Notice of Hearing

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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 October 16, 2001 to September 1, 2006, the Respondent was registered in Ontario as a mutual fund salesperson (now known as a dealing representative) with FundTrade Financial Corp. (“FundTrade”).

2. FundTrade was a Member of the MFDA from February 8, 2002 to September 1, 2006 when it amalgamated with FundEX Investment Inc. (“FundEX”), a Member of the MFDA. Following the amalgamation, all business of the amalgamated entity was conducted under the name, FundEX.

3. From September 1, 2006 to December 6, 2014, the Respondent was registered in Ontario as a mutual fund salesperson with FundEX.

4. The Respondent operated under the approved trade name, Total Concept Financial.

5. On December 6, 2014, FundEX terminated the Respondent as a result of the events described below.

6. At all material times the Respondent carried on business in Toronto, Ontario.

Graoch Associates

7. Graoch Associates (“Graoch”) is a real estate investment business based in the United States. Graoch purchases, refurbishes, manages and sells residential rental properties located in the United States.

8. Graoch raises capital to acquire rental properties by selling limited partnerships to investors. Investors in the limited partnerships are entitled to receive monthly distributions and a return of principal when the properties are sold.

9. The Respondent began selling, recommending, referring or facilitating the sale of limited partnership offered by Graoch in about 1994.

10. Between February 8, 2002 and December 6, 2014, the Respondent sold, recommended, referred or facilitated the sale of at least $1.3 million (USD) of limited partnerships offered by Graoch to 21 clients and 5 other individuals.

11. The Respondent’s activities with respect to the Graoch limited partnerships included, but were not limited to:
    1. approaching clients and other individuals to invest in the limited partnerships;
    2. providing clients and other individuals with copies of offering memoranda;
    3. assisting clients and other individuals to complete subscription agreements;
    4. collecting cheques from clients and other individuals payable to Graoch in respect of investments in limited partnerships;
    5. forwarding the completed offering memoranda and cheques for investments in the limited partnerships to Graoch; and
    6. providing clients and other individuals who invested in the limited partnerships with information pertaining to their investments.

12. The Respondent received commissions and other remuneration in respect of his activities pertaining to the limited partnerships of up to 4.5% of the amount invested by the clients and other individuals.

13. The Graoch limited partnerships were not investments which were approved for sale by FundTrade or FundEX.

14. Neither FundTrade nor FundEX had a referral arrangement with Graoch.

15. Sales of the Graoch limited partnerships were not carried on for the account and through the facilities of either FundTrade or FundEX in accordance with MFDA Rule 1.1.1.

16. At about the time of the downturn in the financial markets in 2008, some of the Graoch limited partnerships ceased paying monthly distributions. Many of the clients and other individuals who invested in the limited partnerships have been unable to recoup their investments.

Syndacore Technologies

17. In 2005, the Respondent agreed to assist RL, a principal of CFMII Technologies Inc. (“CFMII Technologies”) to raise capital for CFMII Technologies and four related-companies (Fibro Light Technology Inc., Composotech Structures Inc., Miser Lighting Inc., and Mag-Sail Turbines Inc.) by offering a debenture to investors.

18. The Respondent incorporated a corporation known as Syndacore Techologies Management Inc. (“Syndacore Technologies”) to offer the debenture to investors. The Respondent was the President, Secretary, Treasurer, and sole Director, of Syndacore Technologies.

19. Between 2005 and 2008, the Respondent sold, recommended, referred or facilitated the sale of at least $905,000 of debentures offered by Syndacore Technologies to 19 clients and 2 other individuals.

20. Investors in the Syndacore Technologies debentures were entitled to receive quarterly interest payments calculated at a rate of 5% of their investment per annum and to share in the future profits of CFMII Technologies and the four related-companies.

21. The Respondent’s activities with respect to the debentures included, but were not limited to:
    1. approaching clients and other individuals to invest in the debentures;
    2. providing clients and other individuals with investment contracts to purchase the debentures and assisting with the completion of the investment contracts;
    3. signing investment contracts on behalf of Syndacore Technologies;
    4. collecting cheques from clients and other individuals payable to Syndacore Technologies and depositing the cheques a bank account controlled by the Respondent; and
    5. transferring the monies received from clients and other individuals in respect of the purchase of the debentures to CFMII Technologies.

22. The Respondent received compensation in respect of his activities pertaining to the sale of the debentures. As a result of his activities with respect to the debentures, the Respondent was entitled to receive up to $16,000 per year and a further $150,000 through payments to Syndacore Technologies.

23. The Respondent solicited investments in the debentures until early 2008. Syndacore Technologies issued quarterly interest payments to investors until about until March 2008 when CFMII Technologies and the four related-companies began to experience financial difficulties.

24. At about this time, Composotech Structures Inc. (one of the four companies related to CFMII Technologies) was acquired by a business known as One World Energy. The Respondent facilitated this purchase by arranging for debenture holders to convert the debentures into shares of One World Energy.

25. By about 2010, Fibro Light Technology Inc., Miser Lighting Inc. and Mag-Sail Turbines Inc. (i.e., three of the four companies related to CFMII Technologies) had failed.

26. In about 2012, One World Energy filed for bankruptcy.

27. Investors in the Syndacore Technologies debentures have been unable to recover their investments.

28. The Syndacore Technologies debentures were not investments which were approved for sale by FundTrade or FundEX.

29. Sales of the Syndacore Technologies debentures were not carried on for the account and through the facilities of either FundTrade or FundEX in accordance with MFDA Rule 1.1.1.

Chateau Royal and Panterra

30. Between 2003 and 2008, the Respondent sold, recommended, referred or facilitated investments of at least $1.3 million in a real estate development project known as Chateau Royal to 26 clients and 9 other individuals.

31. Chateau Royal is a condominium project located at 630-650 Mount Pleasant Road in Toronto, Ontario. The project was operated by Panterra Federated Properties Corp (“Panterra”). The investments in the Chateau Royal were to be used for management and operation expenses related to the construction and development of the project.

32. Investors in Chateau Royal expected to receive returns of up to 50% of their initial investment upon the sale of the condominium units.

33. The Respondent’s activities with respect to Chateau Royal included, but were not limited to:
    1. approaching clients and other individuals to invest the project;
    2. providing clients and other individuals with sales documentation and assisting them to complete it;
    3. collecting cheques from clients and other individuals in respect of the investments in the project;
    4. forwarding the completed sales documentation and cheques for investments to Panterra; and
    5. providing clients and other individuals who invested in the project with information pertaining to their investments.

34. The Respondent received a commission of approximately 8% of the total investments made by the clients and other individuals.

35. In addition, the Respondent also recommended to clients TH and JH, and assisted them to purchase, shares of Panterra. In particular, on March 9, 2004, the Respondent provided clients TH and JH with instructions and information on how to purchase shares in Panterra from a Panterra shareholder who wished to sell her shares.

36. On that same date, client TH wrote a cheque in the amount of $57,500 to acquire 20 common shares and 49,800 Class A special shares of Panterra from the other shareholder.

37. On May 13, 2004, the Panterra shares were transferred to clients TH and JH.

38. On November 30, 2004, the Respondent sent a letter confirming the transfer of the shares to clients TH and JH.

39. Neither Chateau Royal nor Panterra were investments which were approved for sale by FundTrade or FundEX.

40. Neither FundTrade nor FundEX had a referral arrangement with Chateau Royal or Panterra.

41. Sales of the Chateau Royal investments and Panterra shares were not carried on for the account and through the facilities of either FundTrade or FundEX in accordance with MFDA Rule 1.1.1.

Syndacore Holdings

42. On January 13, 1988, the Respondent incorporated Syndacore Holdings Inc. (“Syndacore Holdings”). Syndacore Holdings remained an active corporation until at least August 9, 2014.

43. The Respondent did not disclose his involvement with Syndacore Holdings to FundTrade or FundEX, and FundTrade or FundEX did not approve these activites.

Miser Lighting

44. Miser Lighting Inc. (“Miser Lighting”) is a business which supplied and sold energy efficient lighting systems. Initially, Miser Lighting was one of the four companies related to CFMII Technologies.

45. On December 5, 2006, the Respondent became a Director of Miser Lighting.

46. On June 29, 2007, the Respondent, through Syndacore Holdings, entered into an agreement to become a distributor of Miser Lighting products. The Respondent would purchase, through Syndacore Holdings, lighting systems from Miser Lighting and resell them for a profit.

47. On June 15, 2009, the Respondent incorporated Miser Lighting Sales Inc. (“Miser Lighting Sales”) to operate his business relating to distribution of lighting systems from Miser Lighting, which he had previously operated through Syndacore Holdings. The Respondent is the sole Officer of Miser Lighting Sales.

48. On August 4, 2010, after the failure of Miser Lighting, the Respondent changed the name of Miser Lighting Sales to Magnetic Lighting Sales Inc. (“Magnetic Lighting”) and began distributing lighting systems from a new supplier.

49. The Respondent did not disclose his involvement with Miser Lighting, Miser Lighting Sales or Magnetic Lighting to FundEX, and FundEX did not approve these activities.

Misleading the Member

50. At all material times, the policies and procedures maintained by FundTrade and FundEX required the Respondent to obtain approval from the Member before engaging in any outside business activities.

51. The Respondent misled the Member with respect to his activities relating to Groach Associates, Syndacore Technologies, Chateau Royal, Panterra, Syndacore Holdings, Miser Lighting, Miser Lighting Sales, and/or Magnetic Lighting on the following occasions:
    1. during a compliance examination conducted by FundTrade on May 10, 2005;
    2. on an Annual Associate Compliance Audit form submitted to FundEX on or about May 23, 2007;
    3. on an Outside Business Activity Approval form submitted to FundEX on or about October 2, 2007;
    4. on an Outside Business Activity Approval form submitted to FundEX on or about August 21, 2008;
    5. during a compliance examination conducted by FundEX on September 21, 2009;
    6. during a compliance examination conducted by FundEX on May 30, 2012; and
    7. during a compliance examination conducted by FundEX in July 2012.

52. The Respondent’s conduct interfered with the ability of the Members to supervise the Respondent, contrary to MFDA Rules 1.1.2, 2.5.1 and 2.1.1.

Allegation #1 – Securities Related Business Outside the Member

53. As described in paragraphs 7 to 41 above, the Respondent engaged in securities related business that was not carried on for the account and through the facilities of the Member by selling, recommending, referring or facilitating the sale of unapproved investment products to clients and other individuals outside the Member, contrary to MFDA Rules 1.1.1, 2.1.4, 2.4.2, and 2.1.1, and sections 13.7 to 13.10 of National Instrument 31-103.

Allegation #2 – Undisclosed and Unapproved Outside Business Activities

54. In the event that the Respondent’s conduct with respect to the sale of the Graoch limited partnerships, Syndacore Technologies debentures, the investments in Chateau Royal, and shares of Panterra did not constitute securities related business, then these activities were dual occupations which were not disclosed to and approved by the Member, contrary to MFDA Rules 1.2.1(c) (now Rule 1.3.2) and 2.1.1.

55. In addition, as described in paragraphs 42 to 49 above, the Respondent engaged in dual occupations, which were not disclosed to and approved by the Member, by:
    1. acting as the President, the Treasurer and a Director of a corporation known as Syndacore Technologies Management Inc.;
    2. operating, including acting as an Officer and/or Director of, corporations known as Miser Lighting Inc., Miser Lighting Sales Inc. and Magnetic Lighting Sales Inc.;

    contrary to MFDA Rules 1.2.1(c) (now Rule 1.3.2) and 2.1.1.

Allegation #3 – Misleading the Member

56. As described in paragraphs 50 to 52 above, the Respondent misled the Member on compliance attestations and during compliance reviews when he failed to disclose that he was:
    1. selling, recommending, referring or facilitating the sale of unapproved investment products to clients and other individuals outside the Member;
    2. acting as the President, the Treasurer and a Director of a corporation known as Syndacore Technologies Management Inc.;
    3. operating, including acting as an Officer and/or Director of, corporations known as Miser Lighting Inc., Miser Lighting Sales Inc. and Magnetic Lighting Sales Inc.;

    thereby interfering with the ability of the Member to supervise the Respondent, contrary to MFDA Rules 1.1.2, 2.5.1 and 2.1.1.

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 four (4) copies of the Reply to the Office of the Corporate Secretary by personal delivery, mail or courier to:
   1. The 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.