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2017103

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

Richard Kenneth Giuliani

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 (“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 December 11, 2017 at 1:00 p.m. (Eastern), or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against Richard Kenneth Giuliani (“Respondent”).

DATED: Oct 9, 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 September 29, 2006 and December 14, 2015, the Respondent had and continued in a dual occupation which was not disclosed to and approved by the Member by acting as Co-Executor and Co-Trustee of LC’s estate and receiving compensation for these activities, contrary to MFDA Rules 1.2.1(c) (formerly MFDA Rule 1.2.1(d) and now MFDA Rule 1.3) and 2.1.1.

Allegation #2: Between March 19, 2008 and April 23, 2010, the Respondent accepted and acted upon appointments as Co-Executor and Co-Trustee in respect of six accounts which the Respondent opened at the Member for LC’s grandchildren, contrary to MFDA Rules 2.1.4, 2.3.1 and 2.1.1.

Allegation #3: Between September 2, 2009 and April 23, 2010, the Respondent failed to comply with the Member’s instruction that he was not permitted to act as a Trustee in respect of accounts at the Member, contrary to MFDA Rule 2.1.1.

Allegation #4: In December 2010, the Respondent failed to notify the Member, within two business days that he was named as a Respondent in a Notice of Application, contrary to MFDA Policy No. 6.

 

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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. From March 8, 2002 to December 14, 2015, the Respondent was registered in Ontario as a mutual fund salesperson (now known as a dealing representative) with Quadrus Investment Services Ltd. (“Member”), a Member of the MFDA.
  1. From November 28, 2003 to November 11, 2012, the Respondent also acted as a branch manager at the Member.
  1. At all material times, the Respondent was also licensed to sell insurance through Great-West Life, which is affiliated with the Member. 
  1. The Respondent is not currently registered in the securities industry in any capacity.

Background

  1. On February 13, 2006, the Respondent’s insurance client, LC, updated his Last Will and Testament (the “Will”) and named the Respondent as a Co-Executor and Co-Trustee of LC’s Estate. LC was not a mutual fund client of the Member.
  1. In the Will, LC named his son, KC, as the other Co-Executor and Co-Trustee of his Estate.
  1. LC informed the Respondent of his intention to name him as an Executor of his Estate and the Respondent agreed to be named as an Executor.
  1. The terms of LC’s Will included, among other things, that:
    1. the Respondent would receive a bequest of $85,000 in lieu of Executor’s fees; and
    2. part of LC’s Estate would be divided among his six grandchildren by way of trust accounts established for each of them.
  1. LC died on July 18, 2006.
  1. On September 29, 2006, the Respondent was appointed as Co-Executor and Co-Trustee of LC’s Estate.
  1. LC’s Estate was valued at approximately $20 million.
  1. On March 19, 2008, the Respondent, acting in his capacity as an Executor and Trustee for LC’s Estate, opened six accounts at the Member for the benefit of LC’s six grandchildren in accordance with the terms of the Will. The Respondent completed New Account Application Forms (“NAAFs”) and Know-Your-Client (“KYC”) forms for the accounts. The Respondent signed the NAAFs and KYC forms as the account applicant and as the advisor of record.
  1. From March 19, 2008 and November 2008, the Respondent, acting in his capacity as an Executor and Trustee for LC’s Estate, processed purchases in the six accounts totaling approximately $5,416,182. The Respondent co-signed the trade forms, together with KC, as the account applicant. The Respondent also signed the trade forms as the advisor of record.
  1. From September to November 2009, the Respondent, acting in his capacity as an Executor and Trustee for LC’s Estate, processed approximately 18 transactions in the six accounts.
  1. As described in greater detail below, in September 2009, the Member (after becoming aware that the Respondent was acting as a Trustee in respect of the six accounts opened at the Member for LC’s grandchildren) notified the Respondent that he was not permitted to act as a Trustee in respect of accounts.
  1. On April 23, 2010 (more than 7 months after the Member advised that he was not permitted to act as a Trustee), the Respondent resigned as the Trustee in respect of the six accounts opened for LC’s grandchildren.
  1. The Respondent continued to act as an Executor in respect of LC’s Estate, without the Member’s knowledge or approval.
  1. At some point between 2009 and 2011, the Respondent accepted the bequest of $85,000 from LC’s Estate as compensation in lieu of Executor fees for acting as an Executor and Trustee.

Allegations #1: Outside Business Activities

  1. At all material times, the Member’s policies and procedures prohibited its Approved Persons from engaging in any dual occupations (also known as outside business activities) unless the activities were disclosed to and approved by the Member.
  1. As stated above, the Respondent was appointed as Co-Executor and Co-Trustee of LC’s Estate on September 29, 2006. The Respondent resigned as the Trustee in respect of the six accounts opened for LC’s grandchildren on April 23, 2010. The Respondent continued to act as Trustee in respect of LC’s Estate when he ceased to be registered with the Member on December 14, 2015.
  1. The Respondent received compensation of $85,000 for acting as Executor and Trustee in respect of LC’s Estate.
  1. The Respondent failed to disclose to the Member that he was acting as an Executor and Trustee in respect of LC’s Estate and was compensated for these activities, and the Member did not approve these activities.
  1. By virtue of the foregoing, the Respondent had and continued in a dual occupation which was not disclosed to and approved by the Member, contrary to MFDA Rules 1.2.1(c) (formerly MFDA Rule 1.2.1(d) and now MFDA Rule 1.3) and 2.1.1. 

Allegation #2: Accepting Appointments as an Executor and Trustee

  1. At all material times, the Member’s policies and procedures prohibited its Approved Persons from accepting an appointment or acting as an Executor or Trustee where the Member’s financial services may be involved.
  1. As stated above, the Respondent accepted and acted upon appointments as Co-Executor and Co-Trustee in respect of six accounts which the Respondent opened at the Member for LC’s grandchildren. The Respondent, acting in his capacity as an Executor and Trustee for LC’s Estate, processed trades in the accounts and signed account forms.
  1. The Respondent’s conduct gave rise to a conflict or potential conflict of interest which the Respondent failed to disclose to the Member, or ensure was addressed by the exercise of responsible business judgment influenced only the best interests of the clients.
  1. By virtue of the foregoing, the Respondent acted contrary to MFDA Rules 2.1.4, 2.3.1 and 2.1.1.

Allegation #3: Failure to Follow Member Directive

  1. In September 2009, the Member sent emails to the Respondent notifying him that he was not permitted to act as a Trustee in respect of the six accounts he had opened for LC’s grandchildren.
  1. The Respondent failed to resign or otherwise remove himself as a Trustee in respect of the accounts until April 23, 2010.
  1. By virtue of the foregoing, the Respondent failed to comply with the Member’s instruction that he was not permitted to act as a Trustee in respect of accounts at the Member, contrary to MFDA Rule 2.1.1.

Allegation #4: Failure to Report a Notice of Application

  1. In December 2010, the Respondent was named as a Respondent in a civil Notice of Application filed by one of LC’s children and two of LC’s grandchildren in the Ontario Superior Court of Justice (the “Application”).
  1. The Application sought to have the Respondent and KC removed as Executors and Trustees of LC’s Estate.
  1. The Respondent failed to notify the Member that he had been named as a respondent in the Application.
  1. Section 4.1(e) of MFDA Policy 6 states that an Approved Person must report to the Member when he is named as a defendant in a civil claim, in any jurisdiction, relating to the handling of client accounts or trading or advising in securities.
  1. By failing to notify the Member within two business days that he was named as a respondent in the Application, the Respondent engaged in conduct contrary to MFDA Policy No. 6.

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 Babin
Fax: (416) 361-9073
Email: dbabin@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 Director of Regional Councils 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.