Notice of Hearing

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 Ontario as a mutual fund salesperson since 1996.

2. Since April 30, 2004, the Respondent has been registered in Ontario as a mutual fund salesperson (now known as a dealing representative) with Worldsource Financial Management Inc. (“Worldsource”), a Member of the MFDA.

3. At all material times, the Respondent was also licensed to sell life insurance and accident and sickness insurance.

4. At all material times, the Respondent conducted business in Ancaster, Ontario.

Allegation #1 – Facilitating Stealth Advising

5. JM was registered as mutual fund salesperson until July 11, 2003. JM has not been registered in the securities industry in any capacity since that date.

6. In about May 2011, JM contacted the Respondent to act as an advisor for some of JM’s former insurance clients, including client MW, as JM had lost his insurance license.

7. In or around May 2011, the Respondent opened a Registered Retirement Savings Plan account (the “RRSP Account”) for client MW with Worldsource.

8. The Respondent did not meet with, or receive instructions from, client MW to open the RRSP Account. The Respondent and received all of the completed account opening documentation from JM and submitted the account opening documentation to Worldsource for processing. Worldsource was not aware that the Respondent had not met with, or received instructions from, client MW.

9. In October 2012, client MW transferred the RRSP Account to another Member. From the time the RRSP Account was opened until it was transferred, the Respondent had failed to contact client MW to service the RRSP Account.  There was no further activity in the RRSP Account during this time.

10. The Respondent did not meet or speak with client MW until November 2012, when client MW contacted the Respondent to express concern with respect to her dealings with JM.

11. In January 2014, Worldsource issued a sanction letter to the Respondent for deficiencies which included the above misconduct. The Respondent was fined $7,500; placed on strict supervision for a period of 6 months; moved to a “high” risk ranking for his branch location and subject to training sessions.

12. By virtue of the foregoing, the Respondent:
    1. allowed JM, an unregistered individual, to open a new account at the Member for a client that the Respondent never met or received instructions from, thereby facilitating stealth advising;
    2. failed to perform the necessary due diligence to learn the essential facts relative to client MW and failed to ensure that the investments were suitable and appropriate for the client MW;

    thereby engaging in conduct contrary to MFDA Rules 1.1.1, 2.2.1 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:

1. a reprimand;
2. a fine not exceeding the greater of:
   1. $5,000,000.00 per offence; and
   2. an amount equal to three times the profit obtained or loss avoided by such person as a result of committing the violation;
3. 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;
4. revocation of the authority of such person to conduct securities related business;
5. prohibition of the authority of the person to conduct securities related business in any capacity for any period of time;
6. 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: H. C. Clement Wai
Fax:  416-361-9073
Email: [email protected]

A Reply shall be filed by:

1. providing four (4) copies of the Reply to the Office of the Corporate Secretary by personal delivery, mail or courier to:
   1. The Mutual Fund Dealers Association of Canada
      121 King Street West, Suite 1000
      Toronto, ON M5H 3T9
      Attention: Office of the Corporate Secretary; or
2. 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
3. transmitting one (1) electronic copy of the Reply to the Office of the Corporate Secretary by e-mail at [email protected].

A Reply may either:

1. 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
2. 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:

1. to serve and file a Reply; or
2. 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.