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Notice of Hearing
File No. 201130



IN THE MATTER OF A DISCIPLINARY HEARING
PURSUANT TO SECTIONS 20 AND 24 OF BY-LAW NO. 1 OF
THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA

Re: Anu Bala Jain



NOTICE OF HEARING

NOTICE is hereby given that a first appearance will take place by teleconference before a
hearing panel (the “Hearing Panel”) of the Central Regional Council of the Mutual Fund Dealers
Association of Canada (the “MFDA”) in the hearing room located at 121 King Street West, Suite
1000, Toronto, Ontario on February 8, 2012 at 10:00 a.m. (Eastern), or as soon thereafter as the
hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against
Anu Bala Jain (the “Respondent”).

DATED this 16th day of December, 2011.

“Jason D. Bennett”

Jason D. Bennett

Corporate Secretary

Mutual Fund Dealers Association of Canada
121 King Street West, Suite 1000
Toronto, Ontario
M5H 3T9
Telephone: 416-943-7431
Facsimile: 416-361-9781
Email: corporatesecretary@mfda.ca

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NOTICE is further given that the MFDA alleges the following violations of the By-laws, Rules
or Policies of the MFDA:

Allegation #1: Between September 2007 and February 2008, the Respondent allowed MRM, an
unregistered individual, to:

i) open new accounts at the Member for 18 individuals with whom the Respondent never
met;
ii) recommend and implement leveraging strategies for these clients; and
iii) recommend and process trades in the accounts of these clients using the Respondent’s
representative code;

Thereby:

a) facilitating stealth advising by MRM, contrary to MFDA Rules 1.1.1(c) and 2.1.1;
b) failing to ensure that she (the Respondent) performed the necessary due diligence to learn
the essential facts relative to the clients and failing to ensure that the investments and the
leveraging strategies were suitable and appropriate for the clients, contrary to MFDA
Rules 2.2.1 and 2.1.1; and
c) failing in her (the Respondent’s) capacity as a branch manger to ensure that business
conducted at the branch was in compliance with MFDA By-laws, Rules and applicable
legislation, contrary to MFDA Rules 2.5.3(b)1 and 2.1.1.

Allegation #2: Between May 26, 2010 and April 14, 2011, in response to a complaint by client
MA, in respect of whom the Respondent was identified as the Approved Person responsible for
servicing client MA’s accounts, the Respondent made false and misleading statements and
omitted to provide other relevant information during the course of investigations by two
Members and by MFDA Staff:

a) in a written statement to MFDA Staff, dated June 3, 2010;
b) in oral statements to compliance staff at two Members; and

1On January 21, 2011, amendments to the numbering and wording of certain MFDA Rules came into effect as a
consequence of which, former MFDA Rule 2.5.3 is now amended and incorporated into Rule 2.5.5.
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c) by fabricating notes of meetings in which she falsely claimed that she had met with client
MA on three occasions in October 2007;

contrary to MFDA Rule 2.1.1 and s. 22.1 of MFDA By-law No. 1.

PARTICULARS

NOTICE is further given that the following is a summary of the facts alleged and intended to be
relied upon by the MFDA at the hearing:

Registration History

1.
From March 31, 2004 to January 18, 2010, the Respondent was registered in Ontario as a
mutual fund salesperson with Global Maxfin Investments Inc. (“Global Maxfin”). While at
Global Maxfin, she was also registered as a branch manager from October 12, 2007 to January
18, 2010.

2.
Prior to working at Global Maxfin, the Respondent was registered with PFSL
Investments Canada Ltd from May 28, 2003 to July 3, 2003.

3.
Since March 15, 2010, the Respondent has been registered in Ontario as a mutual fund
salesperson and branch manager with Queen Financial Group Inc. (“Queen Financial”). On May
24, 2011, following discussions with MFDA Staff concerning the events described herein, Queen
Financial suspended the Respondent’s responsibilities as a branch manager pending the outcome
of this hearing.

4.
Global Maxfin is registered as a mutual fund dealer and an exempt market dealer in
British Columbia, Alberta, Manitoba, Ontario, New Brunswick, Nova Scotia and Newfoundland
and Labrador. Global Maxfin is also registered as a mutual fund dealer in the Northwest
Territories and Nunavut and as a scholarship plan dealer in British Columbia, Alberta, New
Brunswick, Nova Scotia and Newfoundland and Labrador. Global Maxfin became a Member of
the MFDA on June 7, 2002.

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5.
Queen Financial is registered as a mutual fund dealer and an exempt market dealer in
Ontario and as a mutual fund dealer in British Columbia. Queen Financial became a Member of
the MFDA on October 3, 2006.

Allegation #1 – Facilitating Stealth Advising

6.
In September 2007, the Respondent worked from a branch office of Global Maxfin in
Mississauga, Ontario with three other Approved Persons. The Respondent was the branch
manager of the location.

7.
During the summer of 2007, the Respondent met an individual named MRM at a Global
Maxfin event. In 2007, MRM was licensed to sell insurance products through a managing
general agency affiliated with Global Maxfin, but he was not registered to sell securities,
including mutual funds.

8.
In September 2007, MRM told the Respondent that he had some insurance clients who
wanted to purchase mutual funds. MRM asked the Respondent to provide him with the necessary
documentation to open accounts for the individuals at Global Maxfin and to process trades in
those accounts. MRM also requested that the Respondent facilitate this activity by processing all
of the documentation under her Global Maxfin representative code. In exchange for doing so, the
Respondent would be entitled to retain 40% of the sales commissions generated from trading
activity in the individuals’ accounts, and would remit the remaining 60% to MRM. The
Respondent agreed to participate in this arrangement (the “Stealth Advising Arrangement”).

9.
In accordance with Stealth Advising Arrangement, between September 2007 and
February 2008, MRM met with the following 18 individuals in the absence of the Respondent to
complete the account opening and trade processing documentation: Mr. SA, Ms. ARK, Ms. YB,
Ms. RA, Ms. NA, Ms. MN, Ms. FJ, Ms. AMR, Mr. ZA, Mr. SYA, Mr. SA, Mr. MG, Mr. AAK,
Ms. TB, Ms. SM, Mr. MA, Mr. FB, Mr. AZ. MRM provided the completed documentation to
the Respondent, who signed it and submitted it to the Member for processing using her
representative code.

10.
In a number of cases, MRM had recommended that clients borrow money to invest in
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mutual funds, thereby implementing a leveraging strategy for the clients.

11.
By failing to meet with these individuals prior to opening accounts and processing trades
for them, the Respondent failed to fulfill her obligation to:

a) learn the essential facts relative to each client and each order or account accepted;
b) ensure that the acceptance of each order was within the bounds of good business
practice;
c) ensure that each order accepted or recommendation made for each account was
suitable for the client and in keeping with the client’s investment objectives;
d) explain to the individuals the features and risks of using borrowed monies to invest
(leveraging);
e) ensure the leveraging strategy was appropriate for the clients; and
f) ensure that the additional risk disclosure documentation required by MFDA Rule 2.6
was provided to the clients, explained to them and signed by them.

12.
Between September 14, 2007 and March 17, 2008, the Respondent sent 10 cheques to
MRM in payment of his share of the sales commissions earned on the trading activity in the
individuals’ accounts, in accordance with the terms of Stealth Advising Arrangement. The total
amount of the cheques was $21,825, as set out in more detail below:

Date of Cheque
Amount
September 14, 2007
$1,500
September 27, 2007
$2,400
October 13, 2007
$1,800
Date of Cheque
Amount
October 31, 2007
$6,000
November 19, 2007
$2,250
December 17, 2007
$2,400
January 4, 2007
$ 600
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January 31, 2007
$1,440
February 18, 2008
$3,360
March 17, 2008
$ 75
Total $21,825

13.
Based on the 60%-40% commission split called for under the terms of the Stealth
Advising Arrangement, the Respondent retained approximately $14,550 in sales commissions
from the trading activity in the accounts of the 18 clients.

14.
MRM was not registered as a mutual fund salesperson and did not possess the necessary
proficiencies to advise or trade in securities on behalf of the 18 individuals.

15.
There is no evidence that Global Maxfin was aware of the Stealth Advising Arrangement.
As a consequence, at all material times, MRM was not subject to the policies and procedures of,
or supervision by, Global Maxfin.

16.
By participating in the Stealth Advising Arrangement, the Respondent facilitated the
processing of securities related business by MRM, an unregistered individual, through the
accounts and facilities of Global Maxfin. MRM was not in an employer-employee relationship, a
principal-agent relationship or an introducing dealer-carrying dealer relationship with Global
Maxfin, as required by MFDA Rule 1.1.1(c).

17.
During the period that the Stealth Advising Arrangement was in place, the Respondent
was the designated branch manager. In her capacity as the branch manager, the Respondent
failed to ensure that business conducted on behalf of the Member was in compliance with
applicable securities legislation and the By-laws and Rules of the MFDA, contrary to MFDA
Rule 2.5.3.2

18.
On February 21, 2008, after completing the proficiency requirements necessary to
become a registrant, MRM was registered in Ontario as a mutual fund salesperson with Global
Maxfin. As a result, the Stealth Advising Arrangement came to an end.

2 Now MFDA Rule 2.5.5.
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19.
On November 5, 2009, MRM was terminated in good standing by Global Maxfin (which
at that time was unaware of the Stealth Advising Arrangement).

Allegation #2 – The Complaint of MA

20.
On March 15, 2010, the Respondent transferred her registration to Queen Financial.

21.
In April 2010, client MA contacted the Ontario Securities Commission (the “OSC”) and
the MFDA when he learned that MRM had not been registered as a mutual fund salesperson
when he advised client MA and his brother SA to implement a leveraging strategy to purchase
mutual funds for their account at Global Maxfin. Client MA noted that the Respondent’s name
appeared on his Global Maxfin account statements as the Approved Person responsible for his
account but that he had never met her.

The Global Maxfin Investigation

22.
In accordance with its complaint handling obligations pursuant to MFDA Rule 2.11 and
MFDA Policy No. 3, Global Maxfin commenced an investigation after receiving a copy of client
MA’s complaint from the MFDA.

23.
At the time client MA’s complaint was received in April 2010, the Respondent was no
longer an Approved Person with Global Maxfin (she had transferred to Queen Financial on
March 15, 2010). Global Maxfin therefore contacted the Respondent at Queen Financial to
inform her of the complaint and scheduled a meeting with her on May 26, 2010 at Global
Maxfin’s office.

24.
On May 26, 2010, the Respondent attended the meeting at Global Maxfin’s office and
denied the allegations in client MA’s complaint. During an hour of questioning by Global
Maxfin’s compliance staff, the Respondent insisted that she had met with clients MA and SA at
her office on three occasions and she produced copies of handwritten notes from her client file
allegedly recording what occurred during the meetings with clients MA and SA on October 3, 16
and 17, 2007 (the “Notes”).

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25.
On the basis of the information and documentation provided by the Respondent,
including the Notes, Global Maxfin sent a letter to client MA dated June 16, 2010 denying the
allegations in client MA’s complaint.

26.
On June 22, 2010, client MA reasserted to Global Maxfin that he and his brother SA had
never met the Respondent and had never attended a meeting at her office. He informed Global
Maxfin that:

a) all correspondence about investment decisions was exchanged exclusively with MRM
by e-mail;
b) all meetings occurred with MRM at his home (and the Respondent was not present at
any of the meetings); and
c) blank client account forms had been presented to him by MRM to be signed.

27.
Client MA also provided Global Maxfin with copies of several e-mails from MRM that
were received by client MA between September 29, 2007 and October 18, 2007 concerning the
implementation of the leveraging strategy that MRM had recommended to client MA. The
Respondent was not referenced in or copied on any of the correspondence.

28.
On the basis of the additional information provided by client MA, Global Maxfin
reopened its investigation of client MA’s complaint. Global Maxfin contacted additional clients
of the Respondent. Three clients informed Global Maxfin that MRM had implemented
leveraging strategies for them prior to his registration as an Approved Person and indicated that
they had met with MRM and not the Respondent when they set up their leveraged accounts.

29.
Most of the clients whose accounts had been the subject of the Stealth Advising
Arrangement did not respond to Global Maxfin’s inquiries about whether they dealt with the
Respondent or MRM when opening accounts and receiving investment advice.

30.
By letter dated July 27, 2010, Global Maxfin informed client MA that Global Maxfin had
concluded that client MA and his brother, client SA had been provided with investment advice
by MRM before he became an Approved Person.

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The Queen Financial investigation

31.
On May 26, 2010, MFDA Staff informed Queen Financial that the Respondent may have
facilitated stealth advising by an unregistered individual.

32.
When compliance staff from Queen Financial questioned the Respondent about the
MFDA Staff’s concerns, she falsely denied that she had participated in a stealth advising
arrangement.

The MFDA Investigation

33.
On May 26, 2010, MFDA Enforcement Staff sent a request to the Respondent for a
response to the allegations in client MA’s complaint. At the outset of MFDA Staff’s
investigation, Global Maxfin provided MFDA Staff with copies of the Notes that the Respondent
had provided to Global Maxfin.

34.
On June 1, 2010, the Respondent sent a three page response to the MFDA in which she
described client MA’s allegations as “completely baseless, shocking to me and an attempt to
tarnish my image”. The Respondent further stated in her letter that she had met with client MA
in her office three times to provide him with investment advice and to implement a leveraging
strategy in his account. The Respondent also denied that she had ever had a business or
commission splitting arrangement with MRM when MRM was not registered. All of the
Respondent’s assertions were false.

35.
During the course of the MFDA’s investigation, MFDA Staff learned that in November
2010, the Respondent met with client SA and questioned him as to why client MA was
proceeding with his complaint. Client SA informed the Respondent that client MA had no
intention of withdrawing his complaint.

36.
In response to follow-up inquiries by Global Maxfin, the original three clients who had
earlier acknowledged that they had dealt with MRM recanted their statements and denied that
they had ever met with an advisor other than the Respondent.

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37.
On April 14, 2011, at the request of MFDA Staff, the Respondent attended an interview
to provide information relevant to the investigation. In response to questioning by MFDA Staff,
the Respondent admitted, among other things, that:

a) she had entered into the Stealth Advising Arrangement;
b) she has never met client MA;
c) she had never met client MA or SA at the time she allowed account opening
documents and trading in their accounts to be processed under her representative code
in October 2007;
d) she provided false information to the compliance staff at Global Maxfin and Queen
Financial in response to their questions about her conduct; and
e) she fabricated the notes that she had produced to Global Maxfin describing three
purported meetings between her and clients MA and SA in October 2007.

38.
Following the interview with MFDA Staff, in response to an undertaking requested by
MFDA Staff during the interview, the Respondent provided Staff with a list of clients for whom
she had allowed accounts to be opened and trades to be processed under her representative code
under the terms of the Stealth Advising Arrangement. The Respondent also provided copies of
cheques that she had sent to MRM in accordance with the Stealth Advising Arrangement

39.
By providing false and misleading information, and omitting to provide other relevant
information, to MFDA Staff and to compliance staff at Global Maxfin and Queen Financial, and
by fabricating notes of three meetings with clients MA and SA that never occurred and providing
those notes to Global Maxfin, the Respondent attempted to frustrate the MFDA’s investigation
and to interfere with the Members’ handling of client MA’s complaint, contrary to MFDA Rule
2.1.1 and s. 22. 1 of MFDA By-law No. 1.

NOTICE is further given that the Respondent shall be entitled to appear and be heard and be
represented by counsel or agent at the hearing and to make submissions, present evidence and
call, examine and cross-examine witnesses.

NOTICE is further given that MFDA By-laws provide that if, in the opinion of the Hearing
Panel, the Respondent:
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(a) has failed to carry out any agreement with the MFDA;
(b) has failed to comply with or carry out the provisions of any federal or provincial
statute relating to the business of the Member or of any regulation or policy made
pursuant thereto;
(c) has failed to comply with the provisions of any By-law, Rule or Policy of the
MFDA;
(d) has engaged in any business conduct or practice which such Regional Council in its
discretion considers unbecoming or not in the public interest; or
(e) is otherwise not qualified whether by integrity, solvency, training or experience,

the Hearing Panel has the power to impose any one or more of the following penalties:

a) a reprimand;

b) a fine not exceeding the greater of:

i. $5,000,000.00 per offence; and

ii. an amount equal to three times the profit obtained or loss avoided by such
person as a result of committing the violation.

c) suspension of the authority of the person to conduct securities related business for
such specified period and upon such terms as the Hearing Panel may determine;

d) suspension of the authority of the person to conduct securities related business for
such specified period and upon such terms as the Hearing Panel may determine;

e) revocation of the authority of such person to conduct securities related business;

f) prohibition of the authority of the person to conduct securities related business in any
capacity for any period of time;

g) such conditions of authority to conduct securities related business as may be
considered appropriate by the Hearing Panel.

NOTICE is further given that the Hearing Panel may, in its discretion, require that the
Respondent pay the whole or any portion of the costs of the proceedings before the Hearing
Panel and any investigation relating thereto.

NOTICE is further given that the Respondent must serve a Reply on Enforcement Counsel and
file a Reply with the Corporate Secretary within twenty (20) days from the date of service of this
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Notice of Hearing.

A Reply shall be served upon Enforcement Counsel at:
Mutual Fund Dealers Association of Canada
121 King Street West, Suite 1000
Toronto, Ontario
M5H 3T9
Attention: Shelly Feld, Senior Enforcement Counsel
Facsimile: 416-361-9073
Email: sfeld@mfda.ca

A Reply shall be filed by:
a) providing 4 copies of the Reply to the Corporate Secretary by personal delivery, mail
or courier to:

Mutual Fund Dealers Association of Canada
121 King Street West, Suite 1000
Toronto, Ontario
M5H 3T9
Attention: Office of the Corporate Secretary; or

b) transmitting 1 copy of the Reply to the Corporate Secretary by fax to fax number
416-361-9781, provided that the Reply does not exceed 16 pages, inclusive of the
covering page, unless the Corporate Secretary permits otherwise; or

c) transmitting 1 electronic copy of the Reply to the Corporate Secretary by e-mail at
CorporateSecretary@mfda.ca.

A Reply may either:

i.) specifically deny (with a summary of the facts alleged and intended to be relied upon
by the Respondent, and the conclusions drawn by the Respondent based on the
alleged facts) any or all of the facts alleged or the conclusions drawn by the MFDA in
the Notice of Hearing; or

ii.) admit the facts alleged and conclusions drawn by the MFDA in the Notice of Hearing
and plead circumstances in mitigation of any penalty to be assessed.

NOTICE is further given that the Hearing Panel may accept as having been proven any facts
alleged or conclusions drawn by the MFDA in the Notice of Hearing that are not specifically
denied in the Reply.

NOTICE is further given that if the Respondent fails:

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a) to serve and file a Reply; or
b) attend at the hearing specified in the Notice of Hearing, notwithstanding that a Reply
may have been served,

the Hearing Panel may proceed with the hearing of the matter on the date and the time and place
set out in the Notice of Hearing (or on any subsequent date, at any time and place), without any
further notice to and in the absence of the Respondent, and the Hearing Panel may accept the
facts alleged or the conclusions drawn by the MFDA in the Notice of Hearing as having been
proven and may impose any of the penalties described in the By-Laws.
End.

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