Guideline on designated agency

Purpose

Licensees providing mortgage services have obligations under the Mortgage Services Act (MSA), Mortgage Services Regulation (Regulation), and Mortgage Services Rules (Rules) related to establishing agency relationships with clients.

This guideline provides guidance to licensees on the use of designated agency and outlines:

• what designated agency is
• when designated agency may be used
• how to establish a designated agency relationship
• the obligations of mortgage brokerages and designated agents when operating under a designated agency model.

More information on agency relationships, including designated agency, can be found on BCFSA’s Mortgage Services Knowledge Base.

Understanding designated agency

Under the MSA, mortgage brokerages may use a designated agency model where the brokerage and the client agree that the brokerage will designate one or more mortgage brokers to provide mortgage services as designated agent(s) for the client. This differs from the default brokerage agency model, where every licensee in the brokerage owes the same duties to every brokerage client.

When designated agency is established, mortgage brokers within the same brokerage may represent clients on opposite sides of a mortgage transaction without creating a dual agency relationship. For example, one designated agent may represent a borrower while another designated agent from the same brokerage can represent a lender in the same transaction.

A designated agency relationship separates each client and their designated agent for the purposes of representation and confidentiality. Each designated agent owes duties only to their assigned client and must act in accordance with the duties set out in section 38 of the Rules. Confidential information must not be shared between designated agents without the client’s consent.

While designated agents act independently on behalf of their respective clients, the brokerage remains responsible for supervising its designated agents and ensuring compliance with applicable legislative requirements. Mortgage brokerages must establish and implement policies and procedures to ensure compliance with the MSA, Regulations, Rules, and any other applicable legislation. They are encouraged to include the brokerage’s practices regarding designated agency and maintaining confidentiality in these policies and procedures. More information on brokerage policies and procedures can be found on BCFSA’s Mortgage Services Knowledge Base.

Establishing a designated agency relationship

To establish a designated agency relationship, a brokerage must take deliberate steps to assign a specific licensee or licensees to represent a client. Designated agency must be clearly explained to each client and documented in writing. This can be done through the Disclosure of Representation to Borrowers (Form 1A) or the Disclosure of Representation to Lenders (Form 1B).

Once established, each designated agent is responsible for representing only their assigned client and fulfilling all duties owed to that client under the MSA.

By clearly defining these roles in writing and ensuring that confidential information is not shared between agents, the brokerage creates a structure that allows it to serve clients with opposing interests without creating a conflict.

Steps to establish a designated agency relationship

1. Engagement: A client seeks to engage a licensee to provide mortgages services to or on their behalf. The client must be identified as the brokerage’s client. The brokerage and client must agree that the brokerage will designate one or more specific mortgage brokers to act as the client’s designated agent(s).
2. Conflict check: Before agreeing to act for a client, the mortgage broker engaging the client on behalf of the brokerage should assess whether taking on the client could create a conflict of interest or otherwise impair the broker’s ability to act in the client’s best interests and fulfill their duties under the MSA. This assessment should include consideration of existing client relationships, the nature of the transaction, and whether the designated broker may ultimately need to represent clients with competing interests. Where a potential conflict is identified, the broker should determine whether the conflict can be appropriately managed. Licensees should consult their principal broker and are reminded that they must take reasonable steps to avoid conflicts of interest.
3. Ensure clients understand the designated agency relationship: The broker should explain to each client what designated agency is and how the designated agency relationship will operate. This includes explaining that the designated agent represents only that client’s interests and that the client’s information will be treated confidentially and will never be shared with other parties or other brokers without the client’s express direction and consent.
4. Formalize designation in writing: A designated agency relationship must be documented in writing and can be done using the Disclosure of Representation to Borrower (Form 1A) or the Disclosure of Representation to Lender (Form 1B). This confirms the designation of the licensee and the client they represent and ensures compliance with regulatory requirements.
5. Designated agency relationship established: Once these steps are completed, a designated agency relationship is established.

Once a designated agency relationship is established, brokers are reminded that they must not share client information with other parties or with other licensees in the brokerage. They are required to uphold all duties owed to their client under the MSA.

Applicable section of Mortgage Services Act, its Regulations, or the Mortgage Services Rules

MSA Rules

s. 40 [Designated agent]

s. 69 [Disclosure of risks to unrepresented parties]

s. 71 [Disclosure to client of remuneration]

s. 76 [Restriction on dual agency]

s. 77 [Dual agency in under-served remote location]

s. 78 [Dual agency for affiliates or related parties]

s. 79 [Addressing conflicts of interest when acting for multiple clients]