Ontario lawyers are required to manage financial transactions and maintain detailed records in accordance with the regulations set by the Law Society of Ontario (LSO). The Form 9E: Report on the Investment is a key document within this framework, particularly relevant for lawyers involved in handling investments in mortgages or charges on real property. This article will explain what Form 9E is, its purpose, and how it integrates with By-Law 9.
Form 9E is an official document used by Ontario lawyers to report on investments in mortgages or charges on real property held in trust for clients. The use of Form 9E is specifically detailed in section 24 of By-Law 9, which sets out the requirements for managing and documenting these types of investments. This form serves as a comprehensive record of the investment details, ensuring that all pertinent information is accurately recorded and verified.
Before reading on, you might be interested in these articles as well:
How to fill out the Law Society of Ontario’s Form 9A: Electronic Trust Transfer Requisition
How to fill out the Law Society of Ontario’s Form 9B: Authorization of Withdrawal by Teranet
How to fill out the Law Society of Ontario’s Form 9D: Investment Authority
Purpose of the Form 9E
The primary purpose of Form 9E is to provide a standardized report on the investment of trust funds in mortgages or charges. This ensures that every aspect of the investment is documented, including the description of the real property, the amount and terms of the mortgage or charge, and the particulars of the registration. Additionally, the form requires details about the lender, the client for whom the investment is made, and the lawyer responsible for handling the transaction. By compiling all this information in one place, Form 9E helps maintain transparency and accountability in the management of clients’ investments.
Form 9E plays a crucial role in ensuring compliance with By-Law 9 by providing a clear and detailed record of each investment transaction. This is essential for both internal record-keeping and external audits conducted by the LSO. The detailed information captured in Form 9E allows for thorough verification and review, ensuring that all investments are properly authorized and handled in accordance with the law. This helps prevent unauthorized or improper use of trust funds and ensures that clients’ interests are protected.
Option to use a “Reporting Letter” instead
In all private mortgage transactions, whether or not the mortgage was arranged by you, you must complete this form, or, alternatively, you must complete a reporting letter which includes responses to all numbered items in this form.
If you choose to complete this form, you must complete every numbered item on this form, with “n/a” being entered if the numbered item is not applicable.
Instead, if you complete a reporting letter, you must respond to all numbered items in this form in your reporting letter. If a numbered item is not applicable, you must include it in your reporting letter and indicate that it is not applicable.
After completion, an original of this form, or the reporting letter, must be delivered forthwith to each lender. The form may be entered on a word processor or, in the case of TrustReq, on an cloud based web application.
When you don’t need to use a Form 9E
There are specific circumstances under which the completion and submission of Form 9E are not required. According to section 24(2) of By-Law 9, certain types of lenders and transactions are exempt from the requirements that mandate the use of Form 9E. For instance, if the lender is a bank listed in Schedule I or II to the Bank Act (Canada), a licensed insurer, a registered loan or trust corporation, a subsidiary of any of these entities, a pension fund, or any other entity that lends money in the ordinary course of its business, then Form 9E is not necessary. In such cases, the lender must have entered into a loan agreement with the borrower, signed a written commitment setting out the terms of the prospective charge, and provided the lawyer with a copy of this commitment before the advance of money to or on behalf of the borrower.
Form 9E is also not required if the lender and borrower are not at arm’s length, meaning there is a close personal or business relationship between the two parties. Additionally, if the borrower is an employee of the lender or of a corporate entity related to the lender, the form is not needed. Another exception applies when the lender has executed the Investor/Lender Disclosure Statement for Brokered Transactions, approved by the Chief Executive Officer under subsection 54(1) of the Mortgage Brokerages, Lenders and Administrators Act, 2006, and has given the lawyer written instructions to accept this executed disclosure statement as proof of the loan agreement.
Furthermore, Form 9E is not required if the total amount advanced by the lender does not exceed $6,000. Finally, if the lender is selling real property to the borrower and the charge represents part of the purchase price, the completion of Form 9E is also not necessary.
Conclusion
Lawyers are required to maintain detailed financial records, and Form 9E is an integral part of these records. It supports the monthly reconciliations and audits stipulated in By-Law 9, helping to ensure that all trust account transactions are accurately documented and reviewed. During LSO audits, Form 9E provides critical evidence of proper investment management, demonstrating that the lawyer has complied with all regulatory requirements.
By understanding and correctly utilizing Form 9E, lawyers can safeguard their practice against potential issues and uphold the trust placed in them by their clients. For any Ontario lawyer or legal professional, being well-versed in the requirements and procedures outlined in By-Law 9, including the proper use of Form 9E, is essential for maintaining compliance and providing the highest standard of service to their clients.
