Agreed Statement of Facts

I. INTRODUCTION

1. By Notice of Hearing dated December 11, 2019, the Mutual Fund Dealers Association of Canada (the “MFDA”) commenced a disciplinary proceeding against Mitchell Robert Sumka (the “Respondent”) pursuant to ss. 20 and 24 of MFDA By-law No. 1.
2. The Notice of Hearing set out the following allegations:
   1. Allegation #1: Between August 2015 and March 2018, the Respondent misappropriated approximately $659,232 from two mutual fund clients and 12 other individuals, thereby failing to deal fairly, honestly and in good faith with the clients, failing to observe high standards of ethics and conduct in the transaction of business, engaging in business conduct which is unbecoming and detrimental to the public interest, and failing to be of such character and business repute as is consistent with the standard of conduct, contrary to MFDA Rule 2.1.1.
   2. Allegation #2: Commencing in September 2018, the Respondent failed to cooperate with an investigation by MFDA Staff (“Staff”) into his conduct, contrary to section 22.1 of MFDA By-Law No. 1.

II. IN PUBLIC / IN CAMERA

3. 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

4. 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.
5. 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

6. Staff and the Respondent agree that submissions made with respect to the appropriate sanction are based only on the agreed facts in Part IV and no other facts or documents, subject to paragraph 7 below. 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.
7. Staff and the Respondent agree that the Respondent may lead evidence at the hearing on the merits that is relevant to the Respondent’s financial situation. This evidence will be tendered solely for the purpose of the Hearing Panel’s determination of the appropriate sanction and for no other purpose. Staff may lead any responding evidence at its discretion, and may cross-examine any witnesses tendered by the Respondent.
8. 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

9. From March 2013 to March 2018, the Respondent was registered in Manitoba as a dealing representative (formerly known as a mutual fund salesperson) with TD Investment Services Inc. (the “Member”), a Member of the MFDA.
10. On March 5, 2018, the Member terminated the Respondent’s registration, and the Respondent is not currently registered in the securities industry in any capacity.
11. At all material times, the Respondent carried on business in the Winnipeg, Manitoba area.

Allegation #1 – Misappropriation

12. At all material times, the Respondent was employed by the Member and its affiliated bank, TD Canada Trust (“TD Canada Trust”). The Respondent serviced both Member clients and bank clients. Some clients maintained accounts with the Member and with TD Canada Trust.
13. Between August 2015 and March 2018, the Respondent misappropriated approximately $659,233 from two mutual fund clients and 12 other individuals, all of whom held bank accounts at TD Canada Trust. The amounts misappropriated by the Respondent are particularized below:

14. The Respondent misappropriated the monies described above from bank accounts at TD Canada Trust by creating new bank accounts for TD Canada Trust clients without the knowledge or approval of the account holders (the “Fake Accounts”), and then transferring monies from the account holders’ existing bank accounts at the TD Canada Trust to the Fake Accounts. The Respondent subsequently used a bank card to access the monies in the Fake Accounts.
15. The Respondent used the monies that he misappropriated for personal gambling.
16. The Respondent reimbursed six of the clients or other individuals by transferring $244,689.82 that he had misappropriated from other clients or individuals.
17. TD Canada Trust discovered the Respondent’s conduct as a result of an anonymous verbal report from another employee who worked at the branch. The Member terminated the Respondent as an Approved Person and TD Canada Trust terminated the Respondent as an employee of the bank after confirming that the Respondent had engaged in the misappropriation of client money as described above.
18. TD Canada Trust subsequently reimbursed the amounts totaling $414,543.16 that the Respondent obtained from account holders and did not repay.

Allegation #2 – Failure to Cooperate

19. On March 21, 2018, Staff sent a letter to the Respondent requesting that the Respondent provide a written statement by April 10, 2018 with respect to the events described above. On April 10, 2018, the Respondent responded to Staff’s letter, but did not provide the information requested by Staff.
20. On May 31, 2018, Staff sent an email to the Respondent requesting written statements to various questions concerning his conduct. On June 6, 2018, the Respondent responded to Staff’s email, but did not provide the information that Staff had requested from him.
21. On September 11, 2018, Staff sent a registered letter to the Respondent requesting that he contact Staff within ten business days to schedule an interview. The letter was returned to Staff as unclaimed.
22. On October 9, 2018, Staff sent an email to the Respondent requesting that he contact Staff by October 22, 2018 to schedule an interview. Staff received a “read receipt” indicating that the email was viewed on October 9, 2018. The Respondent did not respond to the October 9, 2018 email from Staff.
23. On October 26, 2018, Staff sent another registered letter and another email to the Respondent requesting that the Respondent contact Staff by November 9, 2018 to schedule an interview. The registered mail was signed for by the Respondent’s mother who resided at the Respondent’s residence. The Respondent did not respond to the letter and he did not respond to the October 26, 2018 email.
24. On November 19, 2018, Staff sent another registered letter and another email to the Respondent requesting that he contact Staff by November 26, 2018 to schedule an interview. The letter stated that if Staff received no response, Staff would conduct the interview on January 23, 2019. Staff also informed the Respondent in the November 19, 2018 letter, and in an email sent on November 29, 2018, that if the Respondent did not attend an interview with Staff to give information respecting matters under investigation in accordance with his obligations pursuant to s. 22.1(c) of MFDA By-law No. 1, Staff would commence enforcement proceedings against the Respondent as a consequence of his failure to co-operate with Staff’s investigation. The registered letter dated November 19, 2018 was signed for by the Respondent’s mother who resided at the Respondent’s residence. A second copy of the letter was also personally delivered to the Respondent’s mother by a process server on November 28, 2018.
25. The Respondent did not respond to the Staff’s letters to schedule an interview and did not attend the interview scheduled for January 23, 2019.
26. The Respondent’s failure to cooperate with Staff’s investigation into his conduct interfered with Staff`s ability to confirm the full scope and extent of his misconduct.

Additional Factors

27. The Respondent has not previously been the subject of an MFDA disciplinary proceeding.
28. After the Respondent’s misconduct was discovered by TD Canada Trust, the Respondent cooperated with the bank’s investigation by agreeing to answer questions from bank personnel about his misconduct.
29. On June 14, 2018, the Respondent entered into a consumer proposal agreement whereby he agreed to pay $18,000 over the course of 5 years to TD Canada Trust and various other creditors impacted by the Respondent’s misconduct.
30. On September 5, 2019, the Respondent pleaded guilty to charges of fraud contrary to s. 380(1) of the Criminal Code in criminal proceedings before the Provincial Court of Manitoba (the “Court”). The Court sentenced the Respondent to a 27 month long jail term and ordered him to pay restitution in the amount of $471,625. The Respondent was granted early release from his prison sentence. He has not yet paid the restitution ordered by the Court.

Misconduct Admitted

31. By engaging in the conduct described above, the Respondent admits that:
    1. Between August 2015 and March 2018, the Respondent misappropriated approximately $659,232 from two mutual fund clients and 12 other individuals, thereby failing to deal fairly, honestly and in good faith with the clients, failing to observe high standards of ethics and conduct in the transaction of business, engaging in business conduct which is unbecoming and detrimental to the public interest, and failing to be of such character and business repute as is consistent with the standard of conduct, contrary to MFDA Rule 2.1.1.
    2. Commencing in September 2018, the Respondent failed to cooperate with an investigation by MFDA Staff (“Staff”) into his conduct, contrary to section 22.1 of MFDA By-Law No. 1.

Execution of Agreed Statement of Facts

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