* Hearing adjourned until June 2
* Home Capital shares down 12 percent
* OSC provided 22,000 documents, 10 witnesses
(Updates share price)
TORONTO, May 4 Home Capital Group
shares fell 12 percent on Thursday after a regulatory hearing to
investigate claims the mortgage lender and three of its
long-time executives had misled investors was adjourned until
The Ontario Securities Commission (OSC) has accused Home
Capital of hiding fraudulent mortgage broker activity from
shareholders for months and the allegations have already
contributed to Canada's largest non-bank lender suffering a
share-price nosedive and run on deposits, prompting it to secure
C$2 billion ($1.5 billion) emergency funding last week.
The delay means uncertainty over the case will drag on for
An initial hearing on Thursday was adjourned until June 2
after lawyers acting for Home Capital and the executives said
they needed time to sift through 22,000 documents provided by
the OSC and review 10 names presented by the OSC as witnesses.
The parties agreed to a second hearing on June 2, at which
they will prepare an Agreed Statement of Facts, which is
designed to minimize disputed facts at a later hearing scheduled
for July 14 to examine the merits of the case.
Shares in Home Capital were trading at C$6.01 at 3:23 p.m.
EDT (1923 GMT), down 12.1 percent.
The OSC first detailed the accusations on April 19. If the
panel rules that the respondents broke securities law they can
be banned from acting as a director or officer of any issuer,
while the company itself could face de-registration.
The OSC alleges that the company and its senior leadership
misled investors in an annual report released in February 2015
and a quarterly update in May that year in which they blamed a
decline in mortgage originations on external factors including
the competitive mortgage marketplace.
Home Capital did not acknowledge the review and subsequent
terminations until July 10, 2015. The lender, which offers
mortgages to borrowers who do not meet the lending requirements
of the country's biggest banks, has said that it believes its
disclosures satisfied requirements, and that it intends to
vigorously defend itself.
Late on Wednesday, rating agency DBRS downgraded Home
Capital's senior debt rating, reflecting concerns over the
recent events, including the delay in releasing its first
The OSC panel is an administrative tribunal that decides
whether the evidence submitted proves that the allegations are
more likely than not to be true.
($1 = 1.3728 Canadian dollars)
(Reporting by Alastair Sharp; Editing by Marguerita Choy)