MFDA Notice of Hearing

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201711

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

Winston King-Loong Kuit

NOTICE is hereby given that a first appearance will take place by teleconference before a hearing panel of the Pacific Regional Council (the “Hearing Panel”) of the Mutual Fund Dealers Association of Canada (the “MFDA”) in the hearing room at the MFDA offices, located at 650 West Georgia Street, Suite 1220, Vancouver, British Columbia on March 14, 2017 at 10:00 a.m. (Pacific), or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against Winston King-Loong Kuit (the “Respondent”).

DATED: Feb 6, 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 2010 and August 2013, the Respondent recommended, sold, referred or facilitated the sale of approximately $1.55 million of an unapproved investment to seven (7) clients, seven (7) former clients and four (4) other individuals, outside the facilities of his Members, contrary to MFDA Rules 1.1.1 and 2.1.1.

Allegation #2: Between 2010 and August 2013, the Respondent recommended, sold, referred or facilitated the sale of approximately $1.55 million of an unapproved investment to seven (7) clients, seven (7) former clients and four (4) other individuals, thereby engaging in an outside business activity which was not disclosed to or approved by his Members, contrary MFDA Rules 1.2.1(c) (now MFDA Rule 1.3)[1], 2.4.2 and 2.1.1.

Allegation #3: In November 2012, the Respondent completed an annual compliance questionnaire for his Member which contained responses that were false, thereby interfering with the Member’s ability to supervise his conduct, contrary to MFDA Rule 2.1.1.

[1]Effective December 3, 2010, former MFDA Rule 1.2.1(d) was re-numbered as Rule 1.2.1(c). Effective July 15, 2016, former  MFDA Rule 1.2.1(c) was  amended and re-numbered as current MFDA Rule 1.3.1. 

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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 has been registered as a mutual fund salesperson (now known as a dealing representative[1]) since December 2002.
  2. The Respondent was registered as a mutual fund salesperson with Partners in Planning Financial Services Ltd. (“PIP”), a former Member of the MFDA, in British Columbia from July 2006 to June 1, 2011, in Alberta from August 21, 2008 to June 1, 2011, in Ontario from February 16, 2011 to June 1, 2011, and in Saskatchewan from January 6, 2009 to June 1, 2011.
  3. On June 1, 2011, PIP amalgamated with IPC Investment Corporation (“IPC”), a Member the MFDA, and thereafter continued to operate as IPC. From June 1, 2011 to August 7, 2013, the Respondent was registered in British Columbia as a mutual fund salesperson with IPC.  The Respondent also acted as a Branch Manager with IPC from June 1, 2011 to July 26, 2011.
  4. From September 30, 2013 to August 13, 2014, the Respondent was registered in British Columbia with Global Maxfin Capital Inc. (“Global”), a securities dealer regulated by the Investment Industry Regulatory Organization of Canada.
  5. The Respondent is not currently registered in the securities industry.
  6. At all material times, the Respondent conducted business in the Burnaby, British Columbia area.

The SBC Investment

  1. Between 2010 and August 2013, the Respondent recommended, sold, referred or facilitated the sale of approximately $1.55 million in investments in SBC Financial Group Inc. (“SBC”) to 7 clients, 7 former clients and 4 other individuals (the “Investors”), outside the facilities of PIP and IPC. These transactions in SBC are summarized below:

#

Investor

Year

Member Client?

Amount Invested

1

IC

2010

Former client

$151,500

2

PH

2011

Former client

$27,376

3

TJ

2012

Former client

$58,500

4

YK

2010

Client

$100,000

5

JL

2010

Former Client

$67,500

6

RP

2011

Former Client

$450,000

7

LR

2011

Client

$80,500

8

CS

2012

Client

$15,000

9

JS

2011

Former Client

$33,000

10

DK

2011

Client

$34,250

11

TT

2010

Client

$114,050

12

PT

2011

Client

$91,000

13

ET

2011

Client

$39,000

14

AW

2011

Former Client

$21,615

15

AM

2010

Not a client

$60,000

16

JM

2011

Not a client

$150,000

17

CS

2012

Not a client

$50,000

18

JW

2011

Not a client

$10,500

Total

$1,553,791[2]

  1. SBC is a company incorporated in British Columbia. No prospectus has ever been filed in respect of the distribution of securities of SBC.
  2. The Respondent represented to the Investors that the monies they invested in SBC would be used to invest in real estate and stocks. The Respondent further represented to the Investors that their investments in SBC would pay them returns of 12% to 15% per year for a locked-in term of three years.
  3. The Respondent engaged in one or more of the following types of conduct with respect to each of the Investors:
    1. approached the Investors to invest in SBC;
    2. explained the details of the investments to the Investors, including the rates of return that the Investors could expect to receive;
    3. referred or introduced the Investors to a representative of SBC, Prabhjot Bakshi (“Bakshi”)[3], for the purpose of allowing Bakshi to promote and facilitate the sale of investments in SBC;
    4. met with Investors, together with Bakshi, to facilitate the sale of investments in SBC;
    5. recommended the amount for the Investors to invest in SBC;
    6. answered questions from Investors regarding SBC;
    7. met with Investors to have them sign an SBC investment questionnaire, which SBC required as part of the sales process; and
    8. received monies from Investors for the purpose of investing in SBC; and
    9. arranged for monies received from Investors to be invested in SBC.
  4. The SBC investment was not an investment product known to PIP or IPC, or approved by PIP or IPC for sale by their Approved Persons.
  5. None of the SBC investments were sold or referred through the facilities of PIP or IPC.
  6. Neither PIP nor IPC were aware of the Respondent’s conduct regarding SBC.
  7. The Respondent received commissions or other remuneration of approximately $147,500 in respect of his conduct relating to the SBC investments. None of the commissions and other remuneration was received or processed through the facilities of PIP or IPC.
  8. On January 23, 2015, SBC assigned itself to bankruptcy. At that time, SBC reportedly owed approximately $2,712,077 to unsecured creditors including the Investors.
  9. To date, none of the Investors have recovered any of the monies they invested in SBC.

Allegation #1: Securities Related Business Outside the Member

  1. By virtue of the conduct described above, the Respondent recommended, sold, referred or facilitated the sale of approximately $1.55 million in investments in SBC to the Investors, outside the facilities of PIP and IPC, contrary to MFDA Rules 1.1.1 and 2.1.1.

Allegation #2: Outside Business Activities

  1. In the event that the Respondent’s conduct with respect to SBC did not constitute securities related business, then it constituted an outside business activity which was not disclosed to or approved by PIP or IPC, contrary MFDA Rules 1.2.1(c) (now MFDA Rule 1.3)[4], 2.4.2 and 2.1.1.

Allegation #3: Misleading the Member

  1. In November 2012, the Respondent completed an annual compliance questionnaire and submitted it to IPC. As described below, the Respondent provided responses to questions in the annual compliance questionnaire which were false and misleading:
    1. Are you involved in any outside business activities, defined as: any type of activity other than your day-to-day responsibilities as a Mutual Fund Advisor/Licensed Assistant, in which income is earned or services rendered for gain or as a free service? (e.g. Income Tax, Life Insurance, Rental Properties, GICs outside dealer, etc.)
    1. Respondent’s Answer: Yes, Life Insurance- HUB International
    1. Do you have any agreements in place (written or unwritten) where you pay a fee or receive money for a referral and the fee is not processed through IPC Investment Corporation?
    1. Respondent’s Answer: No
    1. Do you receive any form of compensation from entities other than those within the IPC Networks of companies, excluding commission from life insurance companies and not previously disclosed on this questionnaire?
    1. Respondent’s Answer: No
  2. By virtue of the conduct described above, the Respondent completed an annual compliance questionnaire for his Member which contained responses that were false and misleading, thereby interfering with the Member’s ability to supervise his conduct, contrary to 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
650 West Georgia Street, Suite 1220
Vancouver, B.C. V6B 4N9
Attention: Christopher Corsetti
Fax: 604-683-6577
Email: ccorsetti@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]Since September 2009, the registration category formerly known as ‘mutual fund salesperson’ has been replaced by the category ‘dealing representative’.
[2] The Respondent recommended, sold, referred, or facilitated the sale of a total of approximately $2.4 million of SBC investments. Only approximately $1.55 million of these investments were processed when the Respondent was registered as a mutual fund salesperson.
[3] Bakshi was registered as a mutual fund salesperson with PIP, and served as a branch manager, until he resigned in November 2008. Bakshi has not been registered in the securities industry since 2009 and was not registered in the securities industry at the time of his involvement in the sale of SBC investments. Bakshi is the subject of a Notice of Hearing issued by the British Columbia Securities Commission regarding his involvement in the sale of securities of SBC.
[4]Effective December 3, 2010, former MFDA Rule 1.2.1(d) was re-numbered as Rule 1.2.1(c). Effective July 15, 2016, former  MFDA Rule 1.2.1(c) was  amended and re-numbered as current MFDA Rule 1.3.1.