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Noah Zivitz

Managing Editor, BNN

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The Ontario Securities Commission approved the terms of a settlement with Home Capital Group (HCG.TO), former CEO Gerald Soloway, former President Martin Reid and former CFO Robert Morton on Wednesday for their respective roles misleading investors about mortgage fraud in 2015. 

While the terms of the agreement are consistent with the preliminary framework that was reached in June, paperwork released by the regulator spells out mitigating factors presented by the embattled lender and its former execs in an attempt to reach a settlement and spare themselves from more severe monetary penalties and punishments.

Here are some of those factors, according to the formal settlement:

  1. Home Capital reported "irregularities" in its mortgage paperwork to mortgage insurers CMHC and Genworth Canada, in addition to the country's top banking regulator, OSFI.
  2. Home Capital turned to outside advisors in May 2015 to decide whether the company needed to publish a clarification as a result of management remarks on an earnings conference call. However, in the end, "no clarifying statement was issued." 
  3. Home Capital fired Reid, replaced Morton and brought new directors into its boardroom.

The settlement also requires Home Capital to review all of its disclosure practices and file a report on its findings to the OSC within the next year.

As far as why the OSC agreed to the settlement, paperwork released on Wednesday notes the pact was "highly negotiated." It also points out the value in clearing lingering doubt that was weighing on Home Capital. 

"A settlement in this matter also curtails the uncertainty affecting the market for HCG's securities and the negative effect this uncertainty has on investors," according to a document signed by OSC Vice-Chair Grant Vingoe. 

"A financial institution should have a compelling interest in avoiding the loss of confidence resulting from regulatory violations and the proceedings that rightly follow."