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, 16, 21, 38 and 39;

AND IN THE MATTER OF John Chehade, Rhett McClenaghan, and 2078637 Ontario Inc

NOTICE OF PROPOSAL TO REFUSE TO RENEW LICENSE,
AMEND LICENCE, and
IMPOSE ADMINISTRATIVE PENALTIES

TO: John (Johnny) Chehade

AND TO: Rhett Richard (Richard Rhett) McClenaghan

AND TO:
2078637 Ontario Inc.
41945 Ron McNeil Line
St. Thomas, Ontario N5P 3T1

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 level 2 licence issued to John (Johnny) Chehade.

AND TAKE NOTICE THAT pursuant to sections 15 and 21 of the Act, and by delegated authority from the Chief Executive Officer, the Director is proposing to amend the mortgage broker licence issued to Rhett Richard (Richard Rhett) McClenaghan to impose the condition that Rhett (Richard Rhett) McClenaghan be restricted to a mortgage agent level 2 for a period of two years.

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 administrative penalties on John (Johnny) Chehade in the total amount of $25,000, as follows:

$5,000 for giving false or deceptive information or document when dealing in mortgages in Ontario, contrary to subsection 43(2) of the Act;
$5,000 for acting in circumstances where he ought to have known that by acting he was being used by a borrower and a lender to facilitate dishonesty, fraud, crime or illegal conduct, contrary to section 3.1 of Ontario Regulation 187/08;
$5,000 for failing to take reasonable steps to ensure that mortgages he presented to a borrower were suitable for them, causing his authorizing brokerage to contravene subsection 24(1) of Ontario Regulation 188/08, contrary to section 3 of Ontario Regulation 187/08;
$5,000 for directly receiving a fee or other remuneration for dealing or trading in mortgages from a person or entity other than the brokerage on whose behalf he is authorized to deal or trade in mortgages, contrary to subsection 4(1) of Ontario Regulation 187/08; and
$5,000 for 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, contrary to section 45(1) of the Act;

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 administrative penalties on Rhett Richard (Richard Rhett) McClenaghan in the total amount of $6,000, as follows:

$3,000 for assisting in giving false or deceptive information or document when dealing in mortgages in Ontario, contrary to subsection 43(2) of the Act; and
$3,000 for acting in circumstances where he ought to have known that by acting he was being used by a borrower and a lender to facilitate dishonesty, fraud, crime or illegal conduct, contrary to section 3.1 of Ontario Regulation 187/08;

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 an administrative penalty on 2078637 Ontario Inc. in the amount of $30,000 for carrying on business as a mortgage lender in Ontario without a license, contrary to section 4(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.

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:
1. Refuse to renew the mortgage agent level 2 licence issued to John (Johnny) Chehade (“Chehade”);
2. Amend the mortgage broker license issued to Rhett Richard (Richard Rhett) McClenaghan (“McClenaghan”) to impose the condition that McClenaghan be restricted to a mortgage agent level 2 for a period of two years;
3. Impose five administrative penalties in the total amount of $25,000 on Chehade;
4. Impose two administrative penalties in the total amount of $6,000 on McClenaghan; and
5. Impose one administrative penalty in the amount of $30,000 on 2078637 Ontario Inc., operating as Forest City Living (“FCL”).

II. BACKGROUND

A. Parties

Chehade has been licensed as a mortgage agent level 2 since June 14, 2021 (license #M21002519). His license expired March 31, 2025. Chehade has applied to renew his license.
McClenaghan has been licensed as a mortgage broker since June 9, 2008 (license #M08003293). His license is scheduled to expire on March 31, 2026.
Both Chehade and McClenaghan are licensed through Forest City Funding Inc., operating as Dominion Lending Centres FC Funding (“FCF”).
During the relevant time, McClenaghan was Chehade’s supervisor at FCF.
McClenaghan and his wife are the sole directors of FCL.
FCL has never been licensed under the Act.

B. Dealings with the Borrowers

(i) The First Mortgage

“AT” and “MA” are a married couple. “RT” is AT’s grandmother (collectively, AT, MA and RT are referred to as the “Borrowers”).
The Borrowers owned a property in London, Ontario (the “Property”). In March 2022, the Borrowers had a mortgage on the Property with a major bank (the “Bank”) that charged interest of 2.5% per year. The Borrowers made monthly payments of approximately $2,700 on this mortgage.
The Borrowers wanted a $60,000 loan via their line of credit with the Bank. However, the Bank refused to extend this loan.
Chehade met with the Borrowers and recommended that they break their mortgage with the Bank, pay the approximately $20,000 penalty for doing so, and refinance with a “B” lender (the “B Lender”).
However, the B Lender required that the Borrowers repay approximately $40,000 in unsecured debt prior to advancing funds. Chehade suggested that his supervisor, McClenaghan, could lend the Borrowers this $40,000.
The B Lender did not allow second mortgages without its approval, and required that if the $40,000 came from a gift that it be non-repayable. To get around these restrictions, Chehade advised the Borrowers to sign a false “gift letter” stating that the $40,000 in funding was a non-repayable gift from AT’s father (the “Gift Letter”).
Chehade submitted this false Gift Letter to the B Lender, knowing that the $40,000 was in reality a loan.
FCL then provided $40,000 to AT’s father, who provided the funds to AT. The $40,000 loan from FCL was secured by a promissory note dated April 19, 2022, that charged 14% interest.
The $1,000,000 one-year mortgage on the Property from the B Lender was registered on May 2, 2022 (the “First Mortgage”). The interest rate for the First Mortgage was 3.04% per year.
FCF received a brokerage fee of $4,250 for arranging the First Mortgage, of which Chehade received $2,721.37 and McClenaghan received $425.00. Chehade also received a “finder’s fee” of $5,000 and a “volume bonus” of $1,500.
Chehade failed to conduct a suitability analysis in advance of arranging the First Mortgage. Instead, he had AT sign a one-page “Suitability Form” on May 3, 2022 – the day after the mortgage was registered.

(ii) The FCL Second Mortgage

FCL subsequently extended an additional $40,000 loan to the Borrowers to allow them to make a deposit on a new build property. This loan, the initial $40,000 loan, and an additional loan were secured via a one-year interest-only $165,000 second mortgage on the Property from FCL that was registered on September 9, 2022 (the “FCL Second Mortgage”).
The FCL Second Mortgage charged an interest rate of 14% (a total of $23,100 for one year). FCL also received a “lender fee” of $5,500.
Chehade arranged the FCL Second Mortgage outside of his brokerage. FCF has no records of the FCL Second Mortgage. He received a fee of $2,400 directly from the Borrowers for arranging the FCL Second Mortgage.

(iii) The Renewal of the First Mortgage

After one year, the First Mortgage came due. AT informed the B Lender of the existence of the FCL Second Mortgage. The B Lender agreed to renew its mortgage but increased the interest rate to 7.19%. Chehade arranged this renewal.
FCF received a brokerage fee of $1,962.25 for renewing the First Mortgage, of which Chehade received $1,409.88 and McClenaghan received $196.22.

(iv) The New Second Mortgage

Around the same time, the FCL Second Mortgage came due. To repay it, Chehade arranged a new one-year second mortgage on the Property of $280,000 from a different B lender that charged interest of 12.75% per year (the “New Second Mortgage”). The New Second Mortgage was registered on August 4, 2023.
FCF received a brokerage fee of $5,600 for arranging the New Second Mortgage, of which Chehade received $4,023.60 and McClenaghan received $560.00.
Chehade failed to conduct any form of suitability analysis for the Borrowers in respect of the New Second Mortgage.
As a result of the increase in the interest rate from the B Lender and the payments for the New Second Mortgage, the Borrowers’ monthly payments increased from approximately $2,700 with the Bank to approximately $10,000.
The Borrowers were unable to make this monthly payment and were forced to sell the Property and abandon their purchase of the new build property.

C. Chehade’s License Renewal

After receiving a complaint from the Borrowers in January of 2024, FSRA contacted FCF’s Principal Broker with a series of questions. FCF’s Principal Broker then contacted Chehade and McClenaghan, informed them of FSRA’s investigation, and asked them to answer the questions.
Chehade provided a response to FCF’s Principal Broker in February of 2024.
Chehade applied to renew his license on March 24, 2025. In this application, Chehade submitted a response of “No” to the question:

“… are you the holder of such a license and currently the subject of an investigation or upcoming disciplinary proceeding that may result in a penalty being imposed?”

III. CONTRAVENTIONS OR FAILURES TO COMPLY WITH THE ACT

A. False or Deceptive Information

Subsection 43(2) of the Act states that no mortgage broker or 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.
Chehade advised the Borrowers to sign the false Gift Letter and submitted it to the B Lender. McClenaghan was aware of and assisted Chehade in doing so by advancing the funds that were the subject of the Gift Letter through FCL.
Accordingly, the Director is satisfied that Chehade and McClenaghan breached subsection 43(2) of the Act.

B. Dishonesty, Fraud, etc.

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.
By agreeing to submit the false Gift Letter to the B Lender, the Borrowers engaged in dishonesty. Chehade and McClenaghan assisted the Borrowers in doing so.
In addition, Chehade and McClenaghan knew or ought to have known that FCL was not licensed, yet they acted outside their authorizing brokerage to facilitate FCL’s unlicensed lending, without an exemption.
Accordingly, the Director is satisfied that Chehade and McClenaghan breached section 3.1 of Ontario Regulation 187/08.

C. Failure to Take Reasonable Steps to Ensure Suitability

Subsection 24(1) of Ontario Regulation 188/08 states that a brokerage shall take reasonable steps to ensure that any mortgage or investment in a 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 states that a mortgage broker or agent shall not do or omit to do anything that might reasonably be expected to result in the brokerage on whose behalf he or she is authorized to deal or trade in mortgages to contravene or fail to comply with a requirement established under the Act.
Chehade, as a mortgage agent authorized by FCF, failed to take any steps in advance of the issuance of the First Mortgage or the New Second Mortgage to ensure that they were suitable to the Borrowers’ needs and circumstances.
These mortgages raised several concerns about whether they were suitable for the Borrowers, which Chehade failed to address.
The Director is therefore satisfied that Chehade contravened section 3 of Ontario Regulation 187/08 by failing to take reasonable steps to ensure that mortgages he presented to the Borrowers were suitable for them, causing FCF to contravene subsection 24(1) of Ontario Regulation 188/08.

D. Remuneration Outside of the Brokerage

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.
Chehade arranged the FCL Second Mortgage outside of his brokerage, and received $2,400 in fees directly from the Borrowers for doing so.
Accordingly, the Director is satisfied that Chehade breached subsection 4(1) of the Act.

E. Unlicensed Mortgage Lending

Section 4(1) of the Act defines a mortgage lender as a person or entity who lends money on the security of real property.
Subsection 4(2) of the Act states that no person or entity shall carry on business as a mortgage lender in Ontario unless he, she or it has a brokerage licence or is exempted from the requirement to have such a licence.
FCL advanced funds to the Borrowers, which were subsequently secured by mortgages registered on the title of the Property. Thus, FCL carried on business as a mortgage lender in Ontario. FCL is not licensed as a mortgage brokerage and is not exempt from the requirement to be so licensed.
FCL did not lend through a mortgage brokerage or a person or entity who is exempted from the requirement to have a brokerage license.
Accordingly, the Director is satisfied that FCL contravened subsection 4(2) of the Act by lending funds to the Borrowers on the security of real property while not holding a brokerage license or being exempted from the requirement to have such a licence.

F. False or Misleading Information on Licence Renewal Application

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.
Chehade knew he was under investigation by FSRA in February of 2024 and yet failed to disclose this investigation on his subsequent license renewal application.
The Director is satisfied that Chehade contravened section 45(1) of the Act by providing false information on his license renewal application dated March 24, 2025.

IV. GROUNDS FOR REFUSAL TO RENEW LICENCE

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.
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.
The Director is satisfied that Chehade’s past conduct with respect to the Borrowers affords reasonable grounds for belief that he will not deal or trade in mortgages in accordance with the law and with integrity and honesty.
The Director has reasonable grounds for the belief that Chehade has demonstrated unwillingness to operate in the mortgage industry in accordance with the law, particularly given his breaches of subsection 43(2) of the Act, section 3.1 of Ontario Regulation 187/08, section 3 of Ontario Regulation 187/08, subsection 4(1) of the Act, and subsection 45(1) of the Act.
The Director therefore reasonably believes that Chehade is not suitable for licensing having regard to the circumstances prescribed in paragraph 1 of section 10 of Ontario Regulation. 409/07.
Furthermore, Chehade made false statements on his license renewal application dated March 24, 2025. The Director therefore reasonably believes that he is not suitable for licensing having regard to the circumstances prescribed in paragraph 3 of section 10 of Ontario Regulation. 409/07.
Accordingly, the Director proposes to refuse to renew the mortgage agent level 2 licence issued to Chehade.

V. GROUNDS FOR IMPOSING CONDITIONS ON LICENCE

Subsection 8(3) of the Act states that a mortgage broker’s licence is subject to such conditions as may be imposed by the Chief Executive Officer or by the Tribunal.
Subsection 15(1) of the Act states that the Chief Executive Officer may amend a licence at any time.
Through his actions with Chehade and the Borrowers, McClenaghan has circumvented the regulatory regime and proven unsuitable to act as a broker. McClenaghan:
1. Assisted Chehade in having the Borrowers sign the fraudulent Gift Letter;
2. Assisted the Borrowers’ dishonesty in submitting the fraudulent Gift Letter to the B Lender; and
3. Facilitated FCL’s unlicensed lending.
For these reasons, and such further and other reasons as may come to FSRA’s attention, the Director proposes to impose the condition that McClenaghan be restricted to a mortgage agent level 2 for a period of two years.

VI. GROUNDS FOR IMPOSING ADMINISTRATIVE PENALTIES

The Director is satisfied that imposing administrative penalties on Chehade and McClenaghan 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.
The Director is satisfied that the following administrative penalties should be imposed:
1. (a) On Chehade:
  1. $5,000 for giving false or deceptive information or document when dealing in mortgages in Ontario, contrary to subsection 43(2) of the Act;
  2. $5,000 for acting in circumstances where he ought to have known that by acting he was being used by a borrower and a lender to facilitate dishonesty, fraud, crime or illegal conduct, contrary to section 3.1 of Ontario Regulation 187/08;
  3. $5,000 for failing to take reasonable steps to ensure that mortgages he presented to a borrower were suitable for them, causing FCF to contravene subsection 24(1) of Ontario Regulation 188/08, contrary to section 3 of Ontario Regulation 187/08;
  4. $5,000 for directly receiving a fee or other remuneration for dealing or trading in mortgages from a person or entity other than the brokerage on whose behalf he is authorized to deal or trade in mortgages, contrary to subsection 4(1) of Ontario Regulation 187/08; and
  5. $5,000 for 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, contrary to section 45(1) of the Act.
2. On McClenaghan:
  1. $3,000 for assisting in giving false or deceptive information or document when dealing in mortgages in Ontario, contrary to subsection 43(2) of the Act;
  2. $3,000 for acting in circumstances where he ought to have known that by acting he was being used by a borrower and a lender to facilitate dishonesty, fraud, crime or illegal conduct, contrary to section 3.1 of Ontario Regulation 187/08;
3. On FCF, $30,000 for carrying on business as a mortgage lender in Ontario without a license, contrary to section 4(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.
In respect of the first criterion, the Director is satisfied that Chehade and McClenaghan’s actions were intentional. Chehade and McClenaghan were both licensed under the Act and were aware of their obligations under the Act and the regulations. They both took numerous intentional steps in contravening the Act.
Chehade and McClenaghan knew of the provision of the First Mortgage that prohibited secondary financing and required that any “gifted” funds be non-repayable. Despite this knowledge, Chehade arranged secondary financing from FCL that violated this provision. Furthermore, Chehade and McClenaghan knew or ought to have known that FCL was unlicensed under the Act, and yet still arranged mortgage financing from FCL.
It is clear from Chehade’s late submission of the “Suitability Form” that he was aware of the requirement to take reasonable steps to ensure that the mortgages he arrange were suitable for the Borrowers, yet he failed to conduct a suitability analysis in advance of arranging the First Mortgage and the New Second Mortgage.
The Director is also satisfied that FCL’s actions were intentional. FCL deliberately lent money on the security of real property to the Borrowers.
In respect of the second criterion, the Director is satisfied that Chehade, McClenaghan, and FCL’s activities caused significant harm. As a result of their combined actions, the Borrowers paid significant fees and interest, were forced to sell the Property, and were forced to abandon their purchase of the new build.
In respect of the third criterion, the Director is unaware of any efforts by Chehade, McClenaghan, or FCL to mitigate any loss or take other remedial action.
In respect of the fourth criterion, Chehade received fees and commissions totaling $17,054.84. McClenaghan received fees and commissions totaling $1,181.22. FCL received fees and interest of $28,600.
In respect of the fifth criterion, the Director is unaware of any further contraventions or failures to comply in the preceding five years by Chehade, McClenaghan, or FCL.
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.
Such further and other reasons as may come to my attention.

DATED at Toronto, Ontario, December 4, 2025.

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 REFUSE TO RENEW LICENSE, AMEND LICENCE, and IMPOSE ADMINISTRATIVE PENALTIES