Order

WHEREAS on May 30, 2017, the Mutual Fund Dealers Association of Canada (“MFDA”) issued a Notice of Hearing pursuant to sections 20 and 24 of MFDA By-law No. 1 in respect of International Capital Management Inc. (the “Respondent ICM”), John Paul Sanchez (the “Respondent John Sanchez”) and Javier Andreas Sanchez (the “Respondent Javier Sanchez”) (collectively the “Respondents”);

AND WHEREAS the Respondents entered into a settlement agreement with Staff of the MFDA, dated June 15, 2018 (“Settlement Agreement”), in which the Respondents agreed to a proposed settlement of matters for which the Respondents could be disciplined pursuant to sections 20 and 24.1 of By-law No. 1;

AND UPON READING the Settlement Agreement and the written submissions of Staff and upon hearing the oral submissions of Staff and the Respondent;

AND WHEREAS on the basis of the facts set out in Part IV of the Settlement Agreement and the contraventions admitted by the Respondents in Part V of the Settlement Agreement, the Hearing Panel is of the opinion that:

1. Between 2006 and 2016, the Respondents engaged in securities related business that was not carried on for the account of ICM, through the facilities of ICM or recorded on the books and records of ICM by:
   1. selling or facilitating the sale of at least $25.8 million of investments in a non-arm’s length company to at least 170 ICM clients; and
   2. selling or facilitating the sale of at least $1.64 million of investments in another
      non-arm’s length company to 21 ICM clients;

contrary to MFDA Rules 1.1.1 and 2.1.1;

2. Since 2006, John and Javier have engaged in outside activities that were not approved by ICM in writing or reflected on the books and records of ICM, contrary to MFDA Rule 1.3.2(c)1;

3. Since 2006, John and Javier solicited at least $27.44 million from ICM clients for investment in two non-arm’s length companies, thereby engaging in conduct that gave rise to conflicts of interest which the Respondents failed to address by the exercise of responsible business judgment influenced only by the best interests of the clients, contrary to MFDA Rules 2.1.4 and 2.1.1;

4. Between 2006 and 2016, the Respondents recommended that approximately 170 ICM clients purchase investments distributed by two non-arm’s length companies, without conducting adequate due diligence to know the products and did not maintain sufficient records to demonstrate that they complied with the obligation Know-Your-Client (“KYC”) and to ensure that the products recommended and the orders obtained from clients were suitable, contrary to MFDA Rules 2.2.12;

5. Since October 2006, the Respondents have not complied with the terms of an Agreement and Undertaking entered into between the Respondents and Staff, thereby engaging in conduct contrary to MFDA Rule 2.1.1 and engaging the authority of the Hearing Panel to impose a penalty on the Respondents pursuant to sections 24.1.1 and 24.1.2 of MFDA By-law No. 1;

6. Between 2008 and December 2016, the Respondents failed to cooperate with Staff’s investigations into their conduct by providing inaccurate or misleading statements to Staff and withholding information about some of their business activities in response to questioning by MFDA compliance staff during compliance examinations and by MFDA enforcement staff during investigations of their conduct, and by initially withholding access to electronic records including emails on ICM’s systems during an on-site inspection at ICM’s office that was conducted by Staff on November 15, 2016, contrary to sections 22.1 and 22.2 of MFDA By-law No. 1;

7. Since February 2009, the Respondents have not:
   1. established, implemented and maintained policies and procedures required to ensure adequate head office account supervision;
   2. maintained adequate records of trade supervision that was conducted including inquiries made, responses received from Approved Persons and resolutions achieved as a result of supervisory inquiries; and
   3. established,implemented and maintained adequate policies and procedures to ensure the identification of trends in trading activity,

contrary to MFDA Rules 2.5.1 and 2.5.7, and MFDA Policy No. 2.

IT IS HEREBY ORDERED THAT the Settlement Agreement is accepted, as a consequence of which:

1. Commencing on the date of this Order, the authority of the Respondent John Paul Sanchez to conduct securities related business while in the employ of, or associated with, any Member of the MFDA is permanently prohibited, pursuant to s. 24.1.1(e) of MFDA By-law No. 1;

2. Commencing on the date of this Order, the authority of the Respondent Javier Andreas Sanchez to conduct securities related business while in the employ of, or associated with, any Member of the MFDA is permanently prohibited, pursuant to s. 24.1.1(e) of MFDA By-law No. 1;

3. The Respondent John Paul Sanchez shall pay a fine in the amount of $100,000, pursuant to s. 24.1.1(b) and 24.1.2(b) of MFDA By-law No. 1;

4. The Respondent John Paul Sanchez shall pay $30,000 of the $100,000 fine on the date of this order and shall pay the balance in equal monthly installments of $5,833.33 per month payable on the first day of each month between August 1, 2018 and July 1, 2019;

5. The Respondent Javier Andreas Sanchez shall pay a fine in the amount of $50,000, pursuant to s. 24.1.1(b) of MFDA By-law No. 1;

6. The Respondent Javier Andreas Sanchez shall pay $20,000 of the $50,000 fine on the date of this order and shall pay the balance in equal monthly installments of $2,500 per month payable on the first day of each month between August 1, 2018 and July 1, 2019;

7. On the date of this Order, the Respondents shall pay costs in the amount of $25,000, pursuant to s. 24.2 of MFDA By-law No. 1; and

8. The membership in the MFDA of the Respondent ICM shall be terminated effective on the date of this Order and thereafter, the Respondent ICM shall cease to have any of the rights and privileges of Membership in the MFDA, pursuant to s. 24.1.2(d) of MFDA By-law No. 1.

1 Formerly MFDA Rule 1.2.1(c) and before that Rule 1.2.1(d)

2 MFDA Rule 2.2.1 was amended in December 2010 and in February 2013.  In this Order, the applicable version of MFDA Rule 2.2.1 is the version that was in force prior to December 2010.