Guideline on Remuneration Disclosures

Purpose

Licensees providing mortgage services have obligations under the Mortgage Services Act (MSA), Mortgage Services Regulation (Regulation), and Mortgage Services Rules (Rules) respecting disclosure of expected remuneration to clients and other parties. This guideline provides guidance to licensees on:

• Understanding remuneration disclosures, 
• Disclosure to borrowers of expected remuneration, and 
• Remuneration disclosure to clients. 

For more information on disclosure requirements, visit the BCFSA Mortgage Services Knowledge Base. 

Guideline

Understanding remuneration disclosures

Remuneration includes any direct or indirect payment or compensation, or potential payment or compensation, including commissions, fees, gains or rewards in relation to the provision of mortgage services. There are two different types of remuneration disclosure required under the Rules

1. Disclosure to Borrowers of Expected Remuneration and  
2. Remuneration Disclosure to Clients.  

Both disclosures require the licensee to disclose both direct and indirect remuneration in writing, such as

• money or other benefits (such as event tickets or loyalty points)   
• commissions, fees, bonuses, or other rewards (such as lender payments for things like finder’s fees and volume bonuses paid out in the future) and   
• benefits paid directly to the licensee or indirectly to someone connected to the licensee  

If the remuneration referred to above is to be received as money, the remuneration must be expressed as a dollar amount. If the remuneration is not money, it must be described.

All payments for mortgage services in B.C. must be made to the mortgage brokerage, not directly to the individual broker. If the brokerage does not know the exact amount of remuneration they might receive, they must give the client and/or borrower an estimate or explain how it will be calculated.

Disclosure to borrowers of expected remuneration

If a licensee is presenting a borrower with one or more potential mortgage commitments, they must disclose to the borrower the remuneration that they expect to receive if the borrower goes ahead with that mortgage transaction. This disclosure is made using the Form 4 – Disclosure to Borrower of Expected Remuneration, wherein mortgage brokers are required to provide  

• the amount and source of the remuneration that will be paid to the licensee’s related mortgage brokerage 
• the amount of the remuneration that will (or may) be:  
  • Retained by the licensee’s related mortgage brokerage;  
  • Paid to the broker(s); and  
  • Paid to any other mortgage brokerage involved in the mortgage transaction (if any)  
• any other relevant facts relating to the remuneration   

Form 4 – Disclosure to Borrower of Expected Remuneration must also be provided any time a licensee presents a potential mortgage commitment to an unrepresented borrower. For example, if a broker is dealing on behalf of a lender client and is presenting a mortgage option to an unrepresented borrower, the broker is required to provide Form 4 disclosure to that borrower. The purpose of this disclosure is to clearly explain to the borrower how remuneration will be paid to the licensees involved if they proceed with the proposed mortgage transaction. This helps to ensure the mortgage process is transparent and the borrower can make an informed decision when selecting a mortgage.

In the case where the borrower is also the client of the licensee, some of the contents of the Form 4 disclosure may overlap with any disclosure of remuneration made under s. 71 of the Rules (remuneration disclosure to clients). In those cases, brokers may choose to use the optional Form 7 – Disclosure to Client of Remuneration (recommended) or can otherwise disclose the required information in writing.

Disclosure packages 

Brokers can provide remuneration disclosure in a package instead of using Form 4. There are four disclosure packages available for use depending on the party receiving the disclosure:

1. Disclosure to represented borrowers: for borrowers who are clients of the broker. 
2. Disclosure to represented lenders: for lenders who are clients of the broker.  
3. Disclosure to unrepresented borrowers: for borrowers who are not clients of the broker and are unrepresented.  
4. Disclosure to unrepresented lenders: for lenders who are not clients of the broker and are unrepresented. 

Remuneration disclosure to clients

When a brokerage receives (or expects to receive) remuneration from any source other than their client directly for the mortgage services provided they must promptly disclose this to their client. This includes remuneration from referrals or recommendations to people like notaries, lawyers, banks, real estate agents, insurance agents, or any other person providing products or services related to mortgages, including other mortgage brokers or brokerages.

There is no form required for disclosure of remuneration to the client. However, it is required that the disclosure must be made in writing and contain the following information

• form or amount of remuneration 
• source of remuneration 
• if applicable, other important details about how the mortgage brokerage and broker are paid for providing mortgage services to client or for any referrals/recommendations 

For convenience, brokers may use Form 7 – Disclosure to Client of Remuneration to disclose expected remuneration.  Although its use is not mandatory when disclosing remuneration from sources other than clients, BCFSA recommends the form because it   

• gives borrowers time to review, compare, and reflect on the material risks and suitability   
• promotes consistency and completeness, helping licensees meet their disclosure obligations and 
• creates a clear record of the disclosure, which can help protect both the client and the licensee in the event of a future dispute   

This disclosure requirement is closely tied to a licensee’s duty to identify, avoid and disclose conflicts of interest. When a licensee receives remuneration from someone other than the client in connection with providing mortgage services, there is a risk, whether actual or perceived, that the source of the remuneration could influence the licensee’s conduct or recommendations. Disclosing this information ensures clients are aware of potential conflicts and have the information they need to make informed decisions.

Exceptions to providing remuneration disclosure

If you are acting as a designated agent for only one party in a mortgage transaction, you only need to disclose the remuneration that is paid or payable for the services you provide to that party (your client). The disclosure must still be made in accordance with the standard remuneration disclosure requirements.

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

MSA

s. 1 definitions:

Remuneration: includes any form of remuneration, including any commission, fee, gain or reward, whether the remuneration is received, or is to be received, directly or indirectly.

MSA Rules

s. 1 definitions:

Designated agent: Means one or more licensees designated by the licensee’s or licensees’ related mortgage brokerage as the exclusive licensee or licensees, of all of the licensees related to that mortgage brokerage, to provide mortgage services to or on behalf of a client of the mortgage brokerage in respect of a potential mortgage or mortgage transaction.

s. 70 [disclosure to client or remuneration]

71 [disclosure to borrower or expected remuneration]