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MFDA Agreed Statement of Facts

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File No. 201920

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

Re: Glen Lawrence Gomes

Agreed Statement of Facts

I. INTRODUCTION

  1. By Notice of Hearing dated March 4, 2019, the Mutual Fund Dealers Association of Canada (the “MFDA”) commenced a disciplinary proceeding against Glen Lawrence Gomes (the “Respondent”) pursuant to ss. 20 and 24 of MFDA By-law No. 1.

II. IN PUBLIC / IN CAMERA

  1. The Respondent and Staff of the MFDA (“Staff”) agree that this matter should be heard in public pursuant to Rule 1.8 of the MFDA Rules of Procedure.

III. ADMISSIONS AND ISSUES TO BE DETERMINED

  1. The Respondent has reviewed this Agreed Statement of Facts and admits the facts set out in Part IV herein. The Respondent admits that the facts in Part IV constitute misconduct for which the Respondent may be penalized on the exercise of the discretion of a Hearing Panel pursuant to s. 24.1 of MFDA By-law No. 1.
  2. Staff and the Respondent jointly request that the Hearing Panel determine, on the basis of this Agreed Statement of Facts, the appropriate penalty to impose on the Respondent.

IV. AGREED FACTS

  1. Staff and the Respondent agree that submissions made with respect to the appropriate penalty are based only on the agreed facts in Part IV and no other facts or documents. In the event the Hearing Panel advises one or both of Staff and the Respondent of any additional facts it considers necessary to determine the issues before it, Staff and the Respondent agree that such additional facts shall be provided to the Hearing Panel only with the consent of both Staff and the Respondent.  If the Respondent is not present at the hearing, Staff may disclose additional relevant facts, at the request of the Hearing Panel.
  2. Nothing in this Part IV is intended to restrict the Respondent from making full answer and defence to any civil or other proceedings against him.

Registration History

  1. Commencing in 1998, the Respondent was registered in Ontario as a mutual fund salesperson (now known as dealing representative).
  2. From January 13, 2013 to March 31, 2017, the Respondent was registered in Ontario as a dealing representative with Investia Financial Services Inc. (the “Member”), a Member of the MFDA.
  3. On March 31, 2017, the Member terminated the registration of the Respondent and he is not currently registered in the securities industry in any capacity.
  4. At all material times, the Respondent conducted business in the Markham, Ontario area.

Securities Related Business Outside the Member

  1. At all material times, the Member’s policies and procedures required that its Approved Persons only offer investment products to its clients that it had approved for sale, and required all products be sold through the Member.
  2. Between 2012 and 2015, the Respondent had an arrangement with Tier 1 Transaction Advisory Services Inc. (“Tier 1”), a real estate and development company that offered investments in syndicated mortgages.
  3. Tier 1 had real estate development projects, including projects known as Vaughan Crossings and Memory Care Oakville.
  4. Between October 2013 and May 2014, the Respondent facilitated the sale of syndicated mortgages totaling approximately $434,700 to 3 clients of the Member (collectively the “Syndicated Mortgages”), as described in the table below:

Date

Client

Amount of Investment

Investment

Fee Received by the Respondent

October 2013

AA

$189,000

Vaughan Crossings

$15,192

October 2013

DS

$126,300

Vaughan Crossings

$9,600

May 2014

NS

$119, 400

Memory Care Oakville

$9,552

Total

 

$434,700

 

$34,344

  1. The Respondent engaged in acts in furtherance of a trade in relation to facilitating the sale of the Syndicated Mortgages to the clients, including:
    1. introducing the clients to the opportunity to invest in the Syndicated Mortgages;
    2. discussing the terms and features of investing in the Syndicated Mortgages;
    3. providing the clients’ contact information to representatives of Tier 1; and
    4. attending meetings between the clients and representatives of Tier 1 concerning investing in the Syndicated Mortgages.
  2. As stated above, the Respondent received fees from Tier 1 totaling approximately $34,344 in respect of his activities described above at paragraph 14 and 15.
  3. The Respondent did not disclose to the Member that he was facilitating the sale of the Syndicated Mortgages to clients.
  4. The Syndicated Mortgages were not investments approved by the Member for sale to its clients by its Approved Persons, including the Respondent.
  5. None of the purchases of the Syndicated Mortgages by clients described above in paragraph 14 were carried on for the account of the Member or through its facilities
  6. The Respondent failed to disclose to, or obtain approval from, the Member to have any arrangement with Tier 1.
  7. Prior to the completion of the Vaughan Crossings and Memory Care Oakville developments, clients AA, DS and NS stopped receiving distributions.
  8. On October 31, 2016, pursuant to an application on behalf of the Superintendent of Financial Services, a trustee was appointed for the corporations that were previously performing mortgage administration functions on behalf of syndicated mortgage investors in Tier 1 real estate development projects, which included Vaughan Crossings and Memory Care Oakville.
  9. In April 2017, pursuant to a motion brought by the court-appointed receiver, each investor in Vaughan Crossings, including clients AA and DS, were provided with a pro rata interest in a numbered company that purchased the Vaughan Crossings property. The objective of the numbered company is to apply to have the property zoned residential in order to increase market value and then sell the property to recover as much of the investors’ investments as possible. The likelihood of investors, including clients AA and DS, recovering their full investment from the sale of the Vaughan Crossings property is not known to Staff.
  10. On November 14, 2017, pursuant to a motion brought by the court-appointed receiver, the sale of the Memory Care Oakville property was approved.
  11. Client AA commenced a lawsuit against the Respondent and the Member, relating to the Respondent’s role in client AA purchasing the Syndicated Mortgages. The lawsuit is currently ongoing.
  12. Client NS complained to the Member about her investment in the Syndicated Mortgages. The Member paid client NS compensation and her complaint is now settled.

Pre-Signed Account Forms

  1. At all material times, the Member’s policies and procedures prohibited its Approved Persons from using pre-signed account forms.
  2. Between January 13, 2013 and March 31, 2017, the Respondent obtained and possessed 4 pre-signed account forms in respect of 3 clients.
  3. The pre-signed account forms consisted of a 100% Investment Loan Financial Information Appendix; a B2B T2033 Purchase Instructions form; a Member RRIF Form; and a Limited Trading Authorization form.

Altered Account Forms

  1. At all material times, the Member’s policies and procedures prohibited its Approved Persons from altering account forms without client authorization.
  2. On October 21, 2010, the Respondent altered 2 Self-Directed Redemption / Purchase Forms in respect of a client account without having the client initial the alterations. More particularly, the Respondent altered the date of the client’s signature using liquid correction fluid.

Additional Factors

  1. The Respondent has not been the subject of previous disciplinary proceedings with the MFDA.
  2. By agreeing to the Agreed Statement of Facts the costs associated with a full hearing on the merits has been avoided
  3. In November 2017, the Respondent filed for bankruptcy. At that time, the Respondent reported assets of $7,002, and outstanding liabilities of $684,900 including an unsecured debt of $635,000 owed to the Canada Revenue Agency. To date, the Respondent has not been discharged from bankruptcy.
  4. The Respondent has provided evidence to Staff that his sources of income include the Canadian Pension Plan, Old Age Security, the Guaranteed Income Supplement, and trailing commissions he receives on insurance policies.[1] The Respondent has provided evidence to Staff that his annual income for 2018 was approximately $22,000. The Respondent states that his annual income for 2019 will be substantially similar to 2018.
  5. The Respondent claims to be unable to pay any amount towards either a fine or costs.
  6. As stated above in paragraphs 14 and 16, the Respondent received $34,344 in fees in respect of his role in facilitating the sale of the Syndicated Mortgages. There is no evidence that the Respondent received any financial benefit from obtaining the pre-signed or altering the account forms described above beyond the commissions or fees he would ordinarily be entitled to receive had the transactions been carried out in the proper manner.
  7. There is no evidence of client complaints in relation to the pre-signed or altered account forms described above.

Misconduct Admitted

  1. By engaging in the conduct described above, the Respondent admits that he:
    1. between October 2013 and May 2014, engaged in securities related business that was not carried on for the account of the Member and through its facilities by facilitating the sale of mortgage investments products to 3 clients totaling approximately $434,700, contrary to the Member’s policies and procedures and MFDA Rules 1.1.1, 2.1.1, 2.5.1 and 1.1.2;
    2. between January 13, 2013 and March 31, 2017, obtained and possessed 4 pre-signed account forms in respect of 3 clients, contrary to MFDA Rule 2.1.1; and
    3. on October 21, 2010, altered 2 account forms in respect of a client without having the client initial the alterations, contrary to MFDA Rule 2.1.1.

Execution of Agreed Statement of Facts

  1. This Agreed Statement of Facts may be signed in one or more counterparts which together shall constitute a binding agreement.
  2. A facsimile copy of any signature shall be effective as an original signature.

[1] The Respondent has been licensed in Ontario in the insurance industry since 1976.

DATED: Oct 24, 2019

"Glen Lawrence Gomes"

Glen Lawrence Gomes

“Shaun Devlin”

Staff of the MFDA
Per: Shaun Devlin
Senior Vice-President,
Member Regulation – Enforcement

706302