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 35, 38 and 39;

AND IN THE MATTER OF MOHAMMAD ISLAM, also known as Islam Mohammad.

NOTICE OF PROPOSAL TO ISSUE A COMPLIANCE ORDER AND TO IMPOSE AN ADMINISTRATIVE PENALTY

TO: Mohammad Islam, also known as Islam Mohammad

TAKE NOTICE THAT pursuant to section 35 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 and Enforcement, (the “Director”) is proposing to issue a compliance order requiring Mohammad Islam, also known as Islam Mohammad, to:

Cease and desist from dealing in mortgages in Ontario, as defined in section 2(1) of the Act, or holding himself out as licensed to do so.

Cease and desist from trading in mortgages in Ontario, as defined in section 3(1) of the Act, or holding himself out as licensed to do so.

TAKE NOTICE THAT pursuant to section 39 of the Act, and by delegated authority from the Chief Executive Officer, the Director is proposing to impose an administrative penalty in the amount of $10,000 on Mohammad Islam, also known as Islam Mohammad, for contravening section 2(3) of the Act for dealing in mortgages without a mortgage broker or mortgage agent licence.

Details of these contraventions and 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 35(3), 35(4) 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
25 Sheppard Avenue West, Suite 101 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. TAKE FURTHER NOTICE of the payment requirements in section 4 of Ontario Regulation 192/08, which states 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 the reasons for the proposal by the Director to make a compliance order and to impose an administrative penalty of $10,000 against Mohammad Islam, also known as Islam Mohammad (“Islam”).

Effective, June 8, 2019, pursuant to the Financial Services Regulatory Authority of Ontario Act, 2016, S.O. 2016, c. 37, Sched. 8, the Financial Services Regulatory Authority of Ontario (“FSRA”) became the regulator under the Act and the powers and duties previously vested in the Superintendent of FSCO vested in the Chief Executive Officer.

II. BACKGROUND

Islam was licensed as a mortgage agent (licence no. #M08003806) under the Act from July 1, 2008 to March 31, 2016, when his licence lapsed and expired.

Islam is currently not licensed under the Act in any capacity and has not been licensed since March 31, 2016.

On April 17, 2017, Islam submitted a mortgage agent renewal application. In this application, Islam disclosed for the first time to FSCO, criminal convictions registered in 2014 for Fraud Over $5,000 and Unauthorized Use of Credit Card Data.

The mortgage agent renewal application completed by Islam explicitly asked whether or not the applicant is currently the subject of criminal charges, or has been found guilty of, or plead guilty (convicted) to criminal offences.

Islam was convicted again in October 2017 of multiple criminal offences: Laundering Proceeds of Crime, Theft Over $5,000, Possession of Property Obtained by Crime Over $5000 (3 counts), and Possession of Property Obtained by Crime Under $5,000.

Islam never disclosed these newer criminal charges, which were laid in December 2015, in his 2017 mortgage agent renewal licence application.

On January 16, 2018, Islam entered into Minutes of Settlement (“MOS”) with FSCO, which included an Undertaking. In the MOS, Islam undertook to withdraw his 2017 renewal application, and further undertook not to apply for a licence under the Act for the following ten (10) years (i.e. until January 16, 2028).

On August 22, 2020, FSRA received a complaint regarding Islam, stating that he was engaging in mortgage activity.

On January 12, 2021, FSRA issued a public warning notice about Islam on its website stating that Islam is not licensed to conduct mortgage business in Ontario.

A. Unlicensed Activity

On August 22, 2020, FSRA received a complaint regarding Islam. NK and MU, who are husband and wife (“the Complainants”), stated that they received mortgage services from Islam and that they believed that he was licensed.

Islam’s actions resulted in the Complainants losing the property they were attempting to purchase because no mortgage financing was ever obtained. This caused the Complainants to lose $20,000 of the total $30,000 deposit for the home they had agreed to purchase for $707,000 on February 16, 2020, with a closing date of June 5, 2020.

The Complainants were introduced to Islam in late 2019 by NK’s co-worker who advised that he used Islam’s mortgage services when purchasing his own homes in 2014, and again in 2016. Islam then introduced the Complainants to a real estate agent that Islam said was his “brother”. The Complainants agreed to use this realtor to find a suitable home, and ultimately used this agent when they purchased their new home in February 2020.

On January 27, 2020, at Islam’s request, the Complainants emailed Islam images of their respective social insurance number cards and the articles of incorporation for NK’s numbered company.

Islam again met with the Complainants in the evening hours of Saturday, February 22, 2020, at Noble Mortgages (brokerage licence no. #12446). Islam had a key to open the front door of Noble Mortgages. Islam directed the Complainants to “bring all those documents … you emailed me” for the meeting.

Islam worked at Noble Mortgages for a month in 2014, and his brother is a licensed mortgage agent that worked at the same brokerage in 2020.

At the meeting, the Complainants provided Islam with their driver’s licences and NK’s articles of incorporation. They also sent Islam bank statements, and NK’s last Notice of Assessment subsequently.

According to the principal broker of Noble Mortgages, a mortgage application was entered by Islam’s brother into Filogix for the Complainants’ property on April 1, 2020.

On May 15, 2020, Islam directed the Complainants to email him again their bank statements. On June 10, 2020, Islam directed the Complainants to re-send the bank statements to him by email.

The Complainants sent a text message to Islam on June 11, 2020 about the property inspection for the newly purchased home and whether Islam could schedule it for that weekend.

Islam did not ask the Complainants to complete a mortgage application between February and June 2020.

Between the February meeting at Noble Mortgages with Islam and June 2020, Islam told the Complainants that a mortgage had been obtained and all was in order. Islam also told them that they should not apply for any other mortgage elsewhere because it would jeopardize the mortgage he had arranged for them.

On May 26, 2020, the Complainants received a voicemail from a real estate lawyer, DK. In the voicemail, DK advised the Complainants that they asked for an extension of the closing date, and that “Mohammad” had sent him their file. At this time, the Complainants had not retained a lawyer for the purchase and closing of the home, nor did they ever personally request an extension of the closing date from the vendor.

The Complainants called Islam to clarify the information provided by DK. The Complainants say that Islam informed them that he needed more time to obtain their mortgage. This was contrary to what he stated weeks earlier, that he already obtained their mortgage and all was in order.

Islam also told the Complainants that they must give another bank draft for $10,000 to the lawyer to get the extension. Islam said that the $10,000 was a “security deposit”. The Complainants provided an additional bank draft for $10,000 which meant they had paid a deposit of $30,000 in total.

Islam first asked the Complainants to request an extension of the closing to June 22, 2020, and later to June 29, 2020. The Complainants did not recall signing anything regarding extensions of the closing dates.

On June 23, 2020, the Complainants were emailed a “Conditional Approval for Financing” from CIBC bank dated June 17, 2020. This application was subsequently cancelled without the Complainants’ knowledge. When the Complainants called to speak with the CIBC mortgage specialist, she advised them to contact their mortgage agent, Islam.

On July 9, 2020, Islam sent the Complainants a blank mortgage application with the letterhead, “CityCan Financial Corporation”, with instructions to “please fill out and send back”.

Islam also told the Complainants that he was in the process of obtaining a second mortgage for them with RBC bank. However, on July 16, 2020, Islam told the Complainants that they did not have a mortgage and that there was nothing he could do for them.

The Complainants failed to close the purchase and forfeited the $20,000 deposit to the vendor. The additional $10,000 payable to KD was paid to the vendor after the extended closing date on June 29, 2020, but the vendor ultimately returned that amount.

In anticipation of closing on their new home in June 2020, the Complainants had given notice to their landlord that they would vacate their rental unit. The Complainants, who have five (5) young children, were forced to negotiate to stay in their rental unit, where they continue to live.

The Complainants corresponded with Islam at the email address: islam.milton1@gmail.com and by text message. Islam admits (through his answers at his interview) that the email address and phone number the Complainants used to communicate with him are his, but denies that he was engaged in mortgage activities with the Complainants.

III. CONTRAVENTIONS OR FAILURES TO COMPLY WITH THE ACT

Islam contravened section 2(3) of the Act by attempting to negotiate or arrange a mortgage and dealing in mortgages without being licensed under the Act. Islam dealt in mortgages by attempting to arrange a mortgage for the Complainants as defined in paragraph 4 of subsection 2(1) of the Act.

IV. GROUNDS TO ISSUE COMPLIANCE ORDER

Subsection 35(1)(c) of the Act states that a compliance order may be imposed if the Director is of the opinion that a person or entity has committed any act or pursued any course of conduct that contravenes or does not comply with a requirement established under the Act.

Islam has contravened the Act by engaging in mortgage activity, and holding himself out as doing so, while unlicensed. Islam had been licensed under the Act for eight (8) years and undertaken not to re-apply, and accordingly was aware that he was not entitled to negotiate or arrange mortgages, attempt to do so, or hold himself out as doing so.

Although remuneration to Islam is not demonstrated, that is likely because the mortgage transaction did not materialize. It is reasonable to infer that Islam assisted the Complainants for his own financial benefit.

The Director is of the opinion that Islam committed acts or has pursued a course of conduct that contravenes the Act by holding himself as a mortgage agent, as contemplated in subsection 35(1)(c) of the Act. The Director is of the opinion that the proposed order is necessary to remedy the situation.

The public may engage Islam to provide mortgage services under the misapprehension that he is licensed to do so. This will deprive individuals of the ability to rely on a suitable, licensed individual and may pose harm if the services are provided without regard to the requirements of the Act and Regulations.

The potential for such harm is evidenced by the fact that the Complainants ultimately did not end up with a mortgage, despite Islam’s assurances. This poses significant risk to the public as it puts purchasers in a position to breach an agreement to purchase property and subjects them to significant civil liability and loss.

The requirement for licensing to deal in mortgages is essential to the integrity of the Act and its regime which operates to protect the public from fraudulent activity and misconduct.

Accordingly, the Director proposes to issue a permanent compliance order requiring that Islam cease dealing and trading in mortgages contrary to the Act.

V. GROUNDS FOR IMPOSING AN ADMINISTRATIVE PENALTY

The Director is satisfied that an administrative penalty in the amount of $10,000 should be imposed on Islam for conducting unlicensed mortgage activity.

Section 38 of the Act states that an administrative penalty may be imposed under section 39 for either of the following purposes:
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 the imposition of the administrative penalty on Islam under section 39 of the Act will fulfill the first purpose pursuant to section 38(1) of the Act. It will promote compliance with the requirements to be licensed to deal in mortgages in Ontario in accordance with the Act, which will protect the public from harm.

In determining the amount of the administrative penalty, 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 the contraventions were intentional. As a former licensee who has undertaken not to apply for a licence, Islam was aware that he was not licensed under the Act and that he cannot conduct mortgage activity while unlicensed.

Islam assured the Complainants that the mortgage was approved and that the mortgage was in place for the closing of their new home, and took the active step of seeking an extension of the closing date. These were deliberate actions, taken over the course of approximately five months, intended to conceal the fact that he was not licensed and had not secured mortgage financing as he promised.

In respect of the second criterion, there was direct harm as a result of Islam’s unlicensed mortgage activities. NK and MU relied on Islam for their mortgage needs and suffered financial loss of $20,000, and stress. Islam’s deception deprived the Complainants of advice from a licensed mortgage agent as to whether they would qualify for financing before they entered into an agreement to purchase property and paid a deposit, and of the opportunity to seek alternative sources for their mortgage.

In respect of the third criterion, the Director is not aware of Islam making any attempts to mitigate or take other remedial action.

In respect of the fourth criterion, the Director is not aware of economic benefit derived by Islam from his activity with the complainants. However, it is reasonable to infer that if financing were successfully obtained, a portion of the proceeds would have been paid to him as a fee.

In respect of the fifth criterion, the Director is aware of further contraventions or failures to comply by Islam in the preceding five years. Islam’s failure to fully disclose criminal charges and convictions to FSCO are described above.

The Director is therefore satisfied that there are sufficient grounds to impose the order described in this Notice of Proposal.

Such further and other reasons as may come to the Director’s attention.

DATED at Toronto, Ontario, August 10, 2022

Original signed by

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.