MFDA Notice of Hearing

507052 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. Between January 2003 and September 30, 2008, the Respondent was registered in Nova Scotia as a mutual fund salesperson (now known as a dealing representative[1]) with AEGON Dealer Services Canada Inc. (“AEGON”), a former Member of the MFDA.

2. On September 30, 2008, AEGON amalgamated with Investia Financial Services Inc. (“Investia”), a Member of the MFDA, and thereafter operated under the Investia name. From September 30, 2008 to June 2009, the Respondent was registered in Nova Scotia as a mutual fund salesperson with Investia.

3. Between June 2009 and November 2012, the Respondent was registered in Nova Scotia as a mutual fund salesperson with Quadrus Investment Services Ltd. (“Quadrus”), a Member of the MFDA.

4. The Respondent resigned from Quadrus on November 16, 2012.

5. At all material times, the Respondent conducted business in Halifax, Nova Scotia.

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

Allegation #1 – Outside Business Activities

East River Holdings

7. East River Holdings Limited (“ERH”) is a corporation incorporated pursuant to the laws of Nova Scotia, which operated as a boat yard and marina. ERH commenced operations in 2004 and became insolvent in 2012. At all material times, the Respondent’s spouse was a shareholder of ERH.

8. From 2012 until it became insolvent in 2013, the boat yard and marina operated as East River Marine (“ERM”), a sole proprietorship. In 2013, following ERM’s insolvency, the boat yard and marina began operating as Marine Services East Inc. (“MSE”), a corporation incorporated pursuant to the laws of Nova Scotia.

9. Between 2003 and at least December 12, 2009, the Respondent was a director of ERH.

10. Between 2003 and at least 2013, the Respondent was a principal and/or directing mind of ERH. During this period, the Respondent was actively involved in arranging financing for ERH, controlling its assets and directing its operations.

11. At some point prior to July 2006 (while the Respondent was a director, principal and/or directing mind of ERH), an individual, RB, paid $300,000 to ERH to acquire preferred shares.

12. On or about September 7, 2006, the Respondent signed a Promissory Note, together with ERH and the Respondent’s son, in the amount of $57,500 payable to RB in respect of monies which RB had loaned to ERH. These monies were not paid to RB. Accordingly, on or about May 13, 2010, the Respondent signed, together with the Respondent’s son, an agreement with RB to pay monies owed under the terms of the Promissory Note. In November 2012, RB commenced a lawsuit against the Respondent, his son and ERH.

13. In about 2009 (while the Respondent was a director and directing mind of ERH), an individual, EC, paid $250,000 to ERH to acquire preferred shares. ERH defaulted on its dividend payment obligations and EC commenced a lawsuit against ERH in October 2012.

14. The Respondent did not disclose his activities with respect to ERH to his Members, and his Members did not approve these activities.

PYMC Sailing Centre

15. PYMC Sailing Centre Inc. (“PYMC”) is a corporation incorporated pursuant to the laws of Nova Scotia. PYMC owned the land on which the boat yard and marina (described above) operated.

16. In 2003, the Respondent and his son owned 40% of PYMC’s shares.

17. In 2004, the Respondent sold 36% of PYMC’s shares to 3113571 Nova Scotia Ltd., a corporation owned by the Respondent’s spouse.

18. Until at least December 2015, the Respondent continued to own 4% of PYMC’s shares.

19. At all material times, the Respondent was a director, principal and/or directing mind of PYMC.

20. On or about September 5, 2008, the Respondent signed, as guarantor of the debt, a Promissory Note in the amount of $573,750 payable to an individual, EE, in respect of monies which EE had loaned to PYMC.

21. The Respondent did not disclose his activities with respect to PYMC to his Members, and his Members did not approve these activities.

22. By virtue of the foregoing, the Respondent engaged in outside business activities that were not disclosed to, and approved by, his Members, thereby engaging in conduct contrary to the Members’ policies and procedures, and MFDA Rules 1.2.1(c) (now MFDA Rule 1.3) and 2.1.1. The Respondent’s conduct also contravened the Members’ disclosure and approval requirements with respect to outside business activities, contrary to 2.5.1, 1.1.2 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;
• 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: Michelle Pong
Fax: 416-361-9073
Email: mpong@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.

[1] On September 28, 2009 when National Instrument 31-103 came into force, the Respondent’s registration category was changed from mutual salesperson to dealing representative.