Mortgage brokerage licensing on a sale in Saskatchewan

Mortgage brokering in Saskatchewan is licensed by the Financial and Consumer Affairs Authority of Saskatchewan (FCAA). The Mortgage Brokerages and Mortgage Administrators Act and its Regulations are administered by the Superintendent of Financial Institutions there. Other provinces run their own regimes, and the national picture is in selling a mortgage brokerage in Canada. This page stays with Saskatchewan. The FCAA pages we read set out who must be licensed and what must be filed. They do not describe a procedure for moving a brokerage licence to a new owner, so this guide shows what the pages say, what a sale puts in play and what to ask the Superintendent.

Four licence types, and the ones a sale touches

The FCAA describes four licence types under the Act: mortgage brokerage, broker, associate and mortgage administrator. A mortgage brokerage is a corporation, partnership or sole proprietorship that solicits another person to obtain a mortgage loan or to make an investment in a mortgage, but only if the soliciting is done on behalf of another person; negotiates or arranges a mortgage loan or an investment in a mortgage on behalf of another person; or advises a person on the appropriateness of obtaining a particular mortgage loan or making a particular investment in a mortgage. Each brokerage has one principal broker, who is its main contact with the FCAA and is responsible for overseeing its compliance with the legislation. A sale of the business therefore raises two questions: what happens to the entity’s licence, and what happens to each individual’s.

Individual licences are tied to the brokerage

The FCAA says every broker and associate works on behalf of one mortgage brokerage, and an individual is authorized to broker mortgages only for the brokerage named on the licence. A broker applicant must be authorized by a brokerage to deal in mortgages and may work for only one. If an individual stops brokering for that brokerage, whether the individual or the brokerage decides, the FCAA says the individual must notify the Superintendent within 7 days, and the licence is suspended automatically. The FCAA also says a broker’s licence is automatically suspended if the brokerage named on it has its licence suspended or cancelled, and a suspended broker must stop all brokering until the licence is reinstated. If the buyer plans to carry on under a different brokerage entity, treat each person’s licence status as a closing item and ask the FCAA how it will be handled.

Why the deal structure is the first question

The licence is held by the brokerage as an entity. That makes the structure the first thing to put to the Superintendent. If the licensed corporation stays in place and the shares change hands, ask what changes must be reported and when. If a different entity will carry on the business, ask whether that entity must apply for its own brokerage licence before it deals in mortgages. The pages we read do not answer either question, so do not assume the licence follows the business. The general trade-offs are in should I sell shares or assets, but here the licensing answer has to come from the regulator.

What an application asks for

If a new entity will need its own brokerage licence, the FCAA lists what the application involves. It is filed online through the Registration and Licensing System (RLS), with the annual fee and supporting materials. The FCAA lists these as errors and omissions insurance from an approved provider, criminal record check or checks dated within three months of the application, and copies of the initial disclosure form and the mortgage disclosure form the brokerage will use. The FCAA points applicants to its licensing toolkit for the detail. Ask the buyer’s advisers which of these items the buyer’s entity already has and which it would still need to obtain.

Receiving money other than fees needs an endorsement

Under the FCAA’s published rules, a brokerage cannot receive any money, other than money relating to fees or other remuneration it has earned, unless it has applied for and received an endorsement on its licence. Only a corporation can obtain one, so sole proprietorships and partnerships are not eligible, and the brokerage must meet the financial security requirements set by the Superintendent. The FCAA calls the requirements that apply to a brokerage with an endorsement significant. If the business being sold holds an endorsement, ask whether the buyer’s entity will need its own and what it must show before closing.

Filings and notices that continue through the sale

The FCAA says every licensed brokerage files an annual return for the period from June 1 to May 31, due to the Superintendent by June 30 each year; a brokerage not licensed for the whole period should contact the Superintendent’s office about its reporting period. The FCAA says sections 19 and 20 of the Act and section 14 of the Regulations also require a licensee to notify the Superintendent of certain changes. The FCAA gives examples: contact information, regulatory actions in other jurisdictions and charges under the Criminal Code. It says its list is not comprehensive and that a brokerage unsure what to report should contact the Superintendent. If closing falls near the return date, the purchase agreement should say who prepares and files it. Questions to put to the Superintendent, in writing, before signing:

• Will the licensed brokerage entity continue after closing, and which changes to it must be reported to the Superintendent?
• If a different entity carries on the business, must it hold its own brokerage licence before it deals in mortgages?
• How will each broker’s and associate’s licence be handled if they move to a different brokerage entity?
• If the business holds an endorsement, what must the buyer’s entity show to hold one?
• Who files the annual return and any notices that fall due between signing and closing?