Mortgage Investment Corporations (MICs) in British Columbia operate at the intersection of two regulatory regimes: the new Mortgage Services Act (MSA) for mortgage brokering/lending, and the BC Securities Act for investment activities. Below is a comparative analysis of how exemptions under each framework apply to MICs, highlighting overlaps, differences, and recent changes. The core point is that MICs generally must comply with both regimes – there are limited exemptions to completely exclude them from either – so understanding both sets of rules is crucial.

Mortgage Services Act (MSA): Licensing Requirements & Exemptions for MICs

Under the MSA (which will fully replace the old Mortgage Brokers Act in October 2026), anyone who provides “mortgage services” (such as soliciting, negotiating, or administering mortgages) on behalf of others must be licensed unless a specific exemption applies. MICs – which lend investor funds on the security of real estate – clearly fall under mortgage services (specifically “mortgage lending” and potentially “dealing in mortgages” by soliciting borrowers) and thus require licensing. In fact, under the prior law MICs were required to register as mortgage brokers in BC, which regulated their lending activities, and this continues under the MSA’s updated framework.

No Blanket Licensing Exemption for MICs: The MSA’s regulations enumerate several categories of people who are exempt from needing a mortgage services licence, but MICs are not among them. For example, federally regulated financial institutions (like banks or federal credit unions) are exempt, as are professionals like notaries and accountants when carrying out mortgage-related tasks incidental to their practice. However, mortgage investment corporations do not have a special exemption in these rules – they are generally treated like any other private mortgage lender. The only way an MIC’s staff might avoid individual licensing is via the general rule that a director, officer, or employee of an already exempt entity doesn’t need a licence themselves – but since the MIC itself isn’t exempt, this provision offers no relief in that context. In practice, an MIC (or its management company) that originates or administers mortgages must be licensed as a mortgage broker/brokerage, and its personnel must hold the appropriate individual licences.

Planned “Mortgage Lender” License Category: Notably, the MSA introduces a new licence category for Mortgage Lenders, recognizing companies that extend mortgage loans using their own capital. This could directly apply to MICs. However, this lender licence category is not yet operational – implementation awaits further rules and confirmation by BCFSA. The MSA’s transitional provisions include an exemption for non-business individual lenders solely engaged in “mortgage lending” – this may be removed at some point in the future. If the MIC or its principals engage in mortgage brokering and lending activities – e.g. negotiating loans or dealing in mortgages on behalf of others – a brokerage licence is required  now under the Mortgage Brokers Act.

Overlap with Securities Act – Syndicated Mortgages: One area of overlap between the mortgage and securities regimes is syndicated mortgages (a single mortgage loan split among multiple investors). These have characteristics of both a mortgage deal and a securities offering. The MSA regulation specifically addresses this overlap by granting an exemption in one direction: a firm registered as an investment dealer under the Securities Act is exempt from MSA licensing when facilitating non-“qualified” syndicated mortgage investments. In essence, large or complex syndicated mortgages (those not meeting the “qualified” criteria such as simple residential loans with low loan-to-value) can be handled by IIROC-regulated securities dealers without that dealer also obtaining a mortgage broker licence. This exemption aligns with recent CSA rules that pull these riskier mortgage investments under securities regulators’ purview. By contrast, “qualified syndicated mortgages” – simpler, small-scale residential syndications – remain under the MSA’s domain and typically must be sold through licensed mortgage brokers. For MICs, which pool investors’ funds at the corporate level, syndicated mortgage distribution is usually not their model (they issue shares instead), but this carve-out shows how the MSA and Securities Act coordinate on overlapping products.

BC Securities Act: Capital-Raising Rules & Exemptions Affecting MICs

From the securities law perspective, a MIC is an issuer of securities (e.g. shares or units offered to investors). Any offering of MIC shares must comply with the BC Securities Act, meaning the MIC must either file a prospectus or (far more commonly) rely on a prospectus exemption to sell securities to investors. Virtually all MICs use prospectus exemptions – such as the Accredited Investor exemption or the Offering Memorandum exemption under National Instrument 45-106 – to raise capital privately without a full public prospectus. These exemptions allow MICs to raise money from qualified investors with less regulatory burden than a public offering, but they still carry conditions (e.g. providing an offering memorandum with prescribed disclosure, in the case of the OM exemption).

Dealer Registration Requirement – Past Exemption and Its Removal: In addition to prospectus rules, securities law normally requires that anyone in the business of trading securities be registered (for example, as an exempt market dealer or investment dealer). Historically, British Columbia had a unique registration exemption for mortgage investment entities (MIEs) like MICs. Introduced in 2010, this “MIE dealer registration exemption” (BC Instrument 32-517) allowed MICs or their managers to sell MIC securities to investors without registering as dealers, so long as they met certain conditions (such as filing information reports). This meant that a licensed mortgage broker could raise investor money for an MIC under the Mortgage Brokers Act oversight, and did not also have to be a securities dealer – a notable regulatory carve-out in BC that was not available in other provinces.

However, this exemption was permanently revoked as of February 2019. The BC Securities Commission (BCSC) decided to “lift the registration exemption” for MICs/MIEs in order to harmonize with Canada-wide standards and bolster investor protection. The change was announced in 2018 and took effect in 2019, ending an almost decade-long era in which unregistered finders or mortgage brokers could sell MIC investments directly. Now, any person or firm that trades in securities of an MIC (i.e. solicits investors, advises on the purchase of MIC shares, etc.) generally must be a registered securities dealer or exempt market dealer. In practice, many MIC firms responded by creating or partnering with a separately incorporated dealer entity to handle capital raising. During the transition, the BCSC allowed MIC firms that applied for registration by the deadline to continue operating while their applications were processed.

The removal of the dealer-registration exemption is a critical shift: BC went from exempting MICs entirely from securities dealer requirements to insisting on full dealer oversight. BCSC staff noted that this change ensures investors receive advice from licensed dealers and can check that those selling MIC investments are registered and reputable. Indeed, after the exemption’s repeal, a mortgage broker licence alone is insufficient to raise funds for an MIC – a securities registration is needed as well, or the MIC must engage a registered dealer for distribution. This was a significant new compliance burden for MICs, and industry voices (including the then CEO of BC’s Mortgage Brokers Association, Samantha Gale), raised concerns that the cost of maintaining dealer registration (compliance systems, audits, capital requirements, etc.) could be around $200,000 annually, straining smaller MICs.

Other Securities Act Exemptions: Aside from prospectus exemptions and the now-defunct dealer registration carve-out, MICs have also benefited from certain other exemptions in the securities realm:

• Investment Fund Status: MICs are corporations that lend mortgage money; they typically are not considered conventional “investment funds” (mutual funds) because investors usually cannot demand redemption on short notice, and MICs invest in relatively illiquid mortgage loans. Regulators historically provided relief so that MICs would not be treated as investment funds requiring an Investment Fund Manager registration. For example, the CSA issued blanket orders (like CSA 31-318/BCI 32-521) exempting MICs/MIEs from having to register as investment fund managers or advisers, acknowledging that their activities were already overseen under mortgage broker legislation. These exemptions (from the investment fund manager/adviser rules) have since lapsed or been replaced by guidance, but in general, MICs today are not forced to register as investment fund managers as long as their business is confined to mortgage lending and not running a securities portfolio – they focus on lending, so they aren’t regulated like mutual fund companies.
• Syndicated Mortgage Exemptions: Prior to 2021, certain syndicated mortgages in BC could be sold under a simple exemption (they were largely outside securities law if sold by mortgage brokers). That changed with the CSA’s syndicated mortgage reforms. Now, non-qualified syndicated mortgages must comply with securities rules (including investor disclosure akin to an offering memorandum and involvement of registered dealers). BC adopted these changes in March 2021, removing the old prospectus and registration exemptions for most syndicated mortgages. The remaining “qualified syndicated mortgage” category – essentially low-risk, residential mortgages – continues to be an easier-exempt case. For MICs, which raise pooled capital rather than matching individual investors to individual loans, these specific syndicated mortgage exemptions are less directly relevant. It’s worth noting, however, that the regulatory philosophy has shifted: both mortgage regulators and securities regulators are collaborating to close gaps in oversight for mortgage investments.

Overlapping and Diverging Exemptions – Practical Implications for MICs

Overlapping Regulatory Scope: MICs straddle two regulatory spheres. On the mortgage sector side, the focus is on protecting borrowers and the integrity of mortgage transactions (hence licensing requirements for those who broker or lend). On the securities side, the focus is on protecting investors who purchase MIC shares or debt. There is very little in the way of a full exemption that excuses MICs from one regime simply because they comply with the other. Instead, each Act provides targeted exemptions to avoid duplicative regulation in specific scenarios:

• The MSA exempts securities-licensed investment dealers from needing a mortgage broker licence when they deal in certain mortgage investments (syndicated mortgages). This prevents an IIROC-regulated brokerage from having to double-register when its activity (selling mortgage-backed securities) already falls under securities laws.
• Conversely, the Securities Act (formerly) exempted licensed mortgage brokers from needing to register as dealers when selling MIC investments – but this overlap exemption was eliminated in 2019, as discussed. Now, a mortgage broker licence does not confer any exemption from securities registration for MIC distribution.

Divergent Exemptions: Each regime has exemptions that matter to MICs, but they apply to different aspects:

• Under the MSA, a variety of parties are exempt for policy reasons – e.g. banks and treasury branches (federally regulated lenders) don’t need provincial mortgage licences to lend, and professionals like notaries can arrange the occasional mortgage incidental to their work without a licence. These carve-outs don’t really help MICs (which are private lenders outside those categories). MICs must either be licensed or fit under a temporary transition exemption for mortgage lending. In short, there’s no broad MSA waiver for being an MIC.
• Under securities law, MICs rely on general exempt market provisions (the same used by other private companies) to avoid a prospectus – there’s no MIC-specific prospectus exemption beyond what any issuer might use. The only unique relief MICs had was the dealer registration exemption, which, as noted, BC abandoned. Thus, today MICs are treated like any other issuer: to sell securities, they must either register or use a registered intermediary, unless another narrow exemption (like a friends-and-family dealer exemption for very limited selling) applies.

Practical Impact – Operating in Both Sectors: For an MIC operating in BC, the combined effect of these rules is that it generally needs to comply with both regulatory frameworks:

• The MIC’s lending operations (making and administering mortgage loans) fall under the MSA. The MIC will either need to be a licensed mortgage brokerage or a lender, or have its lending handled by a licensed entity. Many MICs have a brokerage licence for their lending arm or have principals who are licensed mortgage brokers, ensuring compliance with disclosure, reporting, and conduct standards in the mortgage process.
• The MIC’s capital-raising activities (selling shares or units to investors) fall under the Securities Act. The MIC cannot simply rely on its mortgage broker credentials to raise money; it typically must prepare offering documents and sell through a registered dealer (often an Exempt Market Dealer) or register a related company as such. Investors must be sourced and advised by registered representatives now, adding to compliance costs but providing greater investor safeguards

This dual regulatory compliance increases operational complexity. In effect, a BC MIC might have to form two regulated entities – e.g. a mortgage brokerage for lending and a sister securities dealer for fundraising – or otherwise align itself with firms that have the necessary licences. As a result, MICs are more tightly supervised than in the past, which supporters argue enhances trust and consumer protection on both ends (borrowers get licensed professionals; investors get registered advisors)

On the other hand, the lack of any sweeping exemption for MICs means higher costs and regulatory overhead. Smaller MICs have raised the concern that needing an in-house dealer or paying third-party dealers and compliance experts diverts funds that could have been used for lending or offering better returns. This is a trade-off regulators have chosen in the interest of market integrity.

In summary, mortgage investment corporations in BC must navigate both the MSA and the Securities Act, and neither law provides a blanket exemption that would remove MICs from its scope. The MSA demands that those engaging in mortgage business (soliciting loans, lending others’ money, etc.) be licensed, and it exempts only certain institutions and professionals – MICs receive no special pass on the lending side. The Securities Act, likewise, treats MIC securities like any other high-risk private investment: they can be sold without a prospectus under standard exemptions but must involve registered dealers now that BC has closed its historical loopholes. The overlap is managed through targeted exemptions (to avoid duplicative licensing in the case of syndicated mortgages, for example), but for the most part MICs are subject to both sets of requirements.

Practical takeaway for MIC operators: ensure your mortgage lending activities are conducted under an MSA licence (or by licensed staff), and structure your investor-facing activities to comply with securities laws – typically by engaging or becoming an exempt market dealer. This dual compliance structure is the new normal, intended to safeguard both borrowers and investors in BC’s mortgage investment sector