Home Capital Group Inc. last Wednesday approved to pay a total of $30.5 million to settle the charges on the OSC allegations of misleading disclosure and a class-lawsuit in a twofold agreement outline to help recover the viable takeover target.
Brenda Eprile, board chairwoman of the Home Capital Group Inc. stated “These settlements will enable us to move forward with regaining the confidence of our depositors and shareholders and creating value for all our stakeholders.”
“Home Capital will accept full responsibility for failing to meet its disclosure obligation to the marketplace and appreciates the importance of the serious concerns raised by the (Ontario Securities) Commission with respect to continuous and timely disclosure,” she added. Home Capital “acknowledges that the Commission is not to blame for the events of recent months involving its liquidity position.”
According to the Financial Post “The regulatory settlement with staff of the Ontario Securities Commission stems from accusations Home Capital misled investors for months about an internal probe in 2014 and 2015 that led the alternative mortgage lender to cuts ties with 45 brokers over falsified income documentation used for some real estate loans.”
Martin Reid, former chief executive of Home Capital; Gerald Soloway, founder; and former chief financial officer Robert Morton are all part of the proposed settlement agreement with OSC staff, which must be approved by a panel of commissioners at Canada’s largest capital markets watchdog set to convene at a hearing August 9.
Home Capital agreed to pay an administrative penalty of $10 million in the OSC settlement while Soloway will pay $1 million and both of the two others will pay $500,000.
Soloway, Morton, and Reid will all be suspended from their jobs if the proposed settlement is approved. Soloway will be prohibited from acting as a director or officer of any reporting issue for a period of four years. Both the other two will also be reprimanded and prohibited from acting as a director and office of any reporting issue for two years.
“The company’s shares climbed seven per cent Wednesday to close at $12.13, following a Reuters report that Home Capital was close to reaching a new funding arrangement with a syndicate of banks to replace an emergency $2 billion line of credit extended by a syndicate led by the Healthcare of Ontario Pension Plan (HOOPP). Analysts said the emergency loan had an effective interest rate of 22.5 per cent,” noted the Post.