October 22, 2018 (Toronto, Ontario) – A Hearing Panel of the Central Regional Council of the Mutual Fund Dealers Association of Canada (“MFDA”) has issued its Decision and Reasons dated October 19, 2018 (“Decision and Reasons”) in connection with a disciplinary hearing held in Toronto, Ontario on September 18, 2018, in the matter of Hong Lam (“Respondent”).
In its Decision and Reasons, the Hearing Panel found that the five allegations made against the Respondent in the Notice of Hearing dated January 8, 2018 (“Notice of Hearing”) had been established. In particular:
Allegation #1: Between 2012 and 2015, the Respondent engaged in securities related business that was not carried on for the account of the Member and through its facilities by recommending, selling, facilitating the sale of, and/or making referrals in respect of the sale of investments to approximately 24 clients and 3 individuals totaling approximately $2,016,660, contrary to the Member’s policies and procedures and MFDA Rules 1.1.1, 2.1.1, 2.4.2, 2.5.1 and 1.1.2 and the requirements of sections 13.7 and 13.8 of National Instrument 31-103.
Allegation #2: The Respondent had and continued in another gainful occupation, which was not disclosed to and approved by the Member, when:
- between 2012 and 2014, he recommended, sold, facilitated the sale of, and/or made referrals in respect of the sale of investments outside the Member to approximately 24 clients and 3 individuals totaling approximately $2,016,660.00;
- between 2011 and 2015, he was an officer and director of a company, and a partner of a company, which the Respondent operated to accept referral fees outside the Member; and
- in 2015, he failed to disclose that he had transferred his mortgage license to a new mortgage broker company,
contrary to the Member’s policies and procedures and MFDA Rules 1.2.1(c) (now MFDA Rule 1.3), 2.1.1, 2.4.2, 2.5.1 and 1.1.2, and the requirements of sections 13.7 and 13.8 of National Instrument 31-103.
Allegation #3: Between 2012 and 2015, the Respondent had unapproved referral arrangements with three other Approved Persons who referred clients to invest outside the Member through the Respondent in exchange for referral fees paid directly or indirectly by the Respondent, contrary to the Member’s policies and procedures, MFDA Rules 2.1.1, 2.4.2, 2.5.1 and 1.1.2, and the requirements of sections 13.7 and 13.8 of National Instrument 31-103.
Allegation #4: On November 15, 2015, the Respondent misled the Member during an investigation by falsely stating that he had not referred any clients to invest in a real estate and development company, contrary to MFDA Rule 2.1.1.
Allegations #5: Commencing on or about April 1, 2016, the Respondent failed to cooperate with the MFDA during the course of an investigation into his conduct, contrary to section 22.1 of MFDA By-law No. 1.
In its Decision and Reasons, the Hearing Panel imposed the following sanctions on the Respondent:
- a permanent prohibition from conducting securities related business in any capacity while in the employ of, or in association with, any MFDA Member;
- a fine in the amount of $250,000; and
- costs in the amount of $10,000.
Copies of the Decision and Reasons and Notice of Hearing are available on the MFDA website at www.mfda.ca. During the period described in the Decision and Reasons, the Respondent conducted business in the Richmond Hill, Ontario area.
The MFDA is the self-regulatory organization for Canadian mutual fund dealers, regulating the operations, standards of practice and business conduct of its Members and their approximately 82,000 Approved Persons with a mandate to protect investors and the public interest. For more information about the MFDA’s complaint and enforcement processes, as well as links to ‘Check an Advisor’ and other Investor Tools, visit the For Investors page on the MFDA website.