TORONTO — 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.
In a statement late on Wednesday, Home Capital said it believes that it satisfied its disclosure requirements and vowed to defend itself against the allegations, which it said are without merit.
"Home Capital remains focused on serving our customers, carrying on our business and executing on our strategy of creating prudent, profitable growth," Kevin Smith, chairman of the Home Capital board of directors, said in the statement.
"Because this is a regulatory matter, we will not be commenting further on the OSC proceeding at this time."
Reached by telephone, Reid said he had "no comment" regarding the allegations.
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.