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 Wilson Yip Chau.

NOTICE OF PROPOSAL TO IMPOSE ADMINISTRATIVE PENALTIES

TO: Wilson Yip Chau

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 fourteen (14) administrative penalties in the total amount of $75,000 on Wilson Yip Chau (“Chau”):

thirteen (13) administrative penalties of $5,000 each, in the total amount of $65,000, for contravening section 43(2) of the Act by giving false or deceptive information and documents when dealing in mortgages in Ontario; and
an administrative penalty of $10,000 for failing to comply with a summons as required by section 34(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 W, Suite 100
Toronto, ON 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 the reasons for the proposal by the Director to impose 14 administrative monetary penalties in the total amount of $75,000 on Chau.
Chau was a mortgage agent who submitted false or deceptive information to lenders in respect of 13 mortgage applications. Chau also failed to cooperate with a summons issued by the Financial Services Regulatory Authority (“FSRA”) while it was investigating his conduct.

II. BACKGROUND

A. Parties

Chau was licensed as a mortgage agent (licence #M20001918) under the Act from August 19, 2020, until the expiry of his licence on March 31, 2023.
While a licensed mortgage agent, Chau worked for The Mortgage Alliance Company of Canada Inc. (“Mortgage Alliance”), a mortgage brokerage licensed under the Act (licence #10530).
As a mortgage agent, Chau submitted mortgage applications to lenders. He submitted applications to one lender (“Lender A”) between September 2020, and July 7, 2022, when Lender A terminated the business relationship. Chau was setup in the system of another lender (“Lender B”) on November 20, 2020, and deactivated on September 19, 2022.
On July 19, 2022, Lender A submitted a Business Activity Complaint Form to FSRA. Lender A alleged that Chau submitted fraudulent documents, in support of 11 mortgage applications. These fraudulent documents included bank statements, employment letters and income documents.
Mortgage Alliance terminated their relationship with Chau on September 1, 2022. After this date, Chau was not authorized to sell as he was not sponsored by a brokerage and his licence was suspended pursuant to section 17(3)(a) of the Act.

B. Submission of Altered and Fabricated Documents

Between September 2020 and July 2022, Chau submitted 12 altered or fabricated bank account statements and seven altered or fabricated employment and income documents on behalf of borrowers in support of 13 mortgage applications (the “Mortgage Applications”) to Lender A and Lender B. Of the 13 Mortgage Applications, 11 were submitted to Lender A and two were submitted to Lender B.
Relying on the altered or fabricated bank statements and employment records submitted by Chau, Lender A funded 10 mortgages in the total amount of $6,439,338.
Chau also submitted fabricated documents to Lender A for one borrower whose mortgage was not funded and therefore no commissions were paid.
Relying on the altered or fabricated bank statements and employment records submitted by Chau, Lender B funded two mortgages in the total amount of $969,750.
Lender A and Lender B paid total gross commissions of $74,805.71 for the 12 funded Mortgage Applications for which Chau submitted altered or fabricated documents. Chau received $27,407.76 of these commissions, with the rest paid to other agents and the mortgage brokerage.
The commissions received by Chau in respect of the 12 funded Mortgage Applications represented 52% of the commissions he received while licensed as a mortgage agent.

B.1 Altered Bank Account Statements

Chau submitted altered bank account statements in support of 12 of the Mortgage Applications. The balances of the accounts in the altered statements were overstated by $20,000 to $410,000, with an average overstatement of $118,729. In three of the Mortgage Applications, the accounts had an actual balance of $0, while the submitted statement represented a balance as high as $410,000. These alterations made the borrowers appear to be more desirable candidates for mortgages.
The altered bank account statements were purportedly issued by Canadian banks, including The Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Royal Bank of Canada, Tangerine Bank, and Bank of Montreal.

B.2 Altered and Fabricated Employment Records

Between November 5, 2020, and June 10, 2022, Chau submitted altered or fabricated employment and income related documents in support of seven of the Mortgage Applications. Six of these were submitted by Chau to Lender A (BRC, DN, DLN, TG, YC and THT) and one was submitted to Lender B (HTTN).
A FSRA Investigator contacted the named employers for BRC, DN, DLN, TG, YC, THT and HTTN’s by email to confirm the authenticity of the employment documents. The email messages sent to BRC, DN, DLN and YC’s employers were undeliverable. The emails sent to TG, THT and HTTN’s employers were delivered but there was no reply.
A FSRA Investigator called the phone numbers listed on each employment letter. The numbers for THT and HTTN’s employers were unreachable. The numbers for BRC, DN, DLN, TG and YC’s employers directed the caller to an automated medical alert system advertisement.
For each of the seven borrowers, the income statement submitted by Chau used an identical employee identification number format despite purportedly coming from seven different employers. Each statement also does not list values for vacation, holiday, or overtime pay, despite covering a period that includes several statutory holidays.

C. Failure to Comply with Summons

FSRA obtained Chau’s email address from Mortgage Alliance. On July 11, 2023, FSRA sent an MBLAA summons (the “Summons”) to Chau’s email address. The Summons required Chau to participate in an interview on July 20, 2023. A FSRA Investigator also sent Chau a text message and voicemail regarding the Summons.
On July 12, 2023, Canada Post left a notice card at Chau’s residence.
The notice card indicated where and when Chau could pick up the envelope containing the Summons. Chau did not pick up the Summons.
On July 14, 2023, FSRA left a second voicemail on Chau’s phone.
Chau did not comply with the Summons and did not attend the interview with FSRA on July 20, 2023.
On September 21, 2023, FSRA Investigators visited Chau’s residence and left a voicemail on Chau’s phone. An adult at the residence confirmed that Chau lives at the residence but refused to accept any documents. A copy of the Summons was left in the mailbox along with a business card and note requesting a call back.
Chau has not contacted the FSRA Investigator regarding the Summons or suggested an alternative time for an interview.
In not responding to the Summons, Chau failed to provide FSRA with any information regarding his due diligence around the false bank statements and employment and income records that he submitted in support of the Mortgage Applications.

III. CONTRAVENTIONS OR FAILURES TO COMPLY WITH THE ACT

A. Giving False or Deceptive Information when Dealing in Mortgages

Section 43(2) of the Act provides that no mortgage agent 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 in mortgages in Ontario or trading in mortgages in Ontario. Such conduct is prohibited whether or not the agent is aware that the information is false or deceptive.
As described above, during a two-year period, Chau submitted altered or fabricated documents in the 13 Mortgage Applications to Lender A and Lender B, including 12 altered or fabricated bank account statements and seven employment letters and income statements which contained false and deceptive information.
Chau did not demonstrate that he took reasonable steps to verify the authenticity of the bank account statements and the employment-related documents, or that he exercised any diligence with respect to their veracity.
The Director is satisfied that Chau gave false or deceptive information to lenders on 13 occasions when dealing in mortgages contrary to section 43(2) of the Act.

B. Failure to Comply with Summons

Section 34(2) of the Act provides that when a summons is issued, it may require a person to produce documents and to give such information on oath as may be relevant to determining whether a person is complying with the Act.
By requiring the subject of a summons to provide information on oath, section 34(2) creates a requirement under the Act. When the subject of a summons does not attend a required interview on oath to provide the information, they have failed to comply with a requirement under the Act.
The Summons required Chau, who was no longer licensed, to attend an interview and to provide information on oath. The Director is satisfied that the Summons requiring Chau’s attendance came to his attention, as contemplated in O. Reg 190/08 section 7. Chau was notified of the Summons by email, voicemail, text-message, mail and attempted personal delivery where FSRA Investigators spoke to an adult household member and left a copy of the Summons in his mailbox.
The Director is satisfied that when Chau failed attend the scheduled interview, he failed to comply with section 34(2) of the Act.

IV. GROUNDS FOR IMPOSING ADMINISTRATIVE PENALTIES

Section 39 of the Act allows for the imposition of general administrative penalties where a person is or was contravening the Act, or where the person is not or was not complying with a requirement established under the Act.
As described above, Chau contravened section 43(2) of the Act by giving false or deceptive information in 13 Mortgage Applications. He also failed to comply with the requirement to provide information under oath when he was summonsed, pursuant to section 34(2) of the Act.
The Director is satisfied that imposing administrative penalties on Chau under section 39(1) 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 from deriving, directly or indirectly, any economic benefit as a result of contravening or failing to comply with a requirement established under this Act.
Administrative penalties encourage current licensees to comply with the prohibition against submitting false or deceptive information when dealing in mortgages. Further, individuals would be encouraged to comply with summonses issued under the Act.
The imposition of administrative penalties also prevents Chau from benefiting economically from his non-compliance with the Act. Chau received commissions of $27,407.76 on the Mortgage Applications that were supported by the altered or fabricated documents.
In determining the amount of the 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.
The Director is satisfied that 13 administrative penalties of $5,000 each, totaling $65,000, should be imposed on Chau for contravening section 43(2) of the Act by providing false or deceptive information to Lender A and Lender B in support of the 13 Mortgage Applications.
The Director is also satisfied that an administrative penalty of $10,000 should be imposed on Chau for failing to comply with the Summons issued by FSRA, pursuant to section 34(2) of the Act.
In respect of the first criterion, the Director is satisfied that Chau’s conduct with respect to the submission of the altered or fabricated documents to Lender A and Lender B was reckless or negligent:
1. The submission of altered or fabricated documents in mortgage applications was not a single error or lapse in judgement. The pattern of behaviour spanned 13 transactions and the resulting commissions were a majority of the total commissions that Chau received while licensed as a mortgage agent;
2. Chau did not demonstrate that he took reasonable and sufficient steps to confirm if the information in the altered or fabricated bank statements was accurate prior to submitting them to Lender A or Lender B; and
3. Chau did not demonstrate that he took reasonable and sufficient steps to confirm if the employment and income documents relating to BRC, DN, DLN, TG, YC, THT and HTTN were genuine and if the information contained in them was accurate.
The Director is also satisfied that Chau’s failure to comply with the Summons was intentional. FSRA made numerous attempts to notify Chau of the Summons.
Despite FSRA’s numerous attempts to contact Chau, he failed to acknowledge the Summons and failed to attend the interview on July 20, 2023, or seek an alternate date. Chau avoided each of FSRA’s attempts to communicate with him and therefore his failure to reply and provide information in accordance with the Summons was intentional.
In respect of the second criterion, the Director is satisfied that Chau’s reckless or intentional conduct as a mortgage agent caused harm to others. As a result of Chau’s misconduct:
1. Lender A funded 10 mortgages totaling $6,439,338 and Lender B funded two mortgages totaling $969,750. The mortgages were funded based on false information as to the assets and financial circumstances of the borrowers;
2. Lender A and Lender B paid gross commissions of $74,805.71 for the brokering of these 12 mortgages;
3. There is a serious risk that the mortgages may not be affordable or suitable for the borrowers and they may suffer harm if they cannot make their payments. The bank account balances were inflated by an average of $118,729 and the employment details for seven borrowers were falsely represented in the documents submitted by Chau. Accordingly, the mortgages may not be appropriate;
4. Borrowers are at risk of the mortgages being called by the lender based on the terms of the mortgages. Having a mortgage called would put borrowers in a difficult and vulnerable position of trying to find another lender, potentially at higher expense or not at all; and
5. In the event the borrowers’ default on the mortgages, Lender A and Lender B may suffer direct financial harm.
Further, Chau’s misconduct as a mortgage agent, licensed and regulated under the Act, undermines public confidence in the regulatory regime established by the Act and its regulations.
The use of fabricated documents may create mistrust among borrowers and financing entities that might cause lenders to take increased steps to screen applications, increasing the transaction costs. Lenders may also heighten their requirements and take opportunities away from otherwise suitable borrowers.
Chau’s failure to respond to the Summons hampered FSRA’s ability to assess whether Chau complied with the requirements of the Act and impeded the identification of other potential contraventions of the Act by Chau and others who may have been involved in the Mortgage Applications.
In respect of the third criterion, the Director is not aware of any steps taken by Chau to remedy or mitigate the contraventions described in this proposal. Instead, Chau failed to cooperate with the Summons.
In respect of the fourth criterion, the Director is satisfied that Chau derived direct economic benefit from the contraventions described in this proposal. Chau received a total of $27,407.76 in commissions from Lender A and Lender B on the 12 funded Mortgage Applications.
In respect of the fifth criterion, the Director is unaware of any further contraventions or failures to comply in the preceding five years by Chau.
The Director is satisfied, having regard to all the circumstances, that the proposed total amount of the penalties is not punitive in nature, and the amount is consistent with both purposes of section 38 of the Act.
Such further and other reasons as may come to the attention of the Director.

DATED at Toronto, Ontario, March 19, 2024

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.