Skip to Main Content

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. 201111


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: Ajit S. Basi



NOTICE OF HEARING

NOTICE is hereby given that a first appearance will take place by teleconference before a
hearing panel (the “Hearing Panel”) of the Pacific Regional Council of the Mutual Fund Dealers
Association of Canada (the “MFDA”) in the hearing room located in the MFDA offices, 650
West Georgia Street, Suite 1220, Vancouver, British Columbia on September 21, 2011 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 Ajit S. Basi (the “Respondent”).

DATED this 30th day of June, 2011.

“Jason 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
Facsimile: 416-361-9781
Email: [email protected]

Page 1 of 14

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

Allegation #1: Between August 25, 20081 and September 29, 2009, the Respondent engaged in
conduct unbecoming an Approved Person by:
a) failing to invest, repay or otherwise account for approximately $50,000 that client RF
redeemed from her mutual fund account and forwarded to a company in January 2008,
relying on the Respondent’s recommendation and representation that the monies would
be invested on her behalf, when in fact the company was owned or controlled by the
Respondent; and
b) failing to invest, repay or otherwise account for approximately $26,262.27 that client RF
redeemed from her mutual fund account and forwarded to a company in July 2008,
relying on the Respondent’s recommendation and representation that the monies would
be invested on her behalf, when in fact the company was owned or controlled by the
Respondent;
contrary to MFDA Rules 2.1.1 and 2.1.4.

Allegation #2: In or about December 2008, the Respondent misappropriated $5,000 from client
RF by failing to invest, repay or otherwise account for $5,000 which client RF transferred to a
bank account in the name or under the control of the Respondent and which the Respondent led
client RF to believe would be contributed to her RRSP, contrary to MFDA Rule 2.1.1.

Allegation #3: Between April 2009 and September 2009, the Respondent engaged in conduct
unbecoming an Approved Person by soliciting and accepting a total of $35,000 from KS and RS
purportedly to invest on their behalf and thereafter failing to invest or otherwise account for the
monies, contrary to MFDA Rule 2.1.1.

Allegation #4: Commencing November 4, 2009, the Respondent has failed to submit a report in
writing and to attend and give information requested by the MFDA during the course of an
investigation, contrary to section 22.1(c) of MFDA By-Law No. 1.

1 As set out in the “Particulars” section below, it is alleged that the Respondent’s personal financial dealings with
client RF began on January 14, 2008, when the Respondent was no longer registered with his prior Member. The
Respondent subsequently became re-registered, and subject to the jurisdiction of the MFDA, on August 25, 2008.

Page 2 of 14

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.
At all material times, the Respondent resided in Surrey, British Columbia.

2.
The Respondent was registered as a mutual fund salesperson with W.H. Stuart Mutuals
Ltd. (“W.H. Stuart” or the “Member”) in the following jurisdictions:

(a) British Columbia: from August 25, 2008 to September 28, 2009;
(b) Ontario: from August 5, 2009 to September 28, 2009; and
(c) Alberta: from August 17, 2009 to September 28, 2009.

3.
Prior to his registration with W.H. Stuart, the Respondent was registered as a mutual fund
salesperson with Desjardins Financial Security Investments Inc. (“Desjardins”) in the following
jurisdictions:

(a) British Columbia: from October 6, 2006 to October 1, 2007; and
(b) Alberta: from July 19, 2007 to October 1, 2007.

4.
Desjardins became a Member of the MFDA on November 15, 2002.

5.
W.H. Stuart became a Member of the MFDA on March 4, 2003.

6.
The Respondent was terminated by W.H. Stuart on September 29, 2009 as a result of the
events described herein and is currently not registered in the securities industry in any capacity.

Allegation #1 – Personal financial dealings with client RF

7.
In June 2007, RF was a client of Desjardins. The Respondent was the mutual fund

Page 3 of 14

salesperson responsible for servicing her account. RF resides in the greater Vancouver area and
was an acquaintance of the Respondent. At the time of the events described herein, RF was 22
years of age.

8.
As set out above, effective October 2, 2007, the Respondent ceased to be registered with
Desjardins. He subsequently remained unregistered until August 25, 2008, when he became
registered with W.H. Stuart.

9.
On or about January 14, 2008, client RF, acting on the advice and directions of the
Respondent, whom client RF believed was still registered with Desjardins, wrote directly to AGF
Funds (“AGF”) to request the redemption of $50,000 CDN of AGF mutual funds held in her
Desjardins account. In her letter to AGF, client RF indicated that she was going to use the
redemption proceeds to purchase another investment. Acting on the directions of the Respondent,
client RF instructed AGF Funds to make the redemption proceeds cheque that she believed
would be used to purchase her investment payable to a law firm2 (the “Law Firm”) and to mail it
to 1000-355 Burrard Street, Vancouver, British Columbia.

10.
Unbeknownst to client RF, the law firm that the Respondent directed her to mail the
cheque to is located in Calgary, Alberta and was the law firm for Nova West Enterprises Inc.
(“Nova West Enterprises”), one of the Respondent’s companies.

11.
Also unbeknownst to client RF, the Vancouver mailing address that the Respondent
directed client RF to instruct AGF Funds to mail the redemption proceeds cheque to was not the
address of the Law Firm but the address of the following companies owned or controlled by the
Respondent: Nova West Investments (“Nova West Investments”), AS Basi & Associates Inc. and
the aforementioned Nova West Enterprises.

12.
On January 22, 2008, AGF issued a cheque in the amount of $50,000 payable to “Nova-
West Investments Inc.”3 The cheque was delivered by United Parcel Service (“UPS”) to the
address provided by client RF. The following day, the cheque was cashed by the Respondent.

2 Client RF identified the law firm by name in her letter. It is not necessary to identify the law firm for the purposes
of this Notice of Hearing.
3 As the Respondent has failed to cooperate with the investigation of this matter, Staff is unable to determine how
the cheque came to be made payable to the Respondent’s company, “Nova West Investments Inc.” instead of to the
Law Firm (as directed in client RF’s letter to AGF).

Page 4 of 14

13.
The National Registration Database (“NRD”) identifies Nova West Investments and AS
Basi & Associates Inc. as the Respondent’s declared outside business activities. The Respondent
is the sole director of Nova West Enterprises.

14.
By letter dated June 30, 2008, and acting again on the advice and direction of the
Respondent whom RF believed was still registered with Desjardins, client RF wrote a second
letter directly to AGF requesting the redemption of all of the remaining mutual funds in her
account, amounting to approximately $26,262.27 CDN, and the closure of her account.
Following the Respondent’s directions, client RF instructed AGF to make the redemption
proceeds cheque payable to Nova West Enterprises and mailed directly to an address located in
Delta, British Columbia. Staff has identified the address to which the cheque was directed to be
mailed as an address related to the Respondent.

15.
An AGF “Confirmation of Activity” report dated July 7, 2008 for RF’s account confirms
that $26,262.27 was withdrawn from her account on July 4, 2008. The remaining balance in the
account following the withdrawal was $0.00.

16.
On August 25, 2008, RF opened an account at W.H. Stuart. The Respondent had again
become registered, this time with W.H. Stuart and therefore became subject to the jurisdiction of
the MFDA as of that date. The Respondent was the mutual fund salesperson responsible for
servicing client RF’s account at W.H. Stuart.

17.
There is no evidence that the monies that client RF provided to the companies under the
Respondent’s ownership or control were ever invested on client RF’s behalf, repaid to her or
otherwise accounted for.

18.
The Respondent did not disclose his prior and continuing personal financial dealings with
client RF to W.H. Stuart upon becoming registered with W.H. Stuart on August 25, 2008 or at
any time thereafter. The Respondent did not disclose his interest in Nova West Enterprises to
W.H. Stuart.

19.
By engaging in the conduct described above, the Respondent failed to comply with
MFDA Rules 2.1.1 and 2.1.4.

Page 5 of 14

Allegation #2 – Misappropriation from client RF

20.
On December 23, 2008, the Respondent recommended to client RF that she make a
contribution to a Registered Retirement Savings Plan (“RRSP”) and directed her to transfer
$5,000 CDN from her own bank account into the Respondent’s personal bank account
purportedly to allow the Respondent to make the contribution to client RF’s RRSP.

21.
On or about December 23, 2008, client RF transferred $5,000 to a bank account in the
name of or controlled by the Respondent. There is no evidence that the Respondent subsequently
made or facilitated a contribution to client RF’s RRSP using these or any other monies. The
Respondent has not repaid or otherwise accounted for the $5,000 he received from client RF and
deposited in his bank account.

22.
By misappropriating $5,000 from client RF, the Respondent failed to deal fairly, honestly
and in good faith with client RF, contrary to MFDA Rule 2.1.1.

Allegation #3 – Individuals RS and KS

Individual KS

23.
KS was an acquaintance of the Respondent and was aware that the Respondent was
employed as a mutual fund salesperson with W.H. Stuart. KS was not a client of W.H. Stuart.

24.
In April 2009, while the Respondent was registered with W. H. Stuart, the Respondent
provided KS with a business card for “Nova West Investments” during the course of a meeting
with KS to discuss potential investment opportunities. The business card identified the
Respondent as the President of Nova West Investments and listed its office location as 1000-355
Burrard Street, Vancouver, British Columbia.

25.
On April 30, 2009, KS withdrew $5,000 CDN in cash from his bank account and
provided the monies to the Respondent to enable the Respondent to purchase for KS shares of an
unnamed American casino development that the Respondent had persuaded KS to invest in.
The Respondent had led KS to believe that a $5,000 CDN investment in the unnamed American

Page 6 of 14

casino development would generate a return of 10% after two weeks.

26.
The Respondent informed KS that he had made the investment on KS’s behalf but did not
provide KS with any documentation confirming that the investment had been made.

27.
At the alleged maturity date of the initial investment two weeks later, the Respondent
suggested that KS roll the original $5,000 CDN investment into another, newly available,
American casino investment opportunity. The Respondent did not provide KS with any
documentation in respect of the second casino investment or its expected return but did advise
KS that the return would be paid after a 6 week period.

28.
KS instructed the Respondent to reinvest the initial $5,000 CDN plus $500 CDN in
returns into the second casino investment.

29.
The Respondent informed KS that he had reinvested KS’s original $5,000 investment and
$500 return into the second casino investment but did not provide KS with any documentation
confirming that the investment had been made.

30.
On May 21, 2009, KS prepared an $18,000 CDN bank draft to make another investment
in an American casino development recommended by the Respondent. The Respondent had
advised KS that May 21, 2009 was the last day for investors to purchase an interest in the alleged
American casino development and that because the Respondent was busy with other investors,
KS should deposit his monies directly into the Respondent’s personal bank account.

31.
On May 21, 2009, KS deposited the $18,000 CDN bank draft into the Respondent’s
personal bank account. The Respondent did not provide KS with any documentation confirming
his purported investment but advised KS that the investment would pay a 389% return.

Individual RS

32.
RS is the mother of KS. RS was not a client of W.H. Stuart. After learning of the
purported 389% return that the Respondent promised to pay KS, RS became interested in
purchasing her own investments through the Respondent.

Page 7 of 14


33.
On June 4, 2009, RS withdrew $12,000 CDN from her bank account for the specific
purpose of investing with the Respondent. On that same day, RS personally delivered to the
Respondent a bank draft in the amount of $12,000 CDN payable to the Respondent for
investment into the (unnamed) American casino developments in which KS had already
invested.

34.
The Respondent did not provide RS with any documentation confirming her purported
investment and did not communicate with or respond to communications from RS after
accepting the funds.

35.
Beginning in July 2009, KS attempted to contact the Respondent to redeem his
investments. By July 20, 2009, KS had yet to receive his principal investment and the promised
returns. KS began to send numerous text messages and to make numerous telephone calls to the
Respondent to inquire about the status of his investments. The Respondent did not reply to any
of KS’s attempts to contact him.

36.
When RS did not receive either the principal or the promised return on her investment
within 1 to 2 weeks, she requested KS’s assistance to contact the Respondent. As KS was having
difficulty contacting the Respondent, RS contacted W.H. Stuart.

37.
On August 17, 2009, RS telephoned W.H. Stuart and lodged a complaint against the
Respondent. After receiving the complaint, W.H. Stuart began an investigation and contacted the
Respondent to discuss the matter.

38.
On August 31, 2009, KS emailed W.H. Stuart and also lodged a complaint against the
Respondent with W.H. Stuart.

39.
On September 7, 2009, RF filed a complaint with the MFDA regarding her dealings with
the Respondent and reporting what appeared to be a misappropriation of her monies.

40.
During the investigation conducted by W.H. Stuart, the Respondent acknowledged
receiving funds totaling $35,000 from KS and RS but described the monies as a personal loan.

Page 8 of 14

The Respondent advised W.H. Stuart that he had retained a lawyer to facilitate the return of the
monies to KS and RS. W.H. Stuart was also in continual contact with the Respondent’s legal
counsel to address and resolve the complaint filed by RS (and later the complaints filed by KS
and client RF). After the Respondent had addressed the complaints of KS and RS, he ceased to
cooperate further and RF’s complaint remained unresolved.

41.
The Respondent did not provide, nor did the investigations conducted by W.H. Stuart and
Staff find, any documentary evidence to support the Respondent’s claim that the monies
provided to him by KS and RS were personal loans.

42.
The Respondent has not returned or otherwise accounted for the monies provided to him
by client RF. Client RF commenced a civil claim against Desjardins and AGF in respect of her
monies, which has now been resolved.

43.
In September 2009, RS confirmed to W.H. Stuart that she had received a cheque in the
amount of $12,000, the principal amount of her investment, from the Respondent’s counsel in
exchange for signing a release barring RS from making any further claims against the
Respondent.

44.
Sometime later, and with the knowledge of W.H. Stuart, KS was contacted by the
Respondent’s legal counsel, who invited KS to a meeting to discuss the monies owing to KS by
the Respondent.

45.
On September 26, 2009, KS attended at the office of the Respondent’s legal counsel. On
that date, KS received a cheque in the amount of $23,000 CDN from the Respondent’s counsel,
being the principal amounts of his purported investments in the American casino developments4,
in exchange for KS signing a release barring KS from making any further claims against the
Respondent.

46.
On September 29, 2009, the Respondent was terminated by W.H. Stuart.

4 $23,000 = $5,000 + $18,000.

Page 9 of 14

Allegation #4 – Failure to Cooperate

47.
The Respondent has failed to cooperate with Staff’s investigation into the matters alleged
herein. As set out in the chart below, Staff has made a number of attempts to contact the
Respondent to obtain a written statement and to arrange for his attendance at an interview
regarding the alleged inappropriate dealings with client RF as well as with KS and RS:

Date
Content of Letter
Method of Delivery
Outcome
October
Letter from Case Assessment
Registered & Regular Mail
Staff received a reply from the
23, 2009
Staff to Respondent requesting
Respondent’s lawyer
his response, in writing, to the
requesting a copy of MFDA
complaints submitted by KS &
By-Law No. 1 which requires
RS and client RF.
the Respondent to cooperate.

November Case Assessment Staff email a
Email
By letter dated November 4,
2, 2009
copy of MFDA By-Law No. 1
2009, the Respondent’s lawyer
to the Respondent’s lawyer and
advises that the Respondent
request that the Respondent
will not be providing any
cooperate with Staff’s review
further information to Staff.
by responding to its letter by
November 23, 2009.
November Letter from Case Assessment
Registered & Regular Mail
Respondent’s lawyer writes to
11, 2009
Staff to the Respondent
Staff and repeats that the
advising him that should he
Respondent will not be
continue to fail to provide the
providing any further
requested information it will be
information to Staff.
considered a failure to
cooperate.
Staff provides a deadline of
November 23, 2009 for a
response.
June 1,
Investigation Staff writes to the
Registered & Regular Mail is
On June 15, 2010, the
2010
Respondent’s lawyer and to the
successfully delivered to
Respondent’s lawyer advises
Respondent requesting that the
lawyer and to the Respondent.
Staff, by telephone, that the
Respondent attend at an
Respondent is no longer a
interview.
client.

July 14,
Investigation Staff writes to the
Registered & Regular Mail is
On July 30, 2010 the
2010
Respondent requesting that the
successfully delivered to the
Respondent advises
Respondent contact them by
Respondent.
Investigation Staff, by
July 30, 2010 to arrange for an
telephone, that he was leaving
interview in September 2010.
the Vancouver area for some
time, but would obtain new
counsel and arrange for an
interview upon his return in
October 2010.
September Investigation Staff writes to the
Process Server successfully

1, 2010
Respondent to confirm that
delivered the letter to
Staff has not received any
Respondent’s residential

Page 10 of 14

Date
Content of Letter
Method of Delivery
Outcome
correspondence or
address on September 9, 2010.
communication from the
Respondent (or his legal
counsel) and to advise that
should the Respondent fail to
attend at an interview and/or to
provide a statement addressing
the outstanding complaints, the
MFDA would seek to
commence disciplinary
proceedings against him for
failing to cooperate.
September Investigation Staff writes to the
Registered Mail to the lawyer
By letter dated September 16,
16, 2010
Respondent’s former lawyer
(with a copy to the
2010, the Respondent contacts
requesting that he respond if he
Respondent’s residential
Investigation Staff to advise
is acting for the Respondent
address) is successfully
that his legal counsel would
with respect to the ongoing
delivered.
contact Staff within 21 days of
MFDA investigation.
the date of the letter.
A copy of the letter is also sent

to the Respondent at his
On September 21, 2010, the
residential address.
Respondent’s former lawyer
responds, in writing, to confirm
that he no longer represents the
Respondent.
September Investigation Staff writes to the
Registered & Regular Mail is
The Respondent did not
24, 2010
Respondent acknowledging
successfully delivered to the
confirm his attendance at the
receipt of his letter dated
Respondent.
interview and did not attend the
September 16, 2010 and
interview scheduled for
request that the Respondent
October 13, 2010.
attend at the MFDA offices on
October 13, 2010 for an
interview regarding the
outstanding complaints against
him and his subsequent
termination from the Member.
The letter contains a deadline
of September 30, 2010 for the
Respondent to confirm his
attendance.
October
Investigation Staff prepare for

The Respondent fails to appear
13, 2010
an interview of the Respondent
at the interview with
in the event that he appears at
Investigation Staff.
the MFDA offices as per the

letter dated September 24,
2010.
November Investigation Staff writes to the
Registered & Regular Mail is

5, 2010
Respondent to confirm that he
successfully delivered to the
did not attend the interview
Respondent.
scheduled for October 13, 2010
and to advise the Respondent
that proceedings for failing to
cooperate may be commenced
against him. The letter
provides a final opportunity for

Page 11 of 14

Date
Content of Letter
Method of Delivery
Outcome
the Respondent to contact Staff
regarding their investigation
into his activities.

48.
To date, the Respondent has not provided a written report or attended at an interview to
give information as requested by Staff.

49.
Due to the Respondent’s failure to cooperate with Staff’s investigation, the full nature
and extent of the Respondent’s conduct in relation to client RF, and in relation to KS and RS,
and possibly other clients and individuals, is not known to the MFDA.

50.
By failing to cooperate with Staff’s requests to submit a report in writing, to attend and to
give information during the course of an investigation, the Respondent acted contrary to section
22.1 of MFDA By-law No. 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:

(a) has failed to carry out any agreement with the MFDA;
(b) 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;
(c) has failed to comply with the provisions of any By-law, Rule or Policy of the MFDA;
(d) has engaged in any business conduct or practice which such Regional Council in its
discretion considers unbecoming or not in the public interest; or
(e) 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;

Page 12 of 14


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) 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;

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

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

g) 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 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: Maria L. Abate
Facsimile: 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:

Page 13 of 14

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

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.
Doc 259077

Page 14 of 14