Notice of Hearing

Notice of Hearing
File No. 201606


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: Ernest Victor Romain



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 at the offices of the MFDA, located at
121 King Street West, Suite 1000, Toronto, Ontario on March 31, 2016 at 9:30 a.m. (Eastern), or
as soon thereafter as the appearance can be held, concerning a disciplinary proceeding
commenced by the MFDA against Ernest Victor Romain (the “Respondent”).

DATED this 21st day of January, 2016.

“Sarah Rickard”

Sarah Rickard

Director of Regional Councils

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

Telephone: 416-945-5143
Facsimile: 416-361-9781
Email: corporatesecretary@mfda.ca
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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 2014 and September 2014, the Respondent obtained and
maintained 134 pre-signed account forms in respect of 85 clients, contrary to MFDA Rule 2.1.1.

Allegation #2: On August 8, 2015, the Respondent engaged in unauthorized discretionary
trading by processing 5 withdrawals in respect of 7 clients without obtaining client instructions,
contrary to MFDA Rules 2.3.1(a) and 2.1.1.

Allegation #3: On August 8, 2015, the Respondent misled the Member by falsely representing to
the Member that he obtained client instructions to process 5 withdrawals in respect of 7 clients,
thereby interfering with the Member’s ability to supervise the Respondent’s trading activity and
engaging in conduct unbecoming an Approved Person, contrary to MFDA Rules 1.1.2, 2.5.1 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.
The Respondent has been registered in the mutual fund industry since 1988.

2.
From April 28, 2014 to October 9, 2015, the Respondent was registered in Ontario,
Alberta and Quebec with Mandeville Wealth Services Inc. (“Mandeville”), a Member of the
MFDA.

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3.
On September 9, 2015, Mandeville terminated the Respondent’s Agency Agreement
effective December 31, 2015, in part, as a result of the matters described below.

4.
On October 8, 2015, the Respondent advised Mandeville that he was immediately
terminating his Agency Agreement with Mandeville. The Respondent is not currently registered
in the securities industry in any capacity.

5.
At all material times, the Respondent conducted business in the Burlington, Ontario, area.

Pre-Signed Account Forms

6.
At all material times, Mandeville’s policies and procedures prohibited its Approved
Persons, including the Respondent, from holding blank or partially completed pre-signed account
forms.

7.
Between May 2, 2014 and September 5, 2014, the Respondent obtained and maintained
134 pre-signed account forms in respect of 85 clients. None of the forms were used to process
transactions.

8.
The pre-signed account forms included New Account Application forms, Electronic
Transfer forms, Pre-Authorized Contribution Agreements, and Transfer forms.

9.
Mandeville’s compliance staff detected the pre-signed account forms on October 7, 2014,
as a result of a routine trade review and follow-up investigation. As a result of its findings,
Mandeville imposed a period of close supervision on the Respondent, which required that the
Respondent submit all transactions to Mandeville for approval before processing.

10.
By virtue of the foregoing, the Respondent failed to observe high standards of ethics and
conduct in the transaction of business and engaged in conduct unbecoming an Approved Person,
contrary to MFDA Rule 2.1.1.
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Unauthorized Discretionary Trading

11.
At all material times, Mandeville’s policies and procedures prohibited its Approved
Persons, including the Respondent, from engaging in discretionary trading.

12.
At all material times, Mandeville offered a service fee program called the “Prosperity
Program” to its clients. Under the terms of the Prosperity Program, clients have the option of
paying a flat fee or a tiered fee calculated as a percentage of the assets enrolled in the program.

13.
Additionally, clients agreed that Mandeville will collect fees for the Prosperity Program
by charging any free cash balance in the fee payment billing account, or, in the event that there is
no free cash balance, by redeeming any securities in any of the clients’ accounts to generate
sufficient monies to pay the fees.

14.
At all material times, Mandeville required that its Approved Persons obtain instructions
from clients before processing any transaction to redeem securities for the collection of fees
under the Prosperity Program. Mandeville would then pay any monies owed to its Approved
Persons from the fees collected.

15.
On August 8, 2015, the Respondent engaged in unauthorized trading by processing 5
withdrawals in respect of 7 clients for the collection of Mandeville’s fees under the Prosperity
Program without first obtaining client instructions (the “Unauthorized Withdrawals”).

16.
By virtue of the foregoing, the Respondent engaged in unauthorized discretionary
trading, contrary to MFDA Rules 2.3.1(a) and 2.1.1.

Misleading the Member

17.
On August 8, 2015, the Respondent, in accordance with the terms of his close
supervision, submitted the details of the Unauthorized Withdrawals to Mandeville for approval.
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At that time, the Respondent falsely represented to Mandeville that he had obtained client
instructions with respect to the transactions.

18.
By virtue of the foregoing, the Respondent misled the Member and failed to observe high
standards of ethics and conduct in the transaction of business and engaged in conduct
unbecoming an Approved Person, contrary to 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:

 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
(ii)
an amount equal to three times the profit obtained or loss avoided by such person
as a result of committing the violation;

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(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 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: Sarah Glickman

Fax: 416-361-9073

Email: sglickman@mfda.ca

A Reply shall be filed by:

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

The Mutual Fund Dealers Association of Canada
121 King Street West, Suite 1000
Toronto, ON M5H 3T9
Attention: Office of the Corporate Secretary; or

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(b) 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
(c) transmitting one (1) electronic copy of the Reply to the Office of the Corporate Secretary
by e-mail at corporatesecretary@mfda.ca.

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.
DM 464347 v1

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• PARTICULARS
  • Registration History
  • Pre-Signed Account Forms
  • Unauthorized Discretionary Trading
  • Misleading the Member