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Re: Libin Shen

Agreed Statement of Facts

I. INTRODUCTION

  1. By Notice of Hearing dated November 6, 2020, the Mutual Fund Dealers Association of Canada (the “MFDA”) commenced a disciplinary proceeding against Libin Shen (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 January 2017 and May 2018, the Respondent opened and processed trades in fictitious mutual fund client accounts which made him eligible to receive promotional monies that were payable to new banking clients, thereby failing to observe high standards of ethics and conduct in the transaction of business or engaging in conduct unbecoming an Approved Person, contrary to MFDA Rule 2.1.1.
    2. Allegation #2:  Commencing in August 2019, the Respondent failed to cooperate with an investigation into his activities conducted by Staff of the MFDA, contrary to section 22.1 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 and costs to be imposed 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 information, facts or documents, subject to the content of this paragraph and paragraph 7 below.
  2. In the event that the Hearing Panel advises one or both of Staff and the Respondent of any additional facts that it considers necessary in order to determine the issues before it, Staff and the Respondent agree that such additional facts may be provided to the Hearing Panel, either: (a) with the consent of both Staff and the Respondent if the additional facts are agreed upon; (b) if the Respondent is not present at the hearing, Staff may disclose additional relevant facts, at the request of the Hearing Panel; or (c) if the parties are both present at the hearing and are not in agreement about the additional facts requested by the Hearing Panel, the parties will be given a reasonable opportunity to lead evidence concerning the additional facts. In circumstances where a party leads evidence concerning additional facts requested by the Hearing Panel, the opposing party may cross-examine any witness tendered to lead such evidence and shall be given a reasonable opportunity to lead responding evidence if they wish to do so.
  3. 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. From July 24, 2015 to December 13, 2018, the Respondent was registered in Ontario as a dealing representative with TD Investment Services Inc. (the “Member”), a Member of the MFDA. During this time, the Respondent was also employed with Toronto Dominion Bank (“TD Bank”).
  2. The Member operates as a subsidiary of TD Bank.
  3. On December 13, 2018, the Member terminated the Respondent and he is no longer registered in the securities industry in any capacity.
  4. At all material times, the Respondent conducted business in the Markham, Ontario area.

Facts

Allegation #1 – The Respondent Opened Fictitious Client Accounts
  1. At all material times, TD Bank offered new customers a promotional payment of $300 that would be paid into the bank account of bank customers (the “Welcome Offer”) approximately 12 weeks after the customer opened a new TD Bank “unlimited” or “all inclusive” chequing account, if the customer also completed two of the following actions within 45 days of opening the account:
    1. a direct deposit to the new account;
    2. make a minimum $50 Canadian or US online bill payment; and/or
    3. set up a pre-authorized debit of a minimum of $50.
  2. The Respondent executed a scheme to obtain the Welcome Offer for his own benefit by opening fictitious TD Bank chequing accounts which he could access and control. He subsequently opened fictitious mutual fund accounts with the Member, signed the signatures of each mutual fund client on mutual fund account documentation, and processed transactions in the fictitious bank and mutual fund accounts that were necessary to qualify for the “Welcome Offer”.
  3. TD Bank conducted an investigation of the Respondent’s conduct and determined that the Respondent opened approximately 46 fictitious TD Bank chequing accounts.
  4. Between January 2017 and May 2018, the Respondent subsequently opened fictitious mutual fund accounts with the Member in order to satisfy the pre-authorized debit condition that was necessary to establish eligibility for the Welcome Offer. In each of these instances, the Respondent:
    1. created a fictitious customer profile and signed client signatures on account opening documents, including Know-Your-Client (“KYC”) forms required by the Member;
    2. deposited monies into the TD Bank chequing account; and
    3. made a lump-sum purchase or set up a pre-authorized debit from the bank account to money market mutual funds in the fictitious investment accounts that he opened with the Member. The pre-authorized debits were funded from the initial deposits that the Respondent made into the TD Bank chequing accounts.
  5. The TD Bank investigation revealed and the Respondent admits that in total, the Respondent opened approximately 40 fictitious mutual fund accounts.
  6. Subsequently, after the 12 week period had elapsed, the Bank deposited the $300 Welcome Offer payments into some of the fictitious accounts opened by the Respondent.
  7. In or about December 2018, TD Bank completed its investigation of the Respondent’s conduct described above and reported the Respondent’s conduct to the Member. Prior to discovery of the Respondent’s conduct, TD Bank had paid a total of $2,700 in Welcome Offer payments into some of the fictitious TD Bank chequing accounts that had been opened by the Respondent. The Respondent subsequently withdrew those amounts from the fictitious bank accounts.
  8. By making contributions into mutual fund investments held in investment accounts with the Member, the Respondent also accumulated credit towards mutual fund sales targets that qualified the Respondent for financial bonuses if achieved.
  9. On December 13, 2018, TD Bank and the Member terminated the Respondent.
Allegations #2 – Failure to Cooperate with the MFDA’s Investigation
  1. On or about February 4, 2019, Staff of the MFDA (“Staff”) sent a letter by registered and regular mail to the Respondent notifying him that Staff had opened an investigation into his conduct, and requesting that the Respondent confirm whether he had opened accounts without client authorization or had falsified or forged client signatures on account documentation. Staff further requested that the Respondent provide any additional information or documentation related to the allegations.
  2. On February 26, 2019, Staff received a handwritten statement from the Respondent in which he admitted that he misused his position at TD Bank by creating false accounts in order to benefit from the Welcome Offer. The Respondent stated that he had reviewed a list of client names associated with the falsified accounts with TD Bank and that he was willing to review the client list with Staff. The Respondent provided Staff with his primary address and contact information within the letter.
  3. On August 6, 2019, Staff sent a letter by registered and regular mail to the Respondent and requested bank, credit card and investment account information for all accounts in which the Respondent held a beneficial interest so that Staff could further investigate the scope and extent of the Respondent’s alleged misconduct. Staff further requested that the Respondent contact Staff to schedule a date for an interview relating to the subject matter within the letter.
  4. The registered mail copy of the August 6, 2019 letter was received and signed for by the Respondent on August 7, 2019.
  5. The Respondent states that he sent a response to the August 6, 2019 letter to Staff by regular mail. The Respondent states that his response letter explained that he was unable to provide bank statements from the fraudulent accounts which the Respondent opened as the Respondent did not have access to these accounts after his termination. Staff did not receive the Respondent’s responses to the August 6, 2019 letter and the Respondent has not produced a copy of his response to the August 6, 2019 letter to Staff at any time. Furthermore, the Respondent never produced any of his own banking records and never contacted Staff to schedule an interview.
  6. On September 4, 2019, Staff sent a letter by registered and regular mail to the Respondent which repeated the request for information that had previously been made in the August 6, 2019 letter, and again requested that the Respondent contact Staff to schedule an interview.
  7. On September 10, 2019, the registered mail copy of the September 4, 2019 letter was received and signed for by the Respondent.
  8. The Respondent did not provide a response to Staff’s September 4, 2019 letter.
  9. On September 29, 2019, Staff personally served a letter dated September 23, 2019 on the Respondent which repeated the requests for the information that had previously been requested in the September 4, 2019 letter and the August 6, 2019 letter, and stated that an interview with the Respondent had been scheduled for October 22, 2019. The September 23, 2019 letter also stated that, should the Respondent fail to provide the documentation or attend for an interview with Staff, Staff would seek authorization to commence enforcement proceedings against the Respondent for failing to cooperate with Staff’s investigation.
  10. The Respondent did not respond to Staff’s September 23, 2019 letter, and failed to attend the interview with Staff that was scheduled to take place on October 22, 2019.
  11. Due to the Respondent’s failure to cooperate with Staff’s investigation, Staff has not been able to determine the full nature and extent of the Respondent’s conduct described above.

Additional Factors

  1. The Respondent has not previously been the subject of disciplinary proceedings.
  2. By entering into this Agreed Statement of Facts, the Respondent has saved the MFDA the time, resources and expenses associated with conducting a full hearing of the allegations.

Misconduct Admitted

  1. By engaging in the conduct described above, the Respondent admits that:
    1. between January 2017 and May 2018, he opened and processed trades in fictitious mutual fund client accounts which made him eligible to receive promotional monies that were payable to new banking clients, thereby failing to observe high standards of ethics and conduct in the transaction of business or engaging in conduct unbecoming an Approved Person, contrary to MFDA Rule 2.1.1; and
    2. commencing in August 2019, he failed to cooperate with an investigation into his activities conducted by Staff of the MFDA, contrary to section 22.1 of MFDA By-law No. 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.
  • Libin Shen
    Libin Shen
  • “Charles Toth”

    Staff of the MFDA
    Per: Charles Toth
    Vice-President, Enforcement

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