MFDA Notice of Hearing

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2016104

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

Anthony Ladislao Ayala

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 MFDA offices, located at 121 King Street West, Suite 1000, Toronto, Ontario on March 9, 2017 at 10:30 a.m. (Eastern), or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against Anthony Ladislao Ayala (the “Respondent”).

DATED: Jan 2, 2017

"Sarah Rickard"

Sarah Rickard

Director of Regional Councils

Mutual Fund Dealers Association of Canada
121 King St. West, Suite 1000
Toronto, ON M5H 3T9
Telephone: 416-945-5143
Fax: 416-361-9781
E-mail: corporatesecretary@mfda.ca



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

Allegation #1: In about December 2014, the Respondent misappropriated approximately $13,395 from clients PF and JZ, thereby failing to deal fairly, honestly and in good faith with clients PF and JZ, and observe high standards of ethics and conduct in the transaction of business, contrary to MFDA Rule 2.1.1.

Allegation #2: In about December 2014, the Respondent falsified client signatures on account forms in order to process a series of unauthorized transactions in respect of clients PF and JZ, thereby failing to deal fairly, honestly and in good faith with clients PF and JZ, and observe high standards of ethics and conduct in the transaction of business, contrary to MFDA Rules 2.3.1 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 8, 2014 to March 12, 2015, the Respondent was registered in Ontario as a Dealing Representative (formerly known as a mutual fund salesperson) with TD Investment Services Inc. (“TDIS”), a Member of the MFDA.
  2. TDIS terminated the Respondent on March 12, 2015, as a result of the events described below. The Respondent has not been registered in the securities industry in any capacity since he was terminated by TDIS.
  3. At all material times, the Respondent conducted business at a TDIS branch located in London, Ontario (the “Branch”). The Branch also operated as a bank branch for TD Canada Trust (“TD Bank”).

Overview

  1. The Respondent misappropriated approximately $25,000 from dormant or inactive accounts of TDIS clients and TD Bank clients, including $13,395 from TDIS client PF and client JZ as described in greater detail below.

Clients PF and JZ

  1. Client PF and client JZ are not related to each other.
  2. On September 2, 2002, client PF opened a Registered Retirement Savings Plan account (“RRSP Account”) with TDIS and invested monies in mutual funds. From September 2, 2002 to December 2014, client PZ’s RRSP Account was inactive with the exception of the re-investment of the distributions generated by the mutual funds held in the account.  As of December 5, 2014, client PF’s RRSP Account had a balance of approximately $4,515.
  3. From August 2001 to December 2014, client JZ held an RRSP Account with TDIS which was inactive with the exception of the re-investment of the distributions generated by the mutual funds held in the account. As of December 5, 2014, client JZ’s RRSP Account had a balance of approximately $8,886.
  4. On or about December 5, 2014, the Respondent falsified the signatures of clients PF and JZ to open TD Bank accounts in the names of the clients, which the Respondent controlled.  Clients PF and JZ were not aware that the Respondent had opened TD Bank accounts in their names. TDIS and TD Bank were not aware that the TD Bank accounts for clients PF and JZ were under the control of the Respondent and were opened without the knowledge or authorization of clients PF and JZ.
  5. On or about December 5, 2014, the Respondent processed a change in the client addresses associated with the TDIS RRSP Accounts held by clients PJ and JZ.  The change of address prevented clients PF and JZ from receiving account statements or other notifications of the unauthorized transactions processed by the Respondent.
  6. From December 5 to 10, 2014, the Respondent falsified the client signatures of clients PF and JZ on Transaction and Account Maintenance Forms, which updated their investor profiles and changed their Know Your Client (“KYC”) information for their RRSP Accounts. Clients PF and JZ were not aware of that the Respondent engaged in this activity.
  7. On or about December 10, 2014, the Respondent falsified client PF’s signature on a Transaction and Account Maintenance Form and processed a redemption of $4,000 from client PF’s RRSP Account.  The redemption generated net proceeds of $3,600 (after the deduction of the withholding tax) which were deposited into client PF’s TD Bank account that was under the Respondent’s control.
  8. On or about December 10, 2014, the Respondent falsified client JZ’s signature on a Transaction and Account Maintenance Form and processed a redemption of $8,882.51 from client JZ’s RRSP account.  The redemption generated net proceeds of $7,108.38 (after the deduction of the withholding tax) which were deposited into client JZ’s TD Bank account that was under the Respondent’s control.
  9. On or about December 15, 2014, the Respondent withdrew $1,400 in cash from client JZ’s TD Bank account and deposited $1,000 in cash into his personal TD Bank account.
  10. On or about December 15, 2014, the Respondent withdrew $1,400 in cash from client PF’s TD Bank account and deposited $1,000 in cash into his personal TD Bank account.
  11. On or about December 17, 2014, the Respondent withdrew $1,400 in cash from client JZ’s TD Bank account and deposited of $1,000 into his personal TD Bank account.
  12. On or about December 18, 2014, the Respondent withdrew $900 in cash from client JZ’s TD Bank account. Immediately thereafter, the Respondent withdrew $1,400 in cash from client PF’s TD Bank account. On December 19, 2014, the Respondent deposited $2,600 in cash into personal TD Bank account.
  13. On December 22, 2014, the Respondent withdrew $1,000 in cash from client JZ’s TD Bank account. Immediately thereafter, the Respondent withdrew $800 in cash from client PF’s TD Bank account.  That day, the Respondent deposited $368 in cash into his personal TD Bank account and $732 into his TD credit card account.
  14. On or about December 23, 2014, the Respondent withdrew $1,000 from client JZ’s TD Bank account.
  15. On or about December 29, 2014, the Respondent falsified client PF’s signature on a Transaction and Account Maintenance Form and processed a redemption of $512.65 from client PF’s RRSP account. The redemption generated net proceeds of $461.38 (after the deduction of the withholding tax) which were deposited into client PF’s TD Bank account that was under the Respondent’s control. No further activity occurred in this account.
  16. In about February 2015, TDIS became aware of the Respondent’s conduct and commenced an investigation. TDIS terminated the Respondent on March 12, 2015 and reimbursed clients PF and JZ for the monies misappropriated by the Respondent (including $9,300 which the Respondent deposited into his personal TD Bank account and TD credit card account).

Allegation #1: Misappropriation of Client Monies

  1. By virtue of the foregoing, the Respondent misappropriated approximately $13,395 from clients PF and JZ, thereby failing to deal fairly, honestly and in good faith with clients PF and JZ, and observe high standards of ethics and conduct in the transaction of business, contrary to MFDA Rule 2.1.1.

Allegation #2: Falsification of Client Signatures

  1. By virtue of the foregoing, the Respondent falsified client signatures on account forms in order to process a series of unauthorized transactions in respect of clients PF and JZ, thereby failing to deal fairly, honestly and in good faith with clients PF and JZ, and observe high standards of ethics and conduct in the transaction of business, contrary to MFDA Rules 2.3.1 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: cwai@mfda.ca

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 corporatesecretary@mfda.ca.

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.