Regulator pushes for stronger broker accountability
Ontario’s Financial Services Regulatory Authority (FSRA) has released its final practice guidance for mortgage brokers, aiming to tighten oversight and improve consumer protection across the sector.
After a public consultation earlier this year, FSRA finalized the guidance without making any changes, saying that the feedback received did not prompt adjustments. The regulator is now encouraging brokerages to adapt these practices to fit their operations, with a focus on ensuring that brokers are properly supervised and trained.
The guidance puts emphasis on the role of principal brokers, particularly those who do not own the brokerage but are responsible for overseeing the work of brokers and agents. FSRA noted concerns that in larger brokerages, principal brokers may not have enough authority to influence the overall compliance culture.
A survey conducted by FSRA in 2020 found that only half of principal brokers at brokerages with more than 100 agents had sufficient control over compliance matters.
To address this, FSRA’s guidance outlined how brokerages can better empower their principal brokers by providing them with the necessary independence and resources to oversee operations effectively.
Read more: FSRA increasing focus on mortgage suitability in 2024
Principal brokers are expected to take reasonable steps to ensure that brokers and agents are suitable for licensing and are conducting appropriate due diligence when recommending mortgages to clients.
"Promoting a strong conduct and compliance culture within Ontario mortgage brokerages is a top priority for FSRA because it shapes how firms treat their clients and greatly impacts the client experience and outcomes," Huston Loke, executive vice president of market conduct at FSRA, said in a media release. "A brokerage's culture flows from the top down, and our guidance sets out practices to make brokerages and principal brokers more effective at managing agent and broker behaviours that lead to positive consumer outcomes."
Last week, the regulator also unveiled its 2024-2025 Mortgage Brokering Supervision Plan, which focuses on overseeing how private mortgage investments are sold and managed in an economic environment marked by high construction and financing costs.
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