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Notice of Hearing

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:

Notice of Hearing
File No. 200941




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: Douglas Bryan Ruemper



NOTICE OF HEARING


NOTICE is hereby given that a first appearance will take place by teleconference before a
hearing panel of the Pacific Regional Council (the “Hearing Panel”) of the Mutual Fund Dealers
Association of Canada (the “MFDA”) in the hearing room located at 650 West Georgia Street,
Suite #1220, Vancouver, British Columbia on February 25, 2010, at 10:00 a.m. (Pacific), or as
soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by
the MFDA against Douglas Bryan Ruemper (the “Respondent”). The Hearing on the Merits will
take place in Vancouver at a time and venue to be announced.

DATED this 14th day of January, 2010

“Jason D. Bennett”

Jason D. Bennett
Corporate Secretary

Mutual Fund Dealers Association of Canada
121 King St. West, Suite 1000
Toronto, Ontario
M5H 3T9
Telephone: 416-943-7431
Fax: 416-361-9781
Email: [email protected]

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link to page 2 NOTICE is further given that the MFDA alleges the following violations of the By-laws, Rules
or Policies of the MFDA:

Allegation #1: Between April 27, 2005 and October 1, 2007, the Respondent engaged in
personal financial dealings with client WA by paying him $29,000 purportedly on account of
investments made by client WA, thereby creating a conflict or potential conflict of interest
between the Respondent and client WA which the Respondent failed to address by the exercise
of responsible business judgment influenced only by the best interests of client WA, contrary to
MFDA Rules 2.1.4 and 2.1.1.

Allegation #2: Between April 27, 2005 and November 16, 2007, the Respondent failed to report
to the Member complaints from client WA with respect to client WA’s investment in an outside
business activity and offered to pay client WA $10,000 to settle a client complaint without the
prior written consent of the Member, contrary to MFDA Rule 1.2.5(b), MFDA Policy No. 3,
MFDA Policy No. 6 and MFDA Rule 2.1.1.1

Allegation #3: Between April 2, 2004 and December 4, 2007, the Respondent had and
continued in 12 gainful occupations that were not disclosed to and approved by the Member,
contrary to MFDA Rules 1.2.1(d) and 2.1.1.

Allegation #4: From December 1, 2004 to June 6, 2006, 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 selling or facilitating the sale of $105,000 of shares of two companies in
which the Respondent had an interest to five clients, contrary to MFDA Rules 1.1.1 and 2.1.1.

Allegation #5: By engaging in the conduct described in Allegation #4, the Respondent failed to
ensure that a conflict or potential conflict of interest between his interests and those of the five

1 Prior to July 3, 2007, MFDA Policy No. 3 (“Handling Client Complaints”) set out the requirements for Approved
Persons with respect to reporting and handling client complaints. On July 3, 2007, MFDA Policy No. 6
(“Information Reporting Requirements”) became effective and, contemporaneously, MFDA Policy No. 3 was
amended to reflect changes related to the introduction of MFDA Policy No. 6.
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link to page 3 clients were addressed by the exercise of responsible business judgment influenced only by the
best interests of the clients, contrary to MFDA Rules 2.1.42 and 2.1.1.

Allegation #6: Between April 2, 2004 and December 4, 2007, the Respondent failed to comply
with the Member’s policies and procedures by:
(a) providing a false response to the Member’s Compliance Checklist on March 29, 2004 to
enable him to commence acting as an Approved Person effective April 2, 2004; and
(b) thereafter engaging in the conduct described in Allegations #3, #4 and #5 in
contravention of the Member’s policies and procedures;
contrary to MFDA Rules 1.1.2 and 2.5.1 and MFDA Rule 2.1.1.

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 April 2, 2004 to February 8, 2008, the Respondent was registered in British
Columbia as a mutual fund salesperson with Quadrus Investment Services Ltd. (“Quadrus” or the
“Member”). The Respondent was terminated as a result of the events described herein.

2.
From October 20, 1997 to April 2, 2004, the Respondent was registered in British
Columbia as a mutual fund salesperson with Performa Financial Group Limited. The Respondent
was not registered from August 20, 1989 to October 19, 1997.

3.
Quadrus has been a Member of the MFDA since March 8, 2002.

2 MFDA Rule 2.1.4 was amended effective February 27, 2006. It is alleged that the Respondent’s conduct
constituted a contravention of MFDA Rule 2.1.4 both pre- and post-amendment.
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Background

4.
The Respondent met WA in or about 1978 and shortly thereafter became his insurance
agent.

5.
In 1997, the Respondent became an Executive Vice-President of a British Columbia
management corporation which oversaw the development of two 10-room luxury alpine inns at
Sun Peaks, a resort community near Kamloops, B.C. (the “Project”). The Respondent was
provided with a company car to use and was to receive a commission of 10% in respect of capital
he raised on behalf of the Project and shares in the Project.

6.
The Respondent persuaded WA to invest $25,000 in the Project with promises that the
investment would double WA’s money. WA was advised by the Respondent that the first
investment would be in a bed and breakfast situated at Sun Peaks Resort. On February 21, 1997,
WA received a certificate for one unit of the Pension No. 1 Investments Limited Partnership for
$10,000. On July 18, 1997, WA received a certificate for 12,500 Class B shares of Eagle Court
Pinnacle Lodges Ltd. (“Eagle”) for $15,000. The Respondent signed the share certificate as the
president of Eagle. The Respondent received $30,000 in compensation for his involvement but
did not receive any shares.

7.
In or about 1999, the company that was building the Project went into foreclosure. The
Respondent informed WA that the Project had gone into foreclosure, but led WA to believe that
his investment had been allocated to other projects and was continuing to perform, as set out in
greater detail below.

8.
On March 8, 2002, Quadrus became a Member of the MFDA such that Quadrus and its
Approved Persons, including the Respondent, became subject to the By-laws, Rules and Policies
of the MFDA from that date forward.

9.
WA became a client of Quadrus in June 2004. The Respondent was the mutual fund
salesperson responsible for servicing WA’s accounts.
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10.
From 1997 to 2007, the Respondent led WA to believe that his money had been moved to
various ventures after his initial investment in the bed and breakfast at the Sun Peaks Resort.
Throughout this time, WA requested that the Respondent provide him with documentation
concerning his investment but never received any from the Respondent.

Allegations #1 and #2: Conflict of Interest and Complaint Handling

11.
WA also continually asked the Respondent when he was going to receive payments on
account of his principal, as well as interest or gains that his purported investments had generated.
In response, the Respondent provided WA with various cheques from time to time. In total, from
April 27, 2005 to October 1, 2007, the Respondent paid $29,000 from his own resources to WA.

12.
On October 22, 2007, WA submitted a written complaint to the British Columbia
Securities Commission (“BCSC”) about his investment in the Project and the Respondent’s
promise that the investment would double his money. Shortly thereafter, the Respondent offered
to settle the complaint by making a payment to WA in the amount of $10,000. WA declined the
Respondent’s offer. On October 29, 2007, WA’s wife, MA advised the BCSC that the
Respondent had offered them $10,000 (in addition to the $29,000 that the Respondent had
already paid to WA) to settle the outstanding promise of the return on WA’s investment.

13.
On October 30, 2007, the BCSC forwarded WA’s complaint to the MFDA for review. On
November 8, 2007, the MFDA notified Quadrus of the complaint and requested Quadrus’s
assistance in reviewing the complaint. On November 12, 2007, Quadrus commenced an
investigation of the Respondent. Quadrus requested that the Respondent provide information
relating to WA’s complaint by November 15, 2007. The Respondent provided a written response
on November 16, 2007, which confirmed his involvement with WA.

14.
Qaudrus’s internal investigation concluded that, between April 27, 2005 and November
16, 2007, the Respondent had not disclosed or reported to Quadrus that the Respondent:
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link to page 6 (a) had been receiving oral and written complaints from WA with respect to WA’s
investment in the Project;
(b) had been making payments to WA on account of his investment in the Project; and
(c) had offered to pay WA $10,000 to settle WA’s complaint concerning the performance
of his investment in the Project.

15.
By engaging in the conduct described above, the Respondent engaged in personal
financial dealings with client WA by paying him $29,000 purportedly on account of investments
made by client WA, thereby creating a conflict or potential conflict of interest between the
Respondent and client WA which the Respondent failed to address by the exercise of responsible
business judgment influenced only by the best interests of client WA, contrary to MFDA Rules
2.1.4 and 2.1.1.

16.
By engaging in the conduct described above, the Respondent failed to report a client
complaint to the Member and offered to pay client WA monies to settle a client complaint
without the prior written consent of the Member, contrary to MFDA Rule 1.2.5(b), MFDA
Policy No. 3, MFDA Policy No. 6 and MFDA Rule 2.1.1.

Allegation #3: Undisclosed Outside Business Activities

17.
By December 4, 2007, Quadrus’s investigation had determined that the Respondent was
involved in a total of 12 outside business activities, none of which had been disclosed by the
Respondent to Quadrus or approved by Quadrus. The 12 outside business activities are listed in
the table below.3 The full nature and extent of the Respondent’s involvement in each of the 12
outside business activities is unknown.
#
Corporation Name
Incorporation Date Business Activity
Respondent’s
Position

1. Raygil
Holdings
May 16, 1977
Building and
None listed in
Ltd.
(Alberta)
construction
Alberta Corporate
Registry records

3 The first three outside business activities (#1, #2 & #3) listed in the table above went into foreclosure in 1999 when
the Respondent was registered as a mutual fund salesperson with Performa Financial Group Limited and before he
became subject to the jurisdiction of the MFDA.
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#
Corporation Name
Incorporation Date Business Activity
Respondent’s
Position

2.
463548 B.C. Ltd.
January 28, 1994
Bed and breakfast
Transfer Agent
(Pension No. 1
(B.C.)
project
Investments Limited
Partnership)
3. Eagle
Court
October 23, 1996
Bed and breakfast
Transfer Agent
Pinnacle Lodges
(B.C.)
project
Ltd.
4.
687619 B.C. Ltd.
February 19, 2004
Development and
Director, President
(B.C.)
management of
and Shareholder
various recreational
and business
properties
5.
0713887 B.C. Ltd.
January 17, 2005
Management of a
Director
(B.C.)
utility company,
which consists of a
sewage plant and
water facility
6. Newgen
Building July 24, 2005 (B.C.)
Manufactures
Director
Systems Inc.
galvanized steel
building components
for commercial and
residential buildings
7. Shuswap
Lake
August 23, 2005
40 townhomes and
Director
Resort Inc.
(B.C.)
66 lot recreational
vehicle site project
8.
0751015 B.C. Ltd.
March 10, 2006
Operation of a
Director
(B.C.)
recreational vehicle
park
9. Bricon
July 14, 2006 (B.C.)
Building and land
Director
Developments Inc.
development
10.
0776338 B.C. Ltd.
December 5, 2006
Property and
Director and
(B.C.)
development; 40
Shareholder
condominiums built
and purchased by
lawyers for rental
11. Shuswap
Lifestyle March 27, 2007
Recreational vehicle
Director
Developments Inc.
(B.C.)
site with operation
of a retail general
goods store; rental
property; and a
holiday campground

12. SLR
Management
June 20, 2007 (B.C.) Management of
Director and
Inc.
related SLR Group
Executive Vice
Page 7 of 15

#
Corporation Name
Incorporation Date Business Activity
Respondent’s
Position

companies President
13. Bricon
June 21, 2007 (B.C.) Development of a
Director and
Developments (BC)
recreational vehicle
Shareholder
Inc. (Trail Blazer
site
RV Resort)
14. Bricon
Project
July 25, 2007 (B.C.)
Recreational and
Director
Development 2007
commercial property
Inc.
development
15. SLR Storage Inc.
July 27, 2007 (B.C.)
Recreational vehicle
Director
and boat storage
facility

18.
By engaging in the conduct described above, the Respondent had and continued in 12
gainful occupations between April 2, 2004 and December 4, 2007 which were not disclosed to or
approved by Quadrus.

Allegation #4: Securities Related Business Outside the Member

19.
Quadrus’s investigation determined that five clients, acting on the recommendation of the
Respondent, had invested a total of $105,000 in two of the Respondent’s undisclosed outside
business activities (#4 and #7 in the table above), as set out below:
Client Amount
Investment
Date
Issued
WR
$10,000
2 Class A voting
December 1, 2004
shares of 687619 B.C.
Ltd.
BS
$10,000
3 Class A voting
December 1, 2004
shares of 687619 B.C.
Ltd.
MB
$50,000
1 Preferred share of
February 13, 2006
Shuswap Lake Resort
Inc.
MG & WG
$35,000
1 Preferred share of
June 6, 2006
Shuswap Lake Resort
Inc.
Total $105,000


20.
To date, one client has received a payment of $500 on account of her investment. The
remaining four clients have not been paid any amounts on account of their investments.
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21.
Between December 1, 2004 and June 6, 2006, 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 selling or facilitating the sale of $105,000 of shares in two companies, 687619
B.C. Ltd. and Shuswap Lake Resort Inc., in which the Respondent had an interest, contrary to
MFDA Rules 1.1.1 and 2.1.1.

Allegation #5: Conflicts of Interest

22.
By engaging in the conduct described in Allegation #4, the Respondent failed to ensure
that conflicts or potential conflicts of interest between his interests as the President, Director and
shareholder of 687619 B.C. Ltd. and as a director of Shuswap Lake Resort Inc. (see paragraph
17) and those of the five clients were addressed 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.
Allegation #6: Failing to Comply with the Member’s Policies & Procedures

(i) Misrepresentation to enable Respondent to become an Approved Person

23.
On March 29, 2004, the Respondent was required by Quadrus to complete its
Compliance Checklist prior to commencing as an Approved Person of Quadrus. The Compliance
Checklist posed a series of questions, including:

“Do you engage in other non-life insurance or mutual fund business activities? For
example: P&C insurance, tax preparation, real estate agent, etc;”

24.
The Respondent falsely responded “No” to the question by failing to disclose, among
other things, his ongoing investment activities with WA, as described in greater detail above, and
his other outside business activities including, at a minimum, companies #1 to #4 referred to in
the table at paragraph 17 above.

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25.
On the basis of the Respondent’s false response to the question on the Compliance
Checklist, Quadrus allowed the Respondent to commence acting as a mutual fund salesperson
effective April 2, 2004 and, in doing so, did not make him subject to any terms and conditions
and/or place him under heightened supervision.

(ii) Failure to comply with policies & procedures while an Approved Person

26.
On March 29, 2004, the Respondent also signed an Exclusive Sales Agreement with
Quadrus. The section entitled “Exclusivity” prohibited an Approved Person from selling or
trading in an product or service that had not been approved by Quadrus and provided as follows:

I will, with respect to the Products, represent the Dealer exclusively.
In this Agreement, products and services not approved by the Dealer are referred to as
“Prohibited Products or Services”. I will not trade or provide Prohibited Products or
Services. For greater certainty, products and services related to my insurance sales
activities including without limitation, segregated funds activities, are deemed to be
approved by the Dealer.
Subject to the Dealer Policies and in compliance with Applicable Laws, I will not engage
in any other business or employment or in any financial planning activities, other than
such business or employment and financial planning activities as are related to my
insurance sales activities, without the prior approval of the Dealer. Any such prior
approval may include conditions relating to the method by which I carry on such
activities, and I agree to abide by such conditions.

27.
On March 29, 2004, the Respondent also received and read, and agreed to abide by
Quadrus’s Code of Business Conduct. The section entitled “Conflict of Interest” prohibited an
Approved Person from, among other things, engaging in any personal financial dealings with
clients and provided as follows:

You must refrain from entering into any situation that places, or appears to place you, in a
conflict of interest with your clients. You must immediately disclose any potential
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conflict of interest to your client. If you are unsure if a conflict exists, discuss the matter
with your Branch Manager or Quadrus Compliance.

The section entitled “Responsibility to Quadrus” provided as follows:

Registration
You must not engage in any professional conduct that is dishonest, fraudulent or
deceitful, or which reflects adversely on your professional competence.
….
Representing Self (Titles, etc.)

While sponsored by Quadrus, you are permitted to trade only in products and services
offered or approved by Quadrus; you may not conduct mutual fund business with any
other dealer. If you are uncertain whether a product or service is one offered by Quadrus,
you should review it with your Branch Manager or Quadrus Compliance before dealing
with a client.

28.
As described in greater detail in Allegations #3 to #5 above, the Respondent failed to
comply with the terms of Quadrus’s Exclusive Sales Agreement and Code of Business Conduct
after he commenced acting as a mutual fund salesperson for Quadrus on April 2, 2004, in that the
Respondent:

(a) engaged in new or additional occupations after April 2, 2004 that he did not disclose to
Quadrus;
(b) engaged in securities related business that was not carried on for the account of Quadrus
and through the facilities of Quadrus by selling or facilitating the sale of $105,000 of
shares in two companies in which the Respondent had an interest to five clients between
December 1, 2004 and June 6, 2006;
(c) failed to ensure that conflicts or potential conflicts of interest between his interests in the
two companies and those of the five clients were identified to Quadrus and the clients and
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addressed by the exercise of responsible business judgment influenced only by the best
interests of the clients.

29.
By engaging in the conduct described above, the Respondent prevented Quadrus from
identifying and addressing, through reasonable supervisory measures, regulatory risks that
adversely affected, or may have adversely affected, the interests of clients and other individuals.

30.
The Respondent failed to comply with Quadrus’s policies and procedures by:
(a) providing a false response to Quadrus’s Compliance Checklist prior to commencing
employment as an Approved Person on April 2, 2004; and
(b) thereafter engaging in the conduct described in Allegations #3, #4 and #5 in
contravention of Quadrus’s Exclusive Sales Agreement and Code of Business
Conduct;

contrary to MFDA Rules 1.1.2 and 2.5.1 and MFDA Rule 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:

ƒ has failed to carry out any agreement with the MFDA;

ƒ 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;

ƒ has failed to comply with the provisions of any By-law, Rule or Policy of the MFDA;

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ƒ has engaged in any business conduct or practice which such Regional Council in its
discretion considers unbecoming or not in the public interest; or

ƒ 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:

(a) a reprimand;

(b) a fine not exceeding the greater of:

(i)
$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 determine;

(d) revocation of the authority of such person to conduct securities related business;

(e) prohibition of the authority of the person to conduct securities related business in any
capacity for any period of time;

(f) 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.

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NOTICE is further given that the Respondent must serve a Reply on Enforcement Counsel and
file a Reply with 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, Ontario
` M5H
3T9
Attention:
Michelle
Pong

Fax: 416-361-9073
Email:
[email protected]

A Reply shall be filed by:
(a) providing 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, Suite 1000
Toronto, Ontario
M5H 3T9
Attention: Office of the Corporate Secretary; or

(b) transmitting 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 otherwise; or
(c) transmitting 1 electronic copy of the Reply to the Corporate Secretary by e-mail at
[email protected].

A Reply may either:

(i)
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

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(ii)
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.

End.








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