Information on administrative penalties under the Mortgage Services Act

Introduction

Licensees providing mortgage services have specific duties that are set out in the Mortgage Services Act (MSA), Mortgage Services Regulation (Regulation), and Mortgage Services Rules (Rules). Under the MSA, the Superintendent of Mortgage Services (Superintendent) can issue administrative penalties for licensees and unlicensed persons when they fail to comply with the MSA, the Regulation, or the Rules. Administrative penalties are often used to address minor or moderate non-compliance and are used to encourage compliance and to intervene in active non-compliance.

The information below outlines the administrative penalty framework under the MSA and the procedures that BCFSA follows when issuing administrative penalties.

When administrative penalties are used

In instances where the Superintendent is satisfied that one or more provisions of the MSA, the Regulation, or the Rules – designated under section 116 of the Rules – has been contravened, the Superintendent may consider issuing an administrative penalty.

In determining whether to issue an administrative penalty, the Superintendent may consider a variety of factors, including whether:

• The contravention involved a material degree of harm to a client, consumer, or other member of the public 
• The contravention involved harm to the reputation of the mortgage services industry 
• The contravention was an isolated incident 
• The contravention was unintentional or inadvertent and an ordinary standard of care would have prevented its occurrence 
• The individual or business entity promptly took available and reasonable steps to correct or remedy the contravention when the matter wasbrought to their attention 
• There is evidence that the person was acting other than in good faith 
• The contravention was easily substantiated, or the person responsible acknowledged committing the contravention 
• The person benefitted materially from putting a client or consumer at risk 
• The person derived or would have reasonably expected to derive, directly or indirectly, any economic benefit from the contravention 
• The imposition of an administrative penalty in the circumstance would serve the public interest and is likely to satisfy to aims of specific and general deterrence 
• Imposing an administrative penalty rather than recommending the issuance of a Notice of Discipline Hearing is not likely to diminish public confidence in the regulatory framework and/or 
• Where multiple contraventions occur at the same time or within a short period, the Superintendent may consider their combined effect. As a result, the conduct may warrant a stronger enforcement response, even if each contravention appears minor when considered on its own 

The administrative penalty framework

Administrative penalty provisions are set out in sections 58 and 59 of MSA and in sections 116 and 117 of the Rules. Under section 58 of MSA, BCFSA has the authority to designate sections of MSA, the Regulation, or the Rules as being subject to administrative penalties and establish the amount of the penalties. Section 58 also provides that the maximum amount of administrative penalty that may be established is $100,000. Sections 116 and 117 of the Rules indicate which contraventions of MSA, the Regulation, and the Rules are subject to administrative penalties and the prescribed amounts.

Categories of administrative penalties and penalty amounts

Category	Description of designated contraventions	Penalty amounts
Category A	Business infraction with a low risk of harm to consumers. The majority of contraventions in category A are related to the duties and responsibilities of the brokerage.	First contravention = $1,000 Subsequent contravention = $2,000
Category B	Cover a range of licensee responsibilities, including disclosure requirements. Category B penalties generally include misconduct related to minor matters where there is no material harm for consumers. Contraventions are generally related to licensee responsibilities to keep BCFSA or their principal broker informed about changes to their business.	First contravention = $2,500 Subsequent contravention = $5,000
Category C	Category C contraventions are related to the substantial duties that a licensee owes to their clients and also include the failure to act with reasonable care and skill under the Rules, which can apply to non-clients as well. Contraventions in this category may include a higher level of risk for consumers.	First contravention = $5,000 Subsequent contravention = $10,000
Category D	Category D contraventions are related to requirements for licensees. Penalties issued under Category D include a daily penalty to encourage timely compliance and the provision of accurate information.	Base penalty amounts: First contravention = $1,000 Subsequent contravention = $2,000 An additional $250 penalty applies for each day or part of a day that the contravention continues.
Category E	Category E contraventions are related to failure to comply with a BCFSA investigation or with a BCFSA review of brokerage accounts or other records. Category E penalties can apply to licensees and also to unlicensed individuals and entities and include a daily penalty to encourage timely compliance.	Base penalty amounts: First contravention = $1,000 Subsequent contravention = $5,000 An additional $1,000 penalty applies for each day or part of a day that the contravention continues up to a maximum amount of $100,000.
Category F	Category F contraventions are related to BCFSA licensing requirements and related restricted activities. Contraventions in this category can apply to both licensees and to unlicensed persons.	Between $5,000 and the maximum amount for a first contravention. Between $10,000 and the maximum amount for a second contravention. Category F includes a range of penalties, rather than a prescribed amount. The flexible approach allows the Superintendent to consider many factors in determining an appropriate penalty and the unique circumstances of each case.

Administrative penalty amounts are set out in section 117 of the Rules. The penalty amount may be impacted by previously imposed penalties and escalating penalties will be imposed in circumstances of subsequent contraventions. In the case of Category D or Category E contraventions, the method of calculation for daily administrative penalties is set out in the Rules.

Issuing administrative penalties when multiple contraventions are eligible

In circumstances where the Superintendent is satisfied that a person has two or more contraventions of MSA, the Regulation, or the Rules designated as being subject to administrative penalties, the Superintendent may impose an administrative penalty for each separate contravention. Prior to so issuing an administrative penalty, the Superintendent will consider:

• Whether the contraventions, when taken together, are sufficiently serious that they should be addressed through enforcement action initiated through a Notice of Discipline Hearing and
• Whether the contraventions, considered together, indicate a level of carelessness on the part of the individual or the brokerage that may pose a risk to members of the public

Daily penalties (Categories D and E)

Daily penalties can be imposed for contraventions designated in Category D or Category E. Daily penalties are used to encourage prompt action to achieve compliance. This includes promptly responding to requests for information from BCFSA by providing accurate information related to investigations.

Before imposing an administrative penalty for a Category D or Category E contravention, BCFSA will send a Non-Compliance Warning Letter. The Non-Compliance Warning Letter will identify a time period in which the person must come into compliance in order to avoid the imposition of the daily administrative penalty. If compliance is achieved within the identified time period, the Superintendent may still issue an administrative penalty for the base amount.

For contraventions where a daily penalty amount applies, the contravention will include a base penalty amount and a daily penalty amount for each day or part of a day where non-compliance occurs after the Compliance Warning Period has come to an end. Base penalty amounts and daily penalty amounts are as follows:

Category	Base penalty amount	Daily penalty amount
Category D	First contravention = $1,000 Subsequent contravention = $2,000	$250 per day
Category E	First contravention = $1,000 Subsequent contravention = $5,000	$1,000 per day

Category F administrative penalty calculations

Category F contraventions are related to BCFSA licensing requirements and related restricted activities. Category F administrative penalty amounts are determined based on a permissible range of penalties, rather than a prescribed amount. This approach allows the Superintendent to consider many factors in determining an appropriate penalty and the unique circumstances of each case. For the first contravention under Category F, the penalty range is between $5,000 to $100,000 (the statutory maximum for an administrative penalty). For a second contravention, the penalty range is between $10,000 and $100,000.

To determine the appropriate penalty amount for a contravention under Category F, the Superintendent may consider a wide range of factors, including, but not limited to:

• The source of the complaint and if the complaint was self-reported 
• Compliance and/or licensing history for the person 
• Benefit derived from the contravention 
• The risk of harm or material harm for consumers 
• The time period over which the contravention occurred 

More information on the administrative penalty process will be forthcoming on BCFSA’s website.

Reconsideration

Individuals or entities who are subject to an administrative penalty have the right to request a reconsideration of the penalty under section 59 of MSA. A person who wishes to dispute an administrative penalty must submit a Reconsideration Request in writing to BCFSA within 30 days from the date that the penalty was issued. The Administrative Penalty Notice will provide information regarding how a request for reconsideration must be submitted to BCFSA.

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

Mortgage Services Act

s. 2 (3) [Superintendent of Mortgage Services]

s. 58 [Designated contraventions and penalty amounts]

s. 59 [Superintendent may impose administrative penalties]

s. 60 [Publication]

s. 74 [Substituted service]

MSA Rules

s. 23 [Effective delivery to licensees]

s. 24 [Licensee must reply promptly to superintendent]

s. 25 [Mortgage brokerage must give immediate notice respecting insolvency]

s. 26 [Licensee must give notice of discipline, bankruptcy, criminal or other proceedings]

s. 116 [Administrative penalties]

s. 117 [Amount of administrative penalty]