Notice of Hearing

PARTICULARS

NOTICE is further given that the following is a summary of the facts alleged and intended to be relied upon by the MFDA at the hearing:

Registration History

1. From September 28, 2009 to February 13, 2012, the Respondent was registered in Ontario as a mutual fund salesperson (now known as a dealing representative) with Investors Group Financial Services Inc. (“IG”), a Member of the MFDA.

2. From February 13, 2012 to June 15, 2012, the Respondent was registered in Ontario as a mutual fund salesperson with FundEX Investments Inc. (“FundEX”), a Member of the MFDA.

3. From June 18, 2012 to April 7, 2014 when he was terminated as result of the events described below, the Respondent was registered in Ontario as a mutual fund salesperson with Olympian Financial Inc. (“Olympian”), a Member of the MFDA.

4. The Respondent is not currently registered in the securities industry in any capacity.

5. At all material times, the Respondent conducted business in the Toronto, Ontario area.

Background

6. In about October 2011, the Respondent and an individual, BW, agreed to establish a real estate investment development business in the Toronto, Ontario area.

7. On or about November 22, 2011, BW incorporated 2306691 Ontario Corp., operating as “Achiever Financial”, which the Respondent and BW used to conduct their real estate development business.

8. At all materials times, the Respondent was a Director and Secretary of Achiever Financial. The Respondent was also a signatory on Achiever Financial’s corporate bank account with the Bank of Montreal.

9. The Respondent and BW identified two real estate properties which they intended to develop through Achiever Financial:
   1. 31 Northern Place located on Shirley Street in Toronto, Ontario (“Shirley Street”), which the Respondent and BW intended to purchase and develop into townhomes for sale; and
   2. 467 – 469 Spadina Road in Toronto, Ontario (“Spadina Road”), which the Respondent and BW intended to purchase and develop into several condominiums.

10. In order to generate the monies to purchase and develop the Shirley Street and Spadina properties, the Respondent:
    1. solicited and arranged for clients and other individuals to invest in, or loan monies to, Achiever Financial; and/or
    2. personally borrowed monies from clients which the Respondent used to invest in Achiever Financial.

11. As described in greater detail below, between November 2011 and January 2012, the Respondent arranged for four (4) clients and one (1) individual to invest or loan a total $450,000 in respect of Achiever Financial.

12. Almost all of the monies invested or loaned by the clients were obtained from mutual fund redemptions processed by the Respondent.

Client CC

13. At all material times, client CC was a mutual fund client of IG and the Respondent was the mutual fund salesperson responsible for servicing client CC’s accounts. Client CC is the Respondent’s father-in-law.

14. On November 25, 2011, client CC redeemed $157,754 (after the deduction of $7,536 in deferred sales charges (“DSCs”) incurred by client CC) from his mutual fund account with IG. The Respondent processed the redemption.

15. On or about December 5, 2011, the Respondent solicited and arranged for client CC to use $50,000 of the monies redeemed from his mutual fund account to invest or loan monies to Achiever Financial or to loan monies to the Respondent which he used to invest in Achiever Financial.

Client AC

16. At all material times, client AC was a mutual fund client of IG and the Respondent was the mutual fund salesperson responsible for servicing client AC’s account. Client AC is the spouse of client CC and is the Respondent’s mother-in-law.

17. On or about December 5, 2011, the Respondent solicited and arranged for client AC to use $50,000 of the monies redeemed by her spouse, client CC, on November 25, 2011 (described above) to invest or loan monies to Achiever Financial or to loan monies to the Respondent which he used to invest in Achiever Financial.

Client EW

18. At all material times, client EW was a mutual fund client of IG and the Respondent was the mutual fund salesperson responsible for servicing client EW’s account. Client EW is the Respondent’s mother.

19. On November 22, 2011, client EW redeemed $86,626 (after the deduction of $4,806 in DSCs) from her mutual fund account with IG. The Respondent processed the redemption.

20. On or about November 29, 2011, the Respondent solicited and arranged for client EW to use $50,000 of the monies redeemed from her mutual fund account to invest or loan monies to Achiever Financial or to loan monies to the Respondent which he used to invest in Achiever Financial.

Client LW

21. At all material times, client LW was a mutual fund client of IG and the Respondent was the mutual fund salesperson responsible for servicing his account. Client LW is the spouse of client WE and is the Respondent’s father.

22. On or about November 29, 2011, the Respondent solicited and arranged for client LW to use the remaining proceeds of the monies redeemed by his spouse, client EW, on November 22, 2011 (described above), and to contribute additional monies of his own, to invest or loan a total of $50,000 to Achiever Financial or to loan these monies to the Respondent which he used to invest in Achiever Financial.

Individual EM

23. On December 21, 2011, the Respondent solicited and arranged for an individual, EM, to invest or loan $50,000 to Achiever Financial.

24. On January 19, 2012, the Respondent solicited and arranged for EM, through a corporation she controlled, to invest or loan $200,000 to Achiever Financial in exchange for a promissory note. The promissory note set the interest rate payable on the unpaid principal at a rate of 40.11 percent per annum calculated monthly and stipulated that the loan would be repaid in full 13 weeks from the execution of the note. 

Payments Received by the Respondent

25. Between December 21, 2011 and January 27, 2012, the Respondent received at least $18,000 in referral fees and other payments in respect of the monies invested in, or loaned to, Achiever Financial by client CC, client AC, client EW, and client LW.

26. The Respondent did not disclose to IG that he received referral fees and other payments in respect of his activities relating to Achiever Financial. IG did not have a referral arrangement with Achiever Financial and none of the referral fees or payments were recorded on the book and records of IG.

27. The Respondent’s involvement in Achiever Financial, including the receipt of referral fees and other payments in respect of the monies invested or loaned by clients to Achiever Financial, gave rise to conflicts or potential conflicts of interest between the Respondent and the clients that the Respondent failed to ensure were addressed by the exercise of responsible business judgment influenced only by the best interests of the clients.

Achiever Financial’s Business Failed

28. Achiever Financial’s business failed and all of the monies invested or loaned to Achiever Financial have been lost.

29. During his interview with MFDA Staff, the Respondent claimed that:
    1. he used the monies invested or loaned by client EW, client LW, client CC, and client AC as deposits to secure the purchase of the Shirley Street and Spadina Road properties;
    2. the monies invested or loaned by client EW, client LW, client CC, and client AC were lost when the Respondent and BW were unable to complete of the purchase of the Shirley Street and Spadina Road properties; and
    3. the monies invested or loaned by EM were misappropriated by BW.

Allegation #1: Undisclosed and Unapproved Dual Occupation

30. By engaging the conduct described above, the Respondent had and continued in another gainful occupation that was not disclosed to or approved by the Member, contrary to MFDA Rules 1.2.1(c) (formerly, MFDA Rule 1.2.1(d)), 2.1.4, 2.4.2, 2.1.1, and sections 13.7 and 13.8 of National Instrument 31-103.

Allegation #2: Borrowing From Clients

31. To the extent that the Respondent personally borrowed monies from client EW, client LW, client CC, or client AC, and used these monies to invest in Achiever Financial, the Respondent’s conduct gave rise to a conflict or potential conflict of interest between the Respondent and the clients, which the Respondent failed to address by the exercise of responsible business judgment influenced only by the best interests of the clients, contrary to MFDA Rules 2.1.1 and 2.1.4.

Allegation #3: Review and Approval of Sales Communications

32. On June 14, 2012, the Respondent completed a Representative Registration Transfer Form (“Registration Transfer”) to transfer his registration from FundEX to Olympian Financial.  The Respondent provided the Registration Transfer to Olympian.  In the Registration Transfer, the Respondent disclosed that he operated under the trade name “MetroLink”. 

33. Subsequently in 2012, the Respondent ceased using the trade name “MetroLink” and began operating under the trade name “The Finance Coach Co.”.

34. In the course of operating as the “The Finance Coach Co.”, the Respondent:
    1. produced business cards describing “The Finance Coach Co.” as a broker of financial services including insurance, mortgages and investments, located at 246 Harboard Street, Toronto, Ontario;
    2. maintained a website, “www.TheFinanceCoachCo.com”;
    3. maintained a Twitter account, “The Finance Coach Co.”; and
    4. maintained a website “www.tactplan.com”, which describes a program developed by the Respondent called “The Athlete Career Transition Program” or “TACT” that is targeted at providing investment advice to current and former Canadian Football League players.

35. The Respondent did not disclose the activities described in paragraphs 33 and 34 above to Olympian and Olympian did not approve these activities.

36. By failing to advise the Member that he was operating under a new trade name and by issuing advertisements or sales communications that had not been reviewed and approved by the Member, the Respondent engaged in conduct contrary to MFDA Rule 2.7.3.

Allegation #4:  Failure to Report

37. In or about February 2013, EM commenced a civil claim in the Ontario Superior Court of Justice against the Respondent, BW and Achiever Financial seeking repayment of her $250,000 investment or loan to Achiever Financial. The Respondent did not disclose this information to Olympian.

38. Olympian first became aware of the civil action against the Respondent in April 2013.

39. By virtue of the foregoing, the Respondent failed to fulfill his reporting obligations, contrary to MFDA Rule 1.2.2(b), and subsections 4.1(a), (b)(i) and (b)(iv) of MFDA Policy No. 6.

NOTICE is further given that the Respondent shall be entitled to appear and be heard and be represented by counsel or agent at the hearing and to make submissions, present evidence and call, examine and cross-examine witnesses.

NOTICE is further given that MFDA By-laws provide that if, in the opinion of the Hearing Panel, the Respondent:

• has failed to carry out any agreement with the MFDA;
• has failed to comply with or carry out the provisions of any federal or provincial statute relating to the business of the Member or of any regulation or policy made pursuant thereto;
• has failed to comply with the provisions of any By-law, Rule or Policy of the MFDA;
• has engaged in any business conduct or practice which such Regional Council in its discretion considers unbecoming or not in the public interest; or
• is otherwise not qualified whether by integrity, solvency, training or experience,

the Hearing Panel has the power to impose any one or more of the following penalties:

1. a reprimand;
2. a fine not exceeding the greater of:
   1. $5,000,000.00 per offence; and
   2. an amount equal to three times the profit obtained or loss avoided by such person as a result of committing the violation;
3. suspension of the authority of the person to conduct securities related business for such specified period and upon such terms as the Hearing Panel may determine;
4. revocation of the authority of such person to conduct securities related business;
5. prohibition of the authority of the person to conduct securities related business in any capacity for any period of time;
6. such conditions of authority to conduct securities related business as may be considered appropriate by the Hearing Panel;

NOTICE is further given that the Hearing Panel may, in its discretion, require that the Respondent pay the whole or any portion of the costs of the proceedings before the Hearing Panel and any investigation relating thereto.

NOTICE is further given that the Respondent must serve a Reply on Enforcement Counsel and file a Reply with the Office of the Corporate Secretary within twenty (20) days from the date of service of this Notice of Hearing.

A Reply shall be served upon Enforcement Counsel at:

Mutual Fund Dealers Association of Canada
121 King Street West, Suite 1000
Toronto, ON M5H 3T9
Attention: Maria L. Abate
Fax:  416-361-9073
Email: [email protected]

A Reply shall be filed by:

1. providing 4 copies of the Reply to the Office of the Corporate Secretary by personal delivery, mail or courier to:
   1. Mutual Fund Dealers Association of Canada
      121 King Street West, Suite 1000
      Toronto, ON M5H 3T9
      Attention: Office of the Corporate Secretary; or
2. transmitting one (1) copy of the Reply to the Office of the Corporate Secretary by fax to fax number 416-361-9781, provided that the Reply does not exceed 16 pages, inclusive of the covering page, unless the Office of the Corporate Secretary permits otherwise; or
3. transmitting one (1) electronic copy of the Reply to the Office of the Corporate Secretary by e-mail at [email protected].

A Reply may either:

1. specifically deny (with a summary of the facts alleged and intended to be relied upon by the Respondent, and the conclusions drawn by the Respondent based on the alleged facts) any or all of the facts alleged or the conclusions drawn by the MFDA in the Notice of Hearing; or
2. admit the facts alleged and conclusions drawn by the MFDA in the Notice of Hearing and plead circumstances in mitigation of any penalty to be assessed.

NOTICE is further given that the Hearing Panel may accept as having been proven any facts alleged or conclusions drawn by the MFDA in the Notice of Hearing that are not specifically denied in the Reply.

NOTICE is further given that if the Respondent fails:

1. to serve and file a Reply; or
2. attend at the hearing specified in the Notice of Hearing, notwithstanding that a Reply may have been served,

the Hearing Panel may proceed with the hearing of the matter on the date and the time and place set out in the Notice of Hearing (or on any subsequent date, at any time and place), without any further notice to and in the absence of the Respondent, and the Hearing Panel may accept the facts alleged or the conclusions drawn by the MFDA in the Notice of Hearing as having been proven and may impose any of the penalties described in the By-Laws.

END.