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 Raouf Ghadrdoust.

NOTICE OF PROPOSAL TO REFUSE TO RENEW LICENCE and
TO IMPOSE ADMINISTRATIVE PENALTIES

TO: Raouf Ghadrdoust

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 & Enforcement (the “Director”) is proposing to refuse to renew the mortgage agent licence issued to Raouf Ghadrdoust.

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 the following administrative penalties on Raouf Ghadrdoust:

1. $10,000 for receiving remuneration from a person other than his brokerage, contrary to subsection 4(1) of Ontario Regulation 187/08; and
2. $5,000 for facilitating dishonesty, contrary to section 3.1 of Ontario Regulation 187/08.

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.

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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

1. These are reasons for the proposal by the Director to:
   1. Refuse to renew the mortgage agent licence issued to Raouf Ghadrdoust (“Ghadrdoust”); and
   2. Impose administrative penalties of $15,000 on Ghadrdoust.

II. BACKGROUND

A. Parties

2. Ghadrdoust was licensed as a mortgage agent Level 1 (licence #M08005556) from July 1, 2008, to March 31, 2023.
3. On March 24, 2023, Ghadrdoust applied to renew his mortgage agent licence.
4. At the relevant time, Ghadrdoust was licensed through Dream Land Financial Services Inc. (“Dream Land”). He continues to be sponsored by Dream Land.

B. Receiving Remuneration from Person Other Than Brokerage

5. In September of 2021, a married couple in Ontario (the “Clients”) entered into an agreement to purchase a property for approximately $1,850,000.
6. The Clients approached Ghadrdoust and asked that he arrange a mortgage of $1,625,000 to enable them to purchase this property.
7. In December of 2021, Ghadrdoust provided the Clients with a mortgage commitment of $1,125,000 from a major Canadian bank (“the Bank”). Ghadrdoust told the Clients that they would need to find an additional $500,000 to close on the property.
8. The Clients were able to obtain a loan from family members for $250,000.
9. Ghadrdoust told the Clients that he knew a private lender that could issue a private mortgage of $250,000 in respect of the property.
10. In December of 2021, Ghadrdoust arranged a $250,000 private mortgage from 2501585 Ontario Inc. (“2501585”) at an annual interest rate of 12% and a term of 30 days.
11. Ghadrdoust was the director of 2501585 from February 25, 2016, to April 1, 2021. Ghadrdoust’s former assistant then took over as the director of 2501585.
12. As remuneration for arranging the mortgages from the Bank and 2501585, Ghadrdoust was paid $19,068.75 directly from the Clients’ lawyer.
13. Dream Land confirmed that it has no records of the Clients’ mortgages from either the Bank or 2501585.
14. The Clients were unable to repay the private mortgage from 2501585 after 30 days and incurred fees and interest totaling approximately $43,000.

C. False or deceptive information regarding the arranging of mortgages

15. The mortgage commitment from the Bank contained a term that explicitly prohibited secondary financing. As Ghadrdoust arranged the Bank mortgage, he was aware of this term.
16. Ghadrdoust assisted the Clients in obtaining a second mortgage from 2501585. In doing so, Ghadrdoust knowingly facilitated the Clients’ violation of the terms of the Bank mortgage.

III. CONTRAVENTIONS OR FAILURES TO COMPLY WITH THE ACT

A. Dealing in Mortgages not on Behalf of Brokerage

17. Subsection 2(3) of the Act states that “No individual shall deal in mortgages in Ontario for remuneration, whether direct or indirect, as an employee or otherwise, unless he or she has a mortgage broker’s or agent’s licence and is acting on behalf of a mortgage brokerage or is exempted from the requirement to have such a licence.”
18. The Director is satisfied that Ghadrdoust contravened subsection 2(3) of the Act by dealing in mortgages for the Clients for remuneration while not acting on behalf of Dream Land.

B. Receiving Remuneration from Person Other Than Brokerage

19. Subsection 4(1) of Ontario Regulation 187/08 states that “A mortgage broker or agent shall not receive, directly or indirectly, any fee or other remuneration 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.”
20. The Director is satisfied that Ghadrdoust contravened subsection 4(1) of Ontario Regulation 187/08 by receiving a fee of $19,068.75 from the Clients, a person other than Dream Land.

C. Dishonesty, fraud, etc.

21. Section 3.1 of Ontario Regulation 187/08 states that “A mortgage broker or agent shall not act, or do anything or omit to do anything, in circumstances where he or she ought to know that by acting, doing the thing or omitting to do the thing, he or she is being used by a borrower, lender, investor or any other person to facilitate dishonesty, fraud, crime or illegal conduct.”
22. Ghadrdoust acted in circumstances where he ought to have known that by acting he was being used by a borrower to facilitate dishonesty. Specifically, Ghadrdoust arranged a second mortgage from 2501585 for the Clients despite knowing that the mortgage commitment for the Bank mortgage prohibited secondary financing.
23. Accordingly, the Director is satisfied that Ghadrdoust breached section 3.1 of Ontario Regulation 187/08.

IV. GROUNDS FOR REFUSAL TO RENEW LICENCE

24. 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.
25. Section 10 of Ontario Regulation 409/07 under the Act 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.
26. The Director is satisfied that Ghadrdoust’s past conduct with respect to the Clients affords reasonable grounds for belief that he will not deal or trade in mortgages in accordance with the law and with integrity and honesty.
27. Ghadrdoust’s conduct contravened the Act and avoided the monitoring and compliance functions of his brokerage, a key aspect of the regulatory scheme. Furthermore, Ghadrdoust facilitated dishonesty by the Clients by arranging a second mortgage that contravened the terms of the Bank mortgage.
28. Given Ghadrdoust’s actions with respect to the Clients, the Director reasonably believes that he is not suitable for licensing having regard to the circumstances prescribed in paragraphs 1 of section 10 of Ontario Regulation 409/07.
29. Accordingly, the Director proposes to refuse to renew the mortgage agent licence issued to Ghadrdoust.

V. GROUNDS FOR IMPOSING ADMINISTRATIVE PENALTIES

30. The Director is satisfied that imposing administrative penalties on Ghadrdoust 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.
31. The Director is satisfied that the following administrative penalties should be imposed on Ghadrdoust:
    1. $10,000 for receiving remuneration from a person other than his brokerage, contrary to subsection 4(1) of Ontario Regulation 187/08; and
    2. $5,000 for facilitating dishonesty, contrary to section 3.1 of Ontario Regulation 187/08.
32. 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.
33. In respect of the first criterion, the Director is satisfied that Ghadrdoust’s actions were intentional. Ghadrdoust has been licensed since 2008 and was well aware of the requirement to only receive fees through his brokerage. As he arranged the Bank commitment, he was aware of the term prohibiting secondary financing.
34. In respect of the second criterion, the Director is satisfied that Ghadrdoust’s activities had the potential to cause significant harm. Requiring that all fees flow through a brokerage is key to ensuring that all fees charged are compliant with the Act and regulations. Ghadrdoust’s breach of this requirement resulted in the Clients paying inflated fees, which increased their cost of borrowing and their risk of default. Indeed, the Clients were unable to repay the private mortgage when it came due, and incurred significant fees.
35. Issuing secondary funding contrary to the terms of the first mortgage increased the risks of the Clients defaulting on their mortgage. Had the Bank learned of the second mortgage, it could have called the mortgage and forced the sale of the Clients’ home.
36. In respect of the third criterion, the Director is unaware of any efforts by Ghadrdoust to mitigate any loss or take other remedial action.
37. In respect of the fourth criterion, as a result of Ghadrdoust’s failure to comply with the Act he received fees of $19,068.75.
38. In respect of the fifth criterion, the Director is unaware of any further contraventions or failures to comply in the preceding five years by Ghadrdoust.
39. The Director is satisfied, having regarded all the circumstances, that the proposed amounts of the administrative penalties are not punitive in nature, and that the amounts are consistent with one or both purposes of section 38 of the Act.
40. Such further and other reasons as may come to my attention.

DATED at Toronto, Ontario, September 3, 2024.

Original signed by

Elissa Sinha
Director, Litigation & Enforcement

By delegated authority from the Chief Executive Officer

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