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Financial Services Regulatory Authority of Ontario

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 Samuel Dawson.


NOTICE OF PROPOSAL TO IMPOSE ADMINISTRATIVE PENALTIES

TO: Samuel Dawson

TAKE NOTICE THAT pursuant to section 39 of the Act, 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 impose six administrative penalties of $5,000 each, in the total amount of $30,000, on Samuel Dawson for giving false or deceptive information or documents when dealing in mortgages in Ontario on six separate occasions, contrary to section 43(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 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, 7th 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

  1. These are reasons for the proposal by the Director to impose six administrative penalties in the total amount of $30,000 on Samuel Dawson (“Dawson”).

II. BACKGROUND

FSRA Licensing History

  1. Dawson was licensed as a mortgage agent and mortgage broker (licence # M11002006) under the Act from August 29, 2011 until his licence expired on March 31, 2022. Dawson is not currently licensed under the Act.
  2. Dawson was the principal broker for Essential Mortgages Inc. o/a as Dominion Lending Centres Big City Broker (“Essential Mortgages”) (licence # 12956) from April 1, 2014 until March 31, 2022.
  3. Dawson has been a director of Essential Mortgages since February 19, 2014. Dawson surrendered Essential Mortgages’ mortgage brokerage licence on July 5, 2022.
  4. At all material times, Dawson was authorized to deal in mortgages as an agent/broker/principal broker on behalf of Essential Mortgages.

A. Submission of Altered or Fictitious Documents to Manulife

  1. Dawson was registered as mortgage broker with Manulife Bank of Canada (“Manulife”) on May 12, 2020, working under Essential Mortgages.
  2. On November 24, 2021, Manulife was advised by an external partner of inconsistencies in mortgage transactions submitted by Dawson. Manulife investigated and confirmed the existence of falsified documents submitted for Dawson’s transactions.
  3. Manulife conducted a full review of eight out of a total of 23 of Dawson’s funded transactions. Misrepresentations were confirmed in six of the eight transactions reviewed. As a result, Manulife terminated Dawson’s mortgage registration on September 14, 2021, and all pending business was cancelled.
  4. Between December 9, 2020 and July 29, 2021, Dawson submitted five altered or fictitious bank account statements and one fabricated employment letter in support of six mortgage applications.
Altered/Fictitious Bank Account Statements
  1. The altered/fictitious bank account statements were supposedly issued by Toronto Dominion Bank (“TD”) and Bank of Montreal (“BMO”). They purported to show that the applicants had significantly higher amounts of money in their bank accounts available for a down payment than they actually did.
  2. The Financial Services Regulatory Authority of Ontario (“FSRA”) obtained accurate bank statements from each of the banks regarding the accounts in issue and confirmed significant discrepancies. The discrepancies in the funds range from approximately $28,000 to over $308,000 in shortfall between the statements submitted to Manulife and the authentic statements provided by the banks.
  3. Also, in one case, the bank account did not exist at all despite a bank statement submitted to Manulife claiming a balance of over $315,000.
  4. And in another case, the altered/fictitious bank account statement showed transactions from May 1, 2020 to June 1, 2021, however, the bank confirmed that this bank account did not exist prior to November 2020.
Fictitious Employment Letter
  1. On December 6, 2021, Manulife provided FSRA with mortgage application documents for applicant JV, and an email from Dawson with JV’s employment letter.
  2. JV’s employment letter was dated November 23, 2020 and claimed that she was employed as a full time kinesiologist since June 8, 2017, earning an income of over $100,000.
  3. This employment letter was fictitious.
  4. FSRA confirmed that the clinics named in JV’s employment letter did not exist and that that JV was never registered with the College of Kinesiologists of Ontario.
Generally
  1. Dawson submitted the altered/fictitious bank account statements and employment letter to Manulife in connection with the mortgage commitments issued by Manulife to the mortgage applicants.
  2. As a result of the altered/fictitious documents submitted by Dawson, Manulife was deceived into funding six mortgages totalling over $4,800,000. Dawson earned commissions as the mortgage broker on the above transactions.
  3. Dawson claims his administrative assistant, RG, handled the collection of borrower documents and submission to lenders. RG would also provide the borrowers with the mortgage applications to complete. Dawson confirmed that RG was granted full access to Dawson’s email account and would email borrower documents on behalf of Dawson. RG was not licensed to deal in mortgages.
  4. On April 19, 2023, FSRA requested documents from Dawson via summons, including the original documents Dawson received from the mortgage applicants which might demonstrate whether the documents were altered when Dawson received them from the borrowers and any due diligence Dawson undertook to verify the information in the bank and employment documents provided to him. Dawson failed to provide any documents as requested by FSRA.
  5. On May 5, 2023, Dawson was interviewed by FSRA and admitted that he did not know what the process was to determine the veracity of client employment letters.

III. CONTRAVENTIONS OR FAILURES TO COMPLY WITH THE ACT

A. Giving False or Deceptive Documents

  1. Section 43(2) of the Act provides that no mortgage broker shall give, assist in giving or induce or counsel another person or entity to give or assist in giving any false or deceptive information or document when dealing or trading in mortgages in Ontario. Such conduct is prohibited whether or not the agent is aware that the information is false or deceptive.
  2. Over an approximate eight-month period, Dawson recklessly and negligently submitted altered/fictitious bank statements and an employment letter in support of six mortgage applications to Manulife. Dawson did not take any steps to confirm if the bank statements and employment letter were genuine.
  3. In view of the above, the Director is satisfied that Dawson has repeatedly contravened section 43(2) of the Act by submitting false or deceptive information to Manulife in connection with the six mortgage applications.

IV. GROUNDS FOR IMPOSING ADMINISTRATIVE PENALTIES

  1. The Director is satisfied that imposing administrative penalties on Dawson 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.
  2. The Director is satisfied that six administrative penalties of $5,000 each, in the total amount of $30,000, should be imposed on Dawson for giving false or deceptive information or documents when dealing in mortgages in Ontario on six separate occasions, contrary to section 43(2) of the Act.
  3. In determining the amount of administrative penalties, the Director has considered the following criteria as required by section 3(1) 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.
  4. In respect of the first criterion, the Director is satisfied that Dawson’s conduct regarding the submission of altered and/or fictitious documents to Manulife was reckless and negligent:
    1. Dawson took no steps to confirm whether the information in the altered bank statements was accurate prior to submitting them to Manulife;
    2. Dawson took no steps to confirm whether the fictitious bank statements and employment letter were genuine and if the information contained in them was accurate prior to submitting them to Manulife;
    3. Dawson gave his assistant, RG, an unlicensed person, full access to his email and had him collect and submit documents on Dawson’s behalf; and
    4. As principal broker of Essential Mortgages, Dawson’s responsibility included taking reasonable steps to ensure both his and Essential Mortgages’ compliance with their requirements under the Act. As such, Dawson ought to have been aware of his obligations under the Act.
  5. Dawson exhibited a pattern of misconduct by submitting six altered and/or fictitious bank statements and an employment letter to Manulife in six of the eight transactions Manulife reviewed.
  6. In respect of the second criterion, the Director is satisfied that Dawson’s reckless and negligent conduct as a mortgage broker could cause potential harm to others because, as a result, Manulife funded six mortgages totalling over $4,800,000 based on false information regarding the assets and financial circumstances of the applicants (borrowers). Since Manulife was unable to properly assess the risk of funding these mortgages, it could suffer harm if any borrowers default on their payments.
  7. Further, due to the inflation of the borrowers’ bank statements and the false income in the employment letter, the borrowers were able to qualify for much higher mortgages than they likely would have had the documents not been altered/fabricated. This leads to a serious risk that the funded mortgages are not suitable for the borrowers and that they may suffer financial harm if they cannot make their mortgage payments. If the borrowers default on their mortgages, they could lose their homes and Manulife could suffer further harm.
  8. Further, Dawson’s misconduct as a mortgage broker, and the owner of Essential Mortgages, both previously licensed and regulated under the Act, has the potential to harm public confidence in the regulatory regime established by the Act and its regulations.
  9. In respect of the third criterion, the Director is unaware of any steps taken by Dawson to remedy the contraventions outlined in this Notice of Proposal.
  10. In respect of the fourth criterion, the Director is satisfied that Dawson derived economic benefit from the contraventions described in this Notice of Proposal as he received commissions from Manulife for the six mortgages he brokered that were funded.
  11. In respect of the fifth criterion, the Director is unaware of any other contraventions or failures to comply under the Act in the proceeding five years by Dawson.
  12. The Director is satisfied, having regarded all the circumstances, that the proposed amount of the penalty is not punitive in nature, and the amount is consistent with one or both purposes of section 38 of the Act.
  13. Such further and other reasons as may come to the attention of the Director.

DATED at Toronto, Ontario, November 8, 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.