IN THE MATTER OF the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c.29, as amended (the “Act”), in particular sections 15, 21, 38 and 39; 

AND IN THE MATTER OF James Hooker.

NOTICE OF PROPOSAL TO IMPOSE CONDITIONS ON LICENCE AND TO IMPOSE ADMINISTRATIVE PENALTIES

TO: James Hooker 

TAKE NOTICE THAT pursuant to sections 15 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 impose conditions on the mortgage agent licence of James Hooker requiring close supervision for two (2) years.

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 six administrative penalties in the total amount of $34,000 on James Hooker:

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 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 the reasons for the proposal by the Director to:
   
   
   1. Impose conditions on the mortgage agent licence of James Hooker (“Hooker”); and
   
   
   2. Impose six administrative penalties in the total amount of $34,000 on Hooker.
   
   



II. BACKGROUND

FSRA Licensing History

2. Hooker is currently licensed as a mortgage agent (level 1) (licence # M21000242) under the Act.


3. Hooker has been licensed since January 21, 2021.


4. Hooker is currently sponsored by Moneybroker Canada Inc. (a mortgage brokerage, licence # 13024).



Hooker’s Agreement with CMI

5. Hooker was initially licensed on January 21, 2021 with Cashin Mortgages Inc. (“CMI”) (a mortgage brokerage, licence # 12543) until he was terminated for cause on October 1, 2021.


6. Hooker’s independent contractor agreement (the “Agreement”) with CMI included clauses that he not take renumeration outside the brokerage and that all transactions must be processed through CMI in order for those transactions to be covered by CMI’s independent contractor E&O insurance.


7. CMI created a company called Inspire Capital (“IC”) for Hooker to operate as a direct-to-brokers division operating under CMI. IC was separate from their direct- to-consumer business, which was CMI.


8. The Principal Broker of CMI, Mark Cashin (“Cashin”), stated that IC would take a 50/50 split on lender fees with the mortgage investors or lenders, and brokerage fees would be charged by the brokerage that was selling to the consumer. Hooker’s Agreement with IC outlined a 70/30 split on these fees between the mortgage agent (70%) and CMI (30%).



A. Dealing and Receiving Renumeration Outside the Brokerage

9. On October 7, 2021, the Financial Services Regulatory Authority of Ontario (“FSRA”) received information from Cashin that Hooker received fees outside the brokerage for several mortgages he arranged between March and August 2021 that should have been processed through CMI but were not.


10. Cashin provided evidence for these transactions and was also interviewed by FSRA investigators on June 13, 2022.


11. On June 1, 2023, Hooker was interviewed by FSRA investigators and admitted to receiving fees outside his brokerage, CMI, for four different mortgage transactions. Hooker claimed that he knew he was leaving CMI so he took the fees directly because he thought Cashin would not pay him for the transactions.



Transaction #1: The MP First Mortgage

12. In March 2021, Hooker, together with another mortgage agent at CMI, Eli Benzaquen (“Benzaquen") (licence # M20000708), who also uses the name “Ely Benzaquen”, arranged a mortgage for a client, MP, in the amount of $560,000 (the “MP First Mortgage”).


13. In email correspondence for the MP First Mortgage, using his brokerage email address, Benzaquen directed the lawyer on the transaction to split the broker fee 50/50 and pay Hooker and himself directly. Hooker received a copy of the relevant communications at his brokerage email address.


14. The lawyer issued two separate cheques to Hooker and Benzaquen in the amount of $3,500 each for the MP First Mortgage.


15. Cashin confirmed that CMI received a cheque for $2,800 for the MP First Mortgage but was unaware that additional broker fees were issued directly to Hooker and Benzaquen.


16. During his interview, Hooker admitted to taking the $3,500 fee for the MP First Mortgage outside his brokerage.



Transaction #2: The CH Mortgage

17. In August 2021, Hooker assisted another mortgage agent, MT, to arrange a mortgage for borrower, CH (the “CH Mortgage”).


18. Correspondence using Hooker’s brokerage email address regarding the CH Mortgage includes a document titled “term sheet and solicitor instructions” (“term sheet”) with the IC logo on top and dated August 18, 2021.


19. The term sheet included a financial service fee of $5,850.


20. Despite the document for the CH Mortgage being on IC letterhead, this transaction was not processed through CMI.


21. During his interview, Hooker admitted to receiving half of the financial service fee, $2,925, outside his brokerage.



Transaction #3: The TD Mortgage

22. In August 2021, Hooker assisted another mortgage agent, TA, to arrange a mortgage for borrower, TD (the “TD Mortgage”).


23. On August 9, 2021, Hooker emailed Benzaquen TD’s requirements using their brokerage email addresses.


24. On August 23, 2021, Benzaquen transferred his mortgage agent licence to Sherwood.


25. Benzaquen arranged for his father-in-law, a lender and a lawyer, to fund the TD Mortgage.


26. Correspondence regarding the TD Mortgage includes Hooker discussing their fee with Benzaquen.


27. The commitment letter for the TD Mortgage was addressed to Benzaquen of Sherwood Mortgage Group and indicated a brokerage fee of $10,000 and a lender fee of $30,000. However, Sherwood has no records related to the TD Mortgage.


28. A parcel search of TD’s property confirms the TD Mortgage was registered on September 13, 2021 to four lenders including Benzaquen’s father-in-law.


29. On September 30, 2021, after Cashin discovered the email exchanges for the TD Mortgage, he inquired of the lender who advised that the brokerage fee was paid to TD’s brokerage and the lenders fee was shared with Hooker.


30. The TD Mortgage was not processed through CMI or Sherwood.


31. During his interview, Hooker admitted that he split the lender fee with Benzaquen for the TD Mortgage and received $5,000, outside the brokerage.



Transaction #4: The J Mortgage

32. In September 2021, Hooker and Benzaquen arranged a mortgage for clients, the J’s (the “J Mortgage”).


33. Email correspondence from Hooker’s brokerage email included a document for the J Mortgage titled “term sheet and solicitor instructions” with the IC logo at the top and signed by the J’s.


34. The term sheet for the J Mortgage included a financial service fee of $10,000 and a $15,000 brokerage fee.


35. A parcel search of the J’s property confirms the J Mortgage was registered on September 17, 2021.


36. Despite the mortgage commitment document for the J Mortgage appearing on IC letterhead, this transaction was not processed through CMI or Sherwood.


37. During his interview, Hooker admitted to receiving the financial service fee of $10,000 for the J Mortgage outside the brokerage.



B. False Statements on Licence Renewal Applications

2022 and 2023 Renewal Applications

38. On March 31, 2022 and March 17, 2023, Hooker submitted applications to renew his mortgage agent licence.


39. Question #7 of these applications asked if the applicant has ever had an employment or business relationship terminated for breach of confidentiality, breach of trust, fraud, misappropriation of funds, theft, forgery, sexual harassment, or physical assault.


40. Hooker answered “NO” in response to this question on both applications.


41. These answers were false as Hooker’s termination from CMI on October 1, 2021 was due to “[t]heft, dishonesty or falsifying records”.



III. CONTRAVENTIONS OR FAILURES TO COMPLY WITH THE ACT

A. Acting and Receiving Remuneration Outside the Brokerage

42. Section 2(3) of the Act provides that no individual shall deal in mortgages for renumeration unless they have a licence and are acting on behalf of a mortgage brokerage.


43. Section 4(1) of Ontario Regulation 187/08 prohibits a mortgage agent from receiving, directly or indirectly, any fee 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.


44. The Director is satisfied that Hooker contravened section 2(3) of the Act and section 4(1) of Ontario Regulation 187/08 by dealing in mortgages outside his brokerage and receiving approximately $21,425 in fees outside his brokerage for the four transactions described in this Notice of Proposal.



B. False or Misleading Statements on Licence Renewal Applications

45. Section 45(1) of the Act prohibits a person from giving false or misleading information to the Chief Executive Officer or a person designated by the Chief Executive Officer in respect of any matter related to the Act or the regulations.


46. Section 45(2) of the Act prohibits a person from including false or misleading information in any document required to be created, stored or given to the Chief Executive Officer under the Act.


47. The Director is satisfied that Hooker contravened sections 45(1) and 45(2) of the Act by providing false information regarding his termination from CMI on his 2022 and 2023 mortgage agent licence renewal applications.



IV. GROUNDS TO IMPOSE CONDITIONS ON LICENCE

48. Section 15(1) of the Act states that the Chief Executive Officer may amend a licence at any time.


49. Section 15(2) states that if the proposed amendment is without the licensee’s consent, the Chief Executive Officer must take the procedural steps required under section 21 of the Act.


50. Section 21 states that if the Chief Executive Officer proposes to amend a licence without the licensee’s consent the Chief Executive Officer must give written notice of the proposal to the licensee, including reasons for the proposal; inform the licensee that he can request a hearing by the Tribunal about the proposal; and advise the licensee about the process for requesting the hearing.


51. 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.
    
    


52. FSRA assesses suitability to ensure consumers receive competent and ethical mortgage brokering services from licensed mortgage agents in accordance with the Act. Consumers rely on licensees to understand their circumstances and to make informed recommendations about important financial decisions related to the purchase and refinancing of properties.


53. The Director believes that Hooker’s pattern of dealing in mortgages outside his brokerage, receiving fees outside the brokerage, and providing false statements on two renewal applications brings into question his suitability to work independently as a mortgage agent.


54. This past conduct provides reasonable grounds for belief that, without additional supervision, Hooker may not process mortgage transactions as required under the Act and regulations, and in accordance with the law.


55. The Director believes that although Hooker’s past conduct gives rise to suitability concerns, given that he was forthright in the investigation and that his conduct was limited to one brokerage, and the overall sanction being proposed, the Director is of the opinion that these concerns can be mitigated by a heightened supervision condition on Hooker’s mortgage agent licence for the next two years and properly balances Hooker’s ability to act in accordance with the law and the public interest.



V. GROUNDS FOR IMPOSING ADMINISTRATIVE PENALTIES

56. The Director is satisfied that imposing administrative penalties on Hooker 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.
    
    


57. The Director is satisfied that six administrative penalties in the total amount of $34,000 should be imposed on Hooker:
    
    
    1. two administrative penalties of $6,000 each, totalling $12,000, for receiving remuneration from a person or entity other than his brokerage for the MP First Mortgage and CH Mortgage, contrary to subsection 4(1) of Ontario Regulation 187/08;
    
    
    2. one administrative penalty of $8,000 for receiving remuneration from a person or entity other than his brokerage for the TD Mortgage, contrary to subsection 4(1) of Ontario Regulation 187/08;
    
    
    3. one administrative penalty of $10,000 for receiving remuneration from a person or entity other than his brokerage for the J Mortgage, contrary to subsection 4(1) of Ontario Regulation 187/08;
    
    
    4. two administrative penalties of $2,000 each, totalling $4,000, for the provision of false or misleading information to the Chief Executive Officer, contrary to sections 45(1) and 45(2) of the Act.
    
    


58. In determining the amount of 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.
    
    


59. In respect of the first criterion, the Director is satisfied that Hooker’s actions were intentional as he stated that he took the fees outside the brokerage because he did not think Cashin would pay him for the transactions. The Director has also considered the repetitive nature of Hooker’s contraventions over four separate transactions.


60. Hooker intentionally failed to disclose information relating to the mortgages he was dealing in to CMI. He purposely negotiated and accepted remuneration for four mortgage transactions outside the brokerage in order to increase his compensation by concealing these transactions from his brokerage.


61. Hooker actively worked with Benzaquen to source lenders and arrange mortgages for clients that were not processed through his brokerage.


62. Additionally, Hooker knew that the answers on his 2022 and 2023 renewal applications were false and intentionally provided false information to FSRA.


63. In respect of the second criterion, the Director is of the belief that Hooker created a risk or potential risk of harm to others by working outside the brokerage.


64. The four transactions outside the brokerage were not covered by CMI’s Independent Contractor’s E&O Insurance as stipulated in the Agreement with CMI, which is a critical regulatory requirement in place to protect the public.


65. Also, requiring that all fees flow through a brokerage is key to ensuring that all fees charged are compliant with the Act and regulations. Hooker’s breach of this requirement could result in the clients he worked with paying inflated fees, which could increase their cost of borrowing and their risk of default.


66. In respect of the third criterion, the Director is unaware of any efforts by Hooker to mitigate any loss or take other remedial action.


67. In respect of the fourth criterion, as a result of Hooker’s failure to comply with the Act, he received approximately $21,425 in remuneration for four mortgage transactions that did not go through CMI.


68. In respect of the fifth criterion, the Director is not aware of any other contraventions or failures to comply in the preceding five years by Hooker.


69. The Director is satisfied, having regarded all the circumstances, that the proposed amount of the administrative penalties is not punitive in nature as required by section 3(2) of Ontario Regulation 192/08, and the amount is consistent with one or both purposes of section 38 of the Act.


70. Such further and other reasons that may come to the attention of the Director.

DATED at Toronto, Ontario, September 25, 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.