Last March the Canadian Securities Administrators released its Second Notice and Request for Comment in respect to the Proposed Amendments to the registration requirements, exemptions and ongoing registrant obligations relating to syndicated mortgages.
The March 2018 Proposal contemplated that the proposed amendments to the mortgage exemptions would have a staggered implementation with the amendment to the registration exemption coming into effect 12 months after the amendment to the prospectus exemption.
This has been changed. The Proposed Amendments will now come into effect on December 31, 2019. This caught mortgage syndicators by surprise – if they were not registered by then, then they are out of business!
Mortgage syndication has for many been a rather informal undertaking. The syndicator will have a deal in hand, call up a few known investors, chit-chat about the deal and have a signed syndicate agreement in hand by day’s end. Until July of last year, mortgage syndicators and their clients were saved the rather exhausting know your client/know your product (“KYC/KYP”) duties the rest of us in the investment community are required to undertake for the protection of investors. What is ordinary for dealers like Fundscraper and its clients, is often seen as intrusive and unnecessary by traditional mortgage syndicators and their clients. The regulatory landscape has changed for mortgage syndication and now syndicators have to catch up.
First FSRA (then known as “FSCO”) introduced the Form 3 disclosure regime for syndicating non-qualifying mortgages. The KYC protocol is rigorous and the syndicator is now on the hook for making critical suitability assessments they have never been trained to do. The OSC then stepped forward as the new overseer of the market and introduced under its offering memorandum exemption additional prescribed information syndicators have to provide if now relying on that exemption for their syndications. Syndicators, understandably, have had a bad year.
At Fundscraper we’re registered with FSCO as a mortgage brokerage and with the OSC as an EMD in the Province of Ontario (as well as British Columbia, Alberta, Quebec and Prince Edward Island). We have spent the last two and half years perfecting our online compliance procedures with the full expectation of the changes happening today in the mortgage syndication market. We discovered that by creating an interactive online environment we can greatly reduce the costs of compliance while delivering best-in-practice solutions. Once we qualify investors, we apply computer generated algorithms to their investment decisions to assess suitability of investment and flag common investment risks. A qualified investor can begin our process and complete a subscription within twenty minutes from their tablet and desktop and, soon, their phone.