Reetu Gulati) throughout the proceedings, represented himself. The Chair had encouraged him to obtain legal representation, during one the early pre-hearing conferences held in this matter, but he decided not to hire a lawyer or paralegal for financial reasons. Mr. Gulati testified briefly in his own defence but did not call any witnesses or give the panel any documents, other than the ones contained in the ABD. He asked questions from most witnesses and was, on occasion, confrontational in his approach and line of questioning. But overall, he was relatively passive throughout the proceedings. This being said, some of the evidence provided by Mr. Gulati, during his own testimony in-chief and on cross-examination, directly conflicts with the information contained in the exhibits and/or the testimony of the other witnesses heard by the panel. To the extent that the testimony of Mr. Gulati conflicts with the evidence adduced by the Superintendent, we rely on the latter for the purpose of our findings of fact.

12The Superintendent's seven witnesses were all credible. Their testimony was consistent with the documentary evidence before the Tribunal. Furthermore, their testimony was not contradicted by any credible evidence put forward by Mr. Gulati. On occasion, during his questioning, Mr. Gulati claimed to have documents that disproved the answers the witnesses were giving. However, he never produced said documents. In addition, with respect to the three complainants, although there were occasional gaps in their knowledge, understanding and memory of the mortgage transactions at issue, they were all Mr. Gulati's clients. As such, they did not orchestrate the transactions in question, but relied on the services he was providing. Moreover, each of them were vulnerable from a financial perspective. They did what they were told to do; signed what they were told to sign. Thus, it would be unreasonable to expect them to explain everything that occurred on the days in question. Nevertheless, in our view, the complainants have provided enough clear, convincing and cogent evidence to prove the nature of their dealings with Mr. Gulati – and the nature of his misconduct.

B. Licensing History

13Our findings of fact under this heading are based on the ASF and the testimony of a FSCO investigator familiar with Mr. Gulati's case, Gary Logan. In coming to these findings, we have also reviewed Tabs 1, 2, 3, 4, 5, 7, 13, 23 and 25 of the ABD.

14Girish "George" Gulati holds a mortgage broker licence under the terms of the MBLA Act (licence number M08000154). His licence is set to expire on March 31, 2018.

15Mr. Gulati was first licensed as a mortgage broker on June 22, 2008 and has remained continually licensed since that date. Over this ten-year period, Mr. Gulati has been associated with six different brokerages:

a. Currently, Mr. Gulati's licence authorizes him to deal or trade in mortgages on behalf of, and under the supervision of, a mortgage brokerage called Centum Interstate Mortgages Ltd.

b. Between March 28, 2016 and August 14, 2017, Mr. Gulati was authorized to deal or trade in mortgages on behalf of, and under the supervision of, a mortgage brokerage called Mortgage Alliance Active Lending.

c. Between July 21, 2015 and March 27, 2016, Mr. Gulati was authorized to deal or trade in mortgages on behalf of, and under the supervision of, a mortgage brokerage called M.O.S. MortgageOne Solutions Ltd.

d. Between February 2, 2012 and July 13, 2015, Mr. Gulati was authorized to deal or trade in mortgages on behalf of, and under the supervision of, a mortgage brokerage called Real Mortgage Associates.

e. Between January 5, 2010 and February 1, 2012, Mr. Gulati was authorized to deal or trade in mortgages on behalf of, and under the supervision of, a mortgage brokerage called Mortgage Alliance Company of Canada.

f. Between June 24, 2008 and January 4, 2010, Mr. Gulati was authorized to deal or trade in mortgages on behalf of, and under the supervision of, a mortgage brokerage called Invis Inc.

16Despite having declared bankruptcy on December 12, 2009, Mr. Gulati answered "NO" to the following question on his 2012, 2014 and 2016 licence renewal applications:

Have you ever been declared bankrupt or made a voluntary assignment in bankruptcy, or are you currently an undischarged bankrupt or are you currently a defendant in any civil proceeding or are there any unsatisfied judgments imposed by a civil court in Canada or elsewhere, against you personally?

17Despite having been the subject of a complaint with FSCO on September 3, 2010, Mr. Gulati answered "NO" to the following question on his 2012, 2014 and 2016 licence renewal applications:

Have you ever been successfully sued of has a complaint ever been made against you to a regulatory body in any province, territory, state or country that was or is, based in whole or in part, on fraud, theft, deceit, misrepresentation, forgery, or similar conduct; or based in whole or part, on professional negligence or misconduct (including claims paid by your errors and omissions insurance carrier or bonding company)?

18The address of residency provided by Mr. Gulati on his 2012, 2014 and 2016 licence renewal applications is the following: 2518 Rugby Road, Mississauga, Ontario, L5B 1T2. This is the same address as the one he wrote on his Form 1 – Request for Hearing.

C. Corporate Information

19Our findings of fact under this heading are based on the testimony of two FSCO employees familiar with Mr. Gulati's case, Gary Logan, an investigator, and Sean Mitchell, a Regulatory Discipline Officer. In coming to these findings, we have also reviewed Tabs 6 and 34 of the ABD and Exhibit C, as well as parts of the testimony of PN, one of the complainants in this matter.

20SAI Financial Group of Companies ("SAI Financial") is an Ontario business incorporated on September 11, 2006. The registered address of SAI Financial is the following: 2518 Rugby Road, Mississauga, Ontario, L5B 1T2. A Corporation Profile Report dated May 4, 2016 lists "Girish (George) Gulati" as the administrator, director and president of SAI Financial.

21SAI Financial has never been licensed under the terms of the MBLA Act.

22At all material times, Mr. Gulati was the controlling mind of SAI Financial. In particular, we reject his claim that SAI Financial was his wife's company. There is no evidence to support this self-serving assertion. On the contrary, the documentary evidence and testimony of PN, a person who worked for Mr. Gulati and witnessed his day-to-day activities, establish that he is the one who directed and controlled the actions of SAI Financial, and we so find.

23SAI Mortgage Corporation ("SAI Mortgage") is an Ontario business incorporated on March 17, 2006. The registered address of SAI Mortgage is the following: 2518 Rugby Road, Mississauga, Ontario, L5B 1T2. A Corporation Profile Report dated May 4, 2016 lists "Girish (George) Gulati" as the administrator, director and president of SAI Mortgage.

24SAI Mortgage was licensed as a brokerage under the terms of the MBLA Act between March 5, 2008 and September 25, 2008.

D. PN Complaint

25While employed with Real Mortgage Associates (RMA), Mr. Gulati provided mortgage broker services on behalf of a couple named PN and JN. On February 19, 2015, PN filed a written complaint with FSCO in relation to the mortgage services performed by Mr. Gulati and others on behalf of PN and JN. The complainant named RMA, SAI Financial, George Gulati and Reeta Gulati as the subjects of her complaint. PN testified during the Hearing and a copy of her complaint was introduced into evidence as Exhibit G. The following findings are based on PN's testimony and the documentary evidence before the Tribunal, in particular Tabs 15, 16, 17 and 18 of the ABD and Exhibits G, H, I, J, K and L.

26PN retained the services of Mr. Gulati with respect to a consumer proposal undertaken by a third party, and a second mortgage on her property in order to facilitate this proposal. PN testified that she believed that Mr. Gulati's brokerage was "CMA or RMA" at that time, but she was not certain whether the second mortgage was brokered through his brokerage. In addition, PN testified that Mr. Gulati brokered her second mortgage with a lender called SAI Financial. At that moment in time, PN did not know who this entity was.

27With respect to the mortgage brokered by Mr. Gulati, a lawyer named Douglas Hancock represented both the lender and the borrowers. The "Trust Ledger Statement" that Mr. Hancock provided to PN and JN is dated January 21, 2013. This document attests to the fact that the lawyer received $25,000 from SAI Financial – the "new 2nd mortgagee" – and that he paid $25,000 to Killen Landau & Associates Ltd. in satisfaction of a proposal. The statement also indicates that PN and JN paid $1,500 to Mr. Hancock for his services.

28On March 9, 2013, Mr. Hancock submitted a "reporting letter" to PN and JN with respect to their new second mortgage. This letter states that a charge in the amount of $35,000 was registered on the couple's property, in favour of SAI Financial, and that the "Standard Charge Terms filed as Number 200033 [were] incorporated by reference into this mortgage". The address of the new mortgagee is listed as 2518 Rugby Road, Mississauga, Ontario, L5B 1T2. The letter states that the interest rate on the loan is 24% per year, calculated monthly, not in advance. In addition, the letter states that the couple's monthly payments are $700 ("Principal and Interest"), that their first payment is due on March 1, 2013, and that the loan's maturity date is March 1, 2015.

29PN testified that the $10,000 difference between the funds received from SAI Financial ($25,000) and the charge registered on their property ($35,000) relates to a "fee". She testified that, at first, she expected the second mortgage to be in the amount of $25,000 with an interest rate of 12%, because these were the terms that Mr. Gulati and she had agreed upon when his services had been retained. However, according to PN's testimony, the mortgage transaction she expected to conclude did not go forward and, at the last minute, PN was told by Mr. Gulati that the new terms would be $25,000 for the proposal plus $10,000 to the lender at an interest rate of 24%. According to her FSCO complaint, PN "reluctantly went through with the crazy amount" in order to avoid having to declare bankruptcy.

30PN testified that she never missed a single payment on the second mortgage. Tab 16 of the ABD contains copies of eight cheques signed by PN, each in the amount of $700 and each made payable to SAI Financial Group of Companies.

31Several months in advance of the maturity date of the second mortgage, PN began to look for another lender. She communicated her intentions to Mr. Gulati and was told to contact Mr. Hancock. PN testified that neither Mr. Gulati nor Mr. Hancock provided her with any payout amount or supporting documents with respect to the second mortgage, despite being told by PN on many occasions that this information was needed in order to secure alternative financing with a third-party lender. Exhibit K contains multiple emails sent by PN to Mr. Gulati and Mr. Hancock regarding this request for information. The earliest email was sent to Mr. Gulati on January 16, 2015, confirming a request that had been made to him "a week ago".

32Eventually, Mr. Hancock sent a discharge statement to PN's lawyer. The letter is dated February 9, 2015 and says that upon receipt of $41,626.80, the existing second mortgage in favour of SAI Financial will be discharged. The statement provides the following breakdown for this amount: (1) $36,750 (principal balance including interest); (2) $2,205 (three-month "bonus" with payout); (3) $2,205 (three-month "interest penalty"); (4) $350 + HST (discharge fee); and (5) $71.30 (registration of discharge fee).

33PN testified that the payout amount mentioned in the letter dated February 9, 2015, was arrived at following negotiations between her lawyer and Mr. Hancock. Initially, she had been told that the payout figure was $48,000, because Mr. Gulati had "automatically renewed" the mortgage. On February 3, 2015, PN sent an email to Mr. Hancock asking him, "What is going on! How can I owe George 48,000"? In reference to some of the charges included in the payout figure, PN uses the word "robbery" in her email and says, "I looked over my paperwork and see nothing about this???" The email can be found in Exhibit K.

34PN testified that she reluctantly agreed to pay the amount mentioned in the letter dated February 9, 2015, in order to secure alternative financing with a third-party lender. She testified that she ended-up paying between $3,000 and $4,000 from her own pocket.

35A few months later, on May 13, 2015, PN sent an email to Mr. Hancock asking him to provide her with a copy of the 2013 mortgage commitment with SAI Financial, saying that she had "never received one". In addition, PN states that she "never received a copy of the standard charge terms stated in the mortgage info." Finally, she requests "a copy of the letter that you said I had to sign regarding the $10,000 lender fee for George to avoid taxes." Mr. Gulati was copied with this email, which can be found in Exhibit K.

36Exhibit L contains two documents that PN received from Mr. Hancock, in response to her May 2015 request for information. PN testified that she had never seen these documents before and that they contained several mistakes, in form and substance. Neither document is signed by PN or JN, but they both have Mr. Gulati's signature.

37The first document purports to be a mortgage commitment between SAI Financial and PN and JN. The document says that the first payment is due November 5, 2013 and that the date of maturity is January 5, 2015. Both these dates contradict the dates listed in the reporting letter sent by Mr. Hancock on March 9, 2013 (see paragraph 28 of our Reasons). There is also a spelling mistake in the address of the property to be charged. Last, but certainly not least, the document contains the following terms, neither of which appear in the documents sent to PN by Mr. Hancock at the time the second mortgage was closed:

TERMS TWO YEAR OPEN WITH THE THREE MONTHS BONUS WITH PAYOUT, THIRD YEAR THERE WILL BE CHARGE OF 5% THE MORTGAGE AMOUNT WILL BE 36750.

LENDER FEE $4000 FOUR THOUSAND ADDED TO MORTGAGE. BARROWERS [sic] BARROWED [sic] $6000 SIX THOUSAND FROM SAI FINANCIAL TIME TO TIME CASH PAID BY THE BROKERS FOR SAI FINANCIAL, PLEASE ALSO NOTE THAT BROKER IS RELATED TO THE LENDER, BARROWER [sic] THEY HAVE FULL KNOWLEDGE.

38The second document purports to be "CONDITIONS" with respect to the original second mortgage with SAI Financial. PN and JN are described as the "BARROWERS" [sic] and there is a spelling mistake in the name of PN. More importantly, Mr. Gulati's signature appears above SAI Financial, the "LENDER" in the transaction, and the document contains these terms:

automatic renewel [sic] is done for another one years [sic] if 90 days notice is not given by either property [sic]. PLEASE NOTE THERE WILL BE 5% BROKERAGE FEE WILL BE PAID TO THE BROKER IF THIS IS HAPPEN.

39PN testified that the only conditions she and her husband ever agreed to, with respect to the original second mortgage with SAI Financial, are the ones found in Tab 18 of the ABD. This is a document entitled "Charge Provisions – Additional Provisions". The document is signed by PN and JN, the "Borrowers", and Reeta Gulati, on behalf of SAI Financial. The terms outlined in this document are consistent with the ones described by Mr. Hancock, in his reporting letter dated March 9, 2013. Significantly, on this document, there is no mention of any automatic renewal of the mortgage in the absence of advance notice or any mention of a 5% brokerage fee. Instead, the document states that "[i]n the event the borrowers wish to extend the term for one further year, they may do so upon not less than ninety days' notice prior to the expiry of the first 24 months" [emphasis added]. Also, the document says that the mortgage may be "pre-paid at any time upon payment of three months' interest". In this case, PN and JN did not wish to either "extend" the mortgage or "pre-pay" the mortgage; they wanted to pay the balance on maturity.

40PN testified that Mr. Gulati failed to explain the documents which she was required to sign for her second mortgage. PN further testified that she was required to sign the documents quickly and that she was not provided with any disclosures by Mr. Gulati relating to fees to the brokerage or others, material risks involved with the mortgage, lender/brokerage relationships or any analysis of the suitability of the mortgage.

41PN testified that, at the time of signing her second mortgage in favour of SAI Financial, she did not know who owned or operated this corporation. PN further testified that after being employed by Mr. Gulati at his credit counselling business, she learned that Mr. Gulati controlled SAI Financial. According to her testimony, she witnessed Mr. Gulati signing documents on behalf of SAI Financial and had witnessed Mr. Gulati directing and controlling the actions of this corporation. PN testified that she has seen Mr. Gulati's business (SAI Financial) open and operating recently. She said, "I live close by and see the sign often."

E. MA Complaint

42While employed with Real Mortgage Associates, Mr. Gulati provided mortgage broker services on behalf of a couple named MA and GA. On June 8, 2015, MA filed a written complaint with FSCO in relation to the mortgage services performed by Mr. Gulati and his brokerage on behalf of MA and GA. The complainant named "George Gulati – RMA" as the subject of her complaint. MA testified during the Hearing and a copy of her complaint can be found at Tab 8 of the ABD jointly submitted by the parties. The following findings of fact are based on MA's testimony and the documentary evidence before the Tribunal, in particular Tabs 8, 9, 10, 11, 12, 13 and 14 of the ABD and Exhibits M and N.

43MA retained the services of Mr. Gulati with respect to a mortgage refinancing on behalf of herself and her husband GA. They undertook the mortgage refinancing in order to obtain extra money "for the house". MA testified that she thought Mr. Gulati was providing his services on behalf of a mortgage brokerage, but she did not know the name of the brokerage.

44During her testimony, MA reviewed mortgage documents that were prepared for the couple. Many of the documents in this package have the words "RMA", "RMAI" or "RMAI Real Mortgage Associates" written thereon, including a mortgage file checklist, an application, two commission statements, a mortgage summary, and a credit check. A commission statement dated August 19, 2014 from RMAI Real Mortgage Associates indicates a fee of $2,190 payable to "George Gulati", the "Agent" for the file and a second commission statement, dated October 30, 2014 from RMAI Real Mortgage Associates indicates a fee of $5,475 payable to "George Gulati", the "Agent" for the file.

45On November 12, 2014, MA and GA signed a mortgage commitment with a third-party lender in the amount of $273,750. Under the heading "Mortgage Fees", the document indicates that an "Application Fee" of $5,475 was deducted from the funds advanced by the lender. The mortgage in question closed. However, according to the written complaint filed by MA with FSCO, "the amount that [MA and GA] received was nowhere near what they thought they were going to receive".

46During her testimony, MA reviewed a "Trust Ledger Statement" provided to the couple by Kevin Hope, the lawyer for Mr. Gulati. This statement explains how the funds received from the third-party lender were distributed by the attorney. The statement indicates that the sum of $268,245 was received from the lender. From this amount, $5,500 was "[p]aid to George Gulati as per direction" and $10,950 was "[p]aid to Rita Gulati as per direction". Significantly, the sum of $10,950 corresponds to 4% of $273,750, the amount of the couple's new mortgage. In the end, once the previous mortgages were discharged and all fees paid, the statement confirms that MA and GA received $6,982.80.

47During her testimony, MA reviewed a direction addressed to Mr. Hope and signed by MA and GA. The document is dated "Augest [sic] 23, 2014". MA acknowledged that the couple had signed the document, in the presence of Mr. Gulati, but testified that the document was not explained to them. In essence, the document says that MA and GA had borrowed $5,500 in cash from Mr. Gulati over a six-month period and asks that this amount be paid to Mr. Gulati from the proceeds of the mortgage. MA testified that she did not know Mr. Gulati in February 2014. The document is worth quoting in full:

WE […] HAS BARROWED [sic] MONEY FROM GEORGE GULATI $5500 CASH TIME TO TIME OVER THE PERIODE [sic] OF 6 MONTHES [sic] WOULD YOU KNDLY [sic] PAY THIS AMOUNT FROM OUR PROCEEDS TO MR GEORGE GULATI, WE CERTIFIED AND AKNOWLEDGE [sic] THAT WE HAVE BARROWED [sic] THAT MONEY FROM HIM.

48During her testimony, MA also reviewed a "Binding Loan Engagement Letter" under the letterhead of SAI Financial. The document is dated August 12, 2014, and purports to say that MA and GA agree to retain "Sai Mortgage Corporation" to provide them with "services in obtaining financing". In addition, the document purports to say that MA and GA agree to pay to "REETA GULATI SAI FINANCIAL GROUP" a fee of 4% of the "APPRAISEL [sic] VALUE" of the house in exchange for said services. MA testified that the signature on this document was hers, but that she had not signed the document in question. She said, "I did not sign documents on August 12, 2014". Also, she testified that she does not know who SAI Financial is.

49On December 22, 2014, a lawyer retained by MA and GA wrote to Mr. Gulati with respect to the alleged $5,500 loan. The couple's lawyer states that the loan never occurred and asks Mr. Gulati to account for the amount in question. In response, MA received a document dated November 28, 2014 entitled "Recipt" [sic]. The document states that George Gulati, from A-1 Credit Counselling & Bankruptcy, received $6,000 from GA in order to look after the finances of MA and GA between July and November 2014. On this so-called receipt, the funds are characterised as "administrative charges". In addition, the document says that the money was paid "DUE TO THERE [sic] CREDIT HISTORY, WHICH WAS NOT GOOD". MA stated that this document is false; she testified that there was never any agreement with Mr. Gulati with respect to a $6,000 charge and that Mr. Gulati never provided the services mentioned in the document.

50MA testified to the speed which documents were put to the couple by Mr. Gulati. According to her testimony, Mr. Gulati did not explain the documents as they were given to them for signature. She also testified that, on multiple documents, the date signed on the document was incorrect. For example, in the mortgage file, there is a document entitled "Legal Disclaimer for Professional Services" under the letterhead of A-1 Credit Counselling. This document was allegedly signed by MA and GA on August 9, 2014. It purports to acknowledge the services provided to the couple by SAI Financial and purports to release this entity from liability "for non-disclosure of services". MA testified that the signature on this document was hers, but that she had not signed any documents on August 9, 2014. In addition, she testified that she does not know who SAI Financial is or what services this document refers to.

F. MJ Complaint

51While employed with Mortgage Alliance Active Lending, Mr. Gulati provided mortgage broker services on behalf of a man named MJ. On December 6, 2016, MJ filed a written complaint with FSCO against Mr. Gulati in relation to the mortgage services performed on his behalf. The complainant testified during the Hearing and a copy of his complaint was introduced into evidence as Exhibit O. The following findings of fact are based on MJ's testimony and the documentary evidence before the Tribunal, in particular Tabs 24, 27, 28, 29, 31, 32 and 33 of the ABD and Exhibits O and P.

52MJ met Mr. Gulati in July 2016. He was looking to replace an existing mortgage on his condominium. In order to pay for Mr. Gulati's services, MJ obtained a cash advance on his credit card in the amount of $2,000 and gave the full amount to Mr. Gulati shortly after their first meeting. MJ did not receive any receipt for this payment.

53On July 28, 2016, MJ obtained a bank draft in the amount of $1,500, made payable to "George Gulati". Shortly thereafter, MJ returned to the bank and replaced the cheque with $1,500 cash. He gave the full amount to Mr. Gulati. MJ did not receive any receipt for this payment.

54On September 15, 2016, MJ obtained a bank draft in the amount of $1,500, made payable to "SAI Financial". MJ gave this cheque to Mr. Gulati with the understanding that the money would cover a mortgage shortfall and allow the mortgage transaction brokered by Mr. Gulati to close.

55In the end, the mortgage transaction brokered by Mr. Gulati never closed. MJ made several attempts to contact the broker, asking for a refund of the $1,500 that was paid to cover the mortgage shortfall. In response, he was provided a one-page receipt with the handwritten words "No Refund" at the top. The document acknowledges that a payment was made to SAI Financial, but it characterizes the $1,500 sum as an "ADMIN FEE" and describes the services provided to MJ as follows:

RECEIVED $1500.00 FROM THE ABOVE CLEINT [sic] TO DEAL WITH REVENUE CANADA, TO REMOVE THE LIEN OF THE PROPERTY […], THE LETTER FROM CANADA REVENUE AGENCY WAS PROVIDED TO […] THAT JOB WAS VERY HARD DUE TO NUMEROUS BANKCRUPTCY [sic] WAS DONE BY […].

56With respect to this receipt, MJ testified that the bank draft dated September 15, 2016 had nothing to do with Revenue Canada or his bankruptcy. MJ acknowledged that Mr. Gulati had done work for him on those topics, but he testified that he had paid him for those services and that the $1,500 in question was for the mortgage.

57During his testimony, MJ reviewed a letter directed to a lawyer named Richie Linton, which apparently evidenced MJ's signature. The letter is a "Direction of payment" asking Mr. Linton to pay George Gulati a total fee of $10,000 plus HST for having performed the "fallowing [sic] jobs". The letter describes various services allegedly performed by Mr. Gulati on behalf of MJ. The letter states that $2,000 was paid in advance and is "none [sic] refundable". MJ testified that the signature on the letter was not his and that he never agreed to the amounts owed on the document, with the exception of the $2,000 fee paid in advance.

58During his testimony, MJ identified a mortgage commitment between himself and a third-party lender in the amount of $352,000. He testified that this was the mortgage that had been requested. However, MJ could not identify the signatures at the end of the document and could not explain why the commitment was dated March 2016, when he only met Mr. Gulati in July. In addition, it should be noted that the commitment provides that a fee of $19,200 will be paid to SAI Financial from the mortgage advance.

59During his testimony, MJ identified a mortgage commitment between himself and SAI Financial in the amount of $9,040. MJ testified that he had never requested a mortgage in this amount or a mortgage commitment between himself and SAI Financial. MJ does not know who SAI Financial is and he could not identify the signature at the end of the document. We note that this document contains noticeable spelling mistakes. For example, on more than one occasion, the document refers to MJ as the "BARROWER" [sic].

60MJ reviewed several sets of documents for the mortgage transaction. MJ testified that he was unable to identify what the initials "RMA" and "RMAI" indicated on these documents. MJ reviewed additional documents respecting his mortgage transaction. MJ testified that he was unable to identify who SAI Financial was in this transaction.

61MJ testified that he was never provided documents directly from Mr. Gulati. Instead, he was provided all documents for signature regarding the mortgage through his own lawyer. MJ further testified that Mr. Gulati never provided disclosures to MJ with respect to fees or incentives to Mr. Gulati or another party, material risks of his mortgage, suitability of his mortgage or any relationships between the lender, SAI Financial, Mr. Gulati or Mr. Gulati's brokerage.

G. Real Mortgage Associates

62Ron De Silva is the Principal Broker of Real Mortgage Associates, the brokerage on whose behalf Mr. Gulati was registered to deal or trade in mortgages between February 2, 2012 and July 13, 2015. The following findings of fact are based on Mr. De Silva's testimony and the documentary evidence before the Tribunal, in particular Tabs 19, 20 and 21 of the ABD and Exhibits E and F.

63Mr. De Silva took over as Principal Broker of Real Mortgage Associates in mid-2015. At the time, he was given a file involving compliance issues. Upon reviewing the file, he decided to terminate the employment of Mr. Gulati. In his words, "I realized that a lot of things occurred that were outside of business practices" and "I did not want that type of business done through my organization".

64Mr. Gulati was terminated "for cause" on June 29, 2015. The termination letter signed by Mr. De Silva says, inter alia, the following: "Effective immediately, all business cards, websites, yellow pages ads or any form of advertising promoting your association as an agent (or broker) with Real Mortgage Associates Inc., must be destroyed by shredding and cancelling of materials and advertisements."

65Mr. Gulati was terminated for two reasons: (1) he conducted mortgage transactions outside of the brokerage and (2) he used SAI Financial to both lend money on mortgages and receive commissions, something that is against the policies of Real Mortgage Associates. In an internal email explaining his decision, Mr. De Silva refers to the FSCO complaints of PN and MA as two examples of Mr. Gulati's misconduct.

66At no time did Mr. Gulati submit any documents or provide any disclosure to Real Mortgage Associates with respect to the mortgage broker services he provided to PN. Furthermore, the brokerage did not pay any fees to Mr. Gulati with respect to the mortgage broker services he provided to PN. On the other hand, Mr. De Silva testified that Real Mortgage Associates did have a file with respect to MA. He testified that Mr. Gulati had submitted a mortgage application, a credit check and a mortgage commitment.

67When he began his relationship with Real Mortgage Associates, Mr. Gulati requested that his commissions be paid to SAI Financial. On February 2, 2012, he signed an Authorization Form in which he agrees that this company "does not invest in mortgages" and "does not arrange or deal in mortgages". Incidentally, this document also states that SAI Financial is Mr. Gulati's "wholly owned business company".

68After his employment had been terminated, Mr. Gulati sent a backdated resignation letter to Real Mortgage Associates. The letter was sent by fax on July 2, 2015, but it is dated June 27, 2015. In the letter, Mr. Gulati writes: "I AM SORRY TO INFORM YOU THAT I WILL BE LEAVING RMA AND WILL BE JOINING OTHER COMPANY, AGAIN SORRY FOR LEAVING THE COMPANY YOUR COMPANY IS ONE OF THE BEST COMPANY".

69Real Mortgage Associates maintains policies and procedures governing required disclosures and suitability analyses to be taken in mortgage transactions. Agents and brokers who are authorized to deal or trade in mortgages on behalf of Real Mortgage Associates are required to disclose a number of things on behalf of the brokerage, including fees or incentives to the brokerage or others, conflicts of interest, materials risks, and the existence of any relationship between the brokerage and the lender. They are also required to review mortgage transactions for client and mortgage suitability. Mr. De Silva testified that Mr. Gulati would have been made aware of these obligations placed on the brokerage and the existence of these policies and procedures.

H. Mortgage Alliance Active Lending

70Jasbir Attli is the Principal Broker of Mortgage Alliance Active Lending, the brokerage on whose behalf Mr. Gulati was registered to deal or trade in mortgages between March 28, 2016 and August 14, 2017. The following findings of fact are based on Mr. Attli's testimony.

71During his employment with Mortgage Alliance Active Lending, Mr. Gulati did not submit any mortgages for funding through the brokerage. In particular, Mr. Gulati did not submit any mortgage documentation for anyone named "MJ" to the brokerage, nor was he paid by the brokerage for any mortgage work done on behalf of anyone named "MJ".

72Agents and brokers who are authorized to deal or trade in mortgages on behalf of Mortgage Alliance Active Lending are required to provide disclosures while working on behalf of the brokerage. Employees of Mortgage Alliance Active Lending are informed of the code of ethics of the brokerage and informed that brokers and agents are required to abide by the MBLA Act and this code of ethics. Mr. Gulati was informed of these obligations in his initial meeting with Mr. Attli.

73The disclosure obligations of Mortgage Alliance Active Lending include requirements to disclose the following: conflicts of interest; fees or incentives to a broker, brokerage or others; material risks of a mortgage; and any lender/brokerage relationship. In addition, brokers are required to undertake suitability reviews for mortgages.

74Mr. Attli testified that he would expect all employees, agents and brokers with Mortgage Alliance Active Lending to follow these obligations, brokerage policies and laws while employed with the brokerage.

IV. ANALYSIS

A. Introduction

75This hearing involves three proposals and multiple allegations. In total, thirteen issues were addressed by the parties and they fall under two broad categories. Seven issues deal with the question of whether one or more administrative monetary penalties should be imposed on Mr. Gulati. These issues will be addressed in Part IV(B) of our Reasons. The remaining issues deal with his mortgage broker's licence and, in particular, with the question of whether said licence should be revoked. These issues will be addressed in Part IV(C).

76There is some overlap between the issues. For example, many of the findings made below in Part IV(B) are grounds that support the Tribunal's belief that Mr. Gulati is not suitable to be licensed. However, as explained in Part IV(C), there are other grounds upon which we base this conclusion.

B. Administrative Monetary Penalties

77The authority to impose an administrative monetary penalty on a licensee is found in sections 38 and 39 of the MBLA Act. When read together, these provisions state that the Superintendent may impose an administrative penalty on a person or entity provided two conditions are met:

a. The person or entity 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).

b. The penalty is aimed at promoting compliance with the requirements established under the MBLA Act or at preventing a person or entity from deriving, directly or indirectly, any economic benefit as a result of contravening or failing to comply with a requirement established under the MBLA Act.

78In this case, the Superintendent alleges that Mr. Gulati contravened five requirements established under the MBLA Act: (1) the prohibition against giving false or deceptive information imposed by subsection 43(2) of the MBLA Act (Issue A); (2) the prohibition against dealing in mortgages not on behalf of a brokerage imposed by subsection 2(3) of the MBLA Act (Issue B); (3) the restriction on remuneration imposed by subsection 4(1) of Ontario Regulation 187/08 (Issue C); (4) the prohibition on carrying on business as a mortgage lender imposed by subsection 4(2) of the MBLA Act (Issue D); and (5) the duty imposed by section 3 of Ontario Regulation 187/08 (Issue E).

79In addition, the Superintendent argues that five individual monetary penalties would promote compliance with the MBLA Act and would prevent Mr. Gulati from deriving any economic gains from his contraventions (Issue F), and that the appropriate amount for each penalty is $5,000 (Issue G).

Issue A – False or Deceptive Information

80The first requirement that Mr. Gulati is alleged to have contravened is the prohibition against giving false or deceptive information. This requirement is established by subsection 43(2) of the MBLA Act:

No mortgage broker or agent shall give, assist in giving or induce or counsel another person or entity to give or assist in giving any false or deceptive information or document when dealing in mortgages in Ontario or trading in mortgages in Ontario.

81Did Mr. Gulati give or assist in giving or induce or counsel another person or entity to give or assist in giving any false or deceptive information or document when dealing with mortgages, contrary to subsection 43(2) of the MBLA Act?

82The answer to this question is an unqualified "yes". On the basis of clear, cogent, and convincing evidence, the Tribunal finds that the following eight documents are false. In addition, we find that these eight documents were created, used and distributed by Mr. Gulati, for the specific purpose of deceiving three clients on whose behalf he was providing (or had provided) mortgage services.

a. The so-called "Mortgage Commitment" that was delivered to PN in the Spring of 2015. This document is described in paragraph 37 of our Reasons.

b. The so-called "Conditions" that were delivered to PN in the Spring of 2015. This document is described in paragraph 38 of our Reasons.

c. The so-called "Direction of Payment" addressed to Mr. Hope and signed by MA and her husband on August 23, 2014. This document is described in paragraph 47 of our Reasons.

d. The so-called "Binding Loan Engagement Letter" dated August 12, 2014, between MA and SAI Financial. This document is described in paragraph 48 of our Reasons.

e. The so-called "Recipt" [sic] dated November 28, 2014, that was delivered to MA. This document is described in paragraph 49 of our Reasons.

f. The so-called "Receipt" that was provided to MJ in the Fall of 2016. This document is described in paragraph 55 of our Reasons.

g. The so-called "Direction of Payment" addressed to Mr. Linton and purportedly signed by MJ. This document is described in paragraph 57 of our Reasons.

h. The so-called "Mortgage Commitment" between MJ and SAI Financial in the amount of $9,040. This document is described in paragraph 59 of our Reasons.

83The evidence supporting these findings is overwhelming. Besides the testimony of each complainant, we base our findings on the presence of striking similarities between the eight documents. Indeed, the person who created each false document (Mr. Gulati – the only person who could benefit from the documents) made excessive use of all uppercase letters and made numerous spelling mistakes. For example, at some point, each complainant is described as a "BARROWER" [sic] or as having "BARROWED" [sic] money from Mr. Gulati and/or SAI Financial: see paragraphs 37 and 38 with respect to PN, paragraph 47 with respect to MA and paragraph 59 with respect to MJ.

84In addition, the Tribunal finds that the so-called letter of resignation that Mr. Gulati sent to Mr. De Silva of Real Mortgage Associates is false. This document is described in paragraph 68 of our Reasons. Because the letter deals with an employment matter rather than a mortgage transaction, we are not relying on this finding for the purpose of establishing a contravention of 43(2) of the MBLA Act. However, we note that Mr. Gulati used all uppercase letters to write his letter. In our view, this is further evidence that he – and nobody else – is the author of the eight documents listed in paragraph 82 of our Reasons.

Issue B – Dealing in Mortgages Not on Behalf of a Brokerage

85The second requirement that Mr. Gulati is alleged to have contravened is the prohibition against dealing in mortgages not on behalf of a brokerage. This requirement is established by subsection 2(3) of the MBLA Act:

No individual shall deal in mortgages in Ontario for remuneration, whether direct or indirect, as an employee or otherwise, unless he or she has a mortgage broker's or agent's licence and is acting on behalf of a mortgage brokerage or is exempted from the requirement to have such a licence

86Did Mr. Gulati deal in mortgages not on behalf of a brokerage, specifically his specified brokerage, contrary to subsection 2(3) of the MBLA Act?

87Once again, the answer to this question is "yes". On the basis of clear, cogent, and convincing evidence, the Tribunal finds that Mr. Gulati dealt in mortgages for remuneration on behalf of someone other than the brokerage on whose behalf he was authorized to deal on the following three (3) occasions:

a. In the case of PN, the second mortgage in favour of SAI Financial in the amount of $35,000 was brokered entirely outside of Mr. Gulati's brokerage at the relevant time, namely, Real Mortgage Associates. This occurred in the first quarter of the year 2013.

b. In the case of PN, the renewal and/or discharge of the second mortgage in favour of SAI Financial was brokered entirely outside of Mr. Gulati's brokerage at the relevant time, namely, Real Mortgage Associates. This occurred in the first quarter of 2015.

c. In the case of MJ, the mortgage transaction in question never closed. However, Mr. Gulati performed various activities that fall within the definition of dealing in mortgages set out in subsection 2(1) of the MBLA Act, to wit, by "[n]egotiating or arranging a mortgage on behalf of another person or entity, or attempting to do so". At the relevant time, between July and September 2016, the brokerage on whose behalf Mr. Gulati was authorized to deal was Mortgage Alliance Active Lending.

88Once again, the evidence is overwhelming. The principal brokers for each brokerage testified that the activities outlined in the previous paragraph were not undertaken on behalf of their respective brokerages. What is more, Mr. Gulati did not challenge this allegation.

Issue C – Receiving Fees from Someone Other than One's Brokerage

89The third requirement that Mr. Gulati is alleged to have contravened is the restriction on remuneration imposed by subsection 4(1) of Ontario Regulation 187/08. This provision reads as follows:

A mortgage broker or agent shall not receive, directly or indirectly, any fee or other remuneration for dealing or trading in mortgages from a person or entity other than the brokerage on whose behalf he or she is authorized to deal or trade in mortgages.

90Did Mr. Gulati receive fees from individuals other than his brokerage, contrary to subsection 4(1) of Ontario Regulation 187/08?

91The answer to this question is an unqualified "yes". On the basis of clear, cogent, and convincing evidence, the Tribunal finds that Mr. Gulati received the following payments for dealing or trading in mortgages from someone other than the brokerage on whose behalf he was authorized to deal at the relevant time:

a. In the case of PN, the evidence reviewed in paragraphs 27-34 of our Reasons establishes the following: (1) a charge in the amount of $35,000 was registered on PN's property in the name of Mr. Gulati's company, SAI Financial; (2) PN received funds in the amount of $25,000 from SAI Financial; (3) PN made all of her "Principal and Interest" mortgage payments during the term of the mortgage; and (4) PN paid more than $35,000 at the end of the term in order to have the mortgage in favour of SAI Financial discharged. Thus, over the course of two years, Mr. Gulati received through his company SAI Financial an economic benefit of at least $10,000. In our view, this benefit qualifies as a "fee or other remuneration for dealing or trading in mortgages" within the meaning of subsection 4(1) of Regulation 187/08. Furthermore, this benefit was not paid by the brokerage on whose behalf Mr. Gulati was authorized to deal in mortgages at the relevant time; the benefit was paid by the broker's own client.

b. In the case of MA, the evidence reviewed in paragraphs 45-48 of our Reasons establishes that Mr. Gulati was paid $5,500 from the proceeds of the mortgage and that Reeta Gulati, on behalf of Mr. Gulati's company SAI Financial, was paid $10,950 from the proceeds of the mortgage. Each payment qualifies as a "fee or other remuneration for dealing or trading in mortgages" and neither of them came from the brokerage on whose behalf he was authorized to deal in mortgages at the relevant time.

c. In the case of MJ, the evidence reviewed in paragraphs 52-56 of our Reasons establishes that Mr. Gulati was paid a total of $3,500 and that SAI Financial, his own company, was paid $1,500. Each payment qualifies as a "fee or other remuneration for dealing or trading in mortgages" and neither of them came from the brokerage on whose behalf he was authorized to deal in mortgages at the relevant time – in fact, all payments came directly from the client on whose behalf Mr. Gulati was attempting to broker a mortgage.

92In total, the evidence establishes that Mr. Gulati received, directly or indirectly, at least $31,450 from sources other than the brokerage on whose behalf he was authorized to deal or trade in mortgages, thereby contravening subsection 4(1) of Ontario Regulation 187/08.

Issue D – Carrying on Business as a Mortgage Lender

93The fourth requirement that Mr. Gulati is alleged to have contravened is the prohibition against carrying on business as a mortgage lender. This requirement is established by subsection 4(2) of the MBLA Act:

No person or entity shall carry on business as a mortgage lender in Ontario unless he, she or it has a brokerage licence or is exempted from the requirement to have such a licence.

94Did Mr. Gulati carry on business as a mortgage lender in Ontario without having a brokerage licence or being exempted from the requirement to have such a licence, contrary to subsection 4(2) of the MBLA Act?

95There is no dispute that SAI Financial carried on business as a mortgage lender in Ontario. This entity provided funds to a borrower named PN in the amount of $25,000 and it received a charge on her property in the amount of $35,000. Likewise, it is clear that SAI Financial does not have a brokerage licence and is not exempted from the requirement to have such a licence. Therefore, for present purposes, the only question is whether Mr. Gulati can be sanctioned for the actions of SAI Financial.

96In Metro Financial Planning Limited and Dinesh Khanna v. Ontario (Superintendent Financial Services), 2017 ONFST 4 at para. 298, the Tribunal held that a mortgage brokerage may be sanctioned based on the actions of a mortgage broker where "[the brokerage] does not have any practical commercial existence absent [the broker]". Conversely, we believe that a mortgage broker may be sanctioned on the basis of the actions of an unlicensed corporation when he or she is the controlling mind of the corporation and this entity has no practical commercial existence absent the mortgage broker. As argued by the Superintendent, an individual should not be able to escape regulatory scrutiny by creating a corporation in order to conduct unlicensed mortgage transactions. Otherwise, the prohibition against carrying on business as a mortgage lender established by subsection 4(2) of the MBLA Act could be circumvented, at the expense of the public interest.

97As stated in paragraph 22 of our Reasons, we reject Mr. Gulati's testimony that SAI Financial belonged to his wife. The evidence heard by the Tribunal, in totality, establishes that Mr. Gulati was the controlling mind of the corporation at all material times and that he acted entirely in his own interests. Furthermore, there is no evidence that SAI Financial had any separate, commercial existence beyond being the conduit through which Mr. Gulati lent money on mortgage transactions. Simply stated, the corporation was used as a shield for the mortgage lending activities of Mr. Gulati. Therefore, the Tribunal imputes the actions of SAI Financial in lending money on the security of real property to Mr. Gulati and finds that he has contravened subsection 4(2) of the MBLA Act.

Issue E – Putting One's Brokerage at Risk of Contravention

98The fifth requirement that Mr. Gulati is alleged to have contravened is the duty imposed by section 3 of Ontario Regulation 187/08. This provision reads as follows:

A mortgage broker or agent shall not do or omit to do anything that might reasonably be expected to result in the brokerage on whose behalf he or she is authorized to deal or trade in mortgages to contravene or fail to comply with a requirement established under the Act

99Did Mr. Gulati do or omit to do anything that might reasonably be expected to result in the brokerage on whose behalf he is authorized to deal or trade in mortgages to contravene or fail to comply with a requirement established under the MBLA Act, contrary to section 3 of Ontario Regulation 187/08?

100At the outset, the following point should be clarified. With respect to issue E, the question is not whether the brokerages on whose behalf Mr. Gulati was authorized to deal in mortgages did, as a matter of fact, contravene requirements established under the MBLA Act or its regulations. Neither of the two entities mentioned by the Superintendent's counsel in their submissions on this issue, namely Real Mortgage Associates and Mortgage Alliance Active Lending, was a party to these proceedings. Furthermore, neither of them was the subject of the NOP issued by the Superintendent's delegate on June 2, 2017. Instead, with respect to issue E, the question is whether Mr. Gulati breached the duty imposed upon him by section 3 of Ontario Regulation 187/08, by doing or omitting to do anything that might reasonably be expected to put his brokerage at the risk of contravening the law.

101On the basis of clear, cogent, and convincing evidence, the Tribunal finds that Mr. Gulati omitted to do the following things with respect to his clients PN, MA and MJ:

a. Mr. Gulati omitted to take reasonable steps to ensure that the mortgages he arranged for PN and MA, as well as the mortgage he attempted to arrange for MJ, were suitable for these borrowers having regard to their respective needs and circumstances.

b. Mr. Gulati omitted to disclose in writing the material risks associated with the mortgage he arranged for PN, as well as the mortgage he attempted to arrange for MJ. Furthermore, he did not obtain any written acknowledgment from PN and MJ that he had disclosed said risks.

c. Mr. Gulati omitted to disclose in writing his direct, flagrant conflict of interest with respect to the mortgages he arranged for PN and MA, as well as the mortgage he attempted to arrange for MJ. This conflict relates to the economic benefits he had secured for himself during each transaction, as outlined in paragraphs 91-92 of these Reasons.

102Mortgage brokerages have, inter alia, the following duties: (1) they must take reasonable steps to ensure that any mortgage is suitable for the borrower, having regard to the needs and circumstances of the borrower; (2) they must disclose in writing to a borrower the material risks of each mortgage that the brokerage presents for consideration of the borrower and obtain the written acknowledgment of the borrower that the brokerage disclosed said risks; and (3) they must disclose in writing to a borrower any conflict of interest or potential conflict of interest that the brokerage or any broker or agent authorized to deal or trade in mortgages on its behalf may have in connection with a mortgage that the brokerage presents for consideration of the borrower. See Ontario Regulation 188/08, sections 24(1), 25 and 27, respectively.

103By omitting to do the things outlined in paragraph 101 of these Reasons, Mr. Gulati put both Real Mortgage Associates and Mortgage Alliance Active Lending, the brokerages on whose behalf he was authorized to deal in mortgages at the relevant time, at real risk of contravening the duties imposed upon them by sections 24(1), 25 and 27 of Ontario Regulation 188/08. Indeed, it must be recalled that PN and MA both identified Real Mortgage Associates in their FSCO complaints. Therefore, the Tribunal concludes that Mr. Gulati was in contravention of the duty imposed upon him by section 3 of Ontario Regulation 187/08.

Issue F – Appropriateness of Administrative Monetary Penalties

104Having established that Mr. Gulati contravened five requirements established under the MBLA Act, the next issue is whether the imposition of administrative monetary penalties is appropriate, considering subsection 38(1) of the MBLA Act. Specifically, would monetary penalties promote compliance with requirements established under the MBLA Act and/or prevent Mr. Gulati from deriving an economic benefit from his non-compliance?

105Of all the questions raised by these proceedings, this is the easiest one to answer. The requirements breached by Mr. Gulati are necessary for the proper functioning of the mortgage industry. The prohibition against giving false or deceptive information is not an administrative, technical or minor requirement. Nor is the prohibition on carrying on business as a mortgage lender or, for that matter, any of the other requirements involved in this case. Each plays a central role in the regulatory regime established by the Ontario Legislature in July 2008. What is more, Mr. Gulati obtained an economic benefit of at least $31,450 as a result of his misconduct. Therefore, on the facts of this case, the appropriateness of administrative monetary penalties is crystal clear. The Tribunal must deter anyone involved in the mortgage industry from engaging in the kind of acts and omissions displayed by Mr. Gulati in this matter. Moreover, we must ensure that Mr. Gulati cannot retain the benefits he derived from his contraventions.

Issue G – Amount of Administrative Monetary Penalties

106Pursuant to section 41 of the MBLA Act, the maximum penalty that may be imposed on a mortgage broker for any given contravention or failure to comply is $10,000. This maximum applies separately to each breach. Therefore, on the assumption that we are dealing with five contraventions, the maximum total penalty that could be imposed on Mr. Gulati is $50,000. True, one could argue that this case involves more than five contraventions, since Mr. Gulati has breached some of the requirements multiple times. However, for present purposes, it is unnecessary to resolve the point, given that our total sanction is below $50,000.

107In determining the amount of Mr. Gulati's administrative monetary penalties, the Tribunal must only consider the five criteria listed in section 3 of Ontario Regulation 192/08. During his submissions, Mr. Gulati argued that he did not have the resources to pay the fine proposed by the Superintendent. However, according to the wording of section 3, the "only" [emphasis added] relevant factors are those listed therein, and one's ability to pay does not make the list. Furthermore, Mr. Gulati's submissions on this question are somewhat disingenuous, since he showed little empathy with respect to the financial interests of PN, MA and MJ when he engaged in the misconduct for which he is now being sanctioned.

108Each case is unique and must be decided on its own facts, as established by the evidence adduced during the Hearing. Having reviewed the evidence and the parties' arguments, the Tribunal makes the following findings with respect to the application of the five criteria to the circumstances of this case:

a. To what degree was Mr. Gulati's contraventions intentional, reckless or negligent? The Applicant is not a newcomer to the mortgage industry. He has been licensed as a mortgage broker for ten years and has worked with six different brokerages over this period. During cross-examination, Mr. Gulati testified that he was aware of his professional obligations under the MBLA Act and its regulations, in particular the five requirements that are involved in this case. He said, "I am experienced, but not perfect." In addition, according to the testimony of Mr. De Silva and Mr. Attli, the Applicant received training from Real Mortgage Associates and Mortgage Alliance Active Lending with respect to his obligations. Lastly, it must be recalled that many of the requirements that are involved in this case were breached on numerous occasions, over several months. For example, the evidence shows that Mr. Gulati created eight false documents in order to deceive three separate clients. In these circumstances, the Tribunal agrees with the manner in which the Superintendent has characterised the misconduct of Mr. Gulati. On the facts of this case, the adjectives "negligent" and "reckless" do not adequately capture the nature of the contraventions at play. On the contrary, the actions and omissions of Mr. Gulati reveal an intentional scheme to defraud vulnerable borrowers of funds through improper mortgages, fraudulent documents and improper disclosure practices, and indicate an intent to confuse and deceive borrowers to their detriment and to his own personal gain.

b. To what extent did Mr. Gulati's contraventions cause harm or potential harm to others? In this case, the persons harmed most directly were PN, MA and MJ who were collectively induced into paying at least $31,450 in fees and commissions for mortgage services of little or no value. These people were under financial stress at the time of the mortgage transactions. Instead of providing them with help and guidance, Mr. Gulati took advantage of their vulnerability for his own profit.

c. To what extent did Mr. Gulati try to mitigate any loss or take other remedial action? The Applicant has not mitigated any of the harm done to his clients. He has taken no steps to repay PN, MA or MJ the amounts illegitimately received from them. On the contrary, he has taken active steps to cover-up his misconduct, by creating false receipts, false mortgage commitments, false payment directions and even a false resignation letter. During his testimony, Mr. Gulati did not take any responsibility for his actions and omissions. In fact, he said he only made one mistake in this whole affair: he failed to inform Real Mortgage Associates of the mortgage transaction involving PN. But even here, he added he was "doing [PN] a favour" in arranging this mortgage – a $25,000 mortgage with an annual interest rate of 24% and a $10,000 fee!

d. To what extent did Mr. Gulati derive or reasonably might have expected to derive, directly or indirectly, any economic benefit from his contravention? As established in paragraph 91 of our Reasons, Mr. Gulati derived an economic benefit of at least $31,450 as a result of his misconduct. This is money that Mr. Gulati would not have received, had he complied with the five requirements that were breached in this case. Furthermore, the evidence establishes that Mr. Gulati expected to derive even more money from at least one of his clients, PN, because she was told that a payout amount of $48,000 was required in order to obtain a discharge from SAI Financial at the end of her mortgage's two-year term. This amount is $6,000 more than the figure used by the Tribunal in calculating the benefits derived by Mr. Gulati. Shockingly, this amount is also $23,000 more than the funds actually advanced by Mr. Gulati, under the veil of his company, when the transaction was initially brokered.

e. Has Mr. Gulati committed any other contraventions during the previous five years? As conceded by the Superintendent, this criterion has no application in this case.

109In view of these circumstances, the Tribunal concludes that an administrative penalty of $5,000 for each requirement that Mr. Gulati has contravened is appropriate. This amounts to a total monetary penalty of $25,000.

B. Revocation of Licence

110Pursuant to subsection 38(2) of the MBLA Act, an administrative monetary penalty may be imposed alone or in conjunction with any other regulatory measure provided by the MBLA Act, including a suspension or revocation of a licence. In this case, the Superintendent argues that a fine is not enough to protect the interests of the public. We agree.

111Pursuant to subsection 19(1) of the MBLA Act, the Superintendent may revoke the licence of a mortgage broker in any of the circumstances in which he is authorised to suspend a licence under subsection 18(1). For present purposes, the relevant ground is set out in subsection 18(1)(b) as follows: "if the Superintendent believes, on reasonable grounds, that the licensee is no longer suitable to be licensed having regard to the circumstances, if any, prescribed for the purposes of subsection 14(1) or 16(4), as the case may be, and such other matters as the Superintendent considers appropriate." Sections 14 and 16 of the Act deal with the issuance and renewal of a licence. Accordingly, under the MBLA Act, a proposal to revoke or suspend a licence on the basis of a licensee's unsuitability involves a consideration of the same factors as a proposal to deny the issuance or renewal of a licence on the basis of an applicant's unsuitability.

112The factors or "prescribed circumstances" that the Superintendent must consider in determining a person's suitability to work or continue working in the mortgage industry are outlined in section 10 of Ontario Regulation 409/07 (the "Regulation"). Section 10 of the Regulation reads as follows:

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

11. Whether an 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.

113In this case, the Superintendent invokes all three prescribed circumstances listed in section 10, namely, the past conduct of Mr. Gulati (Issue A), his contraventions of the MBLA Act and regulations (Issue B) and a number of false statements he allegedly made during the renewal of his licence in 2012, 2014 and 2016 (Issue C).

114The Superintendent submits that these three circumstances, together with the factors outlined by the Tribunal in Henderson v Ontario (Superintendent Financial Services), 2008 ONFST 7 ("Henderson"), afford reasonable grounds for the belief that Mr. Gulati is no longer suitable to be licensed as a mortgage broker (Issue D). In addition, the Superintendent submits that revocation is the only sanction that adequately protects the public (Issue E) and that any issue respecting the surrender of Mr. Gulati's licence is moot (Issue F).

Issue A – Past Conduct

115Does Mr. Gulati's past conduct afford reasonable grounds for the belief that he will not deal or trade in mortgages in accordance with the law and with integrity and honesty, as described under paragraph 1 of section 10 of Ontario Regulation 409/07?

116We begin with a comment about the relevant standard of proof. In Ontario (Alcohol and Gaming Commission of Ontario) v. 751809 Ontario Inc. (Famous Flesh Gordon's), 2013 ONCA 157, the Court of Appeal discussed the standard of proof that applies when a regulator considers whether the past conduct of a licensee affords "reasonable grounds for belief" that he or she will not carry on business as required. "There is no doubt" according to the Court, that this involves a "lower standard of proof" than the civil standard of proof on the balance of probabilities (at paras. 18 and 19). Therefore, to paraphrase the Court of Appeal, paragraph 1 of section 10 of Ontario Regulation 409/07 requires the Superintendent to establish that the past conduct of Mr. Gulati provides reasonable grounds for belief that he will not deal or trade in mortgages in accordance with the law and with integrity and honesty; the Superintendent does not have to go so far as to show that Mr. Gulati's past conduct makes it more likely than not that he will not carry on business as required.

117Given the repeated nature of Mr. Gulati's misconduct and his failure to take any meaningful responsibility for his actions and omissions, the Tribunal has ample "reasonable grounds" for its belief that Mr. Gulati would not deal or trade in mortgages in accordance with the law and with integrity and honesty if he were allowed to remain licensed. In our view, the totality of evidence paints the picture of someone unwilling to operate within the mortgage industry with honesty and integrity. This was true with respect to the past, and we have no reason to believe the future would be different. Therefore, the answer to issue A is "yes".

Issue B – Activities that Contravene the MBLA Act

118Was Mr. Gulati carrying on activities that contravened the MBLA Act or Regulations while licensed, as described under paragraph 2 of section 10 of Ontario Regulation 409/07?

119Once again, the answer to this question is "yes". As explained in Part IV(B) of our Reasons, the Applicant contravened five different requirements established under the MBLA Act while licensed as a mortgage broker. As noted, these requirements are not administrative, technical or minor; they play a key role in the regulatory regime established by the Ontario Legislature in July 2008. Moreover, Mr. Gulati's contraventions were not one-time violations. They occurred repeatedly, with three separate clients, over the course of many years. For example, Mr. Gulati created, used and distributed no less than eight false documents for the purpose of deceiving people for whom he had provided mortgage services.

Issue C – False Statements to the Superintendent

120Did Mr. Gulati make a false statement or provide false information to the Superintendent with respect to his licence, as described under paragraph 3 of section 10 of Ontario Regulation 409/07?

121This question involves a consideration of the licence renewal applications submitted by Mr. Gulati in 2012, 2014 and 2016. The evidence establishes, without any shadow of a doubt, that Mr. Gulati made two false statements in each application, for a total of six false statements over the course of this timeframe.

122The first three false statements made by Mr. Gulati involves his complaint history. In the ASF, Mr. Gulati concedes that he answered "NO" to the following question in his 2012, 2014 and 2016 licence renewal applications:

Have you ever been successfully sued of has a complaint ever been made against you to a regulatory body in any province, territory, state or country that was or is, based in whole or in part, on fraud, theft, deceit, misrepresentation, forgery, or similar conduct; or based in whole or part, on professional negligence or misconduct (including claims paid by your errors and omissions insurance carrier or bonding company)? [Emphasis added]

123These three answers were false. According to paragraph 9 of the ASF, a complaint was filed against Mr. Gulati with FSCO on September 3, 2010. (This complaint involved someone other than PN, MA and MJ.) Mr. Gulati was aware of the complaint and knew that it was based on his alleged misconduct. Indeed, Tab 7 of the ABD contains a letter dated October 27, 2010, written by John Gabriel, the Director of Compliance & Education for Mortgage Alliance Company of Canada, the brokerage on whose behalf Mr. Gulati was authorized to deal in mortgages at the relevant time. The letter is addressed to the complainant and a copy was sent to Mr. Gulati by electronic mail. Significantly, Mr. Gabriel indicates that he met with Mr. Gulati "in order to obtain his version of your business dealings". Attached to the letter is a "PRIVATE MORTGAGE COMMITMENT LETTER" between the complainant (the "BARROWER" [sic]) and SAI Financial (the "LENDER"). Additional evidence of Mr. Gulati's knowledge of this complaint is found in the Investigative Report of Mr. Logan, located at Tab 1 of the ABD. In paragraph 4 of his Report, Mr. Logan writes that he asked Mr. Gulati about the answers given to this question during a Regulatory Interview on April 25, 2016. He writes, "Mr. Gulati was aware of the elements of the complaint, however did not see it as a complaint."

124The next three false statements made by Mr. Gulati in 2012, 2014 and 2016 involves his bankruptcy history. In the ASF, Mr. Gulati concedes that he answered "NO" to the following question in his 2012, 2014 and 2016 licence renewal applications:

Have you ever been declared bankrupt or made a voluntary assignment in bankruptcy, or are you currently an undischarged bankrupt or are you currently a defendant in any civil proceeding or are there any unsatisfied judgments imposed by a civil court in Canada or elsewhere, against you personally? [Emphasis added]

125Once again, these three answers were false. In paragraph 8 of the ASF, Mr. Gulati acknowledges that he declared bankruptcy on December 12, 2009. When asked about his 2016 licence renewal application by Mr. Logan, during a second Regulatory Interview, Mr. Gulati said that his "NO" answer to the bankruptcy question "must have been a mistake": see Exhibit D at p. 11, para. 60. We do not believe this explanation. Based on the admitted facts, we find that Mr. Gulati knowingly made false statements to the Superintendent in 2012, 2014 and 2016 with respect to his bankruptcy history.

Issue D – Suitability to be Licensed

126Having established the presence of all three "prescribed circumstances" listed in section 10 of Ontario Regulation 409/07, the Tribunal has more than reasonable grounds to believe that Mr. Gulati is no longer suitable to be licensed as a mortgage broker. This belief is reinforced by an analysis of the factors outlined by the Tribunal in Henderson, supra at p. 9:

a. The time that has elapsed since the conduct occurred: The earliest instance of the misconduct outlined in these Reasons relates to the two false statements made by Mr. Gulati on his licence renewal application dated March 15, 2012; the most recent instance relates to Mr. Gulati's interactions with his client MJ, which occurred in the Summer and Fall of 2016. When the Hearing in this matter started, on January 8, 2018, only thirteen months had elapsed since the day MJ filed his written complaint with FSCO.

b. The prolonged or repetitive nature of the conduct: The misconduct outlined in these Reasons occurred from March 2012 until September 2016. Over this period of 4½ years, Mr. Gulati made six false statements to the Superintendent for the purpose of renewing his mortgage broker licence; he created eight false documents that are related to mortgage transactions that he brokered or attempted to broker; he dealt in mortgages for remuneration on behalf of someone other than his authorized brokerage on three occasions; he received at least $31,450 from sources other than his authorized brokerage; he carried on business as a mortgage lender under the veil of his own company, SAI Financial; and he exposed two brokerages to the risk of contravening the law by omitting to verify the suitability of three clients, by omitting to disclose material risks to three clients, and by omitting to disclose his direct, flagrant conflicts of interest to three clients.

c. The advertent or inadvertent nature of the conduct: In our view, there is nothing inadvertent about Mr. Gulati's misconduct. As stated in paragraph 108(a) of our Reasons, the actions and omissions of Mr. Gulati reveal an intentional scheme to defraud vulnerable borrowers of funds through improper mortgages, fraudulent documents and improper disclosure practices, and indicate an intent to confuse and deceive borrowers to their detriment and to his own personal gain.

d. The extent to which the conduct can be taken to call into question the integrity, honesty or law-abiding nature of the individual: As stated in paragraph 117 of our Reasons, the totality of evidence paints the picture of someone unwilling to operate within the mortgage industry with honesty and integrity.

e. The closeness of the context of the conduct to the context of activities in which the individual would be engaged as a mortgage broker: Every instance of misconduct outlined in these Reasons occurred while Mr. Gulati was licensed as a mortgage broker and is directly connected to the activities of a mortgage broker.

f. The fairness of the process followed in the disciplinary proceeding: Prior to this Hearing, Mr. Gulati did not face any disciplinary proceeding with respect to the misconduct outlined in these Reasons. Accordingly, this factor has no application.

g. The seriousness with which the disciplinary body treated the conduct as reflected in the severity of the sanction it imposed: To date, the Applicant has not faced any sanction with respect to the misconduct outlined in these Reasons. Accordingly, this factor has no application.

h. 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: There is no evidence that Mr. Gulati was under any unusual and severe pressure when he acted on behalf of the three clients who are at the centre of these proceedings.

i. Any consistent and prolonged pattern or reformed or redeeming behaviour on the part of the individual since the conduct occurred: There is no evidence of reformed or redeeming behaviour on the part of Mr. Gulati. On the contrary, he has shown no remorse and has taken no responsibility for his actions and omissions, with one minor exception. During his testimony, he said his "only mistake" was not informing Real Mortgage Associates of the mortgage transaction involving PN. In our view, this statement is troubling, because it reveals that Mr. Gulati still does not appreciate the seriousness of his misconduct.

127Accordingly, the Tribunal concludes that Mr. Gulati is no longer suitable to be licensed as a mortgage broker.

Issue E – Penalty

128The Tribunal is mindful of the fact that a licence revocation is one of the most serious enforcement measures available under the MBLA Act. We are also mindful of the fact that an administrative monetary penalty of $25,000 will be imposed on Mr. Gulati, based on similar grounds as those described in Part IV(C) of these Reasons. However, pursuant to subsection 38(2) of the MBLA Act, we are given the authority to impose a fine "in combination" with the revocation of a licence. The question is whether this discretion should be exercised on the facts of this case.

129In many cases, an administrative monetary penalty will be sufficient, either by itself or in combination with a licence suspension. However, in cases involving mortgage fraud, repeated contraventions of the MBLA Act, and what amounts to an ungovernable licensee, protection of the public interest demands a more substantial penalty.

130In our view, allowing Mr. Gulati to continue in the mortgage industry – whether now or after a licence suspension – would jeopardize the public interest and erode public confidence in the financial services industry. This would send the wrong message to the industry, by allowing Mr. Gulati to retain the privileges associated with his licence despite his repetitive, intentional contraventions of the some of the key requirements, prohibitions and protections established by the MBLA Act and its regulations.

131In the circumstances of this case, revocation is the only appropriate sanction for the misconduct of Mr. Gulati.

Issue F – Surrender of Licence

132Given our conclusion with respect to issue E, it is not necessary to determine whether the Superintendent should allow Mr. Gulati to surrender his licence.

V. ORDER

133We order the Superintendent to revoke the mortgage broker licence of Mr. Gulati and to impose administrative monetary penalties on him in the total amount of $25,000.