Regulator admits budget issues as the major contributor to the problem
Over several years, the Financial Services Commission of Ontario has failed to make planned checks on what it identified as risky brokers, according to documents from the regulator along with data acquired by Reuters under freedom of information laws.
As of December 31, the FSCO has yet to complete any of its 5 on-site examinations of risky mortgage brokerages planned for the fiscal year ending March 31. FSCO staff have also conducted only 4 of 50 planned desk reviews for the period.
This was just the latest in the FSCO’s series of missed milestones. The June 2018 audit showed that in the 9 months to December 31, 2017, it managed to complete only 1 out of 25 planned on-site examinations, and 8 out of 15 planned desk reviews.
The regulator admitted that budget is the major contributor to the problem, forcing it to operate “in a challenging regulatory environment with limited resources to carry out its supervisory activities.” FSCO’s 2017-18 annual report indicated that it had an annual budget of $56.5 million, and that this funding has shrunk by 40% since 2015-16.
Read more: Investors share stories about Fortress Real Developments
“This investigative process, which makes the best use of finite resources to address the most significant risks, may include, but does not require, a site visit,” the FSCO stated. “As a result, planned examinations may not take place, but other regulatory and supervisory activities would occur, based on the resources available.”
Ontario’s finance ministry assured that the FSRA is consulting with the FSCO over its planned budget and business plan for 2019-20, along with a potential fee rule that would help the organization recover some costs from its regulatory jurisdictions.
