MFDA Notice of Hearing

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201826

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

Rafal Mark Rosicki

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 May 16, 2018 at 9:30 a.m. (Eastern), or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against Rafal Mark Rosicki (“Respondent”).

DATED: Mar 21, 2018

"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 August 15, 2016, the Respondent obtained a loan in the amount of $40,000 from client RS for his personal use which he did not repay or otherwise account for, thereby engaging in personal financial dealings with a client that gave rise to a conflict of interest that the Respondent failed to address through the exercise of responsible business judgment influenced only by the best interests of the client, contrary to MFDA Rules 2.1.4 and 2.1.1 and the policies and procedures of the Member.

Allegation #2: Commencing on September 13, 2016, the Respondent made false or misleading statements about his conduct in response to questioning from staff from the Member, staff of the Ontario Securities Commission and staff of the MFDA, contrary to MFDA Rule 2.1.1.

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 August 12, 2015 to September 16, 2016, the Respondent was registered in Ontario as a mutual fund salesperson (now known as a dealing representative) with TD Investment Services Inc. (the “Member”), a Member of the MFDA.
  1. On September 16, 2016, the Member terminated the Respondent as a result of the activities described herein.
  1. At all material times, the Respondent conducted business in Toronto, Ontario.
  1. The Respondent is not currently registered in the securities industry in any capacity.

Allegation #1 – Personal Financial Dealings with a Client

  1. At all material times, the Member’s Compliance Manual (the “PPM”) excerpt titled “Code of Ethics and Standards” expressly prohibited Approved Persons of the Member from borrowing money from a customer or receiving questionable payments from a customer.
  1. The Respondent was informed when he became an Approved Person that he was not permitted to borrow money from clients including relatives and close friends.
  1. Client RS was a client of the Member and the Respondent was the mutual fund salesperson responsible for servicing the accounts of client RS.
  1. The Respondent and client RS were acquainted through ties to the same cultural and ethnic community.
  1. On August 12, 2016, the Respondent processed a redemption in the amount of $40,000 from the investment account of client RS. The proceeds of the redemption were deposited into the bank account of client RS.
  1. On August 15, 2016, the Respondent transferred $40,000 from the bank account of client RS to the Respondent’s personal bank account.
  1. On August 16, 2016, the Respondent transferred the $40,000 that he had obtained from the bank account of client RS into the Respondent’s Tax Free Savings Account (“TFSA”). Subsequently, the Respondent invested the money that he had transferred into his TFSA in equities purchased through his discount brokerage account.
  1. On August 17, 2016, the Branch Manager MT, who was responsible for supervising the conduct of the Respondent, discovered an “Investment Agreement” that appeared to have been signed by the Respondent and client RS. The Investment Agreement was not dated and the signatures of the parties to the Investment Agreement were not dated.
  1. The wording of the Investment Agreement was as follows:
    1. As per our conversation this letter is to acknowledge that [client RS] will give myself  [the Respondent] $40,000 so that I could (sic) leverage trade using my . . . Discount Brokerage account.  The principle (sic) of $40,000 will be returned to [client RS], however all interest made is kept by myself [the Respondent].  There is no set date yet as to when the principle (sic) amount used for the leverage trading should will (sic) be returned, this will be worked out between us to be convenient for both of us.
      1. I [client] RS understand and agree to these terms
      2. I [the Respondent] understand and agree to these terms.
  1. The Respondent drafted the Investment Agreement.
  1. The loan from client RS was not secured by any collateral and did not entitle client RS to any interest or other return on his investment or any regular reporting on the status of the loan.
  1. Furthermore, no date was specified in the Investment Agreement for the repayment of the $40,000 that the Respondent borrowed from client RS.
  1. Following his termination by the Member, the Respondent relied in part on money that had been obtained from client RS and was contributed to his TFSA to finance his personal expenses.
  1. By borrowing $40,000 from client RS in order to make personal investments or for other personal use, the Respondent engaged in personal financial dealings with a client giving rise to a conflict of interest that the Respondent failed to address by the exercise of responsible business judgment influenced only by the best interests of the client, contrary to MFDA Rules 2.1.4 and 2.1.1 and the policies and procedures of the Member.

Allegation #2 – False or Misleading Statements

  1. On September 13, 2016, in response to questioning about his conduct by staff of the Member, the Respondent falsely claimed that he had obtained the money from client RS in order to invest in a TFSA on behalf of the client because the client did not have a social insurance number and was not eligible to open a TFSA.
  1. In an e-mail dated October 4, 2016 in response to questioning by staff of the Ontario Securities Commission, the Respondent falsely described the transaction with client RS as follows:
  1. A friend owed me money from work that I did for him for a while ago and because it was a large sum of money ($40,000.00) that was transferred to me (again none of these transactions were done under my log in ID) TD had a hard time believing the legitimacy of these funds.  I said once again if they have a problem with (sic) they can call the guy who gave me the money for work that I have don’t (sic) for him.
  2. . . .
  3. Further more (sic) all these transactions were done under my branch managers (sic) knowledge and nothing was said to me about breaking any codes of ethics or laws that TD has for their employees.
  1. In an interview with Staff of the MFDA on April 21, 2017, the Respondent told Staff that he had learned about two marijuana stocks that he wanted to purchase but he did not have any money to invest so he decided to ask client RS to lend him the money to invest because “[client RS] has a decent amount of money . . . I handled his finances before. He owed me favours from before from working for him.  He always said, oh, you need anything, you need anything, I’ll help you out, type of thing.”  The Respondent also stated that, because he and client RS were both Polish, he thought that client RS would want to see “another young, like, Polish kid do well” and would agree to loan the Respondent the money that he wanted to invest in his TFSA.
  1. In his interview with Staff, the Respondent falsely stated that he had obtained prior approval from his branch manager to borrow money from client RS to invest in his own account.
  1. By making false or misleading statements to staff of the Member, staff of the OSC and staff of the MFDA who were investigating his conduct, the Respondent contravened the policies and procedures of the Member 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 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: Maria L. Abate
Email: mabate@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) 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.

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