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 Sabine Quattrociocchi;

AND IN THE MATTER OF Diamond Capital Investments Inc.

NOTICE OF PROPOSAL
TO IMPOSE ADMINISTRATIVE PENALTIES

TO: Sabine Quattrociocchi

AND TO:

Diamond Capital Investments Inc.
499 Edgeley Blvd., Unit 4
Concord, Ontario, L4K 4H3

TAKE NOTICE THAT pursuant to sections 38 and 39 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 impose four (4) administrative penalties in the total amount of $40,000 on Sabine Quattrociocchi (“Quattrociocchi”):

three (3) administrative penalties of $10,000 each for dealing in mortgages without a licence or while not acting on behalf of a mortgage brokerage contrary to section 2(3) of the Act; and
an administrative penalty of $10,000 for providing false or misleading information to the Chief Executive Officer contrary to section 45 of the Act.

AND TAKE NOTICE THAT pursuant to sections 38 and 39 of the Act, and by delegated authority from the Chief Executive Officer, the Director is proposing to impose an administrative penalty of $25,000 on Diamond Capital Investments Inc. (“Diamond Capital”) for carrying on the business of administering mortgages without a licence or a valid exemption contrary to section 5(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, 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

These are the reasons for the proposal by the Director to impose administrative monetary penalties on Sabine Quattrociocchi (“Quattrociocchi”) and Diamond Capital Investments Inc. (“Diamond Capital”).
The Director issued a previous Notice of Proposal regarding Quattrociocchi dated September 17, 2021 (the “2021 NOP”). Quattrociocchi requested a hearing in respect of the 2021 NOP. This Notice of Proposal addresses information that FSRA has learned since the 2021 NOP was issued.

II. BACKGROUND

A. Licensing History

Quattrociocchi was licensed as a level 2 mortgage agent (licence # M17000871) under the Act. Quattrociocchi was first licensed as a mortgage agent on April 3, 2017. Her licence was set to expire on March 31, 2024, and she applied to renew it on March 8, 2024 (the “2024 Renewal Application”).
On May 13, 2024, Quattrociocchi withdrew the 2024 Renewal Application. Quattrociocchi’s licence is now expired and she remains unlicensed.
From April 3, 2017, to January 7, 2019, Quattrociocchi was authorized to deal or trade in mortgages on behalf of I Direct Mortgages Inc. (licence # 10584).
From January 7, 2019, to July 24, 2020, Quattrociocchi was authorized to deal or trade in mortgages on behalf of Unimor Capital Corporation (licence # 10675).
Quattrociocchi was then authorized to deal or trade in mortgages on behalf of Adamas Financial (licence # 13266) until the withdrawal of her 2024 Renewal Application on May 13, 2024.

B. Relevant Entities and Parties

Quattrociocchi is the sole owner of Adamas Financial. She is not a director or officer of the company and was never the principal broker.
Diamond Capital is a corporation registered in Ontario. The company was first registered on June 19, 2015. Quattrociocchi is the sole director of Diamond Capital and was the sole director during the relevant time period. Quattrociocchi was the sole signing authority on the bank account of Diamond Capital and the address associated with the account is her home address.
2605336 Ontario Inc. (“2605336”) was incorporated in Ontario on November 9, 2017. Quattrociocchi has been a director of 2605336 since November 12, 2017, and the sole director since July 24, 2018.
2404056 Ontario Inc. (“2404056”) was incorporated in Ontario on January 21, 2014. It was dissolved effective September 14, 2018. Quattrociocchi was a director of the company from inception.
MLF is a law firm in Woodbridge, Ontario.

C. 2021 NOP

On September 17, 2021, the Director issued the 2021 NOP, proposing to suspend Quattrociocchi’s mortgage agent licence and to impose an administrative penalty of $5,000 for providing false information to the Chief Executive Officer contrary to section 45 of the Act.
On September 28, 2021, Quattrociocchi requested a hearing before the Financial Services Tribunal in respect of the 2021 NOP. The matter is still before the Tribunal with file number M0948-2021 in respect of the administrative penalty.

D. Additional Complaints

Following the issuance of the 2021 NOP, FSRA received additional complaints in August and September 2023 from consumers IC, PE and CP.
The mortgages for IC, PE, and CP/AP were done at a time when Quattrociocchi was not a licensed mortgage agent or, once Quattrociocchi became licensed, were not done through Quattrociocchi’s mortgage brokerage.

IC

In February 2016, IC sought out a second mortgage on her home to pay some outstanding debts. IC was referred to Quattrociocchi by an employee at MLF.
IC understood Quattrociocchi to be a “mortgage person.” At the time, Quattrociocchi was not a licensed mortgage agent.
After IC met with Quattrociocchi at MLF, Diamond Capital advanced a loan to IC, registered a second mortgage and charged a lender fee. IC was not made aware that Diamond Capital was Quattrociocchi’s company.
Soon after, in November 2016, Quattrociocchi told IC that she could get her a lower rate. Quattrociocchi brought IC to a different law firm. Quattrociocchi was present at the meeting. A new mortgage was registered, but the Diamond Capital mortgage was not discharged; it was instead postponed.
Quattrociocchi was paid two fees for this transaction. Quattrociocchi received $13,399 to herself personally and $13,000 through 2404056.
Quattrociocchi assisted IC in arranging several more mortgages on her property, some in exchange for discharges. By November 30, 2017, four mortgages were registered, including the Diamond Capital mortgage. IC eventually defaulted and lost her home by power of sale.

PE

PE was referred to Quattrociocchi by PE’s father. Quattrociocchi presented herself as a mortgage broker. PE understood Diamond Capital to be the brokerage and believed she met Quattrociocchi in Diamond Capital’s office.
Quattrociocchi arranged mortgages on two properties owned by PE. The mortgages were arranged in March 2017, while Quattrociocchi was unlicensed, and in January 2018, outside of her brokerage.
In March 2017, on the first property, Quattrociocchi arranged six-month, interest-only mortgages.
In January 2018, another second mortgage was placed on the first property and Quattrociocchi, through 2605336, was paid a fee of $22,000. This mortgage was brokered outside of iDirect Mortgages, Quattrociocchi’s mortgage brokerage at the time.
On the second property, Quattrociocchi arranged six-month, interest-only private first and second mortgages in March 2017. For the first mortgage, Quattrociocchi, through Diamond Capital, was paid a fee of $5,960.

CP/AP

CP is the son of AP, lives with AP, and is her power of attorney for property.
CP was introduced to Quattrociocchi through his mother-in-law, who had used Quattrociocchi to broker a mortgage while Quattrociocchi was employed at a bank. CP believed that Quattrociocchi was a mortgage broker and that Diamond Capital was the mortgage brokerage.
Quattrociocchi advised AP and CP that AP would not qualify for a traditional mortgage and that Quattrociocchi could arrange two interest-only private mortgages for 6 months. In July 2017, the two mortgages were registered on AP’s home.
Although Quattrociocchi indicated to AP and CP as they were nearing the end of the 6-month period that AP would qualify for a mortgage with the bank, at the last minute she told them AP would not qualify and brokered a mortgage with another private lender.
In January 2018, two new mortgages, totalling $985,000, were registered in favour of a private lender. Quattrociocchi, through 2605336, was paid a fee of $35,750.
Although Quattrociocchi was licensed while dealing with CP, none of the mortgages were brokered through iDirect Mortgages, Quattrociocchi’s mortgage brokerage at the time.

E. Administration of Mortgages

Between May 1, 2017, and July 29, 2018, Diamond Capital received bulk mortgage interest payments from MLF and then made separate, monthly mortgage interest payments to lenders in at least 9 instances.
In general, MLF would pay Diamond Capital in one to two bulk payments. Subsequently, Diamond Capital would pay out interest only payments to the mortgage lenders in monthly installments by cheque that totalled the amount received from MLF on closing as an interest reserve.
The monthly installments to the lenders corresponded with the duration of mortgages, typically either 6 or 12 months.
Most of the incoming cheques from MLF displayed the name of a mortgagor and a reference to a mortgage discharge or mortgage prepayments.
The memos on the outgoing cheques from Diamond Capital reflected the name of the borrowers or the property address. The cheques are signed by Quattrociocchi.
Quattrociocchi confirmed in her interview with FSRA investigators that she was responsible for the cheques and did not realize that a licence is required to receive payments from a borrower under a mortgage and remit them on the borrower’s behalf.

F. 2022 Renewal Application and Undisclosed Lawsuits

On March 28, 2022, Quattrociocchi completed her 2022 renewal application. When asked about outstanding civil proceedings, she stated that she and companies she had an interest in were involved in civil proceedings. In follow up communications, Quattrociocchi provided details of 13 proceedings.
FSRA learned of at least 5 additional lawsuits that named Quattrociocchi, Diamond Capital, 2605336 and/or 2404056. Quattrociocchi also failed to disclose that in one of the lawsuits, Adamas Financial was named as a party.
On her 2023 renewal application, Quattrociocchi’s answers to the questions were similar to her 2022 renewal application.

G. Interviews with FSRA

On June 11, 2021, FSRA Investigators interviewed Quattrociocchi. At the interview, Quattrociocchi was represented by counsel. When asked about the questions relating to lawsuits, she indicated that she had answered the questions honestly.
Quattrociocchi attended a second interview on December 21, 2023. She was represented by counsel.
At this interview, Quattrociocchi deflected blame onto individuals at MLF and stated that she was an innocent dupe. Quattrociocchi also indicated that, despite payments from the Diamond Capital bank account that appeared to be signed by her for services at her home, she received no compensation from the IC, PE, or AP mortgages.
In civil proceedings, Quattrociocchi has stated that she generally kept 6% of the value of the mortgages as commission for her work as the “mortgage sales referring agent.”

III. CONTRAVENTIONS OR FAILURES TO COMPLY WITH THE ACT

A. Administering Mortgages Without a Licence

Section 5(2) of the Act provides that no person or entity shall carry on the business of administering mortgages in Ontario unless they have a mortgage administrator’s licence or an exemption from such a licence.
Section 5(1) sets out what constitutes administering mortgages. A person or entity administers a mortgage when they receive payment from a borrower under a mortgage on behalf of another person or entity, and remit payments to or on behalf of the person or entity, or when they hold themself out as doing so.
Those exempted from the requirement to have a licence to administer mortgages include financial institutions, those acting for collections agencies, those acting for the crown, and lawyers. Quattrociocchi and Diamond Capital are not entitled to an exemption.
The Director is satisfied that Quattrociocchi and Diamond Capital contravened section 5 of the Act by carrying on the business of administering mortgages. They received payments from at least nine borrowers through MLF for lenders and remitted the payments to the lenders.

B. Dealing in Mortgages Without a Licence or not on Behalf of a Mortgage Brokerage

Section 2(3) of the Act provides that no individual shall deal in mortgages in Ontario for remuneration, whether direct or indirect, unless he or she has a mortgage broker or agent licence and is acting on behalf of a mortgage brokerage.
Before April 3, 2017, Quattrociocchi was not licensed as a mortgage agent and thus could not deal or trade on behalf of a mortgage brokerage. Once licensed, Quattrociocchi could only deal or trade on behalf of a mortgage brokerage. However, the mortgages related to PE and AP while Quattrociocchi was licensed were not done on behalf of her brokerage.
The Director is satisfied that Quattrociocchi contravened section 2(3) of the Act by dealing in mortgages related to IC, PE, and AP not through her brokerage, and/or while she was not licensed. In all three cases, Quattrociocchi met with the borrowers and presented herself as a mortgage agent or broker. She provided information to them about the mortgages, and the terms of those mortgages.
Quattrociocchi received remuneration either directly or indirectly through fees charged by Diamond Capital and her other companies, and through the payment of personal expenses by Diamond Capital.

C. Providing False or Misleading Information to FSRA

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 Quattrociocchi contravened section 45 of the Act by making false or misleading statements to FSRA.
Quattrociocchi was involved in at least nine lawsuits that should have been disclosed on her 2021 renewal application. When FSRA brought the non-disclosure of two lawsuits to Quattrociocchi’s attention in the 2021 interview, she maintained that she had answered the questions on the 2021 renewal application honestly. Eventually she provided this information. However, it was still incomplete.
The Director is satisfied that Quattrociocchi was aware of all of the litigation involving herself and her companies and should have disclosed it to FSRA in her 2022 and 2023 renewal applications.

IV. GROUNDS FOR IMPOSING ADMINISTRATIVE PENALTIES

The Director is satisfied that imposing administrative penalties on Quattrociocchi and Diamond Capital under section 39 of the Act will satisfy 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 administrative penalties in the total amount of $40,000 should be imposed on Quattrociocchi for dealing in mortgages outside of a brokerage contrary to section 2(3) of the Act, and for providing false or misleading information to the Chief Executive Officer contrary to section 45 of the Act.
The Director is satisfied that an administrative monetary penalty of $25,000 should be imposed on Diamond Capital for carrying on the business of administering mortgages without a licence, contrary to section 5(2) of the Act.
In determining the amount of the 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.

A. Quattrociocchi

In respect of the first criterion, the Director is of the opinion that Quattrociocchi’s actions in dealing in mortgages outside of a brokerage and/or without a licence were intentional. IC, PE, and AP each met with Quattrociocchi to acquire a mortgage. None of the mortgages went through her brokerage.
Additionally, given that one of the unlicensed transactions occurred one month before being licensed, Quattrociocchi knew of the requirement to act through her brokerage due to having taken the mortgage agent licensing course. This further demonstrates that her conduct was intentional.
Further, the Director is satisfied that the non-disclosures were intentional and intended to mislead FSRA into issuing a licence. The questions are clear in requiring the disclosure of lawsuits both personally and against companies.
In respect of the second criterion, the Director is satisfied that the harm was substantial. IC, PE, and AP entered into private mortgages with significant fees, many of which were paid to companies controlled by Quattrociocchi and to others. IC lost her home.
With respect to the activity outside the brokerage, the public rightly expects the protections of the Act when their business is solicited by a FSRA licensee. By acting outside of her brokerage, Quattrociocchi deprived the borrowers of the protections afforded by the Act.
In respect of the non-disclosures to FSRA, 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. Quattrociocchi’s false statements impeded FSRA’s ability to assess her suitability for licensing. Many of the lawsuits appear to be related to mortgage transactions and would have reduced the likelihood of Quattrociocchi being licensed at all or increased the likelihood of FSRA seeking conditions.
In respect of the third criterion, the Director is not aware of any mitigation efforts that Quattrociocchi has taken with respect to the unlicensed mortgage activity or dealing outside of her brokerage.
The Director is aware that Quattrociocchi eventually disclosed most of the lawsuits on her 2022 renewal application. However, the existence of ongoing litigation and the failure to disclose during the 2021 interview reduce the impact of the later truthful disclosure.
In respect of the fourth criterion, the Director is satisfied that Quattrociocchi, through her companies, received a direct economic benefit by receiving substantial fees in the total amount of $90,109 for brokering the IC, PE, and AP mortgages.
Further, the Director is satisfied that Quattrociocchi benefited from reduced scrutiny on her licence renewal applications, potentially leading to additional time as a licensee. Had FSRA been properly informed of the lawsuits, many of which involve Quattrociocchi’s actions during mortgage transactions, FSRA would have been in a position to review these documents and investigate this matter at the time.
In respect of the fifth criterion, the Director is aware of the outstanding 2021 NOP and contraventions of the Act alleged in it.

B. Diamond Capital

In respect of the first criterion, the Director is satisfied that the administration of mortgages by Diamond Capital was intentional. Quattrociocchi explained during her 2023 interview that lenders wanted to be paid monthly, and that the mortgage amounts would be paid upfront. Quattrociocchi, on behalf of Diamond Capital, signed the cheques to lenders. The conduct was intentional.
In respect of the second criterion, the Director is satisfied that the potential for harm was significant. Mortgage administrators are required to be licensed, and Diamond Capital’s work as an unlicensed mortgage administrator harmed confidence in the mortgage administrator licensing system. The lack of licence prevented FSRA from assessing Diamond Capital’s suitability as a mortgage administrator, and from assessing the principal representative of the company.
Further, the licensure of mortgage administrators ensures that consumers are protected. The standards of practice imposed on licensed administrators under Ontario Regulation 189/08 ensure protections like the disclosure of conflicts of interest (s. 20), the presence of adequate policies and procedures (s. 25), a complaints process (s. 26), insurance (s. 27), the use of trust accounts (s. 34) and more. By acting as an unlicensed mortgage administrator, Diamond Capital deprived clients of these critical protections, putting their funds at risk, and deprived FSRA of the opportunity to assess whether Diamond Capital complied with the relevant regulatory obligations.
In respect of the third criterion the Director is not aware of any mitigation efforts made by Diamond Capital or Quattrociocchi on its behalf.
In respect of the fourth criterion, the Director is satisfied that Diamond Capital received indirect compensation for its work as an administrator. Records of the transactions were not available to FSRA to quantify the economic gain.
In respect of the fifth criterion, the Director is not aware of any other contraventions or failures to comply with the Act or other financial services legislation within the previous 5 years.
The Director is satisfied, having regarded all the circumstances, that the proposed amount of the penalties against Quattrociocchi and Diamond Capital are not punitive in nature, and the amounts are consistent with one or both purposes of section 38 of the Act.
Such further and other reasons as may come to my attention.

DATED at Toronto, Ontario, June 19, 2024.

Original signed by

Elissa Sinha
Director, Litigation and Enforcement

By delegated authority from the Chief Executive Officer

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NOTICE OF PROPOSAL TO IMPOSE ADMINISTRATIVE PENALTIES