Every year, thousands of mortgage agents and brokers in Ontario rush through their license renewal forms. It is easy to autopilot through the “Suitability” questions checking No, No, No without thinking.
A recent decision from the Financial Services Tribunal, Michalopoulos v. Ontario (CEO of FSRA) [2024 ONFST 3], serves as a $10,000 warning: read the questions carefully.
In this case, a mortgage agent faced a Notice of Proposal to refuse his license renewal after FSRA discovered he had failed to disclose past convictions and a license refusal from another regulator.
FSRA argued he was “unsuitable” to practice. The Tribunal disagreed, but the victory came with a heavy price tag.
The Facts: A History of Non-Disclosure
The Applicant was a licensed mortgage agent who also had a background in the motor vehicle industry.
- The Background: In 2020, the License Appeal Tribunal (LAT) refused his registration as a motor vehicle salesperson due to concerns about falsified paperwork. In 2021, he was convicted of provincial offences related to vehicle sales.
- The Error: Despite this history, on three separate FSRA applications (2021 Initial, 2021 Renewal, and 2022 Renewal), the Applicant answered “No” to questions asking if he had ever been refused a license or convicted of an offence.
When FSRA discovered the truth, they issued a Notice of Proposal to refuse his renewal and impose an administrative penalty. Their argument was simple: If you lie to the regulator on your application, you cannot be trusted to be licensed.
The Defence: “I Told My Broker, Not FSRA”
At the hearing, the Applicant argued that his false answers were a mistake, claiming he thought the questions only applied to the mortgage industry. The Tribunal rejected this explanation, finding his conduct was “intentional or reckless” given the clear wording of the forms.
However, the Applicant had one crucial piece of evidence that saved him: Transparency with his Employer.
The evidence showed that while he failed to tell FSRA, he had fully disclosed his history to the compliance departments of his sponsoring brokerages. He assumed (incorrectly) that his broker would handle the regulatory reporting.
The Turning Point: Secret Clearance & Service
The Tribunal looked beyond the paperwork to assess the Applicant’s current character. Two factors weighed heavily in his favour:
- Broker Support: His Principal Broker testified that they audited every single one of his files and found them to be compliant and honest.
- Military Service: At the time of the proceedings, the Applicant was serving in the Canadian Armed Forces and had passed a “Secret Level” security clearance, involving deep vetting by CSIS.
The Tribunal reasoned that if the Canadian military trusts him with national secrets, and his broker trusts him with client files, a complete ban from the industry was not necessary to protect the public.
The Outcome: A Conditional License + A Fine
The Tribunal ordered FSRA to renew his license, but with strict Conditions:
- Supervision: He must work under a supervising broker with at least 5 years of experience.
- Reporting: The supervisor must submit quarterly reports to FSRA.
- Ethics Training: He must complete an approved ethics course.
However, the Tribunal also upheld a $10,000 Administrative Penalty for the false statements. The message was clear: You can keep your license, but providing false information to the regulator has a cost.
Key Takeaways for Professionals
- “Suitability” is Forward-Looking: A past conviction does not automatically disqualify you. If you can prove you have changed (rehabilitated) and have strong character evidence, you can often save your license.
- Don’t Rely on Your Broker: Never assume your brokerage “handled it” with FSRA. The duty to disclose lies with you, the individual licensee.
- Conditions are a Win: If you are facing a refusal, fighting for a “Conditional License” (supervision) is often the smartest strategy. It keeps you in business while you rebuild trust.
Facing a Notice of Proposal?
If you have received a Notice of Proposal to refuse or revoke your license, do not panic. As Michalopoulos shows, there is often a middle ground between “Revocation” and “Unconditional License.”
FAQ: License Renewals, Non-Disclosure & Suitability
Q: I accidentally checked “No” on the criminal record question. Will FSRA revoke my license automatically?
A: Not necessarily. While providing false information is a serious offence, the Michalopoulos decision confirms that it does not always lead to a revocation or refusal. If you can demonstrate that the error was not an attempt to deceive, or if you have strong evidence of “good character” (like military service or community leadership), the Tribunal may grant you a Conditional License instead of banning you from the industry.
Q: My brokerage already knows about my past charges. Do I still need to tell FSRA?
A: YES. This was the exact mistake the agent made in Michalopoulos. The legal duty to disclose information lies with you, the individual agent, not your brokerage. However, if you did disclose it to your brokerage, keep proof of that email! In this case, the Tribunal used that evidence to prove the agent wasn’t “hiding” the truth, which saved his license.
Q: What exactly is a “Conditional License”?
A: A Conditional License allows you to continue working despite a regulatory concern, but with strict guardrails to protect the public. In the Michalopoulos case, the conditions included:
- Supervision: Working under a Principal Broker with at least 5 years of experience.
- Reporting: The supervisor must send quarterly reports to FSRA confirming you are compliant.
- Audits: Every single file the agent touched had to be reviewed and initialed by the supervisor.
Q: How much can FSRA fine me for a false statement on my application?
A: In this specific case, the Tribunal upheld a $10,000 Administrative Penalty. However, under the Act, the maximum penalty for an individual can be much higher (up to $100,000 for serious contraventions). The amount usually depends on whether you profited from the lie and how “intentional” the conduct was.
Q: I have a criminal record or a past bankruptcy. am I “Unsuitable” to be a mortgage agent?
A: “Suitability” is not a yes/no checklist; it is a risk assessment. A past conviction does not mean you are permanently unsuitable. The Tribunal looks at rehabilitation: Have you changed? Are you honest now? Do you have support? If you are facing a Notice of Proposal to refuse your license, you have the right to present this evidence at a hearing.
Q: What should I do if I receive a “Notice of Proposal to Refuse” my renewal?
A: You must act immediately. You typically have only 15 days to request a hearing before the Financial Services Tribunal. If you miss this deadline, the refusal becomes final. Do not try to argue with FSRA directly; contact a regulatory defence lawyer to draft your Request for Hearing and preserve your right to fight for a conditional license.
This commentary is for informational purposes only and does not constitute legal advice.
Contact Tamir Litigation Law Firm today at 416-499-1676 or visit tamirlitigation.com to learn how you can protect your licence and your reputation. You can also message us on WhatsApp for a free initial chat.