OSC accepts $11M Home Capital settlement

Investors weren’t told quickly about fraudulent activities of some brokers

TORONTO — Ontario’s securities watchdog approved a settlement Wednesday with Home Capital Group Inc. and three former executives who failed to tell investors quickly and completely about fraudulent activity by some mortgage brokers associated with the alternative lender.

As a result of the settlement, about $11 million could flow through the Ontario Securities Commission to shareholders covered by a related class-action suit that’s awaiting court approval.

The agreement is conditional on the Ontario Superior Court accepting a settlement worth about $29.5 million including the money available through the OSC process.

An OSC lawyer told a hearing the commission needed to send a clear message that public companies are legally obligated to disclose important information quickly and in a form investors can use.

Lawyers for the company and three men said little during the 90-minute hearing, except to point out their clients had kept Home Capital’s board informed and received outside professional advice about their disclosure requirements.

But OSC vice-chair Grant Vingoe, who read out the three-member panel’s decision, said a public company’s disclosure of material changes “is not a discretionary decision from management, but a regulatory requirement and a public responsibility.”

He said Home Capital failed to reveal the termination of the brokerage agreements — representing about 10 per cent of Home Capital’s 2014 mortgage originations — until mid-2015, more than two months later than it should have.