Notice of Hearing

Notice of Hearing
File No. 201503


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: Patrick Pasquale Caicco




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 April 23, 2015 at 10:00 a.m. (Eastern), or as soon thereafter as the
appearance can be held, concerning a disciplinary proceeding commenced by the MFDA against
Patrick Pasquale Caicco (the “Respondent”).

DATED this 6th day of March, 2015.

“Sarah Rickard”

Sarah Rickard

Director of Regional Councils

Mutual Fund Dealers Association of Canada
121 King Street West, Suite 1000
Toronto, Ontario
M5H 3T9

Telephone: 416-945-5143
Facsimile: 416-361-9781
Email: [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: Between May 12, 2009 and March 12, 2010, the Respondent engaged in
securities related business that was not carried on for the account and through the facilities of the
Member by recommending, selling, facilitating the sale or making referrals in respect of the sale
of approximately $3.35 million of investment products to at least 33 clients and other individuals
outside the Member, contrary to MFDA Rules 1.1.1 and 2.1.1, and sections 13.7 and 13.8 of
National Instrument 31-103.

Allegation #2: Between May 12, 2009 and March 12, 2010, the Respondent had and continued
in another gainful occupation which was not disclosed to and approved by the Member by
recommending, selling, facilitating the sale or making referrals in respect of the sale of
approximately $3.35 million of investment products to at least 33 clients and other individuals
outside the Member, contrary to MFDA Rules 1.2.1(d)1 and 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 May 12, 2009 to March 12, 2010, the Respondent was registered in Ontario as a
mutual fund salesperson (now referred to as a dealing representative in the category of mutual
fund dealer) with Professional Investments (Kingston) (“Professional Investments”), a Member
of the MFDA.

1 Effective February 22, 2011, the MFDA’s Rules were amended. MFDA Rule 1.2.1(d) was re-numbered as current
MFDA Rule 1.2.1(c). The wording of the section was not changed.
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2.
Prior to the Respondent’s registration with Professional Investments, he had been
intermittently registered in the securities industry in various capacities since approximately 1992.
The Respondent is not currently registered in the securities industry in any capacity

3.
During the material time, the Respondent resided and carried on business in Ottawa,
Ontario.

Allegation #1: Securities related business outside the Member

4.
On or about February 9, 2009, the Respondent incorporated Advantage Wealth Building
Strategies Inc. (“Advantage”) in the province of Ontario. Advantage purportedly carried on
business providing wealth coaching and wealth planning services.

5.
The Respondent never sought or obtained permission from Professional Investments to
engage in any outside business activities through Advantage.

a) Skyline Apartment REIT

6.
The Skyline Group of Companies (“Skyline”) is a real estate acquisition, management
and investment company. The Skyline Apartment REIT was launched in 2006, and is one of
Canada’s largest multi-residential real estate owners and managers.

7.
From May 12, 2009 to March 12, 2010, the Respondent recommended, sold, facilitated
the sale or made referrals in respect of the sale of at least $1,343,449 of investments in the
Skyline Apartment REIT to at least 21 investors outside of Professional Investments.2 Four of
the investors were clients of Professional Investments and they invested a total amount of
approximately $232,016.

8.
At the time of these sales or referrals, the Skyline Apartment REIT was not approved by
Professional Investments for sale by its Approved Persons, including the Respondent. The

2 In total from February 27, 2009 to March 15, 2010, the Respondent referred or facilitated the investment of at least
$2,400,000 of Skyline Apartment REIT to at least 30 investors.
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Respondent did not seek or obtain approval from Professional Investments with respect to his
involvement in the sale or referral of the Skyline Apartment REIT. None of the sales or referrals
of the Skyline Apartment REIT were processed through the facilities or for the account of
Professional Investments. Professional Investments did not have a referral arrangement with
Skyline.

9.
All of the Respondent’s sales or referrals of investments in the Skyline Apartment REIT
were facilitated through Advantage. The Respondent received a 1% referral fee from Skyline
relating to the sales or referrals of the Skyline Apartment REIT, which amounts were paid to
Advantage.

10.
None of the investors in the Skyline Apartment REIT who were sold or referred to the
investment by the Respondent have complained to the MFDA or to Professional Investments.

b) The Assaly Group

11.
The Assaly Group of Companies (the “Assaly Group”) carried on business as a
diversified real estate organization engaged in the development and management of residential
and commercial properties in Canada and the US. The Assaly Group included but was not
limited to: Assaly Financial Corporation, Act 1 Corp., Assaly Investment Program Corporation,
Millennium Springs Development & Construction Corp., Assaly Credit & Trade Inc. and
Thomas C. Assaly Charitable Foundation (“Foundation”). Thomas G. Assaly (“Assaly”) was the
president and sole director of the various corporate entities that formed the Assaly Group other
than the Foundation, where he was the Chairman of the Board.

12.
Between 2009 and 2012, Assaly through various Assaly Group corporations undertook
several developments, including the following two projects:

a) Nature’s Walk Gated Community (“Nature’s Walk”); and
b) Villa Montague

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a. Nature’s Walk

13.
Nature’s Walk was promoted as a development which would include a gated community
of 20 condominiums and a golf course. The Nature’s Walk development included a 56 acre
parcel of land and an abutting 100 acre parcel of land in North Grenville, Ontario. An Offering
Memorandum was issued by Assaly Investment Program Corp. in March 2009 for the Nature’s
Walk development.

14.
The Respondent was the sole promoter of the Nature’s Walk investment. During the
course of Staff’s investigation, he admitted that he assisted in the creation of the investment
product and marketing materials for the investment product, and that he solicited investments in
the project.

15.
The Respondent initially told prospective investors that the investment was being
structured as a mortgage investment corporation which would hold a mortgage on Assaly’s farm.
Prospective investors were told they would receive an annual income of approximately 10% for a
period of 5 years on their investment.

16.
During the time the Respondent was registered with Professional Investments3, he
facilitated investments in the Nature’s Walk development by a total of 21 investors in the total
amount of approximately $2,108,000. Five of the 21 investors were clients of Professional
Investments.

17.
Twelve of the 21 investors paid $1,306,000 in cash for their investments, which were to
be held outside their RRSP’s. The other 9 investors invested a total of $802,000 using monies in
their RRSP’s.

3 The Respondent facilitated investments in Nature’s Walk in the months prior to being registered at Professional
Investments. The MFDA does not have jurisdiction over the activity engaged in by the Respondent prior to
becoming an Approved Person. The Respondent did not disclose his involvement in that activity to Professional
Investments at the time of his registration or thereafter.
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18.
Shortly after the investors advanced their monies for their investments in Nature’s Walk,
Assaly directed that the investment be restructured. The 21 investors who paid cash for their
investments became Preferred A shareholders of Millennium Springs Development &
Construction Corp. (“Millennium”), a company owned and controlled by Assaly. Millennium
was purportedly the developer of the Nature’s Walk project.

19.
For the investors who held their investments in Nature’s Walk in their RRSP’s, their
investments were restructured as a syndicated mortgage. The syndicated mortgage was not
secured by the lands forming the Nature’s Walk project but by an adjacent parcel of land
consisting of wetlands which was valued at significantly less (approximately $40,000) than the
total amount that had been paid by these investors for their investments ($802,000).

20.
The investors in the Nature’s Walk project received monthly dividends and interest
payments respectively until approximately February 2011, when the payments stopped.

b. Villa Montague

21.
Villa Montague was structured as a Real Estate Investment Pool (“REIP”). The project
purportedly involved the redevelopment of an existing retirement residence in Smiths Falls,
Ontario through renovations and expansion. An investor who purchased a unit in the REIP was
supposed to receive regular payments of income, with a guarantee by Assaly Credit & Trade Inc.
to buy back units from the investors in the year 2020.

22.
During the time the Respondent was registered with Professional Investments, the
Respondent recommended, sold, facilitated the sale or made referrals in respect of an investment
in the amount of at least $171,000 in Villa Montague to one individual outside of Professional
Investments. (The individual was not a client of Professional Investments.)

23.
At the time of these sales or referrals of investments in Nature’s Walk and Villa
Montague, Assaly Group investment products were not approved by Professional Investments
for sale by its Approved Persons, including the Respondent. The Respondent did not seek or
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obtain approval from Professional Investments with respect to his involvement in the sale or
referral of the Assaly Group investment products. None of the sales of the Assaly Group
investment products were processed through the facilities or for the account of Professional
Investments. Professional Investments did not have a referral arrangement with the Assaly
Group.

24.
All of the Respondent’s sales or referrals of investments in Nature’s Walk and Villa
Montague were made or facilitated through Advantage. The Respondent received a 3% referral
fee from the Assaly Group relating to the sales or referrals of investments in Nature’s Walk and
Villa Montague, which amounts were paid to Advantage.

Legal proceedings by investors in the Assaly Group investment products

25.
After the investors in the Assaly Group projects stopped receiving payments on their
investments in February 2011, they eventually sued the Assaly Group in an attempt to recover
their initial investment and any remaining amounts owing to them. The investors allege, among
other things, that the Assaly Group investments were fraudulent in nature and that Assaly used
investment proceeds for his personal benefit.

26.
On or about April 27, 2013, the Ottawa Citizen published an article in which the
Respondent was named as the financial advisor who had, between 2009 and 2010, facilitated the
investment of approximately $3.3 million into two real estate development projects promoted by
the Assaly Group. Professional Investments saw the article and reported the matter to the MFDA.
Shortly thereafter, Staff began its investigation into the Respondent’s activities.

27.
A Court appointed inspector in the legal proceedings determined that the Nature’s Walk
and Villa Montague projects “are hopelessly insolvent and in stages of abandonment”. There is
no reasonable prospect that the investors will recover the full amount of their investments.

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Professional Investments’ Policies and Procedures

28.
At all material times, Professional Investments’ policies and procedures, consistent with
MFDA requirements, required all Approved Persons to report in writing all outside business
activities to Professional Investments and to obtain their prior approval before commencing any
outside business activities. Professional Investments required all of its Approved Persons,
including the Respondent, to complete a Standard Associate Agreement and an Advisor Update
Form listing any dual occupations or outside business activities.

29.
On January 26, 2009, the Respondent completed the Standard Associate Form without
disclosing his involvement with Skyline or the Assaly Group. The Respondent completed two (2)
additional Advisor Update Forms without disclosing his involvement with Skyline or the Assaly
Group.

Summary of Allegation #1

30.
In summary, during the time the Respondent was registered at Professional Investments,
he sold, recommended, referred or facilitated the sale of approximately $3,352,449 of
investments in the Skyline Apartment REIT, Nature’s Walk and Villa Montague to 33 clients
and other individuals, for which he received sales commissions, referral fees or other
compensation in the amount of approximately $73,704, all of which was paid to Advantage.

31.
By engaging in the conduct described above, the Respondent engaged in securities
related business that was not carried on for the account and through the facilities of Professional
Investments, contrary to MFDA Rules 1.1.1 and 2.1.1 and sections 13.7 and 13.8 of National
Instrument 31-103.

Allegation #2 – Undisclosed dual occupations

32.
To the extent any of the activity described in Allegation #1 above did not constitute
securities related business, then the Respondent had and continued in another gainful occupation
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that was not disclosed to and approved by Professional Investments, contrary to MFDA Rules
1.2.1(d)4 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:

(a) a reprimand;

(b) a fine not exceeding the greater of:

(i)
$5,000,000.00 per offence; and

4 See Note 1 above.
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(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.

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, ON M5H 3T9

Attention: H.C. Clement Wai

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:
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Mutual Fund Dealers Association of Canada
121 King Street West, Suite 1000
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 otherwise; or
(c) transmitting one (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
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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.

DM 416957 v2

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