IN THE MATTER OF the Mortgage Brokerages, Lenders and Administrators Act, 2006,
S.O. 2006, c.29, as amended (the “Act”), in particular sections 18, 19, and 21;

AND IN THE MATTER OF My Mortgage Auction Corp. and Gregory Joseph Martel.

NOTICE OF PROPOSAL TO REVOKE LICENCE AND TO SUSPEND LICENCE

TO:                
My Mortgage Auction Corp.
33 Bloor Street, 5^th Floor, Suite E,
Toronto, ON M4W 3H1

Gregory Joseph Martel
Principal Broker

AND TO: Gregory Joseph Martel

TAKE NOTICE THAT pursuant to sections 19 and 21 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 revoke the mortgage brokerage licence issued to My Mortgage Auction Corp.

AND TAKE NOTICE THAT pursuant to sections 18 and 21 of the Act, and by delegated authority from the Chief Executive Officer, the Director is proposing to suspend the mortgage broker licence issued to Gregory Joseph Martel.

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 21(2) AND 21(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, 7^th Floor
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 Director proposes to revoke the mortgage brokerage licence issued to My Mortgage Auction Corp. (“MMAC”) and to suspend the mortgage broker licence issued to Gregory Joseph Martel (“Martel”).



II. BACKGROUND

A. The Licensees

2. MMAC is licensed as a mortgage brokerage (licence # 13040) under the Act. MMAC is incorporated in British Columbia. With the exception of its principal broker, MMAC does not sponsor any other mortgage brokers or mortgage agents in Ontario.


3. Martel is licensed as a mortgage broker (licence # M14001465) under the Act and is the principal broker of MMAC. Martel is also the sole director and shareholder of MMAC.


4. MMAC and Martel are also registered in the mortgage brokering sector in British Columbia and have been suspended since May 25, 2023.



B. The Receivership and the Bankruptcy

5. By Order, dated May 4, 2023, the British Columbia Supreme Court appointed PricewaterhouseCoopers Inc. (the “Receiver”) as receiver over MMAC, following an application by an investor who alleged that MMAC had ceased making payments required under its investment agreement.


6. The Receiver took possession of the property and records of MMAC.


7. In its reports to the British Columbia Supreme Court, the Receiver noted:
   
   
   1. As of May 4, 2023, the MMAC account at Royal Bank of Canada (the “RBC Account”) had a balance of $273.98;
   
   
   2. In the month preceding the Receiver’s appointment, MMAC withdrew approximately $5.0 million from the RBC Account, with approximately $4.0 million transferred to corporations controlled by Martel;
   
   
   3. The MMAC financial statements indicate that MMAC had loans payable of approximately $226.4 million as of September 30, 2022 (primarily outstanding principal and accrued interest owing to investors);
   
   
   4. The MMAC financial statements indicate that MMAC held approximately $186.0 million in loans receivable as of September 30, 2022;
   
   
   5. The MMAC financial statements indicate that MMAC had advanced $48.2 million to Martel and corporations controlled by Martel as of September 30, 2022; and
   
   
   6. To date, the Receiver has found no loan agreements to support the MMAC bridge loans.
   
   


8. The Receiver has reported to the British Columbia Supreme Court that Martel has failed to comply with the court orders made in the receivership proceedings. The Receiver intends to file an application for Contempt of Court against Martel.


9. By order, dated May 17, 2023, the British Columbia Supreme Court authorized the Receiver to assign MMAC into bankruptcy.


10. On June 6, 2023, the Receiver assigned MMAC into bankruptcy.



C. The British Columbia Interim Suspension Order

11. By order, dated May 26, 2023, the British Columbia Financial Services Authority (the “BCFSA”) suspended the registrations of MMAC and Martel (Re Martel, 2023 BCRMB 6) following an ex parte application by the BCFSA under the British Columbia Mortgage Brokers Act.


12. The evidence before the BCFSA included five complaints from investors and one additional complaint. In some cases, the investors provided supporting documentation, such as loan agreements, to the BCFSA. The BCFSA also considered the civil claims against MMAC and Martel, and the reports from the Receiver.


13. The BCFSA Hearing Officer held that:
    
    
    1. There is a prima facie case that supports a conclusion that Martel and MMAC were engaged in activities that would disentitle them to registration if they were applicants for registration under the British Columbia mortgage brokering legislation;
    
    
    2. There is a prima facie case that supports a conclusion that Martel and MMAC conducted business in a manner that was prejudicial to the public interest; and
    
    
    3. The protection of the public requires the issuing of an interim registration suspension order.
    
    



D. Ontario Regulatory Contraventions

14. FSRA has not received any complaints from Ontario investors or borrowers.


15. However, in response to the Receivership proceeding, the British Columbia interim suspension order, and media reports, the Financial Services Regulatory Authority of Ontario (“FSRA”) began a review of the suitability of MMAC and Martel.


16. FSRA identified several contraventions of the Ontario mortgage brokering regulatory regime.



i) Martel Provided False Information to FSRA

17. Martel filed his 2023 mortgage broker licence renewal application (the “Renewal Application”) on March 31, 2023.


18. In the Renewal Application, Martel was asked:

    “Have you ever been declared bankrupt or made a voluntary assignment in bankruptcy, or are you currently an undischarged bankrupt or are you currently a defendant in any civil proceeding or are there any unsatisfied judgements imposed by a civil court in Canada or elsewhere, against you personally?” [emphasis added]



19. Martel responded “No” to this question.


20. Martel swore that he had truthfully answered the questions in the Renewal Application. Martel was warned:

    “Providing false or misleading information in this application/declaration and/or any attachment is an offence under the MBLAA, and doing so may be sufficient grounds to reject the application/declaration, revoke or refuse to renew a licence or, if you are an officer/director/partner, result in refusal of the brokerage or administrator licence applied for, or result in your prosecution. By clicking the "Confirmed" button below, you swear that you have truthfully answered all questions contained within this electronic application and consent to the Collection, Use and Disclosure by FSRA of this information.”



21. In fact, Martel was a defendant in a British Columbia civil proceeding.


22. On February 28, 2023, Laurel Beth Rayani filed a lawsuit (the “Rayani Action”) naming Martel and MMAC as defendants (Victoria Registry Action No. VIC-S-S- 230663).


23. Martel failed to disclose the Rayani Action in the Renewal Application, contrary to section 45(2) of the Act.



ii) MMAC Failed to File its Annual Information Return

24. Under section 2 of Ontario Regulation 193/08, MMAC was required to file its 2022 Annual Information Return with FSRA by March 31, 2023.


25. MMAC has not filed its 2022 Annual Information Return.



iii) MMAC Failed to Maintain its Ontario Mailing Address

26. In regulatory filings with FSRA, MMAC listed its Ontario business address as 33 Bloor Street, 5th Floor, Suite E, Toronto, ON M4W3H1 (the “Bloor Address”).


27. However, MMAC has vacated the Bloor Address.


28. MMAC has not provided an updated mailing address to FSRA, contrary to section 6 of Ontario Regulation 193/08.



iv) Martel Failed to Take Reasonable Steps to Ensure MMAC’s Compliance

29. Under section 2 of Ontario Regulation 410/07, as principal broker, Martel was required to take reasonable steps to ensure MMAC complied with all requirements under the Act.


30. Martel has failed to take reasonable steps to ensure MMAC fulfilled its regulatory obligations.


31. In particular, as discussed above, MMAC failed to file its 2022 Annual Information Return, contrary to section 2 of Ontario Regulation 193/08, and failed to update its mailing address with FSRA, contrary to section 6 of Ontario Regulation 193/08.



III. GROUNDS FOR REVOCATION AND SUSPENSION

32. Section 19(1) of the Act states that the Chief Executive Officer may, by order, revoke a licence in any of the circumstances in which he or she is authorized to suspend a licence.


33. According to section 18(1) of the Act, such circumstances are:
    
    
    1. if the licensee ceases to satisfy the prescribed requirements for issuance or renewal, as the case may be, of the licence;
    
    
    2. if the Chief Executive Officer believes, on reasonable grounds, that the licensee is no longer suitable to be licensed having regard to the circumstances, if any, prescribed for the purposes of subsection 14(1) or 16(4) of the Act, as the case may be, and such other matters as the Chief Executive Officer considers appropriate;
    
    
    3. if the licensee contravenes or fails to comply with a requirement established under this Act; or
    
    
    4. if such other circumstances as may be prescribed.
    
    



A. MMAC

34. Pursuant to section 1(2) of Ontario Regulation 408/07, the Chief Executive Officer must consider the following when determining that a mortgage brokerage is not suitable to be licensed:
    
    
    1. Whether, having regard to its financial position, the corporation cannot reasonably be expected to be financially responsible in the conduct of its business.
    
    
    2. Whether the past conduct of any director or officer of the corporation affords reasonable grounds for belief that the business of the corporation will not be carried on in accordance with the law and with integrity and honesty.
    
    
    3. Whether the corporation is carrying on activities that contravene or will contravene the Act or the regulations if the corporation is licensed.
    
    
    4. Whether a director or officer of the corporation has made a false statement or has provided false information to the Chief Executive Officer with respect to the application for a licence.
    
    


35. Due to the receivership and its bankruptcy, MMAC cannot reasonably be expected to be financially responsible in the conduct of its business.


36. MMAC has failed to comply with requirements established under the Act by failing to file its 2022 Annual Information Return, contrary to section 2 of Ontario Regulation 193/08, and by failing to update its mailing address with FSRA, contrary to section 6 of Ontario Regulation 193/08.


37. Furthermore, MMAC and Martel are alleged to have engaged in highly improper conduct. The BCFSA has issued an interim suspension order on the basis of the prima facie case that MMAC and Martel are no longer suitable to be registered in the mortgage brokering sector in British Columbia. The British Columbia Supreme Court has similarly granted a receivership order and ancillary relief to permit the investigation of the affairs of MMAC and recovery for investors.


38. The Director is of the view that the same affidavit evidence, as well as reports filed by the Receiver and supporting materials, afford reasonable grounds for belief that the conduct of Martel affords reasonable grounds for belief that MMAC’s business will not be carried on in accordance with the law and with integrity and honesty.


39. The Director is of the view that MMAC is not suitable to be licensed.



B. Martel

40. Under section 10 of Ontario Regulation 409/07, the Chief Executive Officer must consider the following when determining that a mortgage broker is not suitable to be licensed:
    
    
    1. Whether the individual’s past conduct affords reasonable grounds for belief that he or she will not deal or trade in mortgages in accordance with the law and with integrity and honesty.
    
    
    2. Whether the individual is carrying on activities that contravene or will contravene the Act or the regulations if he or she is licensed.
    
    
    3. Whether the individual has made a false statement or has provided false information to the Chief Executive Officer with respect to the application for the licence.
    
    


41. Martel has contravened the Act by providing false information to FSRA, contrary to section 45(2) of the Act, and by failing to take reasonable steps to ensure that MMAC complied with the requirements established under the Act, contrary to section 6 of Ontario Regulation 193/08.


42. Martel provided false information to FSRA in the Renewal Application by failing to disclose the Rayani Action.


43. The Director is of the view that affidavit evidence filed in support of the receivership application and the BCFSA licensing proceedings, as well as the reports filed by the Receiver and supporting materials, afford reasonable grounds for belief that Martel’s past conduct affords reasonable grounds for belief that he will not deal or trade in mortgages in accordance with the law and with integrity and honesty.


44. Suspending Martel’s license will prevent him from dealing or trading in mortgages while investigation and proceedings are ongoing in British Columbia. As Martel is the principal broker of MMAC, there is no reasonable means to address the suitability concerns other than licence suspension.


45. Further, upon the suspension of MMAC’s licence, Martel’s licence is automatically suspended by the operation of section 17(3) of the Act.


46. Having regard to the circumstances, the Director believes, on reasonable grounds, that MMAC and Martel are no longer suitable to be licensed.


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

DATED at Toronto, Ontario, June 15, 2023

Original signed by

Elissa Sinha
Director, Litigation and Enforcement

By delegated authority from the Chief Executive Officer

Si vous desirez recevoir cet avis en français, veuillez nous envoyer votre demande par courriel immediatement a : contactcentre@fsrao.ca.