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 Rahman Mohammed.

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

TO: Rahman Mohammed

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 the following conditions on the mortgage broker licence of Rahman Mohammed (“Mohammed”):

Restricting Mohammed to a mortgage agent licence, Level 1, under the Act, for a period of five (5) years; and
Requiring Mohammed to successfully complete the Private Mortgage Course and an ethics course from any accredited mortgage education provider within one year.

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 two (2) administrative penalties in the total amount of $20,000 on Mohammed:

An administrative penalty of $10,000 for contravening section 3.1 of Ontario Regulation 187/08 by doing or omitting to do anything, in circumstances where he ought to know that by acting, doing the thing or omitting to do the thing, he is being used to facilitate dishonesty, fraud, crime or illegal conduct; and
An administrative penalty of $10,000 for contravening section 3 of Ontario Regulation 187/08 by causing his mortgage brokerage to fail to meet its requirement under section 24(1) of Ontario Regulation 188/08 to take reasonable steps to ensure a mortgage is suitable for a borrower.

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

These are reasons for the proposal by the Director to:

Impose conditions on the mortgage broker licence of Rahman Mohammed (“Mohammed”); and
Impose two administrative penalties in the total amount of $20,000 on Mohammed.

II. BACKGROUND

A. FSRA Licensing History

Mohammed is currently a licensed mortgage broker (licence # M16001119) under the Act and is the Principal Broker of Wisheskept Mortgage Group Inc. (“Wisheskept”), a mortgage brokerage under the Act (licence # 13196).
Mohammed has been licensed under the Act since May 11, 2016, and has been Principal Broker of Wisheskept since January 21, 2020.
Mohammed is the sole director of Wisheskept. Wisheskept currently has approximately 20 active mortgage agents and brokers.
On August 11, 2021, Mohammed received a Caution Letter for the late filing of Wisheskept’s 2020 Annual Information Return.

B. Misconduct while Dealing in Mortgages

Overview

On or about October 18, 2022, the Financial Services Regulatory Authority of Ontario (“FSRA”) received a complaint from two private lenders (the “Complainants”) regarding Mohammed’s conduct while acting on their behalf regarding various mortgage transactions.
The Complainants alleged Mohammed induced them to, among other things, lend funds to borrowers knowing that the market value of the properties used to secure the mortgages was less than the amount of the mortgages registered on title, knowing the loan to value for one property was negative, lend funds at a high interest rate, and provided the Complainants with dated appraisals for properties they funded as mortgage lenders.

The MJA Mortgage

In or around November 2020, Mohammed arranged a mortgage for borrower MJA (the “MJA Mortgage”). The Complainants were the lenders.
Iftikhar Qadeer (“Qadeer”), an unlicensed person, acted as a referral agent and intermediary for the MJA Mortgage, facilitating the transaction by passing mortgage related documents between the parties involved.
MJA relied heavily on her lawyer to conduct the MJA Mortgage transaction on her behalf.
Mohammed created documents for the MJA Mortgage through Wisheskept for a $100,000 mortgage with an interest rate of 10% per month on a two-month term. This mortgage also contained a consultant fee of $15,000 or 15% of the total mortgage amount. The Cost of Borrowing (APR) was 141% ($23,516.66), or 231% ($38,516.66) with the consultant’s fee included. Therefore, MJA only received approximately $61,483.34 of the $100,000 MJA Mortgage.
The MJA Mortgage was secured against two of MJA’s properties in Haliburton and Toronto, Ontario. However, according to appraisals, the Haliburton property had sufficient equity on its own.
MJA did not know that Mohammed was her mortgage broker. Mohammed conducted this transaction for MJA without ever meeting or speaking to her directly. Mohammed relied on the lawyers for the transaction to confirm MJA’s identity and to obtain MJA’s information for her mortgage application.
Mohammed created a Filogix file for the MJA Mortgage consisting of a “Disclosure to Borrower”, “Mortgage Application”, “Credit Bureau Consent and Email Authorization” and “Credit Bureau Report”. These documents contained alterations, falsified information, and forged signatures for MJA.
MJA defaulted on repaying the MJA Mortgage and the Complainants have sued MJA to recover these funds.

C. Facilitation of Unlicensed Mortgage Agent/Broker Activity

As stated above, Qadeer is not licensed under the Act and acted as a referral agent and intermediary for the MJA Mortgage.
Qadeer has referred a number of mortgage transactions to Mohammed, usually making between $500 and $1000 per deal.
Emails and mortgage related documents for the MJA Mortgage were sent between Mohammed and Qadeer to Qadeer’s email address of “mortgagesmadeeasy2016@gmail.com.”
Qadeer’s email address made it appear that he represented the Ottawa-Carleton Mortgage Inc. o/a Mortgages Made Easy brokerage (licence #10419), but he has never been licensed as a mortgage agent or broker.

D. Failure to take Reasonable Steps to Ensure Suitability

Mohammed, as Principal Broker of Wisheskept, caused the brokerage to fail in its duty to ensure the MJA Mortgage was suitable for MJA given her personal circumstances and market conditions.
Policies and procedures at Wisheskept, in force at the relevant time, outline that an agent or broker owes a duty of care to their clients which includes acting in the client’s best interest. They also require an agent or broker to take reasonable steps to ensure a mortgage is suitable for the borrower.
Mohammed arranged the MJA Mortgage with a private lender without ever having spoken to or meeting MJA. The MJA Mortgage terms included a high rate of borrowing on a two-month term and a consultant fee of $15,000 on a $100,000 mortgage. The MJA Mortgage was secured against two properties when one property alone had enough equity to secure a mortgage. Mohammed could not demonstrate that he took any steps to understand MJA’s circumstances or ensure that the MJA Mortgage was suitable for her.

III. CONTRAVENTIONS OR FAILURES TO COMPLY WITH THE ACT

A. Failure to Verify Borrower Identity

Section 11(2) of Ontario Regulation 188/08 under the Act requires a brokerage that wishes to present a mortgage or renewal to a lender for consideration, to take reasonable steps to verify the identity of each borrower.
Section 3 of Ontario Regulation 187/08 under the Act prohibits a mortgage broker from doing or omitting to do anything that might reasonably be expected to result in the brokerage on whose behalf he is authorized to deal or trade in mortgages to contravene or fail to comply with a requirement under the Act.
The Director is satisfied that Mohammed, on behalf of Wisheskept, failed to take sufficient steps to verify the identity borrower MJA, contrary to section 11(2) of Ontario Regulation 188/08. Mohammed never met or spoke to MJA and relied on others to confirm her identity. Further, MJA had no idea that Mohammed was her mortgage broker.
By failing to take steps to verify MJA’s identity, Mohammed contravened section 3 of Ontario Regulation 187/08.

B. Failure to Ensure Suitability

Section 24(1) of Ontario Regulation 188/08 under the Act requires a brokerage to take reasonable steps to ensure that any mortgage that it presents for the consideration of a borrower is suitable for the borrower having regard to the needs and circumstances of the borrower.
Section 3 of Ontario Regulation 187/08 under the Act prohibits a mortgage broker from doing or omitting to do anything that might reasonably be expected to result in the brokerage on whose behalf he is authorized to deal or trade in mortgages to contravene or fail to comply with a requirement under the Act.
The Director is satisfied that Mohammed, on behalf of Wisheskept, failed to take reasonable steps to ensure that the MJA Mortgage was suitable for her as outlined in Section II.D. above, contrary to section 24(1) of Ontario Regulation 188/08.
By failing to take steps to ensure the MJA Mortgage was suitable for MJA, Mohammed contravened section 3 of Ontario Regulation 187/08.

C. Facilitating Dishonesty, Fraud, Crime or Illegal Conduct

Section 3.1 of Ontario Regulation 187/08 provides that licensees 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, they are being used to facilitate dishonesty, fraud, crime or illegal conduct.
Section 3 of Ontario Regulation 187/08 under the Act prohibits a mortgage broker from doing or omitting to do anything that might reasonably be expected to result in the brokerage on whose behalf he is authorized to deal or trade in mortgages to contravene or fail to comply with a requirement under the Act.
The Director is satisfied that Mohammed contravened section 3.1 of Ontario Regulation 187/08 by facilitating Qadeer’s dishonesty and illegal conduct of dealing in mortgages without a licence. Mohammed did not meet with MJA himself and relied on Qadeer to pass mortgage-related documents and information to MJA. At the very least, Mohammed failed to exercise due diligence to ensure Qadeer was properly licensed in the mortgage sector.

D. Failure to Carry Out Principal Broker Duties

Section 2(1) of Ontario Regulation 410/07 states that the principal broker of a brokerage shall take reasonable steps to ensure that the brokerage, and each broker and agent authorized to deal or trade in mortgages on its behalf, complies with every requirement established under the Act.
In light of sections III.A. to III.C. of this Notice of Proposal, the Director is satisfied that Mohammed, as Principal Broker and sole director of Wisheskept, contravened section 2(1) of Ontario Regulation 410/07 by failing to take reasonable steps to ensure that his brokerage and himself complied with all requirements under the Act by failing to identify MJA, failing to take reasonable steps to ensure the mortgage was suitable for her, and facilitating a non-licensee to deal in mortgages.

IV. GROUNDS TO IMPOSE CONDITIONS ON LICENCE

Section 15(1) of the Act states that the Chief Executive Officer may amend a licence at any time.
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 and issue a Notice of Proposal.
Section 10 of Ontario Regulation 409/07 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.
The Mortgage Broker Regulators’ Council of Canada (MBRCC) Code of Conduct for the Mortgage Brokering Sector (Code of Conduct) has been adopted by FSRA into its supervisory framework and can also be used to assess suitability with regard to the prescribed factors from section 10 of Ontario Regulation 409/07. The Code of Conduct has ten principles that outline professional conduct that Canadians can expect when working with Mortgage Brokers. The ten principles listed are: Compliance / Outcomes, Accountability, Honesty, Competence, Suitability, Disclosure, Management of Conflicts of Interest, Security and Confidentiality, Stewardship, and Co-operation with Regulator.
FSRA assesses suitability to ensure consumers receive competent and ethical mortgage brokering services from licensed mortgage brokers 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.
The Director reasonably believes that Mohammed’s actions with respect to the MJA Mortgage, i.e. failing to ensure mortgages were suitable for the borrower; failing to verify borrower identity; facilitating unlicensed conduct; and committing actions which caused his brokerage to contravene the Act, brings into question his suitability to work independently as a mortgage broker and to supervise other licensees under the Act.
The seriousness of Mohammed’s misconduct is compounded by the fact that he is the principal broker of Wisheskept and had a heightened responsibility regarding the regulatory requirements of the Act and its regulations.
The Director believes that although Mohammed’s past conduct gives rise to suitability concerns, given that he was forthright in the investigation and that his conduct was limited to one transaction, and the overall sanction being proposed, the Director is of the opinion that these concerns can be mitigated by placing conditions on Mohammed’s licence.

V. GROUNDS FOR IMPOSING ADMINISTRATIVE PENALTIES

The Director is satisfied that imposing administrative penalties on Mohammed under section 39 of the Act will satisfy 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 two administrative penalties in the total amount of $20,000 should be imposed on Rahman Mohammed as follows:
1. An administrative penalty of $10,000 for contravening section 3.1 of Ontario Regulation 187/08 by doing or omitting to do anything, in circumstances where he ought to know that by acting, doing the thing or omitting to do the thing, he is being used to facilitate dishonesty, fraud, crime or illegal conduct;
2. An administrative penalty of $10,000 for contravening section 3 of Ontario Regulation 187/08 by causing his mortgage brokerage to fail its requirement to ensure a mortgage is suitable for a borrower.
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.
In respect of the first criterion, the Director is satisfied that Mohammed’s actions were intentional. Mohammed failed to speak to or meet MJA to determine whether the mortgage he was arranging for her was suitable given her personal circumstances and current market conditions. In addition, Mohammed failed to properly verify MJA’s identity and instead relied on the assurances of others with respect to same. In fact, MJA did not even know Mohammed was her mortgage broker.
Mohammed also created mortgage commitments with a high interest rate, short term, and extra fees in an effort to force more money from MJA. The interest rate was required to be paid upfront on a two-month term and when the consultant’s fee was added, MJA only received approximately $61,483.34 of a $100,000 mortgage.
Lastly, Mohammed’s actions were also reckless as he ought to have known that Qadeer was not licensed to deal in mortgages. At the very least, Mohammed failed to exercise due diligence to ensure Qadeer was properly licensed when he allowed him to assist with the MJA Mortgage transaction.
In respect of the second criterion, the Director believes that Mohammed created actual consumer harm for MJA when he arranged a mortgage for her facilitated by an unlicensed person, failed to meet or speak to her, or take any steps to assess her individual needs and current market conditions to determine whether the MJA Mortgage was suitable for her.
In respect of the third criterion, the Director is unaware of any efforts by Mohammed to mitigate any loss or take other remedial action.
In respect of the fourth criterion, it is reasonable to infer that Mohammed anticipated a fee being paid at the time of his conduct.
In respect of the fifth criterion, the Director is not aware of 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 Mohammed.
The Director is satisfied, having regard to 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.
Such further and other reasons as may come to the attention of the Director.

DATED at Toronto, Ontario, October 11, 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.

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