CAPL has submitted a letter to the BC Financial Services Authority (BCFSA) requesting confirmation of our understanding of how non-qualified syndicated mortgages and non-qualified syndicated mortgage investments (NQSMs/NQSMIs) are treated under British Columbia’s current Mortgage Brokers Act framework and the upcoming Mortgage Services Act (expected to come into force in or around October 2026).

The letter focuses on the practical impact of the transition for exempt market dealers (EMDs) involved in NQSMI distributions, including the expected narrowing of exemptions and the resulting need to ensure any “mortgage services” activities are conducted by appropriately licensed entities. We also ask for guidance on whether an affiliated-entity structure—where one related entity handles securities distribution as an EMD and another related entity conducts mortgage services as an MSA licensee—can be used as a compliant model, and what BCFSA’s expectations may be regarding roles, disclosures, supervision, and controls.

We are sharing this correspondence to keep members informed and to support proactive planning for the MSA transition.

—-see below—

Todd Healey
Practice Standards Advisor

BC Financial Services Authority
600-750 West Pender Street
Vancouver, BC V6C 2T8
Phone: 604.660.3555 | Toll-free: 1.866.206.3030
www.bcfsa.ca

Re: Request for confirmation – treatment of non-qualified syndicated mortgages (NQSMs/NQSMIs) under the Mortgage Brokers Act and Mortgage Services Act; applicability to exempt market dealers and affiliated-entity models

Dear Mr. Healey:

I am writing on behalf of the Canadian Association of Private Lenders to request confirmation of our understanding of the regulatory framework applicable to non-qualified syndicated mortgages (“NQSMs”) in British Columbia, including the expected shift from the Mortgage Brokers Act (“MBA”) to the Mortgage Services Act (the “MSA”), anticipated to come into force in or around October 2026.

We appreciate that BCFSA administers the mortgage services regime, while the securities distribution of NQSMIs is overseen by the British Columbia Securities Commission (“BCSC”). We recognize that any response may be limited to general guidance and not constitute a binding determination. That said, clarity on the points below would be helpful to industry members as they prepare for the transition to the MSA.

1. Our understanding of the current framework (MBA regime)

Based on our review of the MBA and its regulations, we understand that under the current MBA regime an exempt market dealer (“EMD”) registered under the BC Securities Act may participate in the distribution of NQSMIs without needing to register as a mortgage broker, due to the exemption in MBA Regulation 18(2) that applies to registrants under the securities legislation in connection with syndicated mortgages other than “qualified” syndicated mortgages.

In practice today, we understand the market commonly operates with a split of responsibilities, where:

(a) the EMD conducts investor-facing distribution activity under securities law (including solicitation, suitability, and trade execution under prospectus exemptions); and

(b) a licensed mortgage brokerage and/or administrator originates, registers, and administers the underlying mortgage and provides the applicable mortgage disclosure documentation to borrowers.

1. Our understanding of the future framework (MSA regime)

We further understand that the MSA and its regulations will materially change the mortgage licensing law treatment of EMDs involved in NQSM offerings, including that:

(a) the broad MBA regulatory exemption that has allowed securities registrants (including EMDs) to engage in syndicated-mortgage-related activity without MBA registration/licensing will no longer be available to EMDs once the MSA is in force; and

(b) the MSA regulatory exemption will be more narrowly framed such that only “investment dealers” (CIRO/IIROC investment dealers), while compliant with securities law, will be exempt from MSA licensing for certain specified activities in relation to syndicated mortgages (other than qualified syndicated mortgages), and that EMDs will not be included in that exemption.

We also understand the MSA definition of “mortgage services” is broad and may capture typical EMD-facing activities involved in marketing and selling NQSMIs (including solicitation of lenders/investors, providing information or advice to prospective lenders/investors, and trading in mortgages for others). On that basis, our understanding is that, once the MSA is in force, an EMD that continues to distribute NQSMIs in BC will need to ensure that any “mortgage services” activities are carried out by an appropriately licensed person or entity (or within a specific exemption), and that an EMD acting alone, without an MSA licence, could be offside the MSA even if compliant with securities registration requirements.

1. Confirmation requested

We respectfully request confirmation (or correction) of the following:

(a) Under the current MBA regime, an EMD may distribute NQSMIs without needing mortgage broker registration/licensing under the MBA, due to MBA Regulation 18(2).

(b) Once the MSA is in force, an EMD will not be exempt from MSA licensing for “mortgage services” activities relating to NQSMs (even where the securities distribution is properly conducted under securities law).

(c) The MSA regulatory exemption for syndicated mortgage activity is intended to apply to CIRO/IIROC “investment dealers,” but not to EMDs.

1. Affiliated-entity model – EMD + MSA licensee working together

Assuming the above understanding is correct, we would also appreciate guidance on whether a related-entities structure is acceptable from the perspective of the MSA, where:

(a) one entity (Entity A) is an EMD registered under securities legislation and conducts the securities distribution of the NQSMI (including KYC/KYP/suitability, delivery of offering documentation where applicable, subscription processing, and exempt trade reporting); and

(b) a separate related entity (Entity B) is licensed under the MSA as a mortgage brokerage (and/or other applicable licence class) and performs the “mortgage services” activities (including, as applicable, mortgage solicitation/negotiation, required mortgage disclosures to lenders/investors, mortgage origination/registration, and ongoing administration).

In particular, we request confirmation or guidance on:

(i) whether it is acceptable for “mortgage services” activities to be performed by Entity B (the MSA licensee) while Entity A (the EMD) performs the securities distribution, provided that Entity A and its representatives do not themselves perform “mortgage services” unless appropriately licensed;

(ii) any BCFSA expectations regarding allocation of responsibilities, client-facing disclosures of the two-entity arrangement, supervision and controls for individuals who may hold roles with both entities, and how communications to investors should be structured to avoid an unlicensed person being viewed as providing “mortgage services”; and

(iii) whether, in BCFSA’s view, an entity distributing NQSMIs is expected to obtain both securities registration and MSA licensing within the same legal entity, or whether the affiliated-entity model described above is an acceptable compliance approach.

1. Closing

We would be grateful for any written response you are able to provide, including any guidance you consider relevant for market participants preparing for the transition to the MSA regime.

Please direct any response to:

Samantha Gale
CAPL Chief Executive Officer
s.gale@privatelenderassociation.ca