Amended Notice of Hearing
File No. 200915
IN THE MATTER OF A DISCIPLINARY HEARING
PURSUANT TO SECTIONS 20 AND 24 OF BY-LAW NO. 1
OF THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA
Re: David William John Irwin
AMENDED NOTICE OF HEARING
NOTICE is hereby given that a first appearance will take place by teleconference before
a hearing panel of the Central Regional Council (the “Hearing Panel”) of the Mutual
Fund Dealers Association of Canada (the “MFDA”) in the hearing room located at 121
King Street West, Suite 1000, Toronto, Ontario on September 2, 2009 at 10:00 a.m.
(Eastern), or as soon thereafter as the hearing can be held, concerning a disciplinary
proceeding commenced by the MFDA against David William John Irwin (the
DATED: May 20th, 2009.
“Jason D. Bennett”
Jason D. Bennett
Mutual Fund Dealers Association of Canada
121 King St. West
E-mail: [email protected]
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NOTICE is further given that the MFDA alleges the following violations of the By-laws,
Rules or Policies of the MFDA:
Allegation #1: In or about June 2004, the Respondent engaged in securities related
business that was not carried on for the account of the Member and through the facilities
of the Member by recommending, selling, facilitating the sale, or making referrals in
respect of the sale of Lighthouse Pointe Limited Partnership units (“Lighthouse LPs”) to
24 clients, contrary to MFDA Rules 1.1.1 and 2.4.2.
Allegation #2: In or about June 2004, the Respondent engaged in another gainful
occupation, which was not properly disclosed to and approved by the Member, by
recommending, selling, facilitating the sale, or making referrals in respect of the sale of
Lighthouse LPs to 24 clients, contrary to MFDA Rules 1.2.1(d) and 2.4.2.
Allegation #3: In or about June 2004, the Respondent recommended, sold, facilitated the
sale, or made referrals in respect of the sale of Lighthouse LPs to 24 clients without
(a) the clients qualified as accredited investors in accordance with Ontario
Securities Commission Rule 45-501 and subsequently National Instrument 45-
106, thereby engaging the jurisdiction of the Hearing Panel to impose a
penalty on the Respondent pursuant to s. 24.1.1(h) of MFDA By-law No. 1;
(b) the investments were suitable for the clients and in keeping with their
investment objectives, contrary to MFDA Rule 2.2.1.
Allegation #4: Between June 2004 and September 2005, the Respondent failed to
comply with the Member’s policies and procedures with respect to securities related
business, referral arrangements and the disclosure and approval of outside business
activities, contrary to MFDA Rules 1.1.2, 2.5.1, and 2.1.1.
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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:
From December 2000 to September 2005, the Respondent was registered in
Ontario as a mutual fund salesperson with Manulife Securities International Limited
The Respondent was terminated by Manulife on September 12, 2005 as a result of
the events described below.
The Respondent is currently registered in Ontario with Becksley Capital Inc., a
limited market dealer.
Manulife became a member of the MFDA on April 12, 2002. Manulife
amalgamated with Berkshire Investment Group Inc. and changed its name to Manulife
Securities Investment Services on July 2, 2008.
Between May 2001 and June 2004, Manulife notified its mutual fund
salespersons, including the Respondent, on several occasions that they were not permitted
to recommend, sell or facilitate the sale of any investment products that had not been
approved for sale by Manulife.
In or about June 2004, the Respondent recommended, sold, facilitated the sale, or
made referrals in respect of the sale of approximately US$805,000.00 of Lighthouse LPs
to 24 clients. According to an Offering Memorandum dated October 31, 2003, the
Lighthouse LPs provide investors with an interest in a 270 unit residential apartment
complex located in Palm Bay, Florida.
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The Lighthouse LPs are high risk investments.
The investments were sold to clients in reliance on the “accredited investor”
exemption set out in s. 2.3 of Ontario Securities Commission Rule 45-501 and
subsequently National Instrument 45-106.
The Respondent did not disclose to Manulife that he had recommended, sold,
facilitated the sale, or made referrals in respect of the sale of the Lighthouse LPs to
clients and had received commissions of at least US$161,100 in respect of these
Allegation #1 – Securities Related Business Outside the Member
By engaging in the conduct described above, the Respondent engaged in
securities related business that was not carried on for the account of Manulife and
through the facilities of Manulife, contrary to MFDA Rules 1.1.1, 2.1.1 and 2.4.2.
Allegation #2 – Undisclosed Dual Occupation
In the event that the Respondent’s involvement in the sale of the Lighthouse LPs
to the clients did not constitute securities related business that was not carried on for the
account of and through the facilities of Manulife, then the Respondent had and continued
in another gainful occupation that was not disclosed to and approved by Manulife,
contrary to MFDA Rules 1.2.1(d), 2.1.1 and 2.4.2.
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Allegation #3 – Failure to Ensure Clients Qualified as Accredited Investors and
At the time the investments were sold, the Respondent arranged for clients to
execute a Subscription Agreement, Power of Attorney and an Accredited Investor
Certificate (collectively, the “Sales Documentation”) in respect of their purchase of the
Lighthouse LPs. The Respondent delivered the Sales Documentation to Jaymor Group
Inc. (“Jaymor”), which was identified as the promoter of the Lighthouse LPs in the
At no time prior to the execution of the Sales Documentation, or at any time
thereafter, did the Respondent conduct sufficient due diligence to ensure that: (1) the
clients purchasing the Lighthouse LPs qualified as accredited investors; and (2) the
Lighthouse LPs were suitable for the clients and in keeping with their investment
Based upon the Know-Your-Client (“KYC”) information maintained by Manulife
in respect of the clients, the Respondent knew or ought to have known that at least 20 of
the 24 purchasers of the Lighthouse LPs did not qualify as accredited investors or there
was insufficient information available for the Respondent to be able to determine whether
the clients qualified as accredited investors. In addition, the KYC information maintained
by Manulife in respect of the clients indicated that the Lighthouse LPs were unsuitable
for at least 5 of the 24 clients who purchased them because the clients had a risk tolerance
of less than “High”.
Allegation #4 – Failure to Comply with Manulife’s Policies and Procedures
In or about May 2001, Manulife distributed a policy on high risk investment
products to its mutual fund salespersons, including the Respondent, stating that mutual
fund salespersons were not permitted to sell limited partnerships “unless you have
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In or about February 2004, Manulife sent an email entitled “Protect Your
License” to its mutual fund salespersons, including the Respondent, which stated:
all securities related business, including activities involving limited
partnerships, must be conducted through Manulife;
mutual fund salespersons are not permitted to enter into referral
arrangements with respect to the sale of securities, including limited
partnerships, except through Manulife; and
all referral fees must flow through Manulife.
By participating in the sale of the Lighthouse LPs to the clients as described
above, the Respondent failed to comply with Manulife’s policies and procedures with
respect to outside business activities and referral arrangements, contrary to MFDA Rules
1.1.2, 2.5.1 and 2.1.1.
The Respondent Declined to Explain his Conduct
MFDA investigators provided the Respondent with reasonable opportunities to
attend an interview and explain his conduct pertaining to the sale of the Lighthouse LPs.
The Respondent declined to do so.
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;
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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
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
the Hearing Panel has the power to impose any one or more of the following penalties:
(a) a reprimand;
(b) a fine not exceeding the greater of:
$5,000,000.00 per offence; and
(ii) an amount equal to three times the profit obtained or loss avoided by
such person as a result of committing the violation;
(c) 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
(d) revocation of the authority of such person to conduct securities related
(e) prohibition of the authority of the person to conduct securities related business
in any capacity for any period of time;
such conditions of authority to conduct securities related business as may be
considered appropriate by the Hearing Panel;
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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 Corporate Secretary within 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
Toronto, ON M5H 3T9
Attention: Charles A. Toth
A Reply shall be filed by:
(a) providing four (4) copies of the Reply to the Corporate Secretary by personal
delivery, mail or courier to:
The Mutual Fund Dealers Association of Canada
121 King Street West
Toronto, ON M5H 3T9
Attention: Office of the Corporate Secretary; or
(b) transmitting one (1) copy of the Reply to 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 Corporate Secretary permits
(c) transmitting one (1) electronic copy of the Reply to the Corporate Secretary
by e-mail at [email protected].
A Reply may either:
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(a) 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
(b) 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:
(a) to serve and file a Reply; or
(b) 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.
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