Home Capital Group Inc. Settlement with the OSC: Lessons Learned

On August 9, 2017 the Ontario Securities Commission (OSC) approved a settlement agreement entered into by Home Capital Group Inc (HCG), a reporting issuer in the residential and commercial lending business, Gerald Soloway (Soloway), its former founder and CEO, Robert Morton (Morton), its former CFO and  Martin Reid (Reid), its former President. Both Morton and Reid were also members of the Company's Disclosure Committee at the relevant time.

The settlement resolves allegations made by OSC Staff that, inter alia,

1. over a period of several months in 2015, HCG materially misled its shareholders about the reason for a decline in the number of its new mortgage originations by failing to disclose until July 10, 2015 that it had terminated 3 underwriters, 2 brokerages and 30 brokers because of its discovery of falsified loan applications in its broker channels.  The terminated brokers and brokerages accounted for approximately 10% of HCG's 2014 originations;