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MFDA Notice of Hearing

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HomeCompleted Hearings201869 - Robert William Copland › NOH201869

201869

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

Robert William Copland

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 September 11, 2018 at 9:00 a.m. (Eastern), or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against Robert William Copland (“Respondent”).

DATED: Jun 20, 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: Between about June 2013 and October 2015, the Respondent recommended, sold or facilitated investments by four clients in a retail coffee shop business, thereby engaging in securities related business outside the Member, contrary to MFDA Rules 1.1.1 and 2.1.1

Allegation #2: Between about June 2013 and October 2015, the Respondent engaged in outside business activities with respect to one or more coffee businesses, without the knowledge or approval of the Member, contrary to the Member’s policies and procedures, and MFDA Rules 1.2.1(c) (now MFDA Rule 1.3), 2.5.1, 1.1.2, and 2.1.1.

Allegation #3:  Between about June 2013 and October 2015, the Respondent engaged in personal financial dealings with clients when he, among other things:

  1. established or operated a non-arm’s length coffee business with a client;
  2. opened a joint bank account with a client in respect of a non-arm’s length coffee business;
  3. recommended, sold or facilitated investments by clients in a retail coffee shop business;
  4. arranged for a client to loan monies to a non-arm’s length coffee business;
  5. arranged for or accepted a personal loan from a client; or
  6. accepted payments from a client and/or made payments to a client relating to one or more non-arm’s length coffee businesses;

thereby giving rise to a conflict or potential conflict of interest which the Respondent failed to disclose to the Member, or failed to 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 2.1.4, 2.5.1, 1.1.2, and 2.1.1.

Allegation #4:  On or about May 31, 2014, the Respondent misrepresented himself as a client’s property manager in a letter submitted in support of the client’s application to unlock a pension on the basis of financial hardship, thereby failing to observe a high standard of conduct and ethics in the transaction of business, or engaging in conduct which is unbecoming or detrimental to the public interest, contrary to MFDA Rule 2.1.1.

Allegation #5:  Commencing May 29, 2017, the Respondent failed to cooperate with an investigation by MFDA Staff into his conduct, contrary to section 22.1 of MFDA By-law No. 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. Between August 2005 and October 14, 2015, the Respondent was registered in Ontario as a mutual fund salesperson (now known as a dealing representative) with Investors Group Financial Services Inc. (the “Member”), a Member of the MFDA.
  1. On October 14, 2015, the Member terminated the Respondent as a result of the matters described below.
  1. The Respondent is no longer registered in the securities industry in any capacity.
  1. At all material times, the Respondent conducted business in the Bowmanville, Ontario area.

Coffee Businesses: R&R Enterprises and Mixed Bean

  1. At all material times, client RF was a client of the Member whose accounts were serviced by the Respondent.
  1. Commencing in or about July 2013, without the knowledge or prior approval of the Member, the Respondent established and/or operated a joint business venture with client RF known as R&R Enterprises (“R&R”) which supplied coffee products.
  1. Among other things, R&R supplied coffee products to a retail coffee store operating using the name “Mixed Bean”. At all material times, Mixed Bean was a business entity owned or operated by the Respondent’s spouse and his brother-in-law. Mixed Bean operated a small number of retail coffee stores in Ontario.
  1. While meeting with prospective clients, the Respondent suggested that they purchase coffee products from R&R.
  1. In or about August 2013, the Respondent and client RF established a joint bank account for R&R (the “R&R Joint Account”). The R&R Joint Account was used for, among other things, accepting deposits from Mixed Bean for the purchases of coffee products, and accepting or making payments on behalf of Mixed Bean.
  1. As described in more detail below, the Respondent also recommended, sold or facilitated investments by four clients in Mixed Bean.
  1. Between about June 2013 and October 2015, the Respondent engaged in business activities involving both R&R and Mixed Bean, without the knowledge or prior approval of the Member.
  1. As described in more detail below, the Respondent failed to attend an interview with MFDA Staff during the course of an investigation into his conduct. As a result, the full nature and extent of the Respondent’s conduct with respect to R&R and Mixed Bean is not known.

Allegation #1 – Client Investments in Mixed Bean

Client RF
  1. In addition to establishing and operating R&R with client RF as described above, between about June 2013 and December 2013, the Respondent recommended, sold or facilitated investments totaling approximately $111,437 by client RF in Mixed Bean. Some or all of these monies were used to purchase an ownership interest in Mixed Bean store locations.
  1. Client RF redeemed holdings from accounts at the Member in order to generate the monies invested in Mixed Bean. The Respondent processed the redemptions from the client’s accounts at the Member.
Client GK
  1. At all material times, client GK was a client of the Member whose accounts were serviced by the Respondent.
  1. In or about November 2013, the Respondent recommended, sold or facilitated an investment by client GK in Mixed Bean in the amount of at least $25,000.
Client AB
  1. At all material times, client AB was a client of the Member whose accounts were serviced by the Respondent.
  1. On at least two occasions between June 2013 and August 2013, the Respondent recommended, sold or facilitated two investments by client AB totaling $50,000 in Mixed Bean. The two investments were purported to be structured as loans.
  1. With regards to the first loan, the Respondent provided client AB with a loan agreement signed by the Respondent in his personal capacity in which the Respondent agreed to borrow from client AB, and personally secure, $20,000 in exchange for a 30% ownership share in a Mixed Bean retail store in Owen Sound, Ontario.
  1. With regards to the second loan, the Respondent provided client AB with a loan agreement signed by the Respondent on behalf of Mixed Bean in which Mixed Bean agreed to borrow $30,000 from client AB in exchange for a 6% interest in all Mixed Bean operations.
  1. Client AB redeemed holdings from accounts at the Member in order to generate the monies invested in Mixed Bean. The Respondent processed the redemptions from the client’s accounts at the Member.
Client CM
  1. At all material times, client CM was a client of the Member whose accounts were serviced by the Respondent.
  1. In or about February 2014, the Respondent recommended, sold or facilitated an investment by client CM totaling $12,000 in Mixed Bean. Client CM was advised that he could expect a 5% return on his investment.
  1. Client CM redeemed holdings from accounts at the Member in order to generate the monies invested in Mixed Bean. The Respondent processed the redemptions from the client’s accounts at the Member.
  1. None of the investments by the clients in Mixed Bean described above were carried on for the account or through the facilities of the Member.
  1. As a result of the Respondent’s failure to attend in interview with MFDA Staff, the full nature and extent of the Respondent’s conduct with respect to the client’s investments in Mixed Bean, and the status of these investments, is not known.
  1. By virtue of the foregoing, the Respondent recommended, sold or facilitated investments by four clients totaling approximately $198,437 in Mixed Bean, thereby engaging in securities related business outside the Member, contrary to MFDA Rules 1.1.1 and 2.1.1.

Allegation #2 – Undisclosed and Unapproved Outside Business Activities

  1. At all material times, the Member had policies and procedures in place that required Approved Persons to obtain prior approval from the Member before engaging in an outside business activity (“OBA”). After approval of an OBA, the Member required its Approved Persons to report any changes to the OBA within two business days.
  1. As described above, commencing in June 2013, the Respondent began engaging in business activities involving both R&R and Mixed Bean. The Respondent did this without disclosing the activities to the Member or obtaining its prior approval.
  1. In or about March 2014, the Respondent submitted an Outside Business Activity approval form (the “OBA Approval Form”) to the Member in respect of his involvement with R&R.
  1. The Respondent did not submit an OBA Approval Form relating to his involvement with Mixed Bean or otherwise disclose these activities to the Member.
  1. In the OBA Approval Form relating to R&R, the Respondent advised the Member, among other things, that:
    1. the start date of the activity was October 1, 2013;
    2. the Respondent’s duties were “3-5 hours of bookkeeping”; and
    3. client RF was involved in the activity.
  1. The Respondent failed to disclose to the Member the full nature and extent of his activities with respect to R&R in the OBA Approval Form or otherwise.
  1. In July 2014, the Member denied the Respondent’s request to operate R&R due to, among other things, the potential for conflicts of interest.
  1. On or about July 8, 2014, the Respondent advised the Member that he would not be continuing the R&R business and expected it to be “wrapped up” in 6-8 weeks.
  1. Notwithstanding that the Member had declined to approve his involvement with R&R and that he had represented that he would not be continuing his activities with respect to the business, the Respondent continued to operate R&R until at least March 2015.
  1. By virtue of the foregoing, the Respondent engaged in outside business activities with respect to R&R and Mixed Bean, without the knowledge or approval of the Member, contrary to the Member’s policies and procedures, and MFDA Rules 1.2.1(c) (now MFDA Rule 1.3), 2.5.1, 1.1.2, and 2.1.1.

Allegation #3 - Personal Financial Dealings with Clients

  1. At all material times, the Member had policies and procedures that:
    1. required Approved Persons to be aware of the possibility of conflicts of interest, and report potential conflict of interest to a branch manager;
    2. required Approved Persons to avoid business relationships with clients (i.e., investing in a business), as such actions can affect business dealings with clients causing a potential conflict of interest and may constitute outside business activities;
    3. prohibited Approved Persons, under any circumstances, from borrowing or lending to a client; and
    4. prohibited Approved Persons from accepting client monies.
  1. The Respondent engaged in personal financial dealings with clients when he, among other things:
    1. established and operated R&R with client RF (as described in paragraph 6 above);
    2. opened a joint bank account with client RF in respect of R&R (as described in paragraph 9 above);
    3. recommended, sold or facilitated investments by clients RF, GK AB, and CM in Mixed Bean, which was a non-arm’s length business owned and operated by the Respondent’s spouse and his brother-in-law (as described in paragraphs 13 to 24 above);
    4. agreed to borrow from client AB, and personally secure, $20,000 in exchange for a 30% ownership in a Mixed Bean retail store in Owen Sound, Ontario (as described in paragraph 19 above);
    5. the Respondent arranged for or accepted a personal loan of at least $2,500 from client RF;
    6. on or about November 21, 2013, the Respondent accepted a cheque from client GK payable to R&R in the amount of $25,000;
    7. on or about December 3, 2013, the Respondent accepted a cheque from client GK payable to Respondent personally in the amount of $11,000;
    8. on or about September 20, 2013, the Respondent, through R&R, paid $600 to client AB in respect of the client’s investment in Mixed Bean;
    9. on or about October 31, 2013, the Respondent, through R&R, paid $600 to client AB in respect of the client’s investment in Mixed Bean; or
    10. on or about January 31, 2014, the Respondent paid $600 to client AB in respect of the client’s investment in Mixed Bean.
  1. The Respondent’s conduct gave rise to a conflict or potential conflict of interest which the Respondent failed to disclose to the Member, or failed to address by the exercise of responsible business judgment influenced only by the best interests of the clients.
  1. As a result of the Respondent’s failure to attend in interview with MFDA Staff, the full nature and extent of the Respondent’s personal financial dealings with clients is not known.
  1. By virtue of the foregoing, the Respondent engaged in conduct contrary to the Member’s policies and procedures, and MFDA Rules 2.1.4, 2.5.1, 1.1.2, and 2.1.1.

Allegation #3 – Misrepresentation

  1. In or about May 2014, client RF completed a financial hardship unlocking application form to access monies from his Life Income Fund (“LIF”) account at the Member.
  1. In support of client RF’s application, the Respondent misrepresented himself as client RF’s property manager in a letter dated May 5, 2014 which stated that client RF’s rent was in arrears.
  1. Based upon client RF’s application, including the letter dated May 5, 2014, client RF was able to redeem $26,250 from the client’s LIF account.
  1. By virtue of the foregoing, the Respondent failed to observe a high standard of conduct and ethics in the transaction of business, and/or engaged in conduct which is unbecoming or detrimental to the public interest, contrary to MFDA Rule 2.1.1.

Allegation #4 – Failure to Cooperate with Staff’s investigation

  1. On July 13, 2016, the Respondent attended the MFDA’s offices in Toronto for an interview during the course of the MFDA’s investigation into the conduct described above. Due to medical reasons, the interview did not proceed on that day. Subsequently, MFDA Staff and the Respondent agreed to reschedule the interview for May 4 and 5, 2017.
  1. On March 14, 2017, MFDA Staff sought confirmation from the Respondent that the May 4 and 5, 2017 interview would proceed as scheduled. On March 22, 2017, the Respondent confirmed that he was available.
  1. On May 3, 2017, the Respondent advised MFDA Staff that, due to medical reasons, he wished to postpone the interview. Subsequently, MFDA Staff and the Respondent agreed to conduct an interview by telephone on May 29 and 30, 2017.
  1. On May 28, 2017, the Respondent emailed MFDA Staff and advised as follows: “I start a job tomorrow early. I sorry I can not (sic) speak on this tomorrow or Tuesday.”
  1. On May 29, 2017, MFDA Staff wrote the Respondent requesting that he contact MFDA Staff no later than May 31, 2017 to advise whether he intended to participate in a telephone interview and, if so, to advise if he was available on certain dates proposed by MFDA Staff.[1]
  1. The Respondent did not respond to MFDA Staff’s May 29, 2017 communication.
  1. On June 2, 2017, MFDA Staff wrote the Respondent and requested that he respond no later than June 8, 2017 to confirm whether he intended to participate in a telephone interview. MFDA Staff also advised the Respondent that if he failed to respond by June 8, 2017, then MFDA Staff would proceed to schedule the telephone interview on June 9, 2017 at 10 a.m.
  1. The Respondent did not respond to MFDA Staff’s May 29, 2017 letter.
  1. On June 9, 2017 Staff attempted to contact the Respondent by telephone at 10 a.m. in order to conduct the scheduled interview. The Respondent did not answer the telephone at that time, and Staff therefore left a voicemail message for the Respondent advising of MFDA Staff’s efforts to confirm his participation in the interview. MFDA Staff also advised that because he did not participate in the interview that MFDA Staff may seek authorization to commence enforcement proceedings against him on the basis that he failed to cooperate with the MFDA’s investigation.
  1. To date, the Respondent has failed or refused to respond to MFDA Staff’s communications seeking to reschedule his interview.
  1. Due to the Respondent’s failure to cooperate with MFDA Staff’s investigation, MFDA Staff has not been able to determine the full nature and extent of the Respondent’s conduct described above, and the extent to which he may have engaged in similar conduct with other clients or individuals.
  1. By virtue of the foregoing, the Respondent failed to cooperate with an investigation by MFDA Staff into his conduct, contrary to section 22.1 of MFDA By-law No. 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; and
  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: David Halasz
Email: dhalasz@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.

[1] MFDA Staff does not allege that the Respondent failed to cooperate with its investigation prior to May 31, 2017.

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