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MFDA Notice of Hearing

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This is a Third Party Document.

201713

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

Chun-Yi Tay

NOTICE is hereby given that a first appearance will take place by teleconference before a hearing panel of the Pacific Regional Council (“Hearing Panel”) of the Mutual Fund Dealers Association of Canada (“MFDA”) in the hearing room at the offices of the MFDA, located at 650 West Georgia Street, Suite 1220, Vancouver, British Columbia on April 6, 2017 at 10:00 a.m. (Pacific), concerning a disciplinary proceeding commenced by the MFDA against Chun-Yi Tay (the “Respondent”). The Hearing on the Merits will take place in Vancouver, British Columbia at a time and venue to be announced.

DATED: Feb 8, 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 May 26, 2015 and June 3, 2015, the Respondent processed two redemptions in the total amount of $51,200 USD based upon email instructions received from a third party who gained unlawful access to a client’s email account and subsequently misappropriated the proceeds of the redemptions, thereby failing to comply with the Member’s policies and procedures that prohibited its Approved Persons from accepting instructions from clients by email, contrary to MFDA Rules 1.1.2,  2.5.1, and 2.1.1.

Allegation #2: On or about June 3, 2015, the Respondent falsely represented to the Member that she had spoken with a client to confirm the client’s instructions to process a transaction, thereby failing to observe high standards of ethics and conduct in the transaction of business, contrary to MFDA Rule 2.1.1.

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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

  1. The Respondent has been registered in the securities industry since 2009.
  1. Since June 17, 2016, the Respondent has been registered in British Columbia as a dealing representative with Royal Mutual Funds Inc., a Member of the MFDA.
  1. From February 15, 2013 to December 20, 2015, the Respondent was registered in British Columbia as a mutual fund salesperson (now known as a dealing representative) with BMO Investments Inc. (“BMO”), a Member of the MFDA.
  1. The conduct described below occurred while the Respondent was registered with BMO.
  1. At all material times, the Respondent carried on business in the Richmond, British Columbia area.

Allegation #1 – Failure to Comply with Member’s Policies and Procedures

  1. At all material times, BMO’s policies and procedures prohibited its Approved Persons from accepting financial instructions from clients by email.
  1. On December 5, 2014, client X signed a Message Agreement with BMO that allowed BMO to accept instructions from client X by telephone or fax transmission. The Message Agreement specifically states that BMO “will not accept or act upon email instructions.”
  1. On May 26, 2015, the Respondent received an email from client X’s email account requesting that she transfer monies from his BMO account by wire transfer to a certain bank account purporting to belong to client X in the United Kingdom.
  1. Unbeknownst to the Respondent, client X’s email account had been unlawfully accessed by an unknown individual, who proceeded to use client X’s email account to communicate via email with the Respondent. These email communications resulted in redemptions being facilitated by the Respondent in the mutual fund account of client X and deposited into bank accounts that did not belong to client X.
  1. On May 28, 2015, the Respondent processed a redemption of $21,200 USD from client X’s mutual fund account at BMO, and processed a wire transfer of $21,200 USD to the bank account specified in the email the Respondent received on May 26, 2015.
  1. On June 1, 2015, the Respondent, received another email from client X’s email account requesting that the Respondent redeem $32,020 USD from his BMO account.
  1. On June 1, 2015, the Respondent processed a redemption of $32,020 USD from client X’s mutual fund account at BMO.
  1. On June 3, 2015, the Respondent received another email from client X’s email account providing the Respondent with instructions to wire transfer the monies to a certain account in the United Kingdom.
  1. On June 3, 2015, the Respondent processed a wire transfer for $30,000 USD from client X’s account to the account in the United Kingdom specified in the June 3, 2015 email.
  1. On June 11, 2015, the Respondent received an email from client X sent from a different email address which advised that the email address from which the Respondent had received the instructions described above had been compromised, that the Respondent should not wire any funds without speaking with client X, and that the Respondent should no longer communicate with client X through that email address.
  1. BMO was able to recover a portion of the monies transferred to the bank account in the United Kingdom and reimbursed client X for the remaining amounts of the redemptions.
  1. By virtue of the foregoing, the Respondent processed two redemptions in the total amount of $51,200 USD based upon email instructions received from a third party who gained unlawful access to a client’s email account and subsequently misappropriated the proceeds of the redemptions, thereby failing to comply with the Member’s policies and procedures that prohibited its Approved Persons from accepting instructions from clients by email, contrary to MFDA Rules 1.1.2, 2.5.1, and 2.1.1.

Allegation #2 – False Representation to the Member

  1. On or about June 3, 2015, the Respondent submitted a requisition for wire transfer form to BMO in order to process the wire transfer described above at paragraph 14. The Respondent falsely indicated on the form that she had contacted client X and obtained instructions for the transaction by phone on June 3, 2015 at 2:10 pm, when she had not done so.
  1. By virtue of the foregoing, the Respondent falsely represented to the Member that she had spoken with a client to confirm the client’s instructions to process a transaction, thereby failing to observe high standards of ethics and conduct in the transaction of business, 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
Pacific Regional Office
650 West Georgia Street, Suite 1220
Vancouver, BC 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.

END.