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Re: Gregory Burke

Agreed Statement of Facts

I. INTRODUCTION

  1. By Notice of Hearing dated May 24, 2017, the Mutual Fund Dealers Association of Canada (“MFDA”) commenced a disciplinary proceeding against Gregory Burke (“Respondent”) pursuant to ss. 20 and 24 of MFDA By-law No. 1.
  1. The Notice of Hearing sets out the following allegation:
    1. Allegation #1: Between August 2011 and November 2015, the Respondent sent written communications to seven clients containing misleading or incomplete information, unwarranted or exaggerated claims, and/or failing to identify the material assumptions upon which the conclusions were based, contrary to MFDA Rules 2.8.2 and 2.1.1.

II. IN PUBLIC/IN CAMERA

  1. The Respondent and Staff of the MFDA (“Staff”) agree that this matter should be heard in public pursuant to Rule 1.8 of the MFDA Rules of Procedure.

III. ADMISSIONS AND ISSUES TO BE DETERMINED

  1. The Respondent has reviewed this Agreed Statement of Facts with attached Appendix “A” (“Agreed Statement of Facts”), and admits the facts set out in Part IV herein. The Respondent admits that the facts in Part IV constitute misconduct for which the Respondent may be penalized on the exercise of the discretion of a Hearing Panel pursuant to s. 24.1 of MFDA By-law No. 1.
  1. Staff and the Respondent jointly request that the Hearing Panel determine, on the basis of this Agreed Statement of Facts, the appropriate penalty to be imposed on the Respondent including:
    1. a reprimand (if any), pursuant to s. 24.1.1 (a) of MFDA By-law No. 1
    2. a fine (if any) to be paid by the Respondent, pursuant to s. 24. 1.1(b) of MFDA By-law No. 1;
    3. the length of a suspension, revocation, or prohibition (if any) to be imposed on the Respondent, pursuant to s. 24.1.1 (c) – (e) of MFDA By-law No. 1;
    4. any other conditions to be imposed on the Respondent (if any), pursuant to s. 24.1.1 (f) of MFDA By-law No. 1; and
    5. an amount for costs (if any) of the investigation and hearing to be awarded against the Respondent, pursuant to s. 24.2 of MFDA By-law No. 1.
  1. Staff is seeking a fine in the amount of at least $20,000 pursuant to s. 24. 1.1(b) of MFDA By-law No. 1, and costs of $5,000 pursuant to s. 24.2 of MFDA By-law No. 1.
  1. The Respondent is seeking a reprimand, pursuant to s. 24.1.1 (a) of MFDA By-law No. 1.

IV. AGREED FACTS

  1. Staff and the Respondent agree that submissions made with respect to the appropriate penalty are based only on the agreed facts in Part IV and the documents attached as Appendix “A”, and no other information or documents. In the event the Hearing Panel advises one or both of Staff and the Respondent of any additional facts it considers necessary to determine the issues before it, Staff and the Respondent agree that such additional facts shall be provided to the Hearing Panel only with the consent of both Staff and the Respondent. If the Respondent is not present at the hearing, Staff may disclose additional relevant facts, at the request of the Hearing Panel.
  1. Nothing in this Part IV is intended to restrict the Respondent from making full answer and defence to any civil or other proceedings against him.

Registration History

  1. The Respondent has been registered as a mutual fund salesperson since January 1998.
  1. Since December 2, 2009, the Respondent has been registered as a mutual fund salesperson (now known as a dealing representative) with Equity Associates Inc. (“Equity”), a Member of the MFDA. The Respondent has been registered with Equity in the following provinces during the following time periods:
    • December 2, 2009 to present: Ontario and Nova Scotia;
    • December 2, 2009 to December 23, 2011 and June 28, 2016 to present: Alberta; and
    • December 2, 2009 to December 23, 2011: Newfoundland and Labrador
  1. From January 2008 to November 30, 2009, the Respondent was registered in Alberta, Newfoundland and Labrador, Nova Scotia, and Ontario as a mutual fund salesperson with FundEX Investments Inc., a Member of the MFDA.
  1. From June 2004 to January 10, 2008, the Respondent was registered in Alberta, Newfoundland and Labrador, Nova Scotia, and Ontario as a dealing representative with HollisWealth Advisory Services Inc. (formerly Dundee Private Investors Inc.), a Member of the MFDA.
  1. At all material times, the Respondent carried on business from a sub-branch location in Halifax, Nova Scotia.

Misleading Client Communications

  1. From August 22, 2011 to November 25, 2015, the Respondent sent client communications to seven clients of Equity with respect to investments that the clients held, or investments that the Respondent was recommending to them, which included the following statements:

Date of email or
letter

Client

Content

Appendix Tab

August 22, 2011
Letter

RB

“I have hired the best portfolio managers in Canada to manage our funds…”

“We are 99% invested in Canada with the remainder in the U.S. in high yield corporate bonds. This month we have spent 8% of our cash during this correction taking advantage of the great buys”

“…in 2008 when the TSX went down to 7,200 points, a decrease of -52% on the TSX. Our portfolio fell -22%. The TSX came up -25% and we came up a plus 7%.”

“If you began a T-SWP in December 2007 you would be receiving $60k per annum, tax deferred.”

1

February 18, 2013
Email

GB & MB

“$100,000 invested today at 8% over 12 years should give you a return of $251k, enabling you to withdraw $20k net, taxed deferred over twenty years…”

2

November 10, 2013
Email

JM & HM

“TSWP funds to avoid non-realized capital gains, monies being distributed on an 8% ROC (return of capital) basically avoiding any taxes over the next twenty years…”

“I may suggest that if given an opportunity to payout your mortgage providing not attached to another interest bearing loan it would be to your benefit to pay it off, borrow against your house to reinvest using the interest for a tax deduction Total interest paid $71k giving you a tax refund of $31,600 over a period of five years…”

3

October 14, 2014
Email

RB[1]

“…in 2013 the market climbed 7%, but we gained 28%”

“We will always outperform the markets on the way up.”

“…I can assure you that with all the volatility we will double our investments in 10 – 12 years”

4

March 25-26, 2015
Email

AB

“…I will do a comparable analyst mine vs. GWL. Most pension funds are managed using a diversified balanced fund, on that alone I can blow theirs out of the ball park even in a downturn.”

5

  1. The client communications set out above:
    1. were untrue or misleading;
    2. failed to explain the risks, potential costs, or losses associated with the recommendations, including leveraged investment recommendations;
    3. made unwarranted or exaggerated claims or conclusions or failed to identify the material assumptions made in arriving at these conclusions; and/or
    4. failed to indicate the source of the information, such as providing complete information about how the proposed returns would be achieved on the investment recommendations the Respondent made to the clients.
  1. The Respondent states that all of the clients referred to above are long-term clients of the Respondent, whose mutual fund accounts the Respondent has serviced for a period of 10 to 19 years. The clients are well-educated and have professional backgrounds.
  1. The Respondent states that the client communications were accompanied by articles and other documents, which provided context to his statements.
  1. No investments were made by the clients as a result of the communications in issue.
  1. There have been no client complaints to the MFDA or Equity in this matter/

Misconduct Admitted

  1. By engaging in the conduct described above, the Respondent admits that:
    1. between August 2011 and November 2015, the Respondent sent written communications to seven clients containing misleading or incomplete information, unwarranted or exaggerated claims, and/or failing to identify the material assumptions upon which the conclusions were based, contrary to MFDA Rules 2.8.2 and 2.1.1.

Additional Factors

  1. The Respondent resides in Lucasville, Nova Scotia and is 64 years old. The Respondent states that he wishes to continue as a dealing representative within the mutual fund industry.
  1. Equity conducted an investigation of this matter, and on April 15, 2016, issued a warning letter to the Respondent. Equity also took steps to increase its review of communications issued by the Respondent to clients.
  1. The Respondent has not previously been the subject of MFDA disciplinary proceedings.
  1. The Respondent has cooperated with MFDA Staff throughout the investigation and the disciplinary proceedings.

Execution of Agreed Statement of Facts

  1. This Agreed Statement of Facts may be signed in one or more counterparts, which together, shall constitute a binding agreement.
  1. A facsimile copy of any signature shall be effective as an original signature.

[1] This refers to the same client RB as identified in the letter sent August 22, 2011.

  • Gregory Burke
    Gregory Burke

    Mutual Fund Dealers Association of Canada

    121 King St. West, Suite 1000

    Toronto, ON M5H 3T9

    Telephone: 416-945-5134

    E-mail: mailto:corporatesecretary@mfda.ca

  • “Shaun Devlin”

    Staff of the MFDA
    Per:  Shaun Devlin
    Senior Vice-President,
    Member Regulation – Enforcement

567754 v1


Appendix “A”

Available Upon Request

Contact the Office of the Corporate Secretary at hearings@mfda.ca