This is the Proposal from OREA:
“RECOMMENDATION
#8: Grant RECO the ability to order disgorgement, thereby forcing a registrant to repay all, or some, of the profits earned through a breach of TRESA and its Code of Ethics, ensuring that any proceeds from such breaches are returned to the victims and impacted parties.
The effectiveness of set fines as a deterrent to unethical behaviour has eroded. For many of those who willingly break the rules, these fines are the cost of doing business. Even with fines being increased in TRESA to $50,000 for an agent and $100,000 for brokerages, there is still a financial incentive for bad behaviour. Depending on the transaction and remuneration received, fines may not cover the profits earned from unethical activity.
OREA believes that there is a need to eliminate all financial incentives for bad behaviour, including by granting RECO the ability to order a registrant to repay all or some of any financial gain resulting from a breach of the TRESA Code of Ethics, which is referred to as ‘disgorgement’. These new powers would be administered under RECO’s Complaints, Compliance & Discipline (CCD) process.
Ontario REALTORS® also believe that in order for the disgorgement process to be impactful and as fair as possible, the fines and proceeds of these breaches must be returned to the victims and impacted parties – rather than going into RECO revenues. 77 percent of OREA Members are supportive of allowing the regulator to claw back and return commissions gained through unscrupulous or illegal behaviour.
The disgorgement penalty is used primarily by securities commissions across North America, including the Ontario Securities Commission. As buying or selling a home is one of the largest financial transactions most people will make in their lives, the stakes are even higher when unsuspecting families are defrauded by unethical behaviour. Without a formal mechanism to seek financial remediation outside, Ontarians are left without resolution or forced to pursue a lengthy and expensive legal process. Given the parallels between investments/securities and real estate, the government should expand disgorgement powers to RECO. Adding disgorgement to the penalties that the regulator has at their disposal will deter unethical behaviour for all levels of infractions and breaches of TRESA.”
COMMENT
We are still awaiting this disgorgement provision. It was already proposed, but it would be a good idea to have it implemented as soon as possible. If RECO has a discipline case, then, it would be easy enough to have all or part of the penalty imposed awarded to the client/complainant.
Brian Madigan LL.B., Broker