FSRA seeks Stakeholder Advisory committee members: deadline Oct. 25

The Financial Services Regulatory Authority (“FSRA”) has announced that it is seeking members for its Stakeholder Advisory committees. Applications for committee membership are due on Oct. 25, 2019.

Members of the committee who come from the industry will not be compensated for time, travel or expenses. If a consumer or member of the public is named to the committee, they will receive a travel reimbursement.

Per the recent FSRA announcement of the committee terms of reference for members of the mortgage brokers and agents committee:

Stakeholder nominees to the Mortgage Brokering SAC should be senior members of their respective organizations or professions who can represent their organization or profession on relevant issues. See Appendix 1 for specific experience FSRA is seeking to have represented through the stakeholder members of the Mortgage Brokering SAC.   

Appendix 1 reads:

FSRA is seeking industry members that have direct experience in one or more of the following functional areas within the Mortgage Brokering sector:

    • Principal Broker
    • Administrator
    • Risk Management & Compliance
    • Private lending
    • Securitization
    • Trading

Industry members will be selected with an emphasis on ensuring adequate diversity by geography and organization size.

In addition to direct industry representation, FSRA will be seeking representatives from the following industry associations:

    • Mortgage Professionals Canada (MPC)
    • Canadian Mortgage Brokers Association (CMBA)
    • Appraisal Institute of Canada 

A link to the application is here.

For more information, please see the FSRA newsletter:

 

ONMICA to meet Oct. 8

The next meeting of the members of ONMICA will take place on Oct. 8, 2019, from 11:30 am to 1:30 pm.

The meeting will be held in Toronto and a working lunch will be provided. Space is limited.

NOTE: NEW LOCATION. Please RSVP to info@onmica.com to confirm your attendance. The location will be provided upon receipt of your RSVP.

This meeting is for members only. To inquire about membership, please visit the Membership Information page.

Fasken publishes update re: regulatory burden reduction for investment fund managers that manage mutual fund trusts

On August 14, 2019, Toronto law firm Fasken published an investment management bulletin regarding recent OSC updates to rules for corporations that can manage mutual fund trusts.

The bulletin states:

Investment Management Bulletin

On June 11, 2019, the Ontario Securities Commission (the “OSC”) published Revised Approval 81-901 Mutual Fund Trusts: Approval of Trustees Under Clause 213(3)(b) of the Loan and Trust Corporations Act (PDF) (the “2019 Approval”), which grants approval to any body corporate that is an investment fund manager to act as trustee of any mutual fund trust in Ontario that it manages.

In Ontario, clause 213(2)(b) of the Loan and Trust Corporations Act (Ontario) (the “LTCA”) provides that no body corporate, other than a registered trust company under the LTCA, shall act as trustee in respect of any service it provides to the public. However, this restriction does not apply to a body corporate that manages a mutual fund trust that has been authorized to act as trustee by the OSC.

In 1997, the OSC published Approval 81-901 Mutual Fund Trusts: Approval of Trustees Under Clause 213(3)(b) of the Loan and Trust Corporations Act (PDF) (the “1997 Approval”) pursuant to which any body corporate that manages a mutual fund trust is authorized to act as trustee of a mutual fund trust in Ontario if (i) the body corporate is the manager of such trust; and (ii) the securities of the mutual fund trust are distributed by means of a prospectus.

Investment fund managers who wanted to act as trustee for their pooled funds could also request the OSC’s approval.  Such approval was often granted by the OSC provided that investment fund managers complied with various conditions including requirements to have the fund’s assets held by a qualified custodian.  Such requirements were integrated on June 4, 2018 in National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations(which in the province of Québec is a regulation) explaining in part why the OSC published the 2019 Approval.

The 2019 Approval replaces the 1997 Approval, which means that investment fund managers no longer have to seek the OSC’s approval to act as trustee for their pooled funds established as trusts governed by the LTCA.

The situation is different in Québec.  Section 1274 of the Civil Code of Québec, (the “Civil Code”) provides that any natural person (individual) having the full exercise of his civil rights, and any legal person (e.g. a corporation) authorized by law, may act as trustee.  The Trust Companies and Saving Companies Act (Québec) (the “TCSCA”) provides that no body corporate, other than an authorized trust corporation under the TCSCA shall carry trust company activities in Québec.  Legal persons that want to act as trustee for an investment fund can also seek the authorization of the Autorité des marchés financiers (the “AMF”) under section 109.6 of the Securities Act (Québec) (the “QSA”) and could previously, under section 7.1 of the QSA.  However, the AMF has only used such power twice and not once since the Norbourg scandal in 2006.

As a result of the foregoing, investment fund managers located in Québec, who preferred to avoid the additional cost of retaining a licensed trust company to act as trustee of their pooled funds, often chose to create them under Ontario law and sought from the OSC the authorization to also act as trustee of their funds.  The 2019 Approval may encourage more investment fund managers to do the same since they can now act as trustee without having to go through the additional step of seeking approval from the OSC, therefore reducing their regulatory burden.

Content retrieved August 15, 2019. Please contact the source for questions and information.

New Report Examines Impacts of Mortgage Stress Tests on Canadian Economy and Housing Market

A new report authored by Mortgage Professionals Canada (MPC) Chief Economist Will Dunning conducts a deep dive on the impacts of the recent introduction of a stress test on both insured and uninsured mortgages in Canada. The report, entitled The False Binary, notes that commentary from government officials is often about whether there should be stress testing at all. In fact, there are no serious voices calling for the elimination of the stress tests, and there are many voices saying that there is a need for adjustments to the policies. This report is a plea to the federal government to engage in discussion about the defects within the policies and to consider changes that will limit the worst consequences.

The report outlines how the current stress tests have contributed to a sharp decline in housing activity in Canada. Impacts within resale markets have gotten considerable attention. But, even more importantly, construction of new homes and home renovations are now in the process of turning sharply downwards.

“Each housing start that is lost has an economic impact that is 10 times greater than for each lost resale transaction”, explained Mr. Dunning. “The adjustments for new construction occur quite gradually. The economic impacts have barely begun, will develop slowly, and won’t be fully experienced until the second half of 2021.”

The current stress tests are blunt instruments that are causing undue pressure to several regional economies across Canada, and as a result the economy as a whole. They are also directly impacting the prospects for first time home buyers and others looking to enter the housing market and build equity.

Left unchecked, the current framework could contribute significantly to the development of recessions in some economic regions.

“For some time, our association and others have emphasized that the major defect within the stress tests is that they fail to consider the income growth that will be experienced by the mortgage borrowers,” said Paul Taylor, President and CEO of Mortgage Professionals Canada. “At 2 percentage points above the actual contracted rates, the stress tests on insured and uninsured mortgages are causing serious and undue negative impacts to the Canadian economy and to the housing market. We advocate for prudent amendments to the current framework. This includes a stress test of 0.75 percentage points to account for higher income and reduced mortgage principal.”