MFDA Notice of Hearing

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201434

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

Yan Feng Li

NOTICE is hereby given that a first appearance will take place by teleconference before a hearing panel of the Central Regional Council (the “Hearing Panel”) 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 March 5, 2015 at 9:30 a.m. (Eastern), or as soon thereafter as the appearance can be held, concerning a disciplinary proceeding commenced by the MFDA against Yan Feng Li (the “Respondent”).

DATED: Jan 22, 2015

"Sarah Rickard"

Sarah Rickard

Director of Regional Councils

Mutual Fund Dealers Association of Canada
121 King St. West, Suite 1000
Toronto, ON M5H 3T9
Telephone: 416-945-5143
Fax: 416-361-9781
E-mail: corporatesecretary@mfda.ca



 

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

Allegation #1: Between February 2008 and December 2012, the Respondent issued advertisements to clients or prospective clients which were not reviewed and approved by the Member, contrary to MFDA Rules 2.7.3 and 1.1.2, and MFDA Rule 2.1.1.

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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. The Respondent was registered as a Mutual Fund Salesperson (now known as a Dealing Representative) with Investia Financial Services Inc. (“Investia”) from February 13, 2008 until March 14, 2013, at which time Investia terminated the Respondent’s registration.
  1. Prior to Investia, the Respondent was registered with Sun Life Financial Services (Canada) Inc. from July 2003 until January 2008.
  1. The Respondent is currently not registered in the securities industry in any capacity.
  1. The Respondent was licensed by the Financial Services Commission of Ontario as an insurance agent.
  1. At all material times, the Respondent carried on business in Markham, Ontario.

Allegation #1: Unapproved advertisements

  1. As described in greater detail below, the Respondent:
    1. wrote articles for publication and placed advertisements in a Chinese language print publication (“Fame Weekly”);
    2. placed an advertisement promoting investment seminars he was providing to the public on a Chinese language community website (“info.51.ca”); and
    3. operated and maintained a website for his company, WealthPros Financial Inc. (“WealthPros Financial”) on which he placed advertisements promoting investment related services he offered to the public.
  1. All of the advertisements, articles and web-site content published or presented by the Respondent referred to in this Notice of Hearing were written in the Chinese language. All of the excerpts contained in this Notice of Hearing have been translated from the Chinese language to English by a third-party interpreter retained by MFDA Staff.
  1. Fame Weekly publication

  1. Fame Weekly is a Chinese language publication distributed in the Greater Toronto Area.
  1. On or about November 1, 2012, Investia made a submission to the National Registration Database that the Respondent was permitted to engage in other business activities for “Weekly Fame – Fortune Weekly”, a newspaper. The Respondent’s approved activities in relation to this outside business activity consisted of writing weekly articles about the TSX stock market without providing investment recommendations.
  1. The Fame Weekly Article

  1. In the November 30, 2012 print issue of Fame Weekly, the Respondent placed a Chinese language advertisement, and wrote a Chinese language article entitled “Canadian TSX Stock Market: Last Week’s Review and Next Week’s Forecast”.
  1. In addition to purporting to provide a review and analysis of the previous week’s performance of the Toronto Stock Exchange (TSX) market, the article included the following content:
    1. an invitation for readers to visit the website wealth178.com, a website belonging to WealthPros Financial, for daily market commentary;
    2. a description of an entity called the “WealthPros Club”, that purported to provide “diagnosis and guidelines for investments” at meetings open to the public every Wednesday at the address of the Respondent’s Investia sub-branch located at 3100 Steeles Ave. East, Suite 308, Markham; and
    3. the following statements:
      1. We offer opinions on actual portfolios. Portfolios may include: Chinese stocks, North American stocks, foreign exchange, futures and ETFs. We welcome professional investors to join us. For investors in North American stocks, Chinese stocks, foreign exchange and mutual funds, please go to the WealthPros website at www.wealth178.com…”

        “… The WealthPros Club has established a professional investment team for portfolio mutual fund investments. The team is made up of professional investment experts including Chinese private fund managers, North American private fund managers, Canadian Investment Managers (CIM), Chartered Financial Analysts (CFA), financial planners, etc. This mutual fund investment team is, up to this point in time, the most professional, the most comprehensive, and the most deluxe investment team. The mutual fund investment team provides portfolio guidance and post-trading analysis to the members of the WealthPros Club. We do band trades in order to maximize return while risks are under reasonable control.”.

  1. The article stated that it was “Supplied By: Frank Li, WealthPros Financial” and included the Respondent’s email address.
  1. The article in Fame Weekly constituted an “advertisement” within the meaning of MFDA Rule 2.7.1(a).
  1. The Respondent advised Investia during its investigation that he had published articles on Fame Weekly on a weekly basis since October 2012, and he subsequently advised Staff that he wrote a total of one or two articles. The Respondent states that he based his articles for Fame Weekly on research he conducted on the internet.  He would copy all or parts of articles he found on the internet and reproduce them in his articles.
  1. The Fame Weekly advertisement

  1. The Respondent placed an advertisement in Fame Weekly that appeared on the same page as his article. The advertisement included the following representations, among others:
    1. the claim that “Up to the end of October, we delivered early to our clients results that exceeded our annual performance expectation.”;
    2. an invitation to a free investment seminar on December 2 and 9 where the Respondent was the speaker;
    3. a statement describing the Respondent as “having 20 years of actual investment experience; a private fund manager, multi-billion dollars of assets under his management, having achieved a performance of 600% in two years”; and
    4. a statement that “All mutual funds are provided by Investia”.
  1. By promoting investment related services purportedly offered by the Respondent, his purported qualifications and experience, and his purported track record as an investment adviser, the advertisement constituted an “advertisement” within the meaning of MFDA Rule 2.7.1(a).
  1. The Respondent did not submit the articles and advertisement described above to Investia for approval prior to publication. Investia was not aware that the Respondent had published articles and advertisements in Chinese language publications, nor was Investia aware that the Respondent was providing seminars on investing to the public.
  1. On or about February 14, 2013, Investia advised the Respondent that he was being terminated on the grounds that the Respondent had not submitted articles and advertisements published in Fame Weekly to Investia for approval and expressed concerns that they included statements that Investia considered to be untrue and misleading.
  1. Info.51.ca Website

  1. 51.ca is a Chinese language community website. The Respondent arranged with a person he knew to post an advertisement on the info.51.ca website advertising the dates and times of seminars in November and December 2012 that he was going to host.
  1. The Info.51.ca website:
    1. identified the Respondent as the contact person for the seminars;
    2. listed the address of his Investia sub-branch; and
    3. included the following statements: “How did the mutual fund under our management avoid losses in 2008, 2011, and 2012?” … “How to achieve an investment return of more than 15% in 2012”.
  1. The content advertising the Respondent’s seminars on the website constituted an “advertisement” within the meaning of MFDA Rule 2.7.1(a).
  1. The Respondent did not submit the content on the Info.51.ca website or the content of his seminars to Investia for approval prior to publication or presentation. Investia was not aware that the Respondent was publishing the content on the website or conducting his seminars.
  1. WealthPros Financial Website

  1. WealthPros Financial is a company incorporated by the Respondent, who is also its sole director. In accordance with MFDA requirements and Investia’s policies and procedures, the Respondent had previously sought and obtained approval from Investia to conduct his business as a licensed insurance agent through WealthPros Financial.
  1. The Respondent operated and maintained a Chinese language website for WealthPros Financial, www.wealthpros.ca.[1]
  1. The Respondent did not seek and obtain approval from Investia to carry on any investment related activity through WealthPros Financial, nor did he disclose to Investia that he operated and maintained the WealthPros Financial website.
  1. The WealthPros Financial website included information about services purportedly offered by WealthPros Financial, and stated that WealthPros Financial was a “wealth management team” consisting of “Chinese private fund managers, North American private fund managers, financial analysts, Canadian investment managers and financial analysts with successful experiences in long-term investment markets”.
  1. The website stated that the wealth management team would “provide timely market analytical forecasts and investment portfolio management strategies in order to achieve maximum returns for self-directed investment while under the premise of utmost risk control”.
  1. The Respondent admitted to Staff that he did not actually have a wealth management team but that he could provide contacts to individuals if needed.
  1. The WealthPros Financial website also advertised weekly investment seminars through the WealthPros Investment Club and stated that all mutual fund related services were provided by Investia.
  1. The content of the WealthPros Financial website constituted an “advertisement” within the meaning of MFDA Rule 2.7.1(a).
  1. The Respondent did not submit the content he put on the WealthPros Financial website to Investia for review and approval prior to publication.

Investia’s policies and procedures

  1. At all material times, Investia’s policies and procedures in respect of advertising and sales communications required, among other things, that:
    • all advertising and marketing materials must be submitted to the Sales Practices Administrator at Investia for approval prior to publication or use;
    • no Investia Representative shall issue or knowingly allow his/her name to be used in respect of any advertisement or marketing piece which:
      • contains an untrue statement or omission or is false or misleading; and
      • contains any unjustified promise of specific results; and
    • all representative websites be approved by Investia prior to being launched to ensure compliance with the MFDA Rules and all other applicable legislation.
  1. By engaging in the conduct described above, between February 2008 and December 2012, the Respondent issued advertisements to clients and prospective clients that were not reviewed and approved by the Member, contrary to MFDA Rules 2.7.3 and 1.1.2, and MFDA Rule 2.1.1.

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:

  • has failed to carry out any agreement with the MFDA;
  • 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;
  • has failed to comply with the provisions of any By-law, Rule or Policy of the MFDA;
  • has engaged in any business conduct or practice which such Regional Council in its discretion considers unbecoming or not in the public interest; or
  • 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:

  1. a reprimand;
  2. a fine not exceeding the greater of:
    1. $5,000,000.00 per offence; and
    2. an amount equal to three times the profit obtained or loss avoided by such person as a result of committing the violation;
  3. 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;
  4. revocation of the authority of such person to conduct securities related business;
  5. prohibition of the authority of the person to conduct securities related business in any capacity for any period of time;
  6. 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 Office of the Corporate Secretary within twenty (20) days from the date of service of this 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, ON M5H 3T9
Attention: David Halasz
Fax: 416-361-9073
Email: dhalasz@mfda.ca

A Reply shall be filed by:

  1. providing 4 copies of the Reply to the Office of the Corporate Secretary by personal delivery, mail or courier to:
    1. The Mutual Fund Dealers Association of Canada
      121 King Street West, Suite 1000
      Toronto, ON M5H 3T9
      Attention: Office of the Corporate Secretary; or
  2. transmitting 1 copy of the Reply to the Office of 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 Office of the Corporate Secretary permits otherwise; or
  3. transmitting 1 electronic copy of the Reply to the Office of the Corporate Secretary by e-mail at CorporateSecretary@mfda.ca.

A Reply may either:

  1. 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
  2. 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:

  1. to serve and file a Reply; or
  2. 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.

[1] In addition to the www.wealthpros.ca website, it appears that the Respondent maintained a second website, www.wealth178.com associated with WealthPros Financial, as previously described in this Notice of Hearing.