MFDA Notice of Hearing

View and Download English PDF
Home › Notice of Hearing 201517 - RE: Guglielmi, Michael



Notice of Hearing
File No. 201517


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: Michael Guglielmi



NOTICE OF HEARING

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 July 15, 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
Michael Guglielmi (the “Respondent”).

DATED this 25th day of May, 2015.

“Sarah Rickard”

Sarah Rickard

Director of Regional Councils

Mutual Fund Dealers Association of Canada
121 King Street West, Suite 1000
Toronto, Ontario
M5H 3T9

Telephone: 416-945-5143
Facsimile: 416-361-9781
Email: corporatesecretary@mfda.ca
Page 1 of 8

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

Allegation #1: Between October 2012 and April 17, 2013, the Respondent allowed WB, PA and
WM, all unregistered individuals, to:

a) open new accounts at the Member for at least 12 individuals that the Respondent never
met; and

b) recommend and process trades in the accounts of the 12 individuals using the
Respondent’s representative code;

thereby facilitating stealth advising by WB, PA and WM, contrary to MFDA Rules 1.1.1(c) and
2.1.1.

Allegation #2: Between October 2012 and April 17, 2013, the Respondent opened new accounts
and processed trades for at least 12 individuals without performing the necessary due diligence to
learn the essential facts relative to the clients and failing to ensure that the investments were
suitable and appropriate for the clients, contrary to MFDA Rules 2.2.1 and 2.1.1.

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 December 16, 2008 to May 1, 2102, the Respondent was registered in Ontario as a
mutual fund salesperson (now known as a dealing representative) with Quadrus Investment
Services Ltd. (“Quadrus”), a Member of the MFDA.

Page 2 of 8

2.
From October 5, 2012 and April 17, 2013 when he was terminated as a result of the
events described herein, the Respondent was registered in Ontario as a mutual fund salesperson
with Hub Capital Inc. (“HUB”), a Member of the MFDA.

3.
The Respondent is not currently registered in the securities industry in any capacity.

4.
At all material times, the Respondent conducted business in the Vaughan, Ontario area.

Allegation #1 – Facilitating Stealth Advising

5.
While he was registered with Quadrus, the Respondent, together with WB, PA and WM
who were registered as mutual fund salespersons, conducted business under the trade name, Real
Wealth Investments (“RWI”) at the same branch location (the “RWI Branch”). At that time, WB
and PA were registered with Quadrus and WM was registered with Investia Financial Services
Inc. (“Investia”), a Member of the MFDA.

6.
In or about April 2012, the Respondent, WB and PA resigned from Quadrus, and WM
resigned from Investia.

7.
WB, PA and WM did not become registered in the securities industry at any time after
April 2012.

8.
On October 5, 2012, the Respondent became registered as a mutual fund salesperson with
HUB. At all material times, the Respondent conducted business at the RWI Branch.

9.
Notwithstanding that WB, PA and WM were no longer registered in the securities
industry, they continued to conduct insurance and mortgage broker business with RWI and
regularly attended the RWI Branch.1

1 There is no evidence that, while registered with HUB, the Respondent conducted business under the trade name
RWI.
Page 3 of 8

10.
Commencing in or about October 2012, WB, PA and WM informed the Respondent that
certain individuals wanted to purchase mutual funds. WB, PA and WM requested that the
Respondent provide them with account forms (including Know-Your-Client Information Forms,
Orders Tickets and Dealer Representative Change Forms) to open accounts for the individuals at
HUB and process trades in those accounts. WB, PA and WM also requested that the Respondent
facilitate this activity by processing all of the account forms under his HUB representative code.
The Respondent agreed to participate in this arrangement with WB, PA and WM (the “Stealth
Advising Arrangement”).

11.
In accordance with the Stealth Advising Arrangement, between October 2012 and April
17, 2013, WB, PA and WM met with at least 12 individuals2 in the absence of the Respondent to
complete the account forms. WB, PA and WM provided the completed account forms to the
Respondent, who signed the documents and submitted them to HUB for processing using his
representative code.

12.
WB, PA and WM were not registered in the securities industry and did not possess the
necessary proficiencies to advise or trade in securities on behalf of the 12 individuals.

13.
HUB was not aware of the Stealth Advising Arrangement and, as a consequence, the
activities of WB, PA and WM were not subject to supervision by HUB.

14.
By virtue of the foregoing, the Respondent facilitated the processing of securities related
business by WB, PA and WM, all unregistered individuals, through the accounts and facilities of
HUB. WB, PA and WM were not in an employer-employee relationship, a principal-agent
relationship or an introducing dealer-carrying dealer relationship with HUB, as required by
MFDA Rule 1.1.1(c).

2 Namely, RP, LR, LA, JW, PM, ML, IC, KC, CT, DJ, DL, and DP.
Page 4 of 8

Allegation #2 – Failing to Know the Client and Assess Suitability

15.
By participating in the Stealth Advising Arrangement or, alternatively, by relying solely
upon the Respondent’s mail communications with the 12 clients, the Respondent opened
accounts and processed trades for the 12 clients, without fulfilling his obligations 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; and

d) explain to the individuals the features and risks of the mutual fund trades he was
processing on their behalf.

16.
The Respondent thereby failed to perform the necessary due diligence to learn the
essential facts relative to the 12 clients and failed to ensure that the investments were suitable
and appropriate for the clients, contrary to MFDA Rules 2.2.1 and 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;

Page 5 of 8

 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:

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

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

(f) such conditions of authority to conduct securities related business as may be considered
appropriate by the Hearing Panel;
Page 6 of 8


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: Francis Roy

Fax: 416-361-9073

Email: froy@mfda.ca

A Reply shall be filed by:

(a) providing 4 copies of the Reply to the Office of the Corporate Secretary by personal
delivery, mail or courier to:
The Mutual Fund Dealers Association of Canada
121 King Street West, Suite 1000
Toronto, ON M5H 3T9
Attention: Office of the Corporate Secretary; or

(b) transmitting one (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

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

A Reply may either:

Page 7 of 8

(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:

(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.

DM 429747 v2

Page 8 of 8