MFDA Notice of Hearing

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201914

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

Christopher Martin Alfred Lee

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, 121 King Street West, Suite 1000, Toronto, Ontario on April 9, 2019 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 Christopher Martin Alfred Lee (“Respondent”).

DATED: Feb 15, 2019

"Michelle Pong"

Michelle Pong

Director of Regional Councils

Mutual Fund Dealers Association of Canada
121 King St. West, Suite 1000
Toronto, ON M5H 3T9
Telephone: 416-945-5134
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 at least July 28, 2012, the Respondent misappropriated or failed to account for, approximately $1,363,850 solicited or received from at least twelve clients and seven individuals, thereby failing to deal fairly, honestly, and in good faith with clients, failing to observe high standards of ethics and conduct in the transaction of business, and engaging in business conduct or practice that is unbecoming or detrimental to the public interest, contrary to the Member’s policies and procedures and MFDA Rules 2.1.1, 2.10, and 1.1.2.

Allegation #2: Commencing on or about October 16, 2018, the Respondent failed to cooperate with MFDA Staff’s investigation 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. From December 13, 2000 to October 13, 2017, the Respondent was registered in Ontario as a mutual fund salesperson (now known as a dealing representative)[1] with Quadrus Investment Services Ltd. (the “Member”), a Member of the MFDA.
  2. On October 13, 2017, the Respondent resigned from the Member.
  3. At all material times, the Respondent was licensed to sell insurance products and was contracted as an insurance advisor with London Life Insurance Company (“London Life”).
  4. At all material times, the Respondent carried on business in the Nepean, Ontario area as part of Moore Wrinn Financial Group Inc. (“Moore Wrin”).
  5. The Respondent is not currently registered in the securities industry in any capacity.

The Respondent Misappropriated or Failed to Account for Monies

  1. Commencing on at least July 28, 2012, the Respondent misappropriated, or failed to account for, approximately $1,363,850 solicited or received from at least twelve clients and seven individuals (the other individuals were insurance clients of the Respondent) (collectively, the “Investors”).
  2. When meeting with the Investors to review their mutual fund and/or insurance investments, the Respondent advised the Investors of a special investment opportunity that he represented had a guaranteed rate of return of 4% or 5% annually. To invest in the special opportunity, the Respondent had the investors write a cheque or obtain a bank draft payable to one of two corporations, 2332244 Ontario Inc. or 8616574 Canada Inc. (the “Numbered Companies”), which the Respondent had incorporated.
  3. Where the Investors did not have sufficient cash available to make an investment, the Respondent arranged for the Investors to redeem existing mutual fund or insurance investments and provide a post-dated cheque or bank draft to transfer the monies to the special opportunity after the redemptions settled in the investors’ bank accounts. In several instances, the investors incurred deferred sales charges or other fees to redeem their existing investments.
  4. While the Respondent typically had the Investors make payments to one of the Numbered Companies, in two instances the Respondent obtained bank drafts from the Investors payable to him personally, in one instance the Respondent obtained a bank draft payable to the Receiver General which the Respondent used to pay his taxes, and in one other instance the Respondent received cash directly from an Investor.
  5. In all cases, the Respondent represented to the Investors that the funds they were providing were being invested in the special opportunity, when in fact the Respondent used the monies to pay his personal expenses.
  6. From time to time, the Respondent provided the Investors with a Moore Wrinn Investment Summary, in which he identified the fictitious investments in the special opportunity including the purported growth of the fictitious investments.
  7. The Respondent led the Investors to believe that the special opportunity investment was a Member and/or London Life investment product.
  8. In the limited instances when an Investor requested to redeem their investment in the special opportunity, the Respondent obtained the funds for the redemptions from funds misappropriated from other Investors. In total, the Respondent repaid $22,750 to Investors.
  9. The Respondent solicited at least $1,386,600 from clients and individuals, paid $22,750 purportedly as redemptions of the special opportunity, and misappropriated or failed to account for at least $1,363,850 of the monies provided to him by the clients and individuals.
  10. The Respondent did not disclose to the Member and it was otherwise not aware that the Respondent had any involvement with the Numbered Companies or that clients were providing monies to the Numbered Companies or the Respondent personally.
  11. The Member was also not aware that the Respondent solicited clients or individuals to invest in any off-book investments.
  12. By engaging in the conduct described above, the Respondent misappropriated, or failed to account for, approximately $1,363,850 solicited or received from at least twelve clients and seven individuals, thereby failing to deal fairly, honestly, and in good faith with clients, failing to observe high standards of ethics and conduct in the transaction of business, and engaging in business conduct or practice that is unbecoming and detrimental to the public interest, contrary to the Member’s policies and procedures and MFDA Rules 2.1.1, 2.10, and 1.1.2..

Failure to Provide Requested Documents

  1. On November 20, 2017, MFDA Staff commenced a review of the Respondent’s conduct in response to a report on the Member Event Tracking System relating to the events described above.
  2. On October 9 and 10, 2018, the Respondent attended an interview by MFDA Staff. During the interview, the Respondent agreed to provide various information and documents in connection with MFDA Staff’s investigation.
  3. On October 16, 2018, MFDA Staff sent a letter to the Respondent by regular mail and e-mail requesting the information and documents the Respondent had agreed to provide.
  4. The Respondent failed to respond to the letter.
  5. On November 12, 2018, MFDA Staff sent a follow-up e-mail to the Respondent again requesting the information and documents identified in the October 16th letter.
  6. Notwithstanding that the Respondent was aware of the November 12th e-mail, the Respondent failed to respond.
  7. On November 27, 2018, MFDA Staff sent a further follow-up letter to the Respondent by process server, advising the Respondent that if he did not provide the requested information and documents he could be subject to a disciplinary proceeding for failing to cooperate. After two attempts to deliver the letter, the process server left the letter in the Respondent’s mailbox on December 7, 2018.
  8. The Respondent did not respond to MFDA Staff’s letter.
  9. The Respondent’s conduct impaired MFDA Staff’s ability to determine the full nature and extent of his activities.
  10. By engaging in the conduct described above, the Respondent failed to cooperate with MFDA Staff’s investigation 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: Alan Melamud
Email: amelamud@mfda.ca

A Reply shall be filed by:

  1. providing four 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 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] In September 2009, the registration category Mutual Fund Salesperson changed to “Dealing Representative” when National Instrument 31-103 came into force.