Toronto-based First Swiss Mortgage Corp. has been placed in receivership by the Ontario Superior Court of Justice after the province’s mortgage regulator filed an urgent receivership application against the company on Mar. 16.
The Financial Services Regulatory Authority of Ontario (FSRA) filed the application following serious allegations of wrongdoing against the mortgage broker, which included underreporting the value of mortgages under administration, discharging mortgages held in trust without notice or repayment, and failing to register certain mortgages.
First Swiss ceases operations, files for bankruptcy
First Swiss notified investors and the public that it had ceased operations and made an assignment in bankruptcy on Mar. 15.
Court documents revealed that investors allege First Swiss failed to send statements of mortgage investments, failed to make payments when due, was not responding to inquiries and falsely representing that mortgages were registered on title.
Court documents reveal investors’ complaints
Dancap Private Equity Inc. is one of the investors who invested in mortgages through First Swiss, court documents detail.
According to an affidavit sworn by a representative of Dancap, they had a relationship with First Swiss dating back to 2013 and had funded approximately 85 residential second mortgages with the company.
As of Dec. 31, 2022, Dancap had 36 mortgage investments in Ontario and 24 in British Columbia through First Swiss as a broker and administrator, with a total principal amount of approximately $6.7 million.
However, Dancap claims that they had not received a distribution for their Dec. 20, 2022 statement or any later periods, despite having received payments for all monthly statements previously.
First Swiss cites banking issues, restructuring process
When Dancap inquired about the status of the outstanding payments, First Swiss indicated that it was experiencing “banking issues” and later stated that payments would be halted due to a potential “restructuring process.”
Dancap conducted real property searches for various properties over which it was led to believe it held mortgages and discovered that many mortgages were not registered or had been discharged without notice.
According to documents, First Swiss was regulated by FSRA, and in its 2021 Annual Information Return, the company stated that it had 34 mortgages under administration, with a total value of $3.2 million.
Court filings also confirm Reza Nezami-Nia, also known as Reza Nezami, of Richmond Hill, Ont. is listed as the sole officer and director of First Swiss and was also the principal broker on record for the company.
KSV Restructuring appointed as receiver
Elissa Sinha, director of enforcement and litigation at FSRA, stated that the agency’s first priority was consumer protection and that they took immediate action in the public interest.
KSV Restructuring Inc. has been appointed as the receiver and will have the power to secure the assets of First Swiss and investigate its affairs.
The company has also established a case website, which includes materials filed with the court and court orders for access by the public.