Enforcement order

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

AND IN THE MATTER OF MEERWISE WAIS HABIBZI.

NOTICE OF PROPOSAL TO IMPOSE AN ADMINISTRATIVE PENALTY

TO: Meerwise Wais Habibzi

TAKE NOTICE THAT pursuant to section 39 of the Act, and by delegated authority from the Chief Executive Officer of the Financial Services Regulatory Authority of Ontario (the “Chief Executive Officer”), the Director, Litigation & Enforcement (the “Director”) is proposing to impose three administrative penalties in the total amount of $30,000 on Meerwise Wais Habibzi as follows:

$10,000 for contravening subsection 43(2) of the Act by providing false or deceptive information when dealing in mortgages;

$10,000 for contravening subsection 3.1 of O. Reg. 187/08 by acting in a manner that facilitated fraud; and

$10,000 for contravening subsection 45(1) of the Act by providing false and misleading information to a person designated by the Chief Executive Officer.

Details of these contraventions and reasons for this proposal are described below.

SI VOUS DÉSIREZ RECEVOIR CET AVIS EN FRANÇAIS, veuillez nous envoyer votre demande par courriel immédiatement à: contactcentre@fsrao.ca.

YOU ARE ENTITLED TO A HEARING BY THE FINANCIAL SERVICES TRIBUNAL (THE “TRIBUNAL”) PURSUANT TO SECTIONS 39(2) AND 39(5) OF THE ACT. A hearing by the Tribunal about this Notice of Proposal may be requested by completing the enclosed Request for Hearing Form (Form 1) and delivering it to the Tribunal within fifteen (15) days after this Notice of Proposal is received by you. The Request for Hearing Form (Form 1) must be mailed, delivered, faxed or emailed to:

Address:

Financial Services Tribunal
5160 Yonge Street
14^th Floor, Box 85
Toronto ON M2N 6L9

Attention: Registrar

Fax: 416-226-7750

Email: contact@fstontario.ca

TAKE NOTICE THAT if you do not deliver a written request for a hearing to the Tribunal within fifteen (15) days after this Notice of Proposal is received by you, orders will be issued as described in this Notice of Proposal. TAKE FURTHER NOTICE of the payment requirements in section 4 of Ontario Regulation 192/08, which state that the penalized person or entity shall pay the penalty no later than (thirty) 30 days after the person or entity is given notice of the order imposing the penalty, after the matter is finally determined if a hearing is requested or such longer time as may be specified in the order.

For additional copies of the Request for Hearing Form (Form 1), visit the Tribunal’s website at www.fstontario.ca. The hearing before the Tribunal will proceed in accordance with the Rules of Practice and Procedure for Proceedings before the Financial Services Tribunal (“Rules”) made under the authority of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22, as amended. The Rules are available at the website of the Tribunal: www.fstontario.ca. Alternatively, a copy can be obtained by telephoning the Registrar of the Tribunal at 416-590-7294, or toll free at 1-800-668-0128 extension 7294.

At a hearing, your character, conduct and/or competence may be in issue. You may be furnished with further and or other particulars, including further or other grounds, to support this proposal.

REASONS FOR PROPOSAL

I. INTRODUCTION

These are reasons for the proposal by the Director to impose three administrative penalties in the total amount of $30,000 on Meerwise Wais Habibzi (“Habibzi”).

II. BACKGROUND

A. Licensing as a Mortgage Agent

Habibzi was previously licensed as a mortgage agent (licence #M09001653) under the Act. He was licensed from July 7, 2009, until his license expired on March 31, 2020.

He has not submitted an application to renew his license and is currently not licensed under the Act.

B. Habibzi Solicits $450,000

Beginning in approximately 2012, Habibzi had a personal and business relationship with an Ontario resident “LT.”

Habibzi was a friend of LT’s cousin. As LT was financially unsophisticated, Habibzi provided LT with financial advice from time to time. Habibzi represented to LT that he was an honest and trustworthy person.

In approximately 2013 LT fell into in financial difficulties. Habibzi acted as mortgage agent on LT’s behalf and arranged for her to receive mortgage financing from a bank via a second mortgage placed on a property owned by LT.

LT was in a lottery group pool with eleven other employees at her place of employment (the “Lottery Group”). The members of the Lottery Group were listed on a written membership list. Habibzi did not work at this place of employment, and his name was not included on the list of members of the Lottery Group.

In approximately May of 2015, the Lottery Group won the lottery (the “Lottery Win”). After being verified as a member of the Lottery Group by the Ontario Lottery and Gaming Corporation (“OLG”), OLG paid LT and the other members of the Lottery Group their share of the Lottery Win.

LT gave her son “DT” $100,000 from her share of the Lottery Win.

After learning of the Lottery Win, Habibzi solicited LT to invest part of her winnings with him by representing that he could offer her a higher rate of return than LT could earn by investing with “the banks.”

In July of 2015, LT and Habibzi entered into an “Investment for 2nd Mortgaeg [sic] Commitment Agreement” (the “Agreement”). Pursuant to the terms of the Agreement:
1. LT would lend a total of $450,000 to Habibzi, comprised of a transfer of $350,000 and a transfer of $100,000 (the money LT had given to DT) ;
2. In exchange, Habibzi would pay a total of $4,000 interest per month (comprised of a $3,000 payment to LT and a $1,000 payment to DT), with the principal amount of the loan repayable at any time; and
3. As security for this investment, Habibzi would place second mortgages on four properties specified in the Agreement (the “Properties”).

Both LT’s and Habibzi’s signatures appear on the Agreement.

Pursuant to the terms of the Agreement, LT transferred a total of $450,000 to Habibzi on August 15, 2015 (via a transfer of $350,000 and a transfer of $100,000).

C. Habibzi Misappropriates $450,000

Habibzi has failed to comply with the terms of the Agreement and is refusing to repay LT and DT’s $450,000 loan.

Habibzi initially made irregular interest payments. However, interest payments were frequently missed, and those that were made were typically made late. After making sporadic interest payments totaling approximately $28,500, Habibzi stopped making interest payments to DT in June of 2017 and to LT in June of 2018.

Habibzi failed to place second mortgages on any of the Properties:
1. Habibzi became the registered owner of the first of the Properties on September 24, 2012. He sold the property on February 9, 2018. At no time did Habibzi register a charge in favor of LT or DT;
2. Habibzi never had a registered interest in the second of the Properties. At no time did Habibzi register a charge in favor of LT or DT;
3. Habibzi never had a registered interest in the third of the Properties. At no time did Habibzi register a charge in favor of LT or DT; and
4. Habibzi never had a registered interest in the fourth of the Properties. At no time did Habibzi register a charge in favor of LT or DT.

Despite repeated demands from LT, Habibzi has failed to repay the principal amount of the loan. LT has commenced a legal claim in an effort to recover the $450,000 misappropriated by Habibzi.

D. Habibzi Provides False and Misleading Information

FSRA investigators interviewed Habibzi on July 29, 2019 (the “FSRA Interview”). During the FSRA Interviews, Habibzi admitted that he drafted the Agreement and provided it to LT, and that LT transferred $450,000 to him.

However, Habibzi also claimed:
1. LT decided not to proceed with the Agreement and it was not consummated;
2. The $450,000 transfer from LT was not provided in relation to the Agreement;
3. He was a member of the Lottery Group; and
4. The $450,000 transfer from LT was in respect of his share of the Lottery Win.

Each of these statements was false. In reality:
1. The Agreement was consummated, as evidenced by the signed Agreement, the fact that LT transferred $450,000 to Habibzi, the fact that this $450,000 transfer was made via two separate transfers exactly as specified in the Agreement, and the fact that Habibzi initially made sporadic interest payments in respect of the Agreement;
2. The $450,000 transfer from LT was provided in relation to the Agreement, as evidenced by the fact that the $450,000 transfer was made via two separate transfers exactly as specified in the Agreement, and the fact that Habibzi initially made sporadic interest payments in respect of the Agreement;
3. Habibzi was not a member of the Lottery Group, as evidenced by the fact that Habibzi’s name is not on the list of members of the Lottery Group and the fact that he was not included in the payment made by the OLG; and
4. The $450,000 transfer from LT was not his share of the Lottery Win, as evidenced by the fact that Habibzi’s name is not on the list of members of the Lottery Group, the fact that he was not included in the payment made by OLG, the fact that the $450,000 transfer was made via two separate transfers exactly as specified in the Agreement, the fact that Habibzi initially made sporadic interest payments in respect of the Agreement, and Habibzi’s failure to produce any documents supporting his claim that he was part of the Lottery Group.

III. CONTRAVENTIONS OR FAILURES TO COMPLY WITH THE ACT

A. False and Deceptive Conduct

Subsection 43(2) of the Act states that 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

The Director is satisfied that Habibzi contravened subsection 43(2) of the Act by providing false or deceptive information in relation to the Agreement. Contrary to the representations in the Agreement, Habibzi did not place a second mortgage in LT’s favor on any of the Properties.

B. Dishonestly and Fraud

Subsection 3.1 of O. Reg. 187/08 of the Act states that a mortgage broker or agent shall not act, or do anything or omit to do anything, in circumstances where he or she ought to know that by acting, doing the thing or omitting to do the thing, he or she is being used by a borrower, lender, investor or any other person to facilitate dishonesty, fraud, crime or illegal conduct.

The Director is satisfied that Habibzi contravened subsection 3.1 of O. Reg. 187/08 by acting in a manner that facilitated fraud. Contrary to the terms of the Agreement:
1. Habibzi did not make the required monthly interest payments;
2. Habibzi did not put in place second mortgages on the Properties; and
3. Despite repeated demands, Habibzi has failed to repay the principal amount owing to LT.

C. False and Misleading Information

Subsection 45(1) of the Act states that no person or entity shall give false or misleading information to the Chief Executive Officer or a person designated by the Chief Executive Officer in respect of any matter related to this Act or the regulations.

The Director is satisfied that Habibzi contravened subsection 45(1) of the Act by providing false and misleading information during the FSRA Interview. Contrary to Habibzi’s statements:
1. The Agreement was consummated;
2. The $450,000 transfer from LT was provided in relation to the Agreement;
3. He was not a member of the Lottery Group; and
4. The $450,000 transfer from LT was not his share of the Lottery Win.

IV. GROUNDS FOR IMPOSING ADMINISTRATIVE PENALTIES

The Director is satisfied that imposing administrative penalties on Habibzi under section 39 of the Act will satisfy one or both of the following purposes under section 38(1) of the Act:
1. To promote compliance with the requirements established under the Act.
2. To prevent 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 Act.

The Director is satisfied that three administrative penalties in the total amount of $30,000 should be imposed on Habibzi as follows:
1. $10,000 for contravening subsection 43(2) of the Act by providing false or deceptive information in relation to the Agreement;
2. $10,000 for contravening subsection 3.1 of O. Reg. 187/08 by acting in a manner that facilitated fraud in relation to the Agreement; and
3. $10,000 for contravening subsection 45(1) of the Act by providing false and misleading information during the FSRA Interview.

In determining the amount of the administrative penalties, the Director has considered the following criteria as required by section 3 of Ontario Regulation 192/08:
1. The degree to which the contravention or failure was intentional, reckless or negligent.
2. The extent of the harm or potential harm to others resulting from the contravention or failure.
3. The extent to which the person or entity tried to mitigate any loss or take other remedial action.
4. The extent to which the person or entity derived or reasonably might have expected to derive, directly or indirectly, any economic benefit from the contravention or failure.
5. Any other contraventions or failures to comply with a requirement established under the Act or with any other financial services legislation of Ontario or of any jurisdiction during the preceding five years by the person or entity.

In respect of the first criterion, the Director is satisfied that Habibzi’s actions were intentional. He solicited LT and DT’s $450,000 investment, he failed to register second mortgages on the Properties, he failed to make interest payments, he is refusing to repay LT and DT’s $450,000 investment, and he deliberately made false or misleading statements during the FSRA Interview.

In respect of the second criterion, as a result of Habibzi’s failure to comply with the Act and the regulations, LT and DT have suffered a pecuniary loss of more than $450,000 (plus outstanding interest). LT and DT have retained legal counsel and commenced a lawsuit in an effort to recover the funds Habibzi fraudulently obtained. The costs of doing so have further increased LT and DT’s pecuniary loss.

In respect of the third criterion, Habibzi has made no efforts to mitigate LT and DT’s loss, and instead continues to deny his actions and refuse to repay her loan.

In respect of the fourth criterion, as a result of Habibzi’s failure to comply with the Act and the regulations he has derived a direct economic benefit of $450,000.

In respect of the fifth criterion, the Director is unaware of any further contraventions or failures to comply in the preceding five years by Habibzi.

Such further and other reasons as may come to my attention.

DATED at Toronto, Ontario, July 28, 2020.

Elissa Sinha
Director, Litigation & Enforcement

By delegated authority from the Chief Executive Officer

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