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 16, 21, 38 and 39;

AND IN THE MATTER OF James Michalopoulos.

NOTICE OF PROPOSAL TO REFUSE TO RENEW LICENCE AND TO IMPOSE AN ADMINISTRATIVE PENALTY

TO: James Michalopoulos

TAKE NOTICE THAT pursuant to sections 16 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 refuse to renew the mortgage agent licence issued to James Michalopoulos.

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 an administrative penalty in the amount of $10,000 on James Michalopoulos for providing false or misleading information to the Chief Executive Officer, contrary to section 45 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 state 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 reasons for the proposal by the Director to refuse to renew the mortgage agent licence issued to James Michalopoulos (“Michalopoulos”) and to impose an administrative penalty in the amount of $10,000 on Michalopoulos.

II. BACKGROUND

A. FSRA Licensing History

Michalopoulos is licensed as a mortgage agent (licence # M21000852) under the Act. He holds a level 2 licence.

Michalopoulos first applied to be a mortgage agent on January 26, 2021 (the “2021 Initial Application”). Michalopoulos became licensed on February 26, 2021.

On March 15, 2021, Michalopoulos applied to renew his agent licence (the “2021 Renewal Application”). His licence was renewed.

On February 16, 2022, Michalopoulos applied to renew his agent licence (the “2022 Renewal Application”). His licence was renewed.

On February 15, 2023, Michalopoulos applied to renew his agent licence before its expiry on March 31, 2023 (the “2023 Renewal Application”).

B. OMVIC Registration History and Charges

Michalopoulos was a registered salesperson under the Motor Vehicle Dealers Act, 2002, S.O. 2002, c. 30, Sch. B. (“MVDA”) from July 3, 2013, to January 5, 2018. He submitted an application for renewal on June 25, 2018.

The Ontario Motor Vehicle Industry Council (“OMVIC”) administers and enforces the MVDA and portions of the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A (“CPA”).

On January 30, 2019, OMVIC laid a total of eight charges under the MVDA and CPA against Michalopoulos:
1. Two counts of making false, misleading or deceptive representations (unfair practice) contrary to sections 14(1) and 17(1) of the CPA;
2. Three counts of working as an unregistered salesperson or dealer, contrary to section 4(1)(a) of the MVDA;
3. Two counts of furnishing, or assisting or counselling the furnishing of, false information or documents contrary to section 27 of the MVDA; and
4. One count of falsifying, or assisting or counselling the falsifying of, information or documents contrary to section 26 of the MVDA.

On May 20, 2021, Michalopoulos pleaded guilty to one count of working as an unregistered dealer contrary to section 4(1)(a) of the MVDA, and one count of making false, misleading or deceptive representations contrary to sections 14(1) and 17(1) of the CPA. The other six charges are still before the courts.

In addition to the charges, OMVIC issued a Notice of Proposal to Refuse Renewal of Michalopoulos’ salesperson registration on or about March 6, 2019.

Michalopoulos requested a hearing before the Licence Appeal Tribunal (“LAT”) in respect of OMVIC’s Notice of Proposal to Refuse Renewal. In a decision dated January 8, 2020, the LAT found that Michalopoulos’ past conduct afforded reasonable grounds for the belief that he would not carry-on business in accordance with the law and with integrity and honesty. The LAT directed OMVIC to carry out the Notice of Proposal and refuse the renewal.

The LAT made several findings of fact in determining that Michalopoulos was not suitable to be registered as a vehicle salesperson, including:
1. Michalopoulos acted as a motor vehicle salesperson in two transactions despite not being properly registered at the time.
2. In both transactions, Michalopoulos furnished false information and misled consumers with respect to material information. In one transaction, he failed to disclose material information about the vehicle’s history.
3. Michalopoulos falsified paperwork related to both transactions. He inflated the deposit that a consumer was providing and understated the trade-in value of a vehicle to improperly reduce his taxes.
4. In one of the transactions, the financing terms of the vehicle loan were not properly explained to the borrower, if at all.

C. False Statements on FSRA Licensing Applications

Applicants for a new mortgage agent licence or a mortgage agent licence renewal are asked a series of questions on their applications. The questions are intended to help FSRA to determine the suitability of the applicant to be licensed.

On his 2021 Initial Application, 2021 Renewal Application, and 2022 Renewal Application, Michalopoulos provided false answers to questions relating to his past conduct. On all three applications, Michalopoulos answered “No” to whether he had ever been refused registration or a licence under any legislation. In fact, OMVIC refused registration in accordance with the LAT decision on January 8, 2020.

On the 2021 Initial Application, 2021 Renewal Application, and 2022 Renewal Application, Michalopoulos answered “No” to whether he had outstanding charges, or whether he had pleaded guilty or had been found guilty of any offence under any law. However, at the time of the 2021 Initial Application and 2021 Renewal Application, Michalopoulos had eight outstanding charges under the MVDA and CPA. At the time of the 2022 Renewal Application, he had six outstanding charges, and two convictions.

On all three applications, Michalopoulos confirmed that he had truthfully answered all questions.

On June 22, 2022, FSRA staff contacted Michalopoulos for an explanation of the non-disclosure of his licence refusal, outstanding charges, and guilty pleas. Michalopoulos responded that he had misunderstood the licensing revocation question. He also said that at the time of the 2021 Initial Application, he thought the outstanding charges were time-barred.

It was only after this inquiry by FSRA staff that Michalopoulos answered “Yes” to the relevant questions on the 2023 Renewal Application. On that application, Michalopoulos noted that he had received a “2 yr suspension of [his] OMVIC Salesperson License”, disclosed the two convictions and noted that there were still outstanding charges.

D. Re-Application for Registration as a Vehicle Salesperson

On February 3, 2022, Michalopoulos applied again to be registered as a vehicle salesperson. On October 9, 2022, OMVIC issued a Notice of Proposal to Refuse Registration. A hearing before the LAT was held in February 2023 and a decision was released on February 27, 2023, directing OMVIC to issue the licence with conditions.

During the hearing, Michalopoulos advised the LAT that he had voluntarily notified FSRA of non-disclosures in his mortgage agent licensing applications and that he had corrected the non-disclosures.

In their decision, the LAT found that Michalopoulos’ licensing as a mortgage agent, along with him rejoining the military, were “new or other evidence” that entitled him to reapply for registration under the MVDA.

Though the LAT agreed with OMVIC that Michalopoulos’ past conduct still provided reasonable grounds for belief that he would not carry-on business in accordance with the law and with integrity and honesty, they imposed conditions instead of a refusal. In determining that conditions were adequate, the LAT pointed to Michalopoulos’ current status as a mortgage agent and his lack of “wrongdoing” in his employment as a mortgage agent as a favourable factor.

III. CONTRAVENTIONS OR FAILURES TO COMPLY WITH THE ACT

Section 45(1) of the Act states that no person shall give false or misleading information to the Chief Executive Officer in respect of any matter related to the Act or the regulations.

Section 45(2) of the Act states that no person or entity shall include 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 Michalopoulos contravened section 45 of the Act by making false or misleading statements on his 2022 Renewal Application relating to the refusal of his vehicle salesperson registration, the two convictions under the MVDA and CPA, and the six outstanding charges under the MVDA and CPA.

IV. GROUNDS FOR REFUSAL TO RENEW LICENCE

Section 16(4) of the Act states that the Chief Executive Officer shall renew the licence of an applicant who satisfies the prescribed requirements for renewal of the licence unless the Chief Executive Officer believes, on reasonable grounds, that the applicant is not suitable to be licensed having regard to such circumstances as may be prescribed and such other matters as the Chief Executive Officer considers appropriate.

Section 10 of Ontario Regulation 409/07 states 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 sections 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 circumstances 1 and 3 are both applicable to Michalopoulos. In respect of the first circumstance, the deceitful, fraudulent nature of Michalopoulos’ conduct as a registered vehicle salesperson provides reasonable grounds for belief that he will not deal or trade in mortgages in accordance with the law and with integrity and honesty. Michalopoulos’ conduct as a vehicle salesperson included furnishing false information, misleading customers, and falsifying paperwork, all of which is relevant to acting as a mortgage agent.

Further, Michalopoulos’ conduct in misleading the LAT in his 2023 hearing with respect to his FSRA licensing applications further shows that he will not carry-on business with honesty and integrity. He misled the LAT into thinking that he had voluntarily notified FSRA of non-disclosures on his licensing applications. In reality, it was FSRA that learned independently of the non-disclosures.

In respect of the third circumstance, Michalopoulos’ repeated dishonesty on his licensing applications also show that he is not suitable to be licensed as a mortgage agent. Michalopoulos’ non-disclosures of his registration refusal, charges, and convictions on his 2021 Initial Application, 2021 Renewal Application, and 2022 Renewal Application were serious and relevant to being licensed as a mortgage agent. Had he honestly disclosed his past conduct on his 2021 Initial Application, he likely would not have been licensed at all.

V. GROUNDS FOR IMPOSING AN ADMINISTRATIVE PENALTY

The Director is satisfied that imposing an administrative penalty on Michalopoulos 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 an administrative penalty in the amount of $10,000 should be imposed on Michalopoulos for providing false or misleading information to the Chief Executive Officer on his 2022 Renewal Application contrary to section 45 of the Act.

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 non-disclosures in the 2022 Renewal Application were intentional and intended to mislead FSRA into issuing a licence. The questions are clear in requiring refused or revoked licenses and registrations other than mortgage agent licences be disclosed. Outstanding charges and convictions are also requested. At the time of the 2022 Renewal Application, Michalopoulos knew of the registration refusal, two convictions and six outstanding charges but still answered ‘No’ to the relevant questions.

In respect of the second criterion, the Director is of the belief that Michalopoulos created a substantial risk of harm by failing to report the 2020 refusal of his vehicle salesperson registration, as well as not disclosing the six outstanding charges and two convictions under the CPA and MVDA.

Self-reporting by prospective and current mortgage agents on applications is a key component of FSRA’s monitoring activities and allows the agency to conduct risk- based monitoring of mortgage agents. Michalopoulos’ false statements impeded FSRA’s ability to assess his suitability for licensing.

In respect of the third criterion the Director is not aware of any mitigation efforts made by Michalopoulos. Only after FSRA independently uncovered the deception and confronted him with the evidence of his registration refusal, convictions and outstanding charges did Michalopoulos confirm they were true.

In respect of the fourth criterion, the Director is satisfied that Michalopoulos gained an additional year of licensing as a mortgage agent only as a result of his intentional non-disclosures. Had FSRA been properly informed of the charges, convictions and refusal, his mortgage agent licence renewal would likely have been refused.

In respect of the fifth criterion, the Director is aware of the May 20, 2021, convictions for working as an unregistered dealer contrary to the MVDA and for making false or deceiving representations contrary to the CPA.

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

DATED at Toronto, Ontario, March 28, 2023.

Original signed by

Elissa Sinha
Director, Litigation and Enforcement
Financial Services Regulatory Authority of Ontario

By delegated authority from the Chief Executive Officer

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