Staff with Ontario's securities regulator alleged on Wednesday that two former CEOs and the current CFO of Home Capital Group Inc. broke the law in their handling of a scandal involving falsified loan applications.
The Ontario Securities Commission issued a notice of hearing and statement of allegations naming the company and former chief executives Gerald Soloway and Martin Reid. It also named Robert Morton, who is still CFO of the Toronto-based mortgage lender.
The allegations were not entirely unexpected. Home Capital said in February that it received an enforcement notice indicating it was the preliminary conclusion of OSC staff that the company failed to meet its continuous disclosure obligations in 2014 and 2015. At the time, it was dealing with a scandal in which income information on some loan applications had been falsified, leading it to suspend some brokers.
On Wednesday, OSC staff made various allegations about how it said the company and the three men misled shareholders. They alleged Soloway and Morton certified financial statements that did not set out the material facts known to the company and the two men at the time. Soloway and Reid also made statements on a 2015 conference call that were materially misleading or untrue, staff alleged.
The OSC staff are seeking to prevent the men from acting as directors or officers. It also wants to make them and the company pay administrative penalties.
Reached by telephone, Reid said he had "no comment" regarding the allegations.
Laura Lepore, assistant vice-president of investor relations at Home Capital, said the company would be issuing a response shortly as it "doesn't want this hanging in the air." When asked to speak directly with Morton, another Home Capital official said the company's communications representative would handle all responses.
Soloway could not immediately be reached for comment.
Last month the company terminated Reid as CEO, saying it needed a leader who could bring a renewed operational discipline and an emphasis on risk management and controls. Reid had taken over as CEO in May 2016.