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2016110

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

FundEX Investments Inc.

NOTICE is hereby given that a first appearance will take place by teleconference before a hearing panel of the Central Regional Council (“Hearing Panel”) of the Mutual Fund Dealers Association of Canada (“MFDA”) in the hearing room at the MFDA offices, located at 121 King Street West, Suite 1000, Toronto, Ontario on August 2, 2017 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 FundEX Investments Inc. (“Respondent”).

DATED: Jun 7, 2017

"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 November 16, 2010 and November 16, 2013, the Respondent failed to conduct an on-site compliance review of the branch of its Approved Person Scott Reeves, contrary to MFDA Rule 2.5.1 and MFDA Policy No. 5.

Allegation #2: Between 2007 and 2008, the Respondent failed to conduct a reasonable supervisory investigation when it received information that its Approved Person Paul Wemple was offering investments to clients and other individuals outside the Respondent, contrary to MFDA Rules 1.1.1, 1.2.1, and 2.5.1.

Allegation #3: Commencing December 7, 2015, the Respondent failed to ensure that a complaint from a client regarding its Approved Person Paul Wemple was handled fairly, contrary to MFDA Rule 2.11 and MFDA Policy No. 3.

Allegation #4: Between June 2011 and April 2012, the Respondent failed to adequately supervise its Approved Person Christopher Singer’s recommendation to a client for the purchase of an exempt market product, which recommendation was unsuitable for the client having regard to concentration and the client’s Know-Your-Client information, including but not limited to the client’s investment knowledge and experience, and time horizon, contrary to MFDA Rules 2.2.1 and 2.1.1.

Allegation #5: Between November 2007 and approximately February 2014, the Respondent did not have adequate procedures in place to monitor all of the holdings in its client accounts held at Canadian Western Trust, and did not identify the sale of unapproved products in the accounts of two clients, contrary to MFDA Rule 2.5.1.

Allegation #6: Commencing in 2011, the Respondent failed to ensure that complaints from two clients regarding its Approved Persons Stuart Henschel and William Cormylo, were handled fairly, contrary to MFDA Rule 2.11 and MFDA Policy No. 3.

555955 v1

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 is registered as a mutual fund dealer and exempt market dealer in all jurisdictions in Canada. The Respondent has been a Member of the MFDA since May 16, 2002.
  1. The Respondent’s head office is located in Markham, Ontario.

Allegation #1 – Failure to conduct on-site visit of Scott Reeves’ branch

  1. Between January 8, 2004 and May 9, 2014, Scott Reeves (“Reeves”) was registered with the Respondent as a mutual fund salesperson (now known as a dealing representative). Reeves operated from different branch locations at various times, including a branch located at 25 Main Street West, suite 1210, Hamilton, Ontario (the “Branch”) between December 2009 and May 2014.
  1. On March 7, 2017, a MFDA Hearing Panel found that Reeves, among other things, engaged in undisclosed outside business activities, and solicited and accepted from at least three clients a total of approximately $5,064,208, some or all of which he failed to invest, return or otherwise account for.
  1. The Respondent conducted on-site reviews of Reeves’ branch locations in 2004, 2005, November 8, 2006, 2007, December 20, 2009, and November 16, 2010. The Respondent did not identify any outside business activities during the on-site reviews.
  1. In February 2014, the Respondent contacted Reeves to schedule an on-site compliance review of the Branch. Reeves asked the Respondent to reschedule the February on-site review because it was RRSP season. As a result, the on-site visit was re-scheduled for April 16, 2014, three years and five months after the previous on-site review of November 16, 2010 was conducted.
  1. On April 15, 2014, Reeves cancelled the on-site review scheduled for April 16, 2014, and rescheduled the review to April 24, 2014.
  1. On April 22, 2014, Reeves advised the Respondent that he had to reschedule the April 24, 2016 on-site review due to a family issue and rescheduled the review to occur on May 1, 2014. 
  1. On April 25, 2014, MFDA Staff received a complaint against the Respondent that was submitted by a former employee of the Respondent and pertained to employment related matters. MFDA Staff forwarded the complaint to the Respondent for consideration.
  1. On April 30, 2014, Reeves contacted the Respondent to again cancel the on-site review. Reeves did not return calls from the Respondent to re-schedule. 
  1. The Respondent took steps to investigate the complaint from the former employee, which led the Respondent’s compliance staff to attend unannounced at the Branch on May 9, 2014.
  1. During the May 9, 2014 visit, the Respondent’s compliance staff became aware of the existence of Reeves’ unapproved outside business activities and other issues related to Reeves’ sales practice. In particular, they observed signs posted at the Branch listing 8 business entities as operating out of the Branch location. Reeves was an officer and/or director for these entities, 6 of which he had not previously disclosed to or obtained approval from the Respondent to operate. 
  1. MFDA Policy No. 5 came into effect on July 24, 2006, which requires each MFDA Member to establish a branch review program to effectively assess and monitor compliance with regulatory requirements. Branch reviews are required to be conducted by qualified individuals who are independent from the branch and the branch manager. An MFDA Member is generally expected to perform an on-site review of its branches and sub-branches no less than once every three years, unless the Member can demonstrate the branches that have not been subject to an on-site review are low risk and have been subject to alternative compliance review procedures performed by head office, such as an off-site desk review.
  1. The Branch was not low risk, and was not subject to alternative compliance review procedures performed by head office instead of a MFDA Policy No. 5 on-site branch visit.
  1. The Respondent did not conduct an on-site compliance review of Reeves’ Branch during the three year period between November 16, 2010 (the date of the last on-site branch visit) and November 16, 2013.
  1. Had the Respondent conducted an on-site compliance review of the Branch prior to November 16, 2013 in accordance with MFDA Policy No. 5, it would have increased the likelihood that the Reeves’ outside business activities would have been detected prior to when the Member eventually became aware of his activities in May 2014.
  1. By virtue of the forgoing, between November 16, 2010 and November 16, 2013, the Respondent failed to conduct an on-site compliance review of Reeves’ Branch, contrary to MFDA Rule 2.5.1 and MFDA Policy No. 5.

Allegation #2 – Failure to adequately supervise Approved Person Paul Wemple

  1. Between September 1, 2006 and December 6, 2014, Paul Wemple (“Wemple”) was registered with the Respondent as a mutual fund salesperson (now known as a dealing representative).
  1. On May 4, 2017, a MFDA Hearing Panel found that Wemple, among other things, engaged in securities related business that was not carried on for the account and through the facilities of the Respondent by selling, recommending, referring or facilitating the sale of unapproved investments products to clients and other individual outside the Members, including the sale of debentures offered by Syndacore Technologies Management Inc. (“Syndacore”).
  1. In May 2007, the Respondent conducted a compliance audit of Wemple, which identified that Wemple owned an undisclosed company, in which two clients of the Respondent had invested. During the audit, Wemple advised the auditor that the undisclosed company was “not the business” of the Respondent.
  1. On or about June 12, 2007, the Respondent issued a compliance audit report to Wemple seeking information from him about his outside business activity. Wemple did not provide his response to the audit report and on August 31, 2007, a compliance representative of the Respondent reminded Wemple to provide his response as soon as possible.
  1. On October 2, 2007, Wemple submitted to the Respondent an outside business activity approval form (“OBA Approval Form”) for Syndacore, which stated the following:
    1. Wemple was president of Syndacore;
    2. the start date for the outside business activity was May 30, 2005; and
    3. Wemple will receive $10,000 salary, and director fees of $500 per month.
  1. In addition, Wemple provided the Respondent with the following description of the outside business activity:
    1. “Present terms and conditions of a debenture which has been granted to its company for accredited investors. Maintain the records of unit holders – process quarterly interest payments – prepare T4s for usual tax reporting”
  1. The Respondent did not follow up with Wemple about Syndacore for a period of more than 4 months. On or about February 25, 2008 and June 10, 2008, a compliance representative of the Respondent left phone messages for Wemple.
  1. On June 17, 2008, a compliance representative of the Respondent requested that Wemple provide additional information regarding Syndacore, including the type of debenture he was presenting, and whether any mutual fund clients were purchasing the debenture.
  1. On July 28, 2008, Wemple advised the Respondent’s compliance department that no debentures were being offered through Syndacore.
  1. On August 11, 2008, a representative of the Respondent’s compliance department wrote Wemple to inquire whether his activities involving Syndacore had changed since the time he submitted the OBA Approval Form dated October 2, 2007, and advised Wemple that if the situation had changed, that Wemple would be required to disclose his activities with Syndacore and provide a new OBA approval form.
  1. On August 21, 2008, Wemple submitted a new OBA approval Form (“New OBA Approval Form”) in which he described Syndacore as follows:
    • “administer personal investments”
    • “personal holding company”
  1. On September 19, 2008, the Respondent’s compliance department approved the New OBA Approval Form.
  1. The Respondent did not conduct an adequate review or investigation of Wemple’s involvement in Syndacore prior to approving the activity. In particular, after Wemple disclosed in May 2007 and on October 2, 2007 that he was presenting a debenture to accredited investors and that two clients had invested in Syndacore debentures, the Respondent did not adequately determine the nature of Wemple’s business or determine whether any other clients or individuals had invested in the debentures offered by Syndacore.
  1. Between 2005 and 2008, Wemple sold, recommended, referred or facilitated the sale of at least $905,000 of debentures offered by Syndacore, to at least 19 clients and 2 other individuals.
  1. At least two clients invested a total of approximately $150,000 in the period after Wemple disclosed his involvement with Syndacore to the Respondent.
  1. In or about 2010, Wemple arranged for the debenture holders of Syndacore to convert their holdings into shares of another company. In 2012, this company went bankrupt, and the investors have been unable to recover their investments.
  1. Had the Respondent conducted a reasonable supervisory investigation when it first became aware of Wemple’s involvement with Syndacore during the audit in May 2007 and prior to approving the activity in September 2008, it would have increased the likelihood that the Respondent would have determined the full nature and extent of Wemple’s involvement in soliciting investment in the debenture offered by Syndacore from clients and other individuals, and taken steps to ensure he ceased engaging in the activity.
  1. By virtue of the foregoing, between 2007 and 2008, the Respondent failed to conduct a reasonable supervisory investigation when it received information that Wemple was offering investments to clients and other individuals outside the Respondent, contrary to MFDA Rules 1.1.1, 1.2.1, and 2.5.1.

Allegation #3 – Failure to ensure a complaint against Approved Person Paul Wemple was handled fairly

  1. At all material times, client PH, and his company, PHSI, were clients of the Respondent whose accounts were serviced by
  1. On or about December 7, 2015, the Respondent received a complaint submitted on behalf of client PHSI advising that client PHSI had purchased investments recommended by Wemple in Syndacore as follows:
    1. July 26, 2005 – $100,000; and
    2. November 7, 2005 – $50,000
  1. The complaint letter stated that the Respondent, among other things, failed to detect that Wemple was promoting and selling Syndacore to the Respondent’s clients, and that client PHSI had not been properly advised that Syndacore was not related to the Respondent and not offered on its behalf. The complaint letter also advised that client PHSI incurred losses of $131,710, and sought compensation from the Respondent.
  1. On March 3, 2016, the Respondent issued its substantive response denying client PHSI’s request for compensation. The Respondent advised that the Syndacore investment was not offered for sale through the Respondent and that its salespersons were prohibited from offering investment advice or making investment recommendations on any products not approved for sale by the Respondent.
  1. The Respondent failed to handle client PHSI’s complaint fairly in accordance with MFDA Rule 2.11 and MFDA Policy No. 3 for, among other things, the following reasons:
    1. it became aware during a branch audit in May 2007 and subsequently in a disclosure from Wemple to the Respondent in October 2007, that Wemple was presenting a debenture to accredited investors and that two clients had invested;
    2. it did not conduct an adequate review or investigation of Wemple’s involvement in Syndacore prior to approving the activity;
    3. had the Respondent conducted a proper review once being made aware of Wemple’s involvement in Syndacore, it would have increased the likelihood that it would have identified that other clients and individuals, including client PHSI, had invested in the debenture offering; and
    4. had client PH been made aware at the time that the Syndacore investment was not approved by the Respondent, he may have been able to take steps to mitigate PHSI’s losses.
  1. By virtue of the forgoing, commencing December 7, 2015, the Respondent failed to ensure that a complaint from a client regarding Wemple was handled fairly, contrary to MFDA Rule 2.11, and MFDA Policy No. 3.

Allegation #4 – Failure to adequately supervise Approved Person Christopher Singer

  1. Since July 2004, Christopher Singer (“Singer”) has been registered in British Columbia and Alberta as a mutual fund salesperson (now known as a dealing representative) with the Respondent.
  1. On February 22, 2017, an MFDA Hearing Panel accepted a Settlement Agreement between MFDA Staff and Singer, wherein Singer admitted that he failed to use due diligence to learn and record the essential facts relative to client AO; failed to ensure investment recommendations made to client AO were suitable; failed to adequately explain the risks and benefits of investment in ROI Funds (described below) that he recommended to client AO; and failed to review or reconsider his recommendation to client AO in light of criteria for assessing suitability of ROI Funds provided to him by the Respondent.
  1. Since March 2011, Singer serviced the mutual fund account of client AO at the Respondent. In March 2011, client AO was a single 62 year old realtor with a novice level of investment knowledge who intended to retire within 3-5 years. Client AO was planning to purchase a new home as soon as she could find a suitable property. In June 2011, client AO sold her home. The sale proceeds and other cash savings that client AO had accumulated totaled approximately $1.15 million. She met with Singer to obtain advice about the possibility of investing this money.
  1. Client AO informed Singer that she intended to apply approximately $800,000 – $900,000 towards the purchase of a new home as soon as she could find an appropriate property. Client AO told Singer that she wanted this portion of her savings to be placed in a low risk short term investment to ensure the preservation of capital required for the anticipated home purchase.
  1. Client AO informed Singer that she wanted to invest the remaining $300,000 – $400,000 in a manner that would provide her with a source of savings and income to support her during her retirement. Client AO intended on retiring between the ages of 65-68.
  1. In July 2011, client AO completed a New Account Application Form (“NAAF”) for her Open account that included the following information:
    1. “novice (very low)” investment knowledge;
    2. investment time horizon of 3-5 years; and
    3. “100% moderate” risk tolerance.
  1. On the same day, Client AO’s NAAF for her TFSA account which contains the same information, except her time horizon is listed as “1-3 years.”
  1. Based on Singer’s recommendation, in July 2011, client AO invested 100% of her portfolio as follows:
    1. $485,000 into ROI Private Placement Fund (“ROPF”) into her Open account;
    2. $650,000 into ROI High Yield Private Placement Fund (together with ROPF, the “ROI Funds”) into her Open account; and
    3. $15,000 into the ROI High Yield Private Placement into her Tax Fee Savings Account.
  1. At the time the Respondent recommended the ROI Funds to client AO, the ROI Funds were exempt securities. According to materials produced and distributed by the fund company, ROI Capital Ltd. (“ROI”), the ROI Funds were open-end investment funds consisting primarily of higher yielding private placements of capital in debt obligations and/or equity securities issued by businesses seeking nonbank financing.
  1. The ROI Funds’ Offering Memorandum dated March 25, 2010 stated that the fund’s investment objective is to provide long-term capital appreciation.
  1. On November 17, 2011, the Respondent sent a Compliance Memorandum to its Approved Persons, including Singer, which indicated, amongst other things, that it would be reviewing clients’ portfolios that exceeded a concentration of 25% in ROI Funds and that it may require advisors to review portfolio holdings with certain clients. It also stated that, “…[i]t is the expectation of the regulators that a client holding a greater allocation in one fund would have a higher risk tolerance and a longer time horizon.”
  1. On December 1, 2011, the Respondent sent another Compliance Memorandum to follow-up on the November 17, 2011 Compliance Memorandum. The December 1, 2011 Compliance Memorandum advised, amongst other things, that the Respondent’s Regional Branch Managers would send to each applicable Approved Person a list of any clients that needed to be reviewed by the Approved Person in respect of the suitability of their ROI investments. Although client AO held 100% of her portfolio in ROI Funds, the Respondent failed to identify Client AO for further review.
  1. The December 1, 2011 Compliance Memorandum stated that a review for suitability should consider the following factors:
    1. Approved Persons should discuss the concentration level of their clients’ portfolio and explain the increased risk that can result from a less diverse portfolio. The clients should have an increased appetite for risk if the client wishes to continue to hold the ROI Private Placement Pool with limited diversification;
    2. clients should have a minimum time horizon of 5 years;
    3. clients should sign an acknowledgment; and
    4. Approved Persons should record detailed notes of the client meetings.
  1. On March 9, 2012, ROI halted redemptions in the ROI Funds.
  1. On April 30, 2012 client AO requested that Singer process a redemption from her open account to pay personal expenses. Singer was unable to process the requested redemption because trading in the ROI Funds were halted.
  1. On August 24, 2012, unitholders of the ROI High Income Private Placement Fund, ROI Private Placement Fund and ROI Strategic Private Placement Fund approved resolutions authorizing the restructuring of the funds to a closed-end investment publicly traded on the TSX.
  1. On October 3, 2012, client AO submitted an offer to purchase a property. However, client AO was unable to complete the purchase of the property because trading of the ROI Funds remained halted and therefore she could not process redemptions of units of her ROI Funds and apply the proceeds towards the purchase of the property as she had intended.
  1. The trades processed by Singer on behalf of client AO for the purchase of the ROI Funds were not suitable taking into account client AO’s personal and financial factors and investment objectives, as follows:
    1. age (62 years);
    2. client AO was an unsophisticated investor, as shown by the “novice” (very low) listing of her investment knowledge in her NAAF;
    3. client AO’s time horizon was listed as 3-5 years; and
    4. client AO’s investment portfolio was 100% concentrated in private placement Funds.
  1. Accordingly, the Respondent’s supervisory staff ought not to have approved the trades submitted by Singer on behalf of client AO for the purchase of the ROI Funds.
  1. The Respondent’s supervisory staff did not query the trades when they reviewed for suitability. Had the Respondent’s supervisory staff done so, it would have increased the likelihood that they would have determined that client AO required the majority of her funds within a short period in order to purchase property.
  1. On December 4, 2012, the ROI Funds were listed on the TSX and the ability of unitholders to redeem their investments in the funds was restored.
  1. Between April 3 and May 9, 2014, client AO redeemed her investments in the ROI Funds, and suffered a loss of approximately $92,657.
  1. The Respondent paid compensation to client AO for her loss.
  1. By virtue of the foregoing, between June 2011 and April 2012, the Respondent failed to adequately supervise Singer’s recommendation to client AO for the purchase of an exempt market product, which recommendation was unsuitable for client AO having regard to concentration and the client’s Know-Your-Client (“KYC”) information, including but not limited to the client’s investment knowledge and experience, and time horizon, contrary to MFDA Rules 2.2.1 and 2.1.1.

Allegation #5 – Failure to supervise Canadian Western Trust accounts

  1. At all material times, the Respondent had an agreement with Canadian Western Trust (“CWT”) whereby CWT opened accounts for some of its clients, held investments in these accounts, and provided clearing or settlement services.
  1. The Respondent was aware that the client CWT accounts could hold investments other than mutual funds, including investments that its Approved Persons may not have been permitted to sell.
  1. The Respondent had an obligation to supervise the CWT accounts in order to ensure only investments it permitted its Approved Persons to sell would be held in the CWT accounts.
  1. The Respondent had access to CWT statements, which contained the name of the Respondent as the dealer of record and any non-mutual fund investments sold off the books of the Respondent.
  1. At all material times, the Respondent failed to have policies and procedures to review and reconcile the CWT statements listing the investments of its clients with its own records of its clients’ investments.
  1. Between September 2006 and April 2012, Stuart Henschel (“Henschel”) and William Cormylo (“Cormylo”) were mutual fund salespersons (now known as dealing representatives) registered with the Respondent. Henschel and Cormylo were subjects of MFDA disciplinary proceedings, where it was found that they sold, recommended, facilitated the sale, or made referrals in respect of investment products outside the Respondent.
  1. At all material times, clients PV and GJ were clients of the Respondent. In or around July 2009, client PV invested $50,000 in an investment described as the Medallion-Cochrane Lakes project based on the recommendation of Cormylo. In or around December 2007, client GJ invested $50,000 in an investment in Medallion Business Centre (together with Medallion-Cochrane Lakes project, the “Medallion Investment”) based on the recommendation of Henschel.
  1. The Respondent did not approve the Medallion Investment for sale by its Approved Persons, including Henschel and Cormylo.
  1. Clients PV and GJ held the Medallion Investments in their CWT accounts with the Respondent. After the purchase of the Medallion Investments, Cormylo and Henschel took steps to have the clients’ positions in the investment included on CWT statements without disclosing to the Member that they had sold the Medallion Investments.
  1. The Respondent had access to the CWT statements of clients PV and GJ, which listed the Medallion Investments held by the clients.
  1. The Respondent did not have policies and procedures requiring it to review and reconcile the CWT statements listing the investments of its clients with its own records of its clients’ investments. The Respondent did not review the CWT accounts belonging to its clients, including clients PV and GJ, and it did not identify that clients PV and GJ were holding unapproved investments in their CWT accounts.
  1. Had a review of the CWT accounts taken place, it would have increased the likelihood that the Respondent would have identified the Medallion Investments and taken appropriate supervisory and disciplinary actions prior to when the matters were first identified by the Respondent in or about March 2011.
  1. No later than February 2014, the Respondent began reviewing reports to review the non-mutual fund investments held in its clients’ CWT accounts.
  1. By virtue of the foregoing, between November 2007 and approximately February 2014, the Respondent did not have adequate procedures in place to monitor all of the holdings in its client accounts held at CWT, and did not identify the sale of unapproved products in the CWT accounts of two clients, contrary to MFDA Rule 2.5.1.

Allegation #6 – Failure to ensure complaints against Approved Persons Henschel and Cormylo were handled fairly

Complaint of client GJ
  1. On December 9, 2011, client GJ complained to the Respondent stating that Henschel recommended, or facilitated the sale of $50,000 in the Medallion Investment on or around December 17, 2007, and that the Respondent had not supervised Henschel.
  1. The Respondent did not review client GJ’s CWT account.
  1. On May 4, 2012, the Respondent declined client GJ request’s for compensation for the following reasons:
    1. the investment was not a security offered for purchase and/or sale through the Respondent;
    2. the Respondent required that all securities related business be conducted through the Member; and,
    3. the Respondent prohibits their salespersons from personally engaging in the sale or referral of any investments that would be considered securities or selling, or advising on such investments through any entity other than the Respondent.
Complaint of client PV
  1. On September 12, 2013, client PV complained to the Respondent with respect to her Medallion Investment. Client PV provided the Member with copies of her CWT statements, which listed the client’s mutual fund holdings at the Respondent along with details of the Medallion Investment. Client PV’s CWT statement indicated that the Respondent was the advisor of record.
  1. The Respondent did not review client PV’s CWT account.
  1. On December 27, 2013, the Respondent declined client PV’s request for compensation for the following reasons:
    1. the investment did not appear on the periodic statements she received from the Respondent and therefore client PV ought to have known the investment was not purchased through the books of the Respondent; and
    2. Cormylo was acting in his personal capacity in soliciting client PV her to invest in the unapproved investment.
Failed to ensure complaints handled fairly
  1. The Respondent failed to ensure that the complaints of clients PV and GJ were handled fairly for the following reasons:
    1. the Medallion Investments held by clients PV and GJ in their CWT accounts with the Member were identifiable by the Respondent on the CWT client statements;
    2. the Respondent did not have a policy and did not conduct a review of non-mutual fund holdings in CWT accounts;
    3. had the Respondent reviewed the clients’ holdings in the CWT accounts, it would have increased the likelihood that the Respondent would have identified the Medallion Investments and taken appropriate supervisory and disciplinary actions; and
    4. the Respondent did not adequately consider or review the CWT client statements in its review of the clients’ complaints.
  1. By virtue of the foregoing, commencing in 2011, the Respondent failed to ensure that complaints from three clients regarding Henschel and Cormylo, were handled fairly, contrary to MFDA Rule 2.11 and MFDA Policy No. 3.

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 four (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 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
  3. 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:

  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.