Ontario’s Superintendent of Financial Services has issued a series of fines totalling more than $1.1 million following an investigation into syndicated mortgage investments.
The Financial Services Commission of Ontario (FSCO) announced on Friday orders against eight parties that were involved with syndicated mortgage investments for real estate projects developed by Fortress Real Developments Inc.
Under the orders, four mortgage brokerages that facilitated the syndicated mortgage transactions that fund Fortress projects will pay a total of $1.1 million in administrative monetary penalties.
Richmond Hill, Ont.-based Building Development and Mortgages Canada Inc. (BDMC), which has also served as the mortgage administrator for the syndicated mortgage investments, has been ordered to pay $400,000. The company’s mortgage brokerage license also has been revoked.
Woodbridge, Ont.-based FFM Capital Inc., Toronto-based FMP Mortgage Investments Inc., and Mississauga, Ont.-based FDS Broker Services Inc. have each been ordered to pay $235,000.
All of the fines must be paid by July 31, 2019.
FSCO also ordered the revocation of mortgage-broker licenses held by:
- Vince Petrozza, chief operating officer at Fortress and mortgage broker with BDMC;
- Rosalia Spadafora, broker of record with FFM Capital;
- Michael Daramola, principal broker and chief compliance officer at FMP Mortgage Investments; and
- Glenn May-Anderson, president and principal broker with FDS Broker Services.
Ildina Galati-Ferrante, principal broker of BDMC, has surrendered her broker license.
All five individuals are required to stop all mortgage brokering business immediately.
FSCO did not release details about the investigation or the specific findings that led to the regulatory sanctions.
In a statement released on Friday, BDMC said that as a result of the FSCO settlement, the company has stopped all mortgage brokerage activities. BDMC also said that its mortgage administration functions for existing syndicated mortgage loans involving Fortress projects will be managed by a new arms-length administrator, FAAN Mortgage Administrators Inc., which will conduct business in BDMC’s name.
“BDMC made a business decision to enter into a settlement with FSCO,” said Galati-Ferrante, in a statement. “The staff of BDMC looks forward to working with FAAN Mortgage Administrators Inc. in administering the existing loans and assisting to bring them across the finish line.”
Fortress, a real estate development company based in Richmond Hill, Ont., is not a mortgage brokerage and is not the subject of any of the regulatory sanctions. The company and its principals have been the subject of numerous proposed class action lawsuits in recent years related to allegations that they misled investors. However, Fortress and its principles have denied any wrongdoing.
Syndicated mortgage investments have become an area of focus for FSCO and other financial industry regulators in recent years. In particular, FSCO has warned investors to be wary of syndicated mortgage investment providers that advertise “high return” or “fully secured” investments.
“FSCO considers syndicated mortgage investments to be high risk, and notes they may not be suitable for the average lender or investor,” FSCO states in its news release. “Potential lenders or investors, including consumers and retail investors, are strongly encouraged to seek independent financial and legal advice before lending money through, or investing in, a syndicated mortgage.”