CSA Syndicated Mortgages

May 3, 2019

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CSA Syndicated Mortgages

Letter Summary:

The proposed amendments to the registration and prospectus requirements relating to syndicated mortgages was first published over a year ago. The proposals would remove the exemptions for the distribution of syndicated mortgages in those provinces in which they were still eligible for the exemption (including Ontario), introduce new requirements for use of the offering memorandum exemption for distributions of syndicated mortgages and amend the private issuer exemption so that it would not be available for the distribution of syndicated mortgages. This proposal revises a few of the original changes and would introduce dealer and prospectus exemptions in Ontario, NB, NS and Nfld for “qualified syndicated mortgages”, similar to the existing BC exemption (generally meaning a retail mortgage and one which does not secure a debt incurred for the construction or development of property). Alberta and Quebec are proposing a prospectus exemption only. In addition, Alberta is proposing a prospectus exemption for syndicated mortgages distributed to permitted clients, similar to an existing exemption in BC. The different exemptions are meant to be consistent with local mortgage legislation and regulations. Changes are proposed to the original amendments to the OM exemption; namely, the property appraisal must be within 6 months preceding the date it is delivered to the purchaser (instead of 12 months) and additional guidance is provided with respect to the meaning of the “issuer” of a syndicated mortgage (i.e. the mortgage broker or borrower). The amendments will come into effect at the end of the year.

Overview of the Council’s Comments:

As stated in the response to the first publication of the Proposed Amendments in March 2018, the CAC supports the changes to the prospectus and registration exemptions for syndicated mortgages in light of the inherent risks associated with distributing such products to retail investors under the current regime. In the council’s view, changes to the syndicated mortgage regime are important for investor protection. The Proposed Amendments would seek to further harmonize, to the extent possible, rules regarding the distribution of these products among all CSA jurisdictions.