Unregistered B.C. mortgage broker who ignored 'cease and desist' order fined $50K

A mortgage application form is seen in this stock image. (Shutterstock.com)

A B.C. man who operated as an unregistered mortgage broker for more than two years has been fined $50,000 by a provincial regulator.

Justin Phu Pham and his company JP Elite Mortgage admitted to continuing to conduct business after their registrations expired in 2016, despite a cease and desist order from the provincial Registrar of Mortgage Brokers in December 2017.

While they admitted misconduct, Pham and JP Elite sought a lower penalty of $25,000, while the BC Financial Services Authority sought the maximum fine of $50,000, plus more than $13,000 in investigation expenses.

In a sanctions decision issued Jan. 3, which wasn't posted online until this week, The BCFSA's chief hearing officer Andrew Pendray rejected Pham's arguments and imposed the stiffer penalty.

'A clear pattern of misconduct'

According to the decision, Pham's registration expired in October 2016, and his company's expired in December of the same year.

As early as March 2017, he was informed in correspondence with the BCFSA's predecessor that he was "not permitted to conduct any mortgage broker activity."

Despite this, according to an agreed statement of facts referenced in the decision, Pham continued to present himself as a mortgage broker with JP Elite in 2017, 2018 and 2019.

The decision indicates he began working with another broker, with whom he was in a relationship and cohabitating at the time, in June 2017.

He used his partner's credentials to log into an electronic platform and submit mortgage applications on behalf of borrowers. She was unaware, at the time, that Pham was no longer a registered mortgage broker, according to the decision.

Later, in December 2017, Pham contacted his former spouse – who was also a mortgage broker – and informed her that he was no longer a practising broker, something he blamed on "issues regarding transfer or registration of licensing."

"Mr. Pham also advised (his ex) at that time that he would be unable to provide her with child support given his registration difficulties," the decision reads.

"Mr. Pham informed (her) that, instead, he would provide her with referrals and assist her."

Around the same time, the precursor to the BCFSA had become aware of Pham's unregistered activities and sent him a cease and desist order. He did not tell his former spouse about the order.

In January 2018, the regulator sent an "industry alert" to all registered mortgage and submortgage brokers advising them of the cease and desist order against Pham, but he continued to provide referrals to his ex-spouse and submit applications on behalf of clients.

The sanctions decision describes Pham's behaviour as "a clear pattern of misconduct" that lasted "for a period of more than two years."

15 transactions and 22 borrowers

Pendray concluded that Pham and JP Elite's misconduct was "serious in nature," noting that they were "experienced" and "well aware of the need to be registered."

"Mr. Pham, and by extension JP Elite, simply chose to, essentially, ignore the requirements of the regulatory regime for more than two years," the decision reads.

"Over the course of that period of time, his unregistered activities involved at least 15 transactions (which he has admitted to in this hearing), and 22 borrowers."

Some of the parties to transactions involving Pham's unregistered activities suffered losses, according to the decision, which also notes that Pham profited from misrepresenting himself as a mortgage broker during the period in question.

"I agree with the submissions of BCFSA that Mr. Pham’s intentional carrying on of business while unregistered, even after the issuing of the cease and desist order, demonstrates a lack of governability," the decision reads.

"In my view, Mr. Pham’s flagrant disregard of clear directions from the regulator to cease engaging in business as a submortgage broker and mortgage broker, is the type of behaviour that requires specific deterrence."

Pendray also rejected the suggestion that there were mitigating factors that could explain Pham's conduct and necessitate a lesser penalty.

While Pham and JP Elite had no disciplinary history with regulators while they were registered, the duration and severity of their misconduct negated any credit they would have received for previous good behaviour, the hearing officer concluded.

Likewise, Pendray concluded Pham's belief that it was "only a matter of time" before his registration would be reinstated was not a justification for his conduct.

"I accept that Mr. Pham was experiencing financial difficulties around and subsequent to the time of the expiration of the registrations," the decision reads. "While I am sympathetic to that fact, I do not consider that this situation of financial hardship can be accepted as a mitigating factor of any significance."

Pendray was less sympathetic to the notion that the industry alert issued about the cease and desist order had harmed Pham's employment opportunities.

"The difficulty that the cease and desist order may have caused in respect of Mr. Pham’s ability to obtain future employment is a difficulty that is of his own creation," the decision reads.

Pendray ordered Pham and his company to pay a $50,000 administrative penalty to the BCFSA, as well as $13,300.49 that the regulator sought as partial repayment for its investigative costs.