IN THE MATTER OF the Insurance Act, R.S.O. 1990, c.I.8, as amended (the “Act”), in particular sections 392.4 and 407.1;

AND IN THE MATTER OF Chad E. Martin.

NOTICE OF PROPOSAL TO REFUSE TO RENEW LICENCE

TO: Chad E. Martin

TAKE NOTICE THAT pursuant to sections 392.4 and 407.1 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 Senior Manager, Licensing Compliance (the “Senior Manager”) is proposing to refuse to renew the insurance agent licence issued to Chad E. Martin (licence # 97045857).

The reasons for this proposal are described below. This Notice of Proposal includes allegations that may be considered at a hearing.

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 407.1(2) AND 407.1(3) 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
25 Sheppard Avenue West, Suite 100
Toronto, Ontario
M2N 6S6

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.

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

1. The Senior Manager proposes to refuse to renew the insurance agent licence issued to Chad E. Martin (“Martin”). Martin’s conduct makes him unsuitable to be licensed as an insurance agent.


2. Martin is unsuitable to be licensed due to his unlicensed activity in the mortgage brokering sector. Martin solicited and brokered syndicated mortgage investments (“SMIs”) for remuneration, while unlicensed.


3. Martin is unsuitable because he has failed to pay an administrative penalty ordered against him for his unlicensed activity in the mortgage brokering sector.


4. Martin is also unsuitable because he provided false information to the Financial Services Regulatory Authority of Ontario (“FSRA”) in his application to renew. Specifically, Martin declared that he was not the defendant in any civil proceedings. In fact, Martin is a defendant in at least two civil proceedings.



II. BACKGROUND

5. Martin was licensed as an insurance agent (licence # 97045857) under the Act until the licence expired on August 1, 2020. Martin was first licensed in Ontario as a life insurance agent in 1997 and has been licensed for most of the period to the date his licence expired.


6. On July 28, 2020, Martin applied to renew his life insurance and accident and sickness insurance agent licence.



III. CONTRAVENTIONS OF THE MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006

a. Hi-Rise SMIs

7. Martin dealt in SMIs for remuneration when not licenced to do so.


8. Subsection 2(3) of the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c. 29 (the “MBLAA”) prohibits dealing in mortgages for remuneration without a mortgage broker or agent licence or an exemption from the requirement to be licenced.


9. Martin has never been licensed as a mortgage agent or broker.


10. Martin operated through a financial planning company (“Williamsburg Financial”). Before July 1, 2012, Martin was a director of Williamsburg Financial. Martin continued to be associated with Williamsburg Financial until 2015.


11. Hi-Rise Capital Ltd. (“Hi-Rise”) operated as a mortgage brokerage (licence #10897) and a mortgage administrator (licence #11893). Until 2017, Hi-Rise brokered SMIs in real estate development projects. Hi-Rise was previously known as Waterview Capital Corp.


12. Between 2012 and 2015, Martin promoted Hi-Rise SMIs to the clients of Williamsburg Financial.


13. Martin raised over $2 million in Hi-Rise SMIs. Martin solicited investments in SMIs from approximately 50 investors and brokered approximately 60 Hi-Rise SMI transactions.


14. Martin prepared and witnessed documents required to invest in Hi-Rise SMIs, including trust agreements, declarations, and letters of direction.


15. Martin thereby solicited and dealt in mortgages while not licensed to do so.


16. Williamsburg Financial received at least $179,190 in commissions as a result of Martin’s unlicensed mortgage brokering activities. Martin was a director of Williamsburg Financial when some of these commissions were received. Martin was associated with Williamsburg Financial during the entire period when commissions were received. Williamsburg Financial has now been dissolved.


17. While Williamsburg Financial received significant commissions from Martin’s unlicensed activities, the SMI investors often suffered substantial losses.



b. The MF and LH Transaction

18. In one case, Martin advised his clients MF and LH to invest in Hi-Rise SMIs. Martin gave a presentation to MF and LH where he explained the benefits of SMIs offered by Hi-Rise. Martin advised MF and LH to borrow money from Manulife in order to fund the SMI. Martin contacted a Manulife representative to facilitate the loan.


19. On August 7, 2012, MF and LH invested $150,000 in a project on Queen St., Toronto, through a Hi-Rise SMI. On September 6, 2012, Williamsburg Financial received a fee of $12,000 as a result of this transaction.


20. With respect to the transaction involving MF and LH, the regulator issued a Notice of Proposal to impose a $10,000 administrative penalty on Martin. Martin did not request a hearing before the Financial Services Tribunal. FSRA subsequently imposed the $10,000 administrative penalty by order, dated September 16, 2020 (the “Order”).



IV. FAILURE TO PAY ADMINISTRATIVE PENALTY

21. To date, Martin has not paid the administrative penalty imposed by the Order.



V. FALSE INFORMATION

22. Martin provided false information to FSRA in his licence renewal application dated July 28, 2020.


23. In response to Question 19 of the licence renewal application, Martin declared that he was not currently a defendant in any civil proceeding in Canada or elsewhere.


24. This declaration was false. Martin was a defendant in at least two civil proceedings.


25. Martin is personally named as a defendant in an Ontario civil proceeding filed by Financial Horizons Incorporated (Court File No. CV-18-595029). The statement of claim in this proceeding was issued on April 3, 2018 and is ongoing. Martin is aware of this proceeding and has filed a statement of defence.


26. Martin is personally named as a defendant in an Ontario civil proceeding filed by Valour Mortgage Services Inc. and Community Trust Company (Court File No. CV-18-66967). The statement of claim in this proceeding was issued on September 28, 2018 and is ongoing. Martin disclosed this civil proceeding following an interview conducted by FSRA staff.



VI. GROUNDS FOR REFUSAL

27. Section 392.4(1) of the Act states that the Chief Executive Officer shall issue a licence to act as an insurance agent in Ontario to an applicant who applies in accordance with section 392.3 and who satisfies the prescribed requirements for the licence unless the Chief Executive Officer believes, on reasonable grounds, that the applicant is not suitable to be licensed having regard to such circumstances as may be prescribed and such other matters as the Chief Executive Officer considers appropriate.


28. Subsection 392.5(2) of the Act states that the Chief Executive Officer may revoke or suspend an agent’s licence if any prescribed grounds for revoking or suspending a licence, or for refusing to issue a licence, exist.


29. Section 8 of Ontario Regulation 347/04 prescribes circumstances when a licensee is not suitable to be licensed. These circumstances occur when a licensee:
    
    
    1. has violated any provision of the licence in the licensee’s operations as an agent;
    
    
    2. has made a material misstatement or omission in the application for the licence;
    
    
    3. has been guilty of a fraudulent act or practice; or
    
    
    4. has demonstrated incompetence or untrustworthiness to transact the insurance agency business for which the licence has been granted.
    
    


30. Clause (a) of subsection 4(1) of Ontario Regulation 347/04 requires that an insurance agent be of good character and reputation.


31. Clause (h) of subsection 4(1) of Ontario Regulation 347/04 requires that an insurance agent not engage in any business or occupation that would jeopardize the applicant’s integrity, independence or competence as an agent.


32. Clause (i) of subsection 4(1) of Ontario Regulation 347/04 requires that an insurance agent is otherwise suitable to hold a licence.


33. By declaring that he was not the defendant in any civil proceedings, Martin made a material misstatement or omission in the application for the licence.


34. FSRA requires truthful and complete disclosure by applicants and licensees to effectively regulate the mortgage brokering sector. To assess licensing applications, FSRA relies upon the information provided by applicants. By providing false information in his licence renewal application, Martin undermined the FSRA licensing process and public confidence in the insurance sector.


35. Further, Martin demonstrated that he may not conduct insurance business with honesty and integrity.


36. By contravening the MBLAA, Martin has demonstrated incompetence or untrustworthiness to transact the insurance agency business pursuant to section 8 of Ontario Regulation 347/04.


37. Martin’s ongoing failure to pay the administrative penalty as required by the Order also demonstrates incompetence or untrustworthiness pursuant to section 8 of Ontario Regulation 347/04.


38. In addition, Martin’s conduct jeopardizes his integrity, independence, and competence as an insurance agent contrary to clause (h) of subsection 4(1) of Ontario Regulation 347/04.


39. Martin’s conduct also demonstrates that Martin lacks the good character and reputation required of insurance agents under clause (a) of subsection 4(1) of Ontario Regulation 347/04.


40. Martin is unsuitable to continue to be licenced as an insurance agent. By contravening the MBLAA, failing to pay an administrative penalty, and failing to make full disclosure to the regulator, Martin has caused public harm. Renewing Martin’s licence would undermine public confidence in the regulated sectors and risk further public harm.


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

DATED at Toronto, Ontario, August 17, 2021

Original signed by

Jelena Pejic
Senior Manager, Licensing Compliance

By delegated authority from the Chief Executive Officer

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