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MFDA Notice of Hearing

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201737

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

David Hamilton Cudmore

NOTICE is hereby given that a first appearance will take place by teleconference before a hearing panel of the Atlantic Regional Council (the “Hearing Panel”) of the Mutual Fund Dealers Association of Canada (the “MFDA”) in the MFDA offices located at 121 King Street West, Suite 1000, Toronto, Ontario on August 17, 2017, at 10:00 a.m. (Atlantic) or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against David Hamilton Cudmore (the “Respondent”). The Hearing on the Merits will take place in Charlottetown, Prince Edward Island at a time and venue to be announced.

DATED: Jul 4, 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:  Commencing on October 26, 2015, the Respondent failed to co-operate with an investigation into his activities conducted by Staff of the MFDA, contrary to section 22.1 of MFDA By-law No. 1 and MFDA Rule 2.1.1.

560595 v2

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 had been registered in the mutual fund industry since November 2001.
  2. From November 23, 2001 to June 24, 2015, the Respondent was registered as a mutual fund salesperson (now known as a dealing representative) in the province of Prince Edward Island with Quadrus Investment Services Ltd. (“Quadrus”), a Member of the MFDA.
  3. From September 5, 2011 to July 24, 2015, the Respondent was also an insurance agent with London Life Insurance Company (“London Life”).
  4. Quadrus is affiliated with London Life and has been a Member of the MFDA since March 25, 2002.
  5. At all material times, the Respondent conducted business in and around Charlottetown, Prince Edward Island.

Morton Dew Ltd.

  1. The Respondent was dually registered as a dealing representative and insurance agent. In his capacity as an insurance agent, the Respondent sold insurance products offered by London Life through Morton Dew Ltd. (“Morton Dew”).
  2. The president and principal of Morton Dew was Quadrus Approved Person and London Life insurance agent, Frank Harrison Dew (“Dew”).
  3. In June 2015, London Life received an e-mail from a third party company that had been engaged in business providing marketing support to insurance agents including Dew and the Respondent that the third party company had terminated its dealings with Dew and the Respondent as a result of concerns that Dew and the Respondent were engaged in irregular and potentially unethical business practices. On or about June 19, 2015, London Life shared the information it had received from the third party company with Quadrus.  Both London Life and Quadrus commenced investigations into the activities of Dew and the Respondent.
  4. On June 24, 2015, London Life terminated the Respondent as an insurance agent which, in accordance with London Life’s internal procedures, also triggered the automatic termination of the Respondent’s mutual fund registration by Quadrus.

Failure to Cooperate

  1. In July 2015, when Staff of the MFDA (“Staff”) was informed that the Respondent’s registration had been terminated, an investigation was commenced into the Respondent’s activities as an Approved Person.
  2. On September 10, 2015, Staff sent a letter to the Respondent by regular and registered mail to request a statement providing his knowledge of matters under investigation by Staff. As it turned, the Respondent no longer resided at the address to which the letter was sent.
  3. By means of further investigation, Staff located the Respondent and on October 22, 2015, Staff sent its request for a statement from the Respondent to his new address. On October 26, 2015, the Respondent accepted delivery of Staff’s letter to him.
  4. Between October 26, 2015 and March 2016, no response was received from the Respondent.
  5. By means of further investigation in March 2016, Staff learned that the Respondent had moved again to a new address.
  6. On April 4, 2016, Staff arranged for a letter dated March 29, 2016 to be delivered to the Respondent at his new address by a process server. The letter dated March 29, 2016 again requested a statement from the Respondent concerning his knowledge of certain matters under investigation and informed the Respondent that he had a regulatory obligation to co-operate with Staff’s investigation.
  7. By letter dated May 19, 2016, Staff sent a third request to the Respondent which was delivered to his home by a process server on May 29, 2016. The May 19, 2016 letter requested a written statement from the Respondent concerning his knowledge of certain matters under investigation and asked the Respondent to contact Staff to schedule and arrange to attend an interview with Staff concerning his knowledge of matters under investigation.  The Respondent was informed in the May 19, 2016 letter that if he failed to respond by June 3, 2016, Staff would consider commencing a disciplinary proceeding against him for failing to co-operate with Staff’s investigation.
  8. To date, the Respondent has failed to provide Staff with a written statement responding to Staff’s requests for information concerning his knowledge of matters that were under investigation and has failed to attend an interview with Staff to give information concerning his knowledge of matters under investigation, thereby failing to co-operate with Staff’s regulatory investigation, contrary to section 22.1 of MFDA By-law No. 1 and 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 Director of Regional Councils 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: Maria L. Abate. Enforcement Counsel
Fax: (416) 361 – 9073
Email: mabate@mfda.ca

A Reply shall be filed by:

  1. providing 4 copies of the Reply to the Director of Regional Councils 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 1 copy of the Reply to the Director of Regional Councils 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 1 electronic copy of the Reply to the Director of Regional Councils 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.