Last week, Canadian securities regulators introduced several changes to syndicated mortgage rules aimed at better protecting investors.
The Canadian Securities Administrators (CSA) proposed to remove exemptions that allow the investments to be sold without registering with regulators or filing a prospectus in certain areas.
Along with much tightened disclosure requirements, these changes are intended to “enhance investors’ ability to make informed decisions when purchasing these investments,” CSA chair and president Louis Morisset said, as quoted by CBC News.
The regulatory revisions would also require an appraisal by an “independent, qualified appraiser” of the property to be invested on.
The proposed rule changes are available for public comment until June 6.
Toronto-based real estate lawyer David Franklin estimated that around $1 billion so far has been lost by Ontario investors in syndicated mortgages.
On April 2017, an investigation by CBC Toronto found that 120 members of the GTA’s Chinese community lost nearly $9 million in syndicated mortgage investments after the person they gave the money to loaned it to a convicted fraudster.
Fraud examiner Bill Vasiliou said at the time that while there are legitimate syndicated mortgage transactions, unscrupulous individuals can also use these investments to enable their nefarious activities.