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MFDA Notice of Hearing

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201778

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

Larry Leslie Williams

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 MFDA offices, located at 650 West Georgia Street, Suite 1220, Vancouver, British Columbia on October 11, 2017 at 10:30 a.m. (Pacific), or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against Larry Leslie Williams (“Respondent”).

DATED: Aug 16, 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 March 6, 2015 and August 5, 2015, the Respondent conducted securities related business that was not carried on for the account of the Member or processed through the facilities of the Member by organizing and participating in an investment club with clients of the Member, contrary to MFDA Rules 1.1.1, 1.1.2, 2.5.1 and 2.1.1, and the policies and procedures of the Member.

Allegation #2: Between March 6, 2015 and August 5, 2015, the Respondent conducted securities related business that exceeded the limits of his registration contrary to the Securities Act (British Columbia), thereby engaging the jurisdiction of the Regional Council to impose penalties pursuant to section 24.1.1(h) of MFDA By-law No. 1 and the standard of conduct set out in MFDA Rule 2.1.1.

Allegation #3: Between March 6, 2015 and August 5, 2015, the Respondent co-mingled his money with clients’ money in an investment account opened off the books and records of the Member, thereby giving rise to a conflict of interest which the Respondent failed to address by the exercise of responsible business judgment influenced only by the best interests of the clients, contrary to MFDA Rules 2.1.4 and 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 became registered in the securities industry in September 1995.
  1. Between May 24, 2005 and December 31, 2015, the Respondent was registered in British Columbia as a mutual fund salesperson (now known as a dealing representative) with Hub Capital Inc. (“Hub”), a Member of the MFDA.
  1. The Respondent resigned from Hub on December 31, 2015.
  1. The Respondent is not currently registered in the securities industry.
  1. At all material times, the Respondent conducted business in the Surrey, British Columbia area.

Allegation #1 – Securities Related Business Outside the Member

  1. Client A opened an account with Hub in May 2005 and Client B opened an account with Hub in November 2006. At all material times, the Respondent was the Approved Person responsible for servicing the clients’ accounts at Hub.
  1. On or about March 6, 2015, without the knowledge, authorization or approval of the Member, the Respondent entered into an agreement with client A and client B to form an investment club (the “Investment Club”).
  1. The Respondent opened a joint investment account for the Investment Club with an online brokerage company called Interactive Brokers.
  1. The Respondent, client A and client B initially contributed the following amounts to the Investment Club’s joint investment account:
    1. Client A: $85,000 US Dollars;
    2. Client B: $25,000 US Dollars; and
    3. The Respondent: $30,000 US Dollars.
  1. Based upon these contributions, the Respondent owned 22% of the Investment Club, while client A and client B owned 60% and 18%, respectively.
  1. The Respondent was appointed as the Managing Partner of the Investment Club.
  1. As of June 18, 2015, the account opened for the Investment Club held shares of three biotechnology companies and options in three technology companies.
  1. The Respondent’s activities in respect of the Investment Club constituted securities related business.
  1. The securities purchased in the investment account held by the Investment Club were not carried on for the account of Hub, or processed through its facilities.
  1. At all material times, Hub had an explicit policy and procedure that prohibited its Approved Persons from becoming involved with clients in private investment schemes, including investment clubs.
  1. On June 24, 2015, Hub conducted a branch audit, at which time the Respondent disclosed to Hub his involvement in the Investment Club.
  1. On August 5, 2015, the Respondent resigned from the Investment Club.
  1. By virtue of the conduct described above, the Respondent conducted securities related business in contravention of MFDA Rule 1.1.1 and breached the Member’s policies and procedures prohibiting participation in investment clubs with clients, contrary to the Member’s policies and procedures and MFDA Rules 1.2.1, 2.5.1 and 2.1.1.

Allegation #2 – Acting Outside Registration Category

  1. By conducting securities related business involving the purchase and sale of equities and options, the Respondent exceeded the limits of his registration category as a mutual fund salesperson.
  1. At no time was the Respondent registered with the British Columbia Securities Commission (“BCSC”) as an Investment Counsel/Portfolio Manager or with the Investment Industry Regulatory Organization of Canada as a registered representative authorized to conduct securities related business involving trading in equity securities or options.
  1. At no time had the Respondent fulfilled the minimum proficiency requirements necessary to qualify for registration to trade in equity securities or options.
  1. By engaging in securities related business beyond the limits of his registration category under the Securities Act (British Columbia), RSBC 1996, C. 418, the Respondent contravened provincial securities law and thereby engaged the jurisdiction of the Regional Council to impose a penalty on the Respondent pursuant to section 24.1.1(h) of MFDA By-law No. 1 and the standard of conduct set out in MFDA Rule 2.1.1.

Allegation #3 – Personal Financial Dealings with Clients

  1. At all material times, Hub had a policy and procedure that required its Approved Persons to immediately disclose any potential conflicts of interest. The Hub policy lists examples of potential conflicts of interest, and specifically prohibits co-mingling a client’s money with an Approved Person’s money.
  1. The Respondent co-mingled his money with clients’ money in the Investment Club investment account.
  1. By virtue of the conduct described above, the Respondent engaged in personal financial dealings with clients giving rise to a conflict or potential conflict of interest which the Respondent failed to disclose to the Member and address by the exercise of responsible business judgment influenced only by the best interests of the clients, contrary to the Member’s policies and procedures and MFDA Rules 1.2.1, 2.5.1, 2.1.1 and 2.1.4.

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 Respondents 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 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 one (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 one (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.