The Financial Services Regulatory Authority of Ontario, or FSRA, has imposed administrative monetary penalties of $60,000 on mortgage broker Harold Gerstel and $150,000 on Esther Gerstel Inc. (EGI), and issued a compliance order restricting EGI from conducting mortgage lending unless it complies with Ontario law.
The action follows a contested hearing before the Financial Services Tribunal, which found that both Gerstel and EGI failed to comply with mandatory regulatory obligations intended to protect borrowers and lenders.
“Buying or refinancing a home is one of the biggest financial decisions most people will ever make, and they deserve to work with professionals they can trust,” said Elissa Sinha, director of litigation and enforcement at FSRA. “FSRA will not hesitate to take action when borrowers are intentionally exposed to serious harm. The Tribunal's decision sends a clear message that mortgage agents, brokers and lenders cannot operate outside Ontario's licensing system and deny consumers the regulatory safeguards they are entitled to.”
The Tribunal found that Gerstel dealt in mortgages for remuneration outside his brokerage when he arranged for EGI, contrary to the Morgage Brokerages, Lenders and Administrators Act of 2006. Under that law, brokers and agents are required to conduct all mortgage brokering activity through the brokerage with which they are licensed.
EGI was found to have carried on business as a private mortgage lender in Ontario while not being licensed, and without qualifying for an exemption.
According to the Tribunal, borrowers suffered significant harm as a result of the conduct of Gerstel and EGI, and both acted intentionally and recklessly while receiving economic benefits.
The decision stated that Gerstel dealt in mortgages for remuneration with six borrowers who were not clients of his brokerage, Harold the Mortgage Closer Inc. (HTMC). Those borrowers were therefore denied protections under the Act, including suitability assessments. Gerstel referred all six borrowers exclusively to EGI for private loans and then dealt with the borrowers on behalf of EGI.
The new penalties and compliance order follow earlier enforcement steps against Gerstel and his brokerage.
FSRA previously revoked and refused the licenses of Gerstel and HTMC and ordered them to pay administrative penalties totaling $70,000 for failing to cooperate with FSRA’s investigation and for providing false information to the regulator. That prior Tribunal decision is currently before the court on judicial review.
For insurers, MGAs, and brokers operating in mortgage, real estate, and professional lines, the case underlines FSRA’s willingness to use significant monetary penalties and licensing action where it finds deliberate noncompliance with the province’s licensing and consumer protection framework.
The findings that borrowers were steered outside the licensed brokerage channel and denied suitability assessments highlight conduct that can trigger regulatory sanctions as well as potential civil claims and coverage questions under errors and omissions and directors and officers policies.
The decision also reinforced FSRA’s expectation that all mortgage brokering activity in Ontario be conducted through properly licensed entities, with borrowers receiving statutory safeguards on suitability, disclosure, and oversight.
For compliance and underwriting teams, it is likely to be viewed as another indicator that regulators are closely scrutinizing how intermediaries structure their businesses and whether any activity is occurring off‑book or through unlicensed entities.
