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, 38, and 39;

AND IN THE MATTER OF Dimitrios Neilas

MINUTES OF SETTLEMENT AND UNDERTAKING

PART I – INTRODUCTION

1. Hi-Rise Capital Ltd. (“Hi-Rise”) is licensed as a mortgage brokerage (licence # 10897) and as a mortgage administrator (licence # 11893) under the Act.


2. Dimitrios “Jim” Neilas (“Jim Neilas”) was licensed as a mortgage broker under the Act (licence #M08003817) and was the principal broker of Hi-Rise from 2001 until December 12, 2017. Jim Neilas is the sole owner of Hi-Rise.


3. On April 1, 2019, the Superintendent of Financial Services (“Superintendent”) issued a Notice of Proposal in respect of Jim Neilas (the “NOP”) proposing to impose administrative penalties for contraventions of the Act.


4. Jim Neilas disputed the allegations and, on June 7, 2019, requested hearings before the Financial Services Tribunal (the “Tribunal”) in respect of the NOP.


5. 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 Financial Services under the Act were vested in the Chief Executive Officer of FSRA (the “Chief Executive Officer”).


6. Jim Neilas and the Director, Litigation and Enforcement, (the “Director”), by delegated authority from the Chief Executive Officer, (collectively the “Parties”) wish to resolve this matter on consent and without a hearing before the Tribunal.



PART II – AGREED FACTS

A. Hi-Rise, Related Entities and Projects

7. During the period between 2004 and 2018 (the “Relevant Time Period”), Hi Rise acted as the mortgage brokerage (“Brokerage”) and the mortgage administrator (“Administrator”) for syndicated mortgage loans (“SMLs”) under which consumer investors are lenders (the “Investors”).


8. Jim Neilas was the sole owner of the Brokerage and Administrator and its sole director and principal broker. Prior to January 2017, Jim Neilas was also the chief executive officer, president, and secretary of Hi-Rise.


9. As of August 10, 2017, Hi-Rise was the mortgage brokerage acting on behalf of the borrower/developer (“B/D”), the mortgage brokerage acting on behalf of Investors, and the mortgage administrator for five syndicated mortgages relating to five real estate development projects (the “Hi-Rise Projects”) as follows:

   Municipal Address	Project Name	Development Corporation
   40-58 Widmer Street, Toronto	Widmer	40 Widmer Street Inc.
   263 Adelaide Street West, Toronto	Adelaide Street Lofts (“Adelaide”)	Adelaide Street Lofts Inc.
   1249 Queen Street East, Toronto	Stage East Lofts (“Queen”)	1249 Queen E. Inc.
   54 & 60 Shepherd Road, Oakville	OpArts Lofts (“Oakville”)	54 Shepherd Road Inc. (amalgamated with 60 Shepherd Road Inc. on October 20, 2016)
   799 College Street, Toronto	Cube Lofts (“College”)	799 College Street Inc.



10. The five development corporations listed above (the “Development Corporations”) were owned and controlled by Jim Neilas and were the developers on all of the Hi-Rise Projects and also the borrowers under the Hi-Rise SMLs.



B. Relationship between Entities

11. Prior to late 2017, Hi-Rise and related companies performed a number of roles in respect of Hi-Rise SMLs as follows:
    
    
    1. Hi-Rise was the brokerage that brokered the Hi-Rise SMLs on behalf of the Development Corporations that are the borrowers under the SMLs. Hi-Rise also brokered the SMLs on behalf of the Investors;
    
    
    2. Hi-Rise held the syndicate mortgages in trust for the Investors and was the mortgage administrator for the Hi-Rise SMLs;
    
    
    3. The Development Corporations acted as developers of the Hi-Rise Projects; and
    
    
    4. A related entity to Hi-Rise acted as construction manager on Hi-Rise Projects.
    
    


12. Jim Neilas disclosed that Hi-Rise Capital Ltd., Neilas Inc., AW General Contractors Inc., and the borrower companies were all owned by the same principal (Jim Neilas) as set out in Appendix “A”.


13. Hi-Rise also provided certain disclosures of risk as set out in Appendix “B”.



C. FSCO Examinations and Investigation

14. The allegations in the NOP relate solely to the 11 Investor Files from the 2018 Examination.


15. FSCO concluded that Jim Neilas had contravened the Act for the 11 Investor Files. Jim Neilas disputed FSCO’s conclusion.


16. FSCO found in its review of the 11 Investor Files that Jim Neilas as principal broker on the five Hi-Rise Projects in paragraph 9 above did not:
    
    
    • adequately ensure compliance with the Act by Hi-Rise and other brokers and agents, contrary to section 2(1) of Ontario Regulation 410/07; and
    
    
    • adequately review the policies and procedures of Hi-Rise and did not recommend changes to the policies and procedures to Hi-Rise, contrary to section 3(1) of Ontario Regulation 410/07.
    
    


17. FSCO found in its review of the 11 Investor Files that Jim Neilas as mortgage broker on the five Hi-Rise Projects in paragraph 9 above did not ensure that Hi-Rise:
    
    
    • adequately determine the suitability of investors; and
    
    
    • ensure that all material risks, fees, and conflicts of interest relating to the investments were adequately disclosed.


18. Such actions resulted in Hi-Rise, as the brokerage, contravening or failing to comply with the Act, contrary to section 3 of Ontario Regulation 187/08.


19. A number of investors in the Hi-Rise projects referenced in paragraph 9 did not recover full principal and interest.


20. Full details of the contraventions are set out in Appendix “C” of these Minutes of Settlement and Undertaking (“Minutes”).


21. The Superintendent issued the NOP to impose administrative penalties on Jim Neilas.



PART III – NON-COMPLIANCE WITH THE ACT

22. By engaging in the conduct described above at paragraphs 16 and 17, Jim Neilas admits and acknowledges that he breached the Act in the manner provided in Appendix “C” of these Minutes.


23. Jim Neilas agrees to pay administrative penalties of $38,888.



PART IV – TERMS OF SETTLEMENT

24. Jim Neilas admits the facts contained in Part II of these Minutes.


25. Jim Neilas acknowledges and agrees that he has been given the opportunity to seek independent legal advice and has done so (or has waived the right to do so) and is entering into these Minutes voluntarily, understanding the consequences of doing so.


26. Jim Neilas acknowledges 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

27. Jim Neilas acknowledges that, upon execution of these Minutes, the order attached as Schedule “A” to these Minutes (the “Order”) will be issued.



(b) Process for Execution of Settlement

28. Jim Neilas acknowledges that these Minutes are not binding on the Director until signed by the Director.


29. 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.


30. Upon receiving an executed copy of these Minutes from FSRA, Hi-Rise and Jim Neilas will withdraw each of 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 business days.


31. 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 the Order in the form attached as Schedule “A” to these Minutes.


32. 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

33. The Parties will keep the terms of these Minutes and the Order confidential until the Order are 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 Tribunal.
    
    


34. 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 and Hi-Rise; and
    
    
    2. FSRA and Hi-Rise 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.
    
    


35. Upon issuance of the Order:
    
    
    1. Hi-Rise agrees 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. Hi-Rise acknowledges 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

36. Whether or not the Order is issued, Jim Neilas 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.


37. Upon issuance of the Order:
    
    
    1. Jim Neilas waives all rights to a hearing before the Tribunal regarding the NOP;
    
    
    2. Jim Neilas waives all rights to a judicial review or appeal of the Order;
    
    
    3. The Director agrees that FSRA will not take any further proceedings against Hi- Rise arising solely from the facts contained in Part II of these Minutes, unless facts not disclosed by Jim Neilas come to the attention of FSRA that are materially different from those contained in Part II of these Minutes or Hi-Rise and Jim Neilas fail to comply with any term in the Order; and
    
    
    4. Jim Neilas agrees 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 May 1, 2023    at Toronto, Ontario,

Original signed by

Dimitrios “Jim” Neilas

DATED May 1, 2023    at Toronto, Ontario,

Original signed by

Justin Nasseri
Name of Witness

DATED May 16, 2023    at Toronto, Ontario,

Original signed by

Elissa Sinha
Director, Litigation and Enforcement

Financial Services Regulatory Authority of Ontario

By delegated authority from the Chief Executive Officer

APPENDIX A

Conflict Disclosures made to Investors

Form 1: Investor/Lender Disclosure Statement for Brokered Transactions

Does the mortgage brokerage or any of its brokers or agents have or expect to have a direct or indirect interest in this property identified in section 3, Part A?
Yes

If Yes, explain:
Hi-Rise Capital Ltd. and related/affiliated companies will make a profit from the project if it is successful.

Does any person related to the mortgage brokerage or any of its brokers or agents have or expect to have a direct or indirect interest in this property?
Yes

If Yes, explain:
A related company holds title to the property and is entitled to profit from the project if it is successful.

The borrower and Hi-Rise Capital Ltd. are companies owned by the same principal, Jim Neilas.

Is the borrower related to the mortgage brokerage or to any of the officers, directors, partners, employees or shareholders of the brokerage or any of its brokers or agents?
Yes

If Yes, explain:
The borrower is a company owned by the same principal of Hi-Rise Capital Ltd., Jim Neilas.

Describe any conflicts or potential conflicts of interest in connection with this mortgage investment, other than those described above. Hi-Rise Capital Ltd., Neilas Inc., AW General Contractors Inc., and the borrower are companies owned by the same principal (Jim Neilas) and are entitled to profit from the project if it is successful.

Describe what steps the mortgage brokerage has taken to reduce the risk resulting from any conflicts or potential conflicts of interest. Hi-Rise Capital has taken the following steps to reduce the risk resulting from any conflicts or potential conflicts of interest

• Established policies and procedures for Hi-Rise Capital Ltd.;


• Segregates bank accounts among related/affiliated companies; and


• Conducts annual audits of financial statement of Hi-Rise Capital Ltd.

The mortgage brokerage is acting for:

• Both the Please refer to Appendix "A" for a list of all relevant fees.borrower and the investor/lender

Does the mortgage brokerage or any of its brokers or agents expect to gain any interest or benefit from this transaction other than the fees disclosed in Part D of this Disclosure Statement?
Yes

If Yes, explain:
Please refer to Appendix "A" for a list of all relevant fees.
[Appendix “A” to Form 1] Conflict of Interest
Hi-Rise Capital Ltd. declares to the Investor that Hi-Rise Capital Ltd. (as mortgage brokerage and mortgage administrator), Neilas Inc., AW General Contractors Inc., Adelaide Lofts Inc. are companies owned by the same principal,
Jim Neilas and are entitled to profit from the project if it is successful. Neilas Inc. is also invested in the project.

Form 1.1: Investor/Lender Disclosure Statement for Brokered Transactions – Addendum for Construction and Development Loans

ls/are the developer(s) related to the mortgage brokerage or to any of the officers, directors, partners, employees or shareholders of the brokerage or any of its brokers or agents?
Yes

If Yes, explain:
The developer is a company owned by Jim Neilas, who is also the principal and owner of Hi-Rise Capital Ltd.

Is the brokerage or any of its brokers or agents related to any of the other investors/lenders in the mortgage?
Yes

If Yes, explain:
Brokers/agents of Hi-Rise Capital Ltd. are related to investors/lenders.

What due diligence has the mortgage brokerage done regarding the background and experience of the developer(s)?
The developer and the mortgage brokerage are related parties.

Mortgage Administration and Loan Participation Agreement

Syndication, Asset Management, and other Fees The Participant acknowledges that fees are payable to HRC and Neilas Inc. or any other related entity for its role in the Participation Loan pursuant to and in accordance with the disclosure documentation provided to the Participant, as same may be amended from time to time.

Receipt and Acknowledgement

There is a potential conflict of interest in connection with this mortgage investment as Hi-Rise Capital Ltd., Neilas Inc., AW General Contractors Inc. and the Borrower are companies owned by the same principal and are entitled to profit from the project if it is successful.

APPENDIX B

Risk Disclosure to Investors

1. This Disclosure Statement has not been filed with the Financial Services Commission of Ontario (FSCO). Neither FSCO nor any other authority of the Government of Ontario has reviewed or approved the completed Disclosure Statement.


2. All mortgage investments carry a risk. There is a relationship between risk and return. In general, the higher the rate of return, the higher the risk of the investment. You should very carefully assess the risk of the mortgage transaction described in this Disclosure Statement, the Addendum (Form 1.2) if applicable and in the supporting documentation before making a commitment.


3. Syndicated mortgages (defined as more than one investor/lender) may carry additional risks pertaining not only to the risk of default but also to the risks associated with participating in a syndication and the financing of real estate transactions.


4. Inexperienced investors are not advised to enter into mortgage investments.


5. You should consider inspecting the property or project as identified in section 3 Part A of this Disclosure Statement.


6. This mortgage investment is not insured by the Government of Ontario or any other investor protection fund.


7. You are strongly advised to obtain independent legal advice before committing to invest.


8. This mortgage investment cannot be guaranteed by the mortgage brokerage. If you are not prepared to risk a loss, you should not consider mortgage investments.


9. If this investment is for a mortgage to fund a development, construction or commercial project, the repayment of this investment may depend on the successful completion of the project, and its successful leasing or sale.


10. If you are one of several investors in a syndicated mortgage, you may not be able to enforce repayment of your investment on your own if the borrower defaults.


11. You should ensure you have sufficient documentation to support the property valuation quoted in this Disclosure Statement. The property value may decrease over time, including the period between the date of the most recent appraisal and the date you complete the transaction. A decline in property value may also affect the return and/or value on your investment in the event of a default in payments under this mortgage.


12. You should satisfy yourself as to the borrower's ability to meet the payments required under the terms of this mortgage investment.


13. The mortgage administrator, if applicable, cannot make payments to you except from payments of principal and interest made by the borrower under the mortgage. Therefore, the mortgage administrator cannot continue mortgage payments to you if the borrower defaults.


14. If you want to withdraw your money before the end of the term, a new investor/lender may be required and there is no assurance that there will be a market for the resale or transfer of the mortgage.


15. If the contract provides for an extension, you may not be able to opt out of any extension of a mortgage term. You need to review terms relating to the extension of mortgages carefully.


16. This Disclosure Statement, the Addendum (Form 1.2) if applicable and the attached documents are not intended to provide a comprehensive list of factors to consider in making a decision concerning this investment. By law, the mortgage brokerage must disclose in writing the material risks of the mortgage investment. There may be additional risks to the investment. You should satisfy yourself regarding all factors relevant to this investment before you commit to invest.

APPENDIX C

List of Contraventions

SCHEDULE 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 Hi-Rise Capital Ltd. (“Hi-Rise”).Dimitrios Neilas.

ORDER IMPOSING ADMINISTRATIVE PENALTIES

Hi-Rise Capital Ltd. (“Hi-Rise”) is licensed as a mortgage brokerage (licence # 10897) and as a mortgage administrator (licence # 11893) under the Act.

Dimitrios “Jim” Neilas (“Jim Neilas”) was licensed as mortgage broker under the Act (licence #M08003817) and was the principal broker of Hi-Rise until December 11, 2017.

On April 1, 2019, the Superintendent of Financial Services issued a Notice of Proposal in respect of Hi-Rise and Jim Neilas (the “Notice of Proposal”)proposing among other things to impose administrative penalties on Jim Neilas for contraventions in his role as a principal broker and as a broker with Hi-Rise Capital Limited.

As a principal broker, Jim Neilas failed to ensure compliance with the Act and Regulations, contrary to section 2(1) of Ontario Reg. 410/07 and failed to ensure policies and procedures were compliant with the Act and Regulations, contrary to section 3(1) of Ontario Reg. 410/07.

As a broker, Jim Neilas failed to ensure: that the mortgages investments were suitable, contrary to section 24 of Ontario Reg. 188/08; disclosure of the “as is” value of the properties, contrary to sections 31(1) and 33 of Ont. Reg. 188/08 and section 3 of Ontario Reg. 187/08: adequate fee disclosure, contrary to sections 31(1) 1, 10 and 33 of Ontario Reg. 188/08 and section 3 of Ontario Reg. 187/08; adequate risk disclosure, contrary to section; and adequate conflict of interest disclosure, contrary to sections 26, 27, and 33 of Ontario Reg. 188/08 and section 3 of Ontario Reg. 187/08.

Requests for Hearing (Form 1) dated June 7, 2019 were delivered by Hi-Rise and Jim Neilas to the Financial Services Tribunal (the “Tribunal”) in accordance with section 39(5) of the Act respecting the Notice of Proposal.

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 became the regulator under the Act and the powers and duties previously vested in the Superintendent of Financial Services under the Act were vested in the Chief Executive Officer of Financial Services Regulatory Authority of Ontario (the “Chief Executive Officer”).

This order is made pursuant to a settlement entered into by Jim Neilas and the Director, Litigation and Enforcement, by delegated authority from the Chief Executive Officer.

ORDER

Administrative penalties in the total amount of $38,888 are hereby imposed on Dimitrios Neilas, for the reasons set out in the Minutes of Settlement and Undertaking dated [TBD].

TAKE NOTICE THAT the Financial Services Regulatory Authority of Ontario will deliver an invoice to Dimitrios Neilas with information as to where and how to pay the administrative penalties.

If Dimitrios Neilas fails to pay the administrative penalty in accordance with the terms of this Order and any further agreement or undertaking, 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 an 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

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