FSCO Audit of Mortgage Agent Course Providers (August 2015)

Introduction

 
In 2010, the Financial Services Commission of Ontario (FSCO) conducted its first audit of mortgage agent course providers (Providers).
 
FSCO conducted the audit to determine if the Providers have operated in accordance with the terms and conditions outlined in the 2008 Letter of Intent they signed with the Superintendent of Financial Services (Superintendent), and that they have adequate corporate governance structures and education oversight systems in place.
 

Mortgage agent program

 
Under Ontario Regulation 409/07 Mortgage Brokers and Agents: Licensing, an individual who wishes to obtain a mortgage agent licence must successfully complete an education program that has been approved by the Superintendent.
 
The Mortgage Agent Program (Program) is based on the Mortgage Agent Qualifying Standards (MAQS) which FSCO developed in 2007 in consultation with stakeholders and industry participants.
 
Developed to meet consumer protection measures set out in the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA), the MAQS set out the minimum competencies a individual must possess in order to become licensed.
 

Course providers and the applicaton process

 
The Program is delivered by independent Providers that have been approved by the Superintendent.
 
Potential course providers can submit an application to FSCO at any time. Applications must outline experience in delivering educational services related to the mortgage broking industry. FSCO reviews the applications based on a set of approval criteria such as items relating to the design and maintenance of the course and examination, course and examination delivery, administration and ongoing monitoring. The approval criteria sets FSCO's acceptable standard for mortgage agent education in Ontario and instills fairness among potential mortgage agents.
 
Regardless of their chosen Provider, individuals will receive the same degree of training and will be at the same proficiency level when taking the exam.
 
FSCO approves Provider applicants based on their ability to demonstrate that they have the capacity and competence to deliver a quality education program due to past experience.
 
Approved Providers must sign a Letter of Intent that requires them to adhere to the established approval criteria.
 

Audit methodology

 
The current Program has been operating since 2008. Before the audit, market participants voiced perceptions that some Providers lack control over, and consistency in, their course content and delivery.
 
In August 2010, FSCO’s Executive Director, Licensing and Market Conduct, wrote to the Providers advising them of the upcoming audit and that its objectives were to:
 
  • confirm that Providers are operating their program in accordance with their signed Letter of Intent;
  • ensure the course and examination are designed and delivered according to the common proficiency standards as set out in the MAQS; and
  • ensure Providers have appropriate governance and oversight systems in place for the delivery of the Program.
FSCO used a risk-based approach to conduct the audit of approved Providers, based on a three-phase audit methodology.
 
  1. Gathering information - FSCO required Providers to confirm that they continue to meet the terms and conditions as set out in their Letter of Intent. Providers were to inform FSCO of any changes to their Program since approval of their submission.
  2. Development of an examination program - FSCO developed a risk-based audit compliance program in order to validate and collect reasonable and appropriate audit evidence, including gather information on whether Providers had adequate governance structures in place.
  3. On-site examinations - On-site examinations of all participants were conducted in accordance with the audit compliance program. Activities included personnel interviews; class and examination observation; reviewing policies and procedures and other sources of information to support the audit methodology.

General findings

 
In general, the audit found Providers to be compliant in delivering the Program in alignment with the MAQS and FSCO’s approval criteria and expectations. At the same time, the audit found areas for improvement for example:

  • Provider practices in deliverying the program were different from those outlined in the initial application.
  • The need for Providers to operationalize or strengthen internal controls over examination administration and security.
  • Inconsistent delivery of the Program across Providers as a result of varying interpretations of the established approval criteria.
  • The lack of Providers’ documented corporate governance and oversight systems, including policies and procedures to support quality assurance.
 
As part of the audit process, FSCO met with each Provider to develop a plan of action to address the areas for improvement.
 
Since the audit, no further concerns have arisen. FSCO will leverage other opportunities to engage with Providers, such as the submission of applications for providing the Continuing Education course, to ensure compliance with the approval criteria and expectations.
 

Conclusion

 
FSCO's first audit of the mortgage agent course Providers offered valuable insights on practices in Program delivery and operations which FSCO is using to inform future training standards for mortgage agents and for other FSCO-regulated sectors.
 
While Providers were generally compliant, there is always room for improvement and FSCO will use other opportunities to engage with Providers and monitor compliance in the lead-up to a full audit.
 
FSCO will also ensure that its approval criteria and course curriculum remain current so that the Program is delivered in a fair and consistent manner while meeting the consumer protection requirements set out in the MBLAA, as well as the expectations of the Superintendent.

 
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