When it comes to agent conduct and compliance, the buck stops with principal brokers
It’s a point that’s been emphasized time and again by regulators and seasoned mortgage industry veterans, and that reared its head once again during an industry panel in May: principal mortgage brokers in Ontario need to be assuming the utmost responsibility for the conduct and compliance of their agents.
That’s been a key focus for the Financial Services Regulatory Authority (FSRA) of Ontario in recent years, and the watchdog’s head of financial institutions and mortgage brokerage conduct Antoinette Leung (pictured top) said she welcomed the message expressed by broker veterans that principal brokers need to be on their game.
One way that some mortgage industry watchers feel principal brokers are falling short at present is by not being rigorous enough during the hiring process.
“The most important thing is at the time you’re making that onboarding or hiring decision, do enough due diligence to assess what the experience and qualifications of that individual are,” Leung told Canadian Mortgage Professional, “and also [examine] their compliance history. Those are the things that I find are often lacking with a lot of firms and principal brokers.
“It’s important to do it upfront for a few reasons: you know what experience they have, and then you know what support you need to give them to really deliver to consumers. If you’re focusing on bruised credit clients and helping them find financing, then you want to make sure that your brokers and agents actually have that experience.”
A potential new hire might look good on paper, with great numbers and an apparently strong track record, but Leung also underlined the importance for principal brokers of carrying out background and reference checks.
Undertaking those measures, she suggested, helps hirers get a better idea of how the agent performed at previous brokerages and whether any possible issues need to be flagged.
“It’s really getting first-hand comments about how they interact with their customers, whether they have prior compliance history or other issues that you want to be aware of,” she said.
“There’s also a requirement that principal brokers who are hiring should always contact the last principal broker to find out other things that they should be aware of. That’s something that surprisingly, many have told us that when they hire, they would call the prior principal broker but they never received a call [themselves].”
Where past issues exist, it’s not always simply the case of deciding not to hire the individual, she added. “All it’s saying is that if you know there’s a higher risk, the way you train the person once you onboard them and the way you monitor their activities will change,” she said. “It’s about protecting the consumers as well as protecting your own reputation.”
FSRA is proposing to revoke the mortgage brokerage licence of Quick Cash Mortgage and refuse the licence renewal of its principal broker after uncovering a series of regulatory violations involving high-cost private mortgages issued to vulnerable seniors.https://t.co/rJemNBc2RU
— Canadian Mortgage Professional Magazine (@CMPmagazine) May 30, 2025
The important questions all principal brokers should ask
There are plenty of crucial points for principal brokers to consider when it comes to hiring and onboarding new staff, Leung said:
- How did they get their past clients?
- What feedback did previous clients give?
- How successful are they in having mortgages funded?
- Have regulators previously seen reason to raise questions about their conduct?
Getting a better understanding of the types of client those agents usually deal with, meanwhile, is also crucial. “Would those types of experiences be helpful for your business? Because your business could be slightly different,” she said. “Again, it just gives you insight into what type of support you can give to the individual who’s coming onboard.”
The positive for the mortgage sector, Leung said, is that there’s been some improvement seen in brokerages – especially larger firms with ample resources – crafting helpful and detailed training to make sure new agents are fully up to speed on what’s expected from a compliance standpoint.
But there’s still room for improvement. “One of the [areas] where we think we still have a way to go is how a principal broker and the compliance team are monitoring individual transactions,” she said. “We often see that the type of supervision that’s being done is a form completed, but there’s less emphasis on the information included in a form being accurate and complete.”
While many brokerages have introduced Know Your Client (KYC) and suitability assessment forms this year and last, FSRA’s examination has shown that often the forms are “superficially” completed or filled out in a way that still doesn’t allow regulators to understand why an agent or broker recommended a specific product.
That doesn’t mean brokers are expected to check every single transaction. “If you understand the experience of your brokers and agents, you can then decide what type of check you want to do,” Leung said.
Best practices might see a principal broker check the first number of transactions of a new agent at the firm to confirm they’re performing as expected and then perform spot checks moving forward.
“If somebody is just one year into the business versus somebody who’s in the business 15 years, the frequency of you doing the check is going to be different,” Leung said. “And that’s how we encourage firms to be creative in thinking about the probability that something could go wrong.
“Based on that probability and your understanding of your brokers’ or agents’ experience, tailor how you supervise them.”
Agency seeks principal broker feedback on compliance
Leung emphasized FSRA’s openness to hearing feedback from principal brokers on compliance issues and the current framework, with the agency also soliciting suggestions for topics of discussion at its next principal broker conference – scheduled for later this year – at MBConduct@fsrao.ca.
Ultimately, Leung said having a robust compliance and oversight structure is in the best interest of a mortgage brokerage in the event of a consumer complaint or lawsuit.
“If you’ve done your supervision, if you have documentation of how you supervise, it’s going to save you a lot of headaches,” she said.
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