Notice of Hearing

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

Allegation #1: Between about November 2012 and November 2014, the Respondent engaged in a dual occupation, which was not approved by the Member, contrary to MFDA Rules 1.2.1(c) (now Rule 1.3.2) and 2.1.1.

Allegation #2: In December 2012, the Respondent misled the Member when he falsely represented to the Member that he did not have an active role and did not engage in client related activities at his dual occupation, contrary to MFDA Rule 2.1.1.

Allegation #3: Between about February 2012 and November 2014, the Respondent failed to report to the Member within 2 business days, or at all, the fact that he was named as a respondent in a regulatory disciplinary proceeding commenced against him, contrary to MFDA Policy No. 6, subsection 4.1(c) and MFDA Rule 1.2.2(b) (now Rule 1.4(b)).

Allegation #4: In May 2014, the Respondent offered to directly reimburse a client for a loss or fee that the client was to incur upon the transfer of the client’s investments to an account serviced by the Respondent, thereby engaging in personal financial dealings with the client which gave rise to a conflict or potential conflict of interest that the Respondent failed to address by the exercise of responsible business judgment influenced only by the best interests of the client, contrary to MFDA Rules 2.1.4 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 was registered in the securities industry commencing in 2004.

2. From August 2009 to November 2014, the Respondent was registered in Ontario and Québec as a mutual fund salesperson (now known as a dealing representative) with Investors Group Financial Services Inc. (“Investors Group”), a Member of the MFDA.

3. On November 27, 2014, the Respondent was terminated as a result of the matters described herein, and is not currently registered in the securities industry.

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

Allegations #1 and #2 – Unapproved Dual Occupation and Misleading the Member

5. At all material times, Investors Group’s policies and procedures prohibited its Approved Persons from engaging in dual occupations that were not approved by Investors Group.

6. In November 2012, the Respondent acquired the accounting firm Leach Bradbury Professional Corp. (“Leach Bradbury”).

7. In November 2012, the Respondent completed and submitted to Investors Group an Outside Business Activity Approval Form (the “First OBA Approval Form”) requesting that Investors Group approve his dual occupation at Leach Bradbury.

8. In December 2012, Investors Group management returned the First OBA Approval Form to the Respondent’s Division Director and Regional Director without having approved the Respondent’s dual occupation at Leach Bradbury. Investors Group management advised the Division Director and Regional Director that the First OBA Approval Form did not clearly describe the Respondent’s involvement with Leach Bradbury and that more information was required about the proposed dual occupation.

9. On December 20, 2012, the Division Director met with the Respondent to complete a second Outside Business Activity Approval Form (the “Second OBA Approval Form”) with respect to the Respondent’s dual occupation at Leach Bradbury. The Division Director, in the presence of the Respondent, completed the Second OBA Approval Form based on the information that the Respondent provided to him during the meeting.

10. Among other things, the completed Second OBA Approval Form stated that:

• the Respondent was the majority shareholder in Leach Bradbury;
• the Respondent did not have an active role in Leach Bradbury;
• the Respondent was responsible for establishing “conditions for [Leach Bradbury] to remain profitable and expand”, but was not involved in the day-to-day operations of Leach Bradbury; and
• the Respondent did not engage in client related activities at Leach Bradbury.

11. On December 31, 2012, the Respondent signed the completed Second OBA Approval Form.

12. In January 2013, Investors Group management reviewed the completed Second OBA Approval Form and, based on the information that was recorded on the Second OBA Approval Form, approved the Respondent’s dual occupation at Leach Bradbury.

13. The Respondent’s representations in the Second OBA Approval Form were misleading. Between about November 2012 and November 2014, the Respondent, on behalf of Leach Bradbury, provided tax planning, succession planning, asset planning and estate planning services (collectively, “Planning Services”) to clients of Leach Bradbury.

14. At no time did Investors Group grant approval to the Respondent to provide Planning Services on behalf of Leach Bradbury.

15. In September 2014, Investors Group conducted a compliance review of the Respondent’s sub-branch office. During the compliance review, Investors Group compliance staff discovered that the Respondent was provided Planning Services outside of Investors Group.  Investors Group directed the Respondent to cease this activity.

16. In September 2014, the Respondent advised Investors Group that he was not willing to cease providing Planning Services outside of Investors Group.

17. In November 2014, Investors Group terminated the Respondent.

18. By virtue of the foregoing, the Respondent engaged in a dual occupation, which was not approved by the Member, contrary to MFDA Rules 1.2.1(c) (now Rule 1.3.2) and 2.1.1. The Respondent also misled the Member when he falsely represented to the Member that he did not have an active role and did not engage in client related activities at his dual occupation, contrary to MFDA Rule 2.1.1.

Allegation #3 – Failure to Disclose a Disciplinary Proceeding

19. In about February 2012, the Respondent was named as a respondent in a regulatory disciplinary proceeding commenced against him by the Certified Management Accountants of Ontario (the “Disciplinary Proceeding”).

20. The Respondent failed to report to Investors Group that he was named as a respondent in the Disciplinary Proceeding.

21. In November 2014, Investors Group became aware that the Respondent was named as a respondent in the Disciplinary Proceeding after it conducted an internet search of his name.

22. By virtue of the foregoing, the Respondent failed to report to the Member within 2 business days or at all the fact that he was named as a respondent in the Disciplinary Proceeding, contrary to MFDA Policy No. 6, subsection 4.1(c) and MFDA Rule 1.2.2(b) (now Rule 1.4(b)).

Allegation #4 – Personal Financial Dealings

23. At all material times, Investors Group’s policies and procedures prohibited its Approved Persons from directly reimbursing fees to clients and from writing personal cheques to clients.

24. In 2011, client DT became a client of BMO Nesbitt Burns Inc. (“BMO Nesbitt”), a dealer member of the Investment Industry Regulatory Organization of Canada. At all material times, client DT’s investment accounts at BMO Nesbitt were serviced by financial advisors CB and EA.

25. In April 2014, client DT retained Leach Bradbury to prepare her tax return.

26. On April 15, 2014, client DT attended at the office of Leach Bradbury to pay for the preparation of her tax return. While at the office, client DT met with the Respondent.

27. During the meeting, client DT agreed to transfer the balance of her non-registered account at BMO Nesbitt to Investors Group, and to have her accounts serviced by the Respondent.

28. On April 22, 2014, client DT met with the Respondent and agreed to transfer all of her investments from BMO Nesbitt to Investors Group.

29. In May 2014, the Respondent advised client DT that she would incur “interest lost” in the amount of $1,115.01 (the “Interest Lost”) when the transfer of her Guaranteed Investment Certificates from BMO Nesbitt to Investors Group was finalized. The Respondent advised client DT to contact CB and EA to request that they compensate her for the Interest Lost.

30. On about May 6, 2014, client DT met with the Respondent and advised him that CB and EA had declined to compensate her for the Interest Lost. The Respondent then provided client DT with a cheque in the amount of $1,115 (the “Cheque”) to compensate her for the Interest Lost.  The Cheque was drawn from the account of Leach Bradbury.

31. Client DT did not cash the Cheque.

32. On May 8, 2014, the transfer of the balance of client DT’s non-registered account from BMO Nesbitt to Investors Group was finalized.

33. On about May 16, 2014, client DT cancelled the transfer of the remaining investments that she held at BMO Nesbitt to Investors Group.

34. Later in May 2014, client DT advised the Respondent that she had decided to close her account at Investors Group. At the Respondent’s request, client DT then returned the uncashed Cheque to the Respondent.

35. On about June 5, 2014, client DT closed her account at Investors Group.

36. By virtue of the foregoing, the Respondent engaged in personal financial dealings with client DT, which gave rise to a conflict or potential conflict of interest between the Respondent and client DT that the Respondent failed to address by the exercise of responsible business judgment influenced only by the best interests of client DT, contrary to MFDA Rules 2.1.4 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:

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: Paul Blasiak

Fax:  416-361-9073

Email: [email protected]

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

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 [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.