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, 38 and 39;

AND IN THE MATTER OF Eli Benzaquen.

NOTICE OF PROPOSAL TO REVOKE LICENCE AND TO IMPOSE ADMINISTRATIVE PENALTIES

TO: Eli Benzaquen

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 agent licence of Eli Benzaquen.

AND 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 six administrative penalties in the total amount of $36,000 on Eli Benzaquen:

three administrative penalties in the total amount of $30,000 for receiving remuneration from a person or entity other than his brokerage, contrary to section 4(1) of Ontario Regulation 187/08;

three administrative penalties in the total amount of $6,000 for providing false or misleading information to the Chief Executive Officer, contrary to sections 45(1) and 45(2) of the Act.

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), 21(3), 39(2) 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, 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.

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:
1. Revoke the mortgage agent licence of Eli Benzaquen, who also uses the name Ely Benzaquen (“Benzaquen”); and
2. Impose six administrative penalties in the total amount of $36,000 on Benzaquen.

II. BACKGROUND

FSRA Licensing History

Benzaquen is currently licensed as a mortgage agent (level 2) (licence #M20000708) under the Act.

Benzaquen has been licensed since February 16, 2020.

Benzaquen is currently sponsored by The Mortgage Hub Inc. (a mortgage brokerage, licence # 11951).

Benzaquen’s Agreement with CMI

Benzaquen was an independent contractor with Cashin Mortgages Inc. (“CMI”) (a mortgage brokerage, licence # 12543) from January 31, 2020 until he was terminated on August 17, 2021.

In 2021, Benzaquen began working with another agent, James Hooker (“Hooker”) (licence # M21000242) at Inspire Capital (“IC”), which operated as a direct-to- brokers division operating under CMI. IC was separate from CMI’s direct-to- consumer business.

Benzaquen’s independent contractor agreement (the “Agreement”) with CMI included clauses that he not take renumeration outside the brokerage and that all transactions must be processed through CMI in order for those transactions to be covered by CMI’s independent contractor E&O insurance.

The Principal Broker of CMI, Mark Cashin (“Cashin”), stated that IC would take a 50/50 split on lender fees with the mortgage investors or lenders, and brokerage fees would be charged by the brokerage that was selling to the consumer. Benzaquen’s Agreement with IC outlined a 75/25 split on these fees between the mortgage agent (75%) and CMI (25%).

Benzaquen’s Complaint against Cashin

Prior to his departure from CMI, Benzaquen and Cashin disagreed about operating fees that were charged to Benzaquen.

Benzaquen’s arrangement with CMI was terminated on August 17, 2021.

The day after his termination, Benzaquen submitted a complaint against Cashin to the Financial Services Regulatory Authority of Ontario (“FSRA”).

FSRA ultimately determined that the nature of the complaint was outside its jurisdiction.

Benzaquen’s Agreement with Sherwood

On August 23, 2021, Benzaquen transferred his mortgage agent licence to Sherwood Mortgage Group Inc. (“Sherwood”) (a mortgage brokerage, licence #12176).

After Cashin reviewed email archives at CMI, he discovered evidence that Benzaquen and Hooker dealt in mortgage transactions outside the brokerage while Benzaquen was contracted with Sherwood.

Cashin contacted the principal broker at Sherwood and shared the evidence.

Benzaquen was subsequently terminated for cause from Sherwood on September 30, 2021.

In Sherwood’s letter to FSRA explaining Benzaquen’s termination for cause, the CEO/President of Sherwood confirmed that Benzaquen was receiving payments directly from Hooker at CMI.

A. Dealing and Receiving Renumeration Outside the Brokerage

On October 7, 2021, FSRA received information from Cashin that Benzaquen received fees outside the brokerage for several mortgages he arranged between March and September 2021 that should have been processed through CMI but were not.

Cashin provided evidence for these transactions and was interviewed by FSRA investigators on June 15, 2022.

On April 21, 2023, Benzaquen was interviewed by FSRA investigators in relation to Cashin’s information. Benzaquen’s lawyer was also present at the interview and advised Benzaquen on his responses throughout.

Transaction #1: The MP First Mortgage

In March 2021, Benzaquen and Hooker arranged a mortgage for client, MP, in the amount of $560,000 (the “MP First Mortgage”).

In email correspondence for the MP First Mortgage, using brokerage email addresses, Benzaquen directed the lawyer on the transaction to split the broker fee 50/50 and to pay himself and Hooker directly.

The lawyer issued two separate cheques to Benzaquen and Hooker in the amount of $3,500 each for the MP First Mortgage.

Cashin confirmed that CMI also received a cheque for $2,800 for the MP First Mortgage but was unaware that additional broker fees were issued directly to Benzaquen and Hooker.

During his interview, Benzaquen admitted to receiving the $3,500 fee for the MP First Mortgage outside his brokerage, CMI, and confirmed these were “brokerage fees”. Benzaquen, through his lawyer, explained that he kept the money to offset fees he believed he was overcharged by CMI.

Transaction #2: The MP Second Mortgage

In July 2021, Benzaquen emailed Hooker to source a lender for an additional small loan for MP (the “MP Second Mortgage”).

Benzaquen and Hooker found a lender, who was also the lawyer for the transaction. Hooker advised the lender that they would split the lender fee and Benzaquen would charge a broker fee.

On August 23, 2021, five days after being terminated from CMI, Benzaquen transferred his mortgage agent licence to Sherwood.

In September 2021, the commitment letter for the MP Second Mortgage was signed. It included a “commitment fee” of $3,500.

The parcel register for the MP’s property confirms the MP Second Mortgage was registered on September 22, 2021.

The MP Second Mortgage was not processed through CMI or Sherwood.

Benzaquen’s bank statement shows a wire transfer on September 23, 2021 from the lender in the amount of $3,517.50.

During his interview, Benzaquen said that he did not remember whether the MP Second Mortgage was executed or if he received fees related to it.

Transaction #3: The TD Mortgage

On August 9, 2021, Hooker emailed Benzaquen the details of a borrower, TD, using their brokerage email addresses. TD was looking for a mortgage (the “TD Mortgage”).

Benzaquen sent the details to his father-in-law, a lender and a lawyer.

On August 23, 2021, Benzaquen transferred his mortgage agent licence to Sherwood.

Correspondence regarding the TD Mortgage includes Hooker discussing their fee with Benzaquen.

The commitment letter for the TD Mortgage was addressed to Benzaquen of Sherwood Mortgage Group and indicated a brokerage fee of $10,000 and a lender fee of $30,000. However, Sherwood has no records related to the TD Mortgage.

A parcel search of TD’s property confirms the TD Mortgage was registered on September 13, 2021 to four lenders including Benzaquen’s father-in-law.

The TD Mortgage was not processed through CMI or Sherwood.

Transaction #4: The J Mortgage

In September 2021, Benzaquen and Hooker arranged a mortgage for clients, the J’s (the “J Mortgage”).

Documents for the J Mortgage included a term sheet and solicitor instructions document with the IC logo at the top signed by the J’s.

The term sheet for the J Mortgage included a brokerage fee of $15,000 to be paid on closing to Benzaquen.

A parcel search of the J’s property confirms the J Mortgage was registered on September 17, 2021.

Benzaquen’s bank statement shows a wire transfer on September 20, 2021 from the lawyer’s office that handled the J Mortgage in the amount of $15,017.50.

Despite the mortgage commitment document for the J Mortgage appearing on IC letterhead, this transaction was not processed through CMI or Sherwood.

During his interview, Benzaquen stated that he recalled the J Mortgage and that Hooker prepared the term sheet. Benzaquen did not recall whether he received any compensation in connection with the J Mortgage.

B. Previous History with FSRA

In 2019, Benzaquen and a licensed mortgage agent named AS were directors for a company called Platinum Capital Connect (“Platinum”), an unlicensed entity that dealt in private mortgages.

On August 14, 2019, a complaint was filed with FSRA alleging that Benzaquen and AS benefitted from a mortgage transaction through Platinum. Benzaquen was unlicensed at the time.

On September 25, 2019, FSRA sent an unlicensed activity warning letter to Benzaquen and AS at Platinum.

C. False Statements

2022 and 2023 Renewal Applications

On March 24, 2022 and March 27, 2023, Benzaquen submitted applications to FSRA to renew his mortgage agent licence.

Question #7 of these applications asked if the applicant has ever had an employment or business relationship terminated for breach of confidentiality, breach of trust, fraud, misappropriation of funds, theft, forgery, sexual harassment, or physical assault.

Benzaquen answered “NO” in response to this question on both applications.

These answers were false as Benzaquen’s termination from Sherwood was for cause due to his misappropriation of funds on September 30, 2021.

Statements to FSRA Investigators

During his interview, Benzaquen gave false statements to FSRA investigators:
1. Benzaquen stated a number of times that he did not close any deals while employed at Sherwood and that, if he had, they would have gone through the brokerage. He also claimed to have “no grievances” with Sherwood, even though the brokerage terminated him for cause.
2. Benzaquen answered “no” when asked if he was in the mortgage business before CMI, despite the warning letter from FSRA regarding Platinum in 2019.

III. CONTRAVENTIONS OR FAILURES TO COMPLY WITH THE ACT

A. Acting and Receiving Remuneration Outside the Brokerage

Section 2(3) of the Act provides that no individual shall deal in mortgages for renumeration unless they have a licence and are acting on behalf of a mortgage brokerage.

Section 4(1) of Ontario Regulation 187/08 prohibits a mortgage agent from receiving, directly or indirectly, any fee for dealing or trading in mortgages from a person or entity other than the brokerage on whose behalf he or she is authorized to deal or trade in mortgages.

The Director is satisfied that Benzaquen contravened section 2(3) of the Act and section 4(1) of Ontario Regulation 187/08 by dealing in mortgages outside his brokerage on all four transactions and receiving a total of approximately $22,035 in fees for the MP First Mortgage, MP Second Mortgage, and J Mortgage outside his brokerages.

B. False or Misleading Statements

Section 45(1) of the Act prohibits a person from giving false or misleading information to the Chief Executive Officer or a person designated by the Chief Executive Officer in respect of any matter related to the Act or the regulations.

Section 45(2) of the Act prohibits a person from including false or misleading information in any document required to be created, stored or given to the Chief Executive Officer under the Act.

The Director is satisfied that Benzaquen contravened sections 45(1) and 45(2) of the Act by providing false information regarding his termination from Sherwood on his 2022 and 2023 mortgage agent licence renewal applications.

The Director is also satisfied that Benzaquen contravened section 45(1) of the Act by repeatedly making false and/or misleading statements to FSRA investigators during his interview.

IV. GROUNDS FOR REVOCATION OF LICENCE

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.

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), 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.

Section 10 of Ontario Regulation 409/07 provides that, in determining whether an individual is not suitable to be licensed as a mortgage broker or agent, the Chief Executive Officer is required by subsections 14(1) and 16(4) of the Act to have regard to the following prescribed circumstances:
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.

The Director is satisfied that Benzaquen’s past conduct regarding the mortgages that he dealt in and received renumeration for, outside his brokerages, contrary to section 2(3) of the Act and subsection 4(1) of Ontario Regulation 187/08, afford reasonable grounds for belief that he will not deal or trade in mortgages in accordance with the law and with integrity and honesty.

Benzaquen’s conduct contravened the Act by him purposely arranging to receive fees for numerous mortgage transactions directly from persons other than his brokerages.

Benzaquen’s conduct was a deliberate and concerted effort to circumvent the monitoring and compliance obligations of two brokerages and his own regulatory requirements, contrary to the public interest.

Further, the Director is satisfied that Benzaquen gave false or misleading information to the Chief Executive Officer with respect to two licence renewal applications, contrary to sections 45(1) and 45(2) of the Act.

Despite his termination from Sherwood for cause, Benzaquen provided false information when he answered “no” to the question of whether he was ever had an employment or business relationship terminated for breach of trust or misappropriation of funds on two licence renewal applications. Without accurate disclosure from applicants, FSRA cannot effectively perform the gate-keeping and supervisory functions inherent in the licensing processes, which are critical to the public interest.

Given Benzaquen’s actions with respect to the mortgage transactions and his repeated false statements to FSRA, the Director reasonably believes that Benzaquen is not suitable for licensing with respect to the circumstances prescribed in paragraphs 1 and 3 of section 10 of Ontario Regulation 409/07.

Accordingly, the Director proposes to revoke the mortgage agent licence issued to Benzaquen.

V. GROUNDS FOR IMPOSING ADMINISTRATIVE PENALTIES

The Director is satisfied that imposing administrative penalties on Benzaquen under section 39 of the Act will satisfy one or both of the following purposes under section 38(1) of the Act:
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 six administrative penalties in the total amount of $36,000 should be imposed on Benzaquen:
1. two administrative penalties of $7,500 each, totalling $15,000, for receiving remuneration from a person or entity other than his brokerage for the MP First Mortgage and MP Second Mortgage, contrary to subsection 4(1) of Ontario Regulation 187/08;
2. one administrative penalty of $15,000 for receiving remuneration from a person or entity other than his brokerage for the J Mortgage, contrary to subsection 4(1) of Ontario Regulation 187/08;
3. three administrative penalties of $2,000 each, totalling $6,000, for the provision of false or misleading information to the Chief Executive Officer, contrary to sections 45(1) and 45(2) of the Act.

In determining the amount of administrative penalties, 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 Benzaquen’s actions were intentional as he admitted to taking fees outside the brokerage for the MP First Mortgage to offset fees he believed he was overcharged by CMI.

Further, Benzaquen continued dealing in mortgages and receiving fees outside his next brokerage, Sherwood, after being terminated from CMI. This conduct led to his termination from Sherwood after approximately one month for cause. Benzaquen has shown a repeated pattern of conduct with no explanation for continuing to circumvent regulatory requirements with two brokerages and through four separate transactions.

Benzaquen intentionally failed to disclose information relating to the mortgages he was dealing in to both CMI and Sherwood. He purposely negotiated and received remuneration for three mortgage transactions outside both brokerages in order to increase his compensation by concealing the transactions from his brokerage.

Benzaquen actively worked with Hooker to source lenders and arrange mortgages for clients that were not processed through his brokerage.

Additionally, Benzaquen knew that the answers on his renewal applications were false and intentionally provided false or misleading information to FSRA investigators.

In respect of the second criterion, the Director is of the belief that Benzaquen created a risk or potential risk of harm to others by working outside the brokerage.

The transactions outside CMI were not covered by CMI’s Independent Contractor’s E&O Insurance as stipulated in the Agreement with CMI, which is a critical regulatory requirement in place to protect the public.

Also, requiring that all fees flow through a brokerage is key to ensuring that all fees charged are compliant with the Act and regulations. Benzaquen’s breach of this requirement could result in the clients he worked with paying inflated fees, which could increase their cost of borrowing and their risk of default.

In respect of the third criterion, the Director is unaware of any efforts by Benzaquen to mitigate any loss or take other remedial action.

In respect of the fourth criterion, as a result of Benzaquen’s failure to comply with the Act, he received a total of approximately $22,035 in remuneration for three mortgage transactions, the First and Second MP Mortgages and the J Mortgage, that did not go through his brokerages.

In respect of the fifth criterion, Benzaquen received a warning letter for unlicensed activity in 2019 with respect to his involvement with Platinum.

The Director is satisfied, having regarded all the circumstances, that the proposed amount of the administrative penalties are not punitive in nature as required by section 3(2) of Ontario Regulation 192/08, and the amount is consistent with one or both purposes of section 38 of the Act.

Such further and other reasons that may come to the attention of the Director.

DATED at Toronto, Ontario, September 25, 2023

Original signed by

Elissa Sinha
Director, Litigation and Enforcement

By delegated authority from the Chief Executive Officer

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