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 19, 21, 22, 38, and 39;

AND IN THE MATTER OF Financial Ties Ltd. and Moninder Khudal

MINUTES OF SETTLEMENT AND UNDERTAKING

PART I – INTRODUCTION

Financial Ties Ltd. (“Financial Ties”):
1. Was licensed as a mortgage administrator from October 6, 2010, until it surrendered its licence on May 2, 2011 (licence #12056);
2. Has been licensed as a mortgage brokerage since April 22, 2008 (licence #10749); and
3. Is no longer in operation and filed an application to surrender its mortgage brokerage licence on April 9, 2020.

Moninder Khudal (“Khudal”):
1. Was licensed as a broker between July 7, 2008, and March 31, 2020 (licence #M08009338);
2. Has been designated as the Principal Broker of Financial Ties since it became licensed;
3. Is the President and sole officer of Financial Ties;
4. Was the President and sole officer of DIAM Danforth Property Inc. (“DIAM Danforth”); and
5. Was the sole Director of DIAM Fox Hill Property Inc. (“DIAM Fox Hill”).

On April 20, 2022, the Director, Litigation and Enforcement (the “Director”), by delegated authority from the Chief Executive Officer (“CEO”) of the Financial Services Regulatory Authority of Ontario (“FSRA”), issued a Notice of Proposal in respect of Financial Ties and Khudal (the “NOP”).

Financial Ties and Khudal disputed the allegations and, on or about May 3, 2022, requested a hearing before the Financial Services Tribunal (the “Tribunal”) in respect of the NOP.

Financial Ties, Khudal, and the Director, by delegated authority from the CEO, (collectively the “Parties”) wish to resolve this matter on consent and without a hearing before the Tribunal.

PART II – AGREED FACTS

Financial Ties and the mortgage agents that it sponsored (the “Agents”) raised funds from the public in respect of investments in syndicated mortgages.

A. The Danforth Project

The “Danforth Project” was a condominium development in Toronto.

Investor funds for the Danforth Project were raised by Financial Ties via syndicated mortgages through DIAM Danforth.

Between August of 2015 and August of 2016, approximately 99 investors invested a total of approximately $5 million in DIAM Danforth.

On May 4, 2020, the Danforth Property was placed into receivership and sold. Investors received a return of approximately 10% of their principal investment.

B. The Fox Hill Project

The “Fox Hill Project” was a townhouse development in Innisfil.

Investor funds for the Fox Hill Project were raised by Financial Ties via syndicated mortgages through DIAM Fox Hill.

Between November of 2016 and August of 2017, approximately 84 investors invested a total of approximately $4.1 million in DIAM Fox Hill.

A third party subsequently assumed the mortgages on the Fox Hill Project and investors received a return of their full principal investment.

C. Investors

The Agents did not conduct any form of suitability analysis for many of the members of the public who invested funds in the Danforth Project or the Fox Hill Project.

Members of the public who invested in the Danforth Project or the Fox Hill Project were provided with a “Form 1 – Investor/Lender Disclosure Statement for Brokered Transactions” (the “Form 1s”).

The Agents signed these Form 1s as a “Mortgage Broker” even though they were not, in fact, licensed as a broker under the Act. Khudal told the Agents that it was acceptable for them to sign in this manner.

D. Maintenance of Records

Khudal maintained copies of many of Financial Ties’ records, including forms, mortgage administrative agreements, term sheets, client lists, appraisal reports, bank statements, and financial documents.

However, Khudal admits that in or around 2020 he ceased to pay rent on Financial Ties’ office, and was locked out by its landlord. As Financial Ties’ physical records were stored in its office, Khudal no longer has access to all of its records and does not know if they have been kept by the landlord or destroyed.

Khudal also admits that he no longer has access to his Financial Ties email account or Filogix account and, as a result, no longer has access to Financial Ties’ electronic records.

E. Current Operations

Financial Ties ceased operations in or around April of 2020.

Financial Ties failed to file Annual Information Returns (“AIRs”) regarding both 2020 and 2021. Khudal incorrectly believed that Financial Ties was no longer required to file AIRs.

PART III – NON-COMPLIANCE WITH THE ACT

By engaging in the conduct described above in Part II, Financial Ties admits and acknowledges that it breached the Act as follows:
1. Failing to take reasonable steps to ensure that investments in a mortgage the Agents presented for the consideration of a lender or investor were suitable for the lender or investor, contrary to subsection 24(1) of O. Reg. 188/08;
2. Failing to maintain complete and accurate records, contrary to subsection 46(1) of O. Reg. 188/08; and
3. Failing to file AIRs in respect of 2020 and 2021.

As a result of this non-compliance, Financial Ties admits that it is no longer suitable to be licensed under the Act, as contemplated by paragraph 18(1)(b) of the Act.

By engaging in the conduct described above in Part II, Khudal admits and acknowledges that they breached the Act as follows:
1. Failing to take reasonable steps to ensure that Financial Ties, and each broker and agent authorized to deal or trade in mortgages on its behalf, complied with every requirement established under the Act, contrary to subsection 2(1) of O. Reg. 410/07; and
2. Assisted agents of Financial Ties in giving false or deceptive information when carrying out the business of dealing in mortgages in Ontario, contrary to subsection 43(2) of the Act.

PART IV – TERMS OF SETTLEMENT

Financial Ties and Khudal admit the facts contained in Part II of these Minutes.

Financial Ties and Khudal represent that they are subject to an order dated September 17, 2020, that restrains them from dissipating their assets (the “Mareva Order”). Financial Ties and Khudal agree that they will notify the Director within two days of:
1. The Mareva Order being lifted;
2. The Mareva Order being varied; or
3. The litigation proceeding in which the Mareva Order was issued being settled or otherwise concluded.

Financial Ties and Khudal acknowledge and agree that they have been given the opportunity to seek independent legal advice and they have done so (or have waived the right to do so) and are entering into these Minutes of Settlement and Undertaking (“Minutes”) voluntarily, understanding the consequences of doing so.

Financial Ties and Khudal acknowledge that these Minutes are an undertaking within the meaning of the Act, and that failure to comply may result in immediate regulatory action including, but not limited to, the issuance of a Notice of Proposal to revoke the licence, a Notice of Proposal to impose an administrative penalty, or a prosecution under the Provincial Offences Act.

(a) Issuance of Order

Financial Ties and Khudal acknowledge that, upon execution of these Minutes by the Parties, the two orders attached as Schedule “A” to these Minutes (the “Order”) will be issued revoking the license of Financial Ties and imposing administrative penalties on Financial Ties and Khudal as proposed in the NOP.

(b) Process for Execution of Settlement

Financial Ties and Khudal acknowledge that these Minutes are not binding on the Director until signed by the Director.

These Minutes may be executed in counterparts, and may be executed and delivered by facsimile or e-mail, and all such counterparts and facsimiles or e-mails, as applicable, shall together constitute one and the same agreement.

Upon receiving an executed copy of these Minutes from FSRA, Financial Ties and Khudal will withdraw their Request for Hearing (Form 1) in respect of the NOP before the Tribunal by completing a Withdrawal/Discontinuance (Form 5) and filing it with the Registrar at the Tribunal within two (2) business days.

Upon confirmation from the Tribunal that the Request for Hearing has been withdrawn and the hearing has been cancelled, the Parties agree that the Director will issue an Order in the form attached as Schedule “A” to these Minutes.

The Parties accept and understand that these Minutes and any rights within the Minutes shall enure to the Parties and to any successors or assigns of the Parties.

(c) Disclosure of Minutes and Order

The Parties will keep the terms of these Minutes and the Order confidential until the Order is issued, except that:
1. The Director shall be permitted to disclose the Minutes and the Order within FSRA; and
2. The Parties shall be permitted to inform the Financial Services Tribunal.

If either of the Parties do not sign these Minutes or the Director does not issue the Order:
1. These Minutes, the Order, and all related discussions and negotiations will be without prejudice to FSRA, Financial Ties, and Khudal; and
2. FSRA, Financial Ties, and Khudal will each be entitled to all available proceedings, remedies and challenges, including proceeding to a hearing of the allegations contained in the NOP. Any proceedings, remedies and challenges will not be affected by these Minutes, the Order, or any related discussions or negotiations.

Upon issuance of the Order:
1. Financial Ties and Khudal agree that these Minutes and the Order form part of their administrative record for the purposes of any future licensing decision or as an aggravating factor in respect of a future administrative penalty or prosecution against them or any affiliated entities;
2. Financial Ties and Khudal acknowledge that these Minutes and the Order are public and will be published by FSRA on its public website (or that of its successor) along with a press release that summarizes these Minutes and the Order; and
3. The Parties agree not to make representations to any member of the public or media or in a public forum that are inconsistent with these Minutes or the Order.

(d) Further Proceedings

Whether or not the Order is issued, Financial Ties and Khudal will not use, in any proceeding, these Minutes or the negotiation or process of approval of these Minutes as the basis for any attack on FSRA’s jurisdiction, alleged bias, alleged unfairness, or any other remedies or challenges that may be available.

Upon issuance of the Order:
1. Financial Ties and Khudal waive all rights to a hearing before the Tribunal regarding the NOP;
2. Financial Ties and Khudal waive all rights to a judicial review or appeal of the Order;
3. The Director agrees that FSRA will not take any further proceedings against Financial Ties and/or Khudal arising solely from the facts contained in Part II of these Minutes, unless facts not disclosed by Financial Ties and/or Khudal come to the attention of FSRA that are materially different from those contained in Part II of these Minutes or Financial Ties and/or Khudal fail to comply with any term in the Order; and
4. Financial Ties and Khudal agree that should they fail to comply with any term in these Minutes or the Order, FSRA is entitled to bring any proceedings available to it.

DATED this 20^th June 2022 in the City of Caledon, Ontario

Original signed by

Financial Ties Ltd.

Witness Printname: Ramanpreet Joshi

DATED this 20^th June 2022 in the City of Caledon, Ontario

Original signed by

Moninder Khudal

Witness Printname: Ramanpreet Joshi

DATED this 14 July 2022 in the City of Toronto, Ontario

Original signed by

Elissa Sinha
Director, Litigation and Enforcement

By delegated authority from the Chief Executive Officer

APPENDIX A

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 Financial Ties Ltd. (“Financial Ties”)

ORDER TO REVOKE LICENSE AND IMPOSE ADMINISTRATIVE PENALTIES

Financial Ties has been licensed as a mortgage brokerage since April 22, 2008 (licence #10749).

On April 20, 2022, by delegated authority from the Chief Executive Officer of the Financial Services Regulatory Authority of Ontario (the “Chief Executive Officer”), the Director, Litigation and Enforcement (the “Director”) issued a Notice of Proposal to revoke the mortgage brokerage license issued to Financial Ties and to impose two administrative penalties in the total amount of $15,000 on Financial Ties as follows:

$10,000 for failing to take reasonable steps to ensure that investments in a mortgage it presented for the consideration of a lender or investor were suitable for the lender or investor, contrary to subsection 24(1) of Ontario Regulation (“O. Reg.”) 188/08; and

$5,000 for failing to maintain complete and accurate records, contrary to subsection 46(1) of O. Reg. 188/08.

The Notice of Proposal was delivered to Financial Ties’ lawyer on April 20, 2022.

A Request for Hearing (Form 1) dated May 3, 2022, was delivered to the Financial Services Tribunal (the “Tribunal”) in accordance with section 39(5) of the Act respecting the Notice of Proposal.

On [date], Financial Ties withdrew the Request for Hearing, and, on [date] the Tribunal closed its file in respect of this matter. Therefore, pursuant to section 39(7) of the Act, the Director makes the following order.

ORDER

The mortgage brokerage license issued to Financial Ties Ltd. is hereby revoked.

Administrative penalties in the total amount of $15,000 are hereby imposed on Financial Ties Ltd., for the reasons set out in the Minutes of Settlement.

TAKE NOTICE THAT the Financial Services Regulatory Authority of Ontario will deliver an invoice to Financial Ties Ltd. with information as to where and how to pay the administrative penalties. Financial Ties Ltd. must pay the administrative penalties no later than thirty (30) days after the order dated September 17, 2020, is lifted or the litigation proceeding in which the order was issued is concluded.

If Financial Ties Ltd. fails to pay the administrative penalties in accordance with the terms of this Order, the Chief Executive Officer may file the Order with the Superior Court of Justice and the Order may be enforced as if it were an order of the court. An administrative penalty that is not paid in accordance with the terms of the order imposing the penalty is a debt due to the Crown and is enforceable as such.

DATED at Toronto, Ontario,

Elissa Sinha
Director, Litigation and Enforcement

By delegated authority from the Chief Executive Officer

Si vous désirez recevoir cet avis en français, veuillez nous envoyer votre demande par courriel immédiatement à : contactcentre@fsrao.ca.

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 Moninder Khudal (“Khudal”)

ORDER TO IMPOSE ADMINISTRATIVE PENALTIES

Khudal was licensed as a mortgage broker between July 7, 2008, and March 31, 2020 (licence #M08009338). Khudal is the Principal Broker, President, and sole officer of Financial Ties.

On April 20, 2022, by delegated authority from the Chief Executive Officer of the Financial Services Regulatory Authority of Ontario (the “Chief Executive Officer”), the Director, Litigation and Enforcement (the “Director”) issued a Notice of Proposal to impose two administrative penalties in the total amount of $10,000 on Khudal as follows:

$5,000 for, as principal broker, failing to take reasonable steps to ensure that Financial Ties Ltd., and each broker and agent authorized to deal or trade in mortgages on its behalf, complied with every requirement established under the Act, contrary to subsection 2(1) of O. Reg. 410/07; and

5,000 for assisting agents of Financial Ties in giving false or deceptive information when carrying out the business of dealing in mortgages in Ontario, contrary to subsection 43(2) of the Act.

The Notice of Proposal was delivered to Khudal’s lawyer on April 20, 2022.

A Request for Hearing (Form 1) dated May 3, 2022, was delivered to the Financial Services Tribunal (the “Tribunal”) in accordance with section 39(5) of the Act respecting the Notice of Proposal.

On [date], Khudal withdrew the Request for Hearing, and, on [date] the Tribunal closed its file in respect of this matter. Therefore, pursuant to section 39(7) of the Act, the Director makes the following order.

ORDER

Administrative penalties in the total amount of $10,000 are hereby imposed on Moninder Khudal, for the reasons set out in the Minutes of Settlement.

TAKE NOTICE THAT the Financial Services Regulatory Authority of Ontario will deliver an invoice to Moninder Khudal with information as to where and how to pay the administrative penalties. Moninder Khudal must pay the administrative penalties no later than thirty (30) days after the order dated September 17, 2020, is lifted or the litigation proceeding in which the order was issued is concluded.

If Moninder Khudal fails to pay the administrative penalties in accordance with the terms of this Order, the Chief Executive Officer may file the Order with the Superior Court of Justice and the Order may be enforced as if it were an order of the court. An administrative penalty that is not paid in accordance with the terms of the order imposing the penalty is a debt due to the Crown and is enforceable as such.

DATED at Toronto, Ontario,

Elissa Sinha
Director, Litigation and Enforcement

By delegated authority from the Chief Executive Officer

Si vous désirez recevoir cet avis en français, veuillez nous envoyer votre demande par courriel immédiatement à : contactcentre@fsrao.ca.