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
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 January 12, 2017 at 9:30 a.m. (Eastern), or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against Alfredo Pino also known as Alfie Pino (the “Respondent”).
DATED: Nov 7, 2016
Director of Regional Councils
Mutual Fund Dealers Association of Canada
121 King St. West, Suite 1000
Toronto, ON M5H 3T9
NOTICE is further given that the MFDA alleges the following violations of the By-laws, Rules or Policies of the MFDA:
Allegation #1: From October 2012 to May 2013, the Respondent misappropriated approximately $276,896.19 from client BC, and failed to repay or otherwise account for $263.786.37 of those monies, thereby failing to deal fairly, honestly and in good faith with client BC, contrary to MFDA Rule 2.1.1.
Allegation #2: Commencing in September 2011, the Respondent engaged in outside business activities with respect to three companies that were not disclosed to or approved by the Member, contrary to MFDA Rules 1.2.1(c) (now MFDA Rule 1.3) and 2.1.1.
Allegation #3: Commencing in February 2015, the Respondent failed to cooperate with an investigation conducted by Staff of the MFDA, contrary to section 22.1 of MFDA By-law No. 1 and MFDA Rule 2.1.1.
As of March 17, 2016, amendments to the MFDA Rules resulted in the renumbering and amendment of the rules concerning the involvement of Approved Persons in Outside Activities. The amended version of the Rule is not applicable to this matter.
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:
- Between September 1997 and May 2013, the Respondent was registered in Ontario as a mutual fund salesperson (or a dealing representative) with Investors Group Financial Services Inc. (“Investors Group”), a Member of the MFDA. Between November 2005 and May 2013, the Respondent was also registered as a mutual fund salesperson in Quebec.
- On May 16, 2013, Investors Group terminated the Respondent.
- At all material times, the Respondent conducted business at a branch located in Ottawa, Ontario (the “Branch”).
- The Respondent has not been registered in the securities industry in any capacity since May 16, 2013.
- On September 23, 2011, the Respondent incorporated a federal company called 7982577 Canada Inc. The Respondent was the sole incorporating officer. 7982577 Canada Inc. operated under the name of Trova Capital and was at all material times wholly under the Respondent’s control.
- On September 27, 2011, Trova Capital Corporation (“Trova Capital”) was registered as a Florida Profit Corporation. The Respondent was the Treasurer of Trova Capital.
- On September 30, 2011, Trova Real Estate Properties LLC (“Trova Real Estate”) was registered as a Florida Limited Liability Company. The Respondent signed as a director of Trova Real Estate on the corporation’s registration documents.
- Trova Capital and Trova Real Estate were established for the purpose of acquiring undervalued American real estate for possible resale or rental.
Allegation #1: Misappropriating Monies From Client BC
- In 2002, client BC became a client of Investors Group. The Respondent was the mutual fund salesperson responsible for servicing her accounts at Investors Group.
- Client BC was an unsophisticated investor. She was born in 1943. Client BC retired in 2008. Her husband passed away in July 2010. By virtue of her circumstances, client BC was a vulnerable client.
- Between October 1, 2012 and May 16, 2013, the Respondent solicited and obtained approximately $280,487.36 from client BC under false pretenses and misappropriated the money by depositing it in corporate bank accounts that he controlled. The Respondent subsequently failed to repay or otherwise account for $267,377.54 of the monies that he obtained from client BC.
- Specifically, commencing on October 1, 2012, the Respondent engaged in a repeated pattern of conduct, whereby he would:
- drive to the home of client BC for the purpose of providing investment advice;
- drive client BC to her bank in his vehicle;
- instruct client BC to enter the bank to obtain bank drafts in amounts that he proposed payable to entities that he recommended for the purpose of making investments while the Respondent waited for client BC in his vehicle;
- provide client BC with a false explanation with respect to the nature and purpose of the investment; and
- deposit the bank draft in the bank account of a corporate entity that the Respondent controlled.
As a consequence of this conduct, the Respondent was able to use the money that he had solicited and obtained from client BC as he saw fit for his benefit.
- The Respondent did not provide client BC with any records, receipts or statements documenting the amounts of money that she provided to the Respondent or how the money would be invested.
- The Respondent falsely represented to client BC that the money was being invested in annuities that would pay client BC a rate of return of 6.5% per year.
- By means of the pattern of conduct described above, the Respondent solicited and obtained bank drafts from client BC that were payable to Trova Capital or Trova Real Estate in the amounts and on the dates listed below:
October 1, 2012
October 5, 2012
October 20, 2012
November 2, 2012
January 25, 2013
February 19, 2013
April 15, 2013
May 16, 2013
- Some of the amounts that the Respondent solicited from client BC were obtained from savings accumulated by BC and other amounts were borrowed from a line of credit or from an investment loan that was secured against her home.
- The Respondent deposited the bank drafts that he obtained from client BC into a bank account he had opened on October 2, 2012 (i.e., the day after he first obtained a bank draft from client BC) at a TD Canada Trust branch in Manotick, Ontario (the “Trova Account”). The Respondent opened the bank account in the name of 7982577 Canada Inc., which he indicated was carrying on business as Trova Real Estate. The Respondent identified himself as the “President” of the corporation and established himself as the sole signing officer in respect of the Trova Account.
Loan Agreement between Client BC and 7982577 Canada Inc.
- On or about May 27, 2013, the Respondent arranged for client BC to sign a loan agreement that identified client BC as the lender of $250,000 to 7982577 Canada Inc. According to the terms of the agreement, 7982577 Canada Inc. intended to repay $250,000 to client BC plus interest payable at a rate of 3% per annum commencing on June 1, 2013.
- If this loan agreement was intended to document the money solicited and obtained by the Respondent from client BC, then the loan agreement misrepresented the amount that she had provided to the Respondent and the nature and purpose of the investment that the Respondent explained to client BC. By the date of the loan agreement, client BC had already advanced approximately $276,896.36 for investment on her behalf by the Respondent and client BC had no intention to loan monies to, or invest in, 7982577 Canada Inc.
- Client BC signed the loan document as the Respondent requested but she was not provided with an explanation of the purpose or content of the document, and she did not receive any independent professional advice before signing it.
Payments To Client BC
- Between November 27, 2013 and February 21, 2014, three drafts payable to client BC were deposited into a bank account of client BC. Specifically, bank drafts were deposited on the dates and in the amounts set out below:
November 27, 2013
December 31, 2013
February 21, 2014
- No investment statements, documents or other disclosure were provided to client BC to explain the nature and purpose of the payments listed above.
- As described above, from October 2012 to June 2013, the Respondent solicited, obtained and misappropriated approximately $280,487.36 from client BC and failed to repay or otherwise account for $263,786.37, thereby failing to deal fairly, honestly and in good faith with client BC, contrary to MFDA Rule 2.1.1.
Allegation #2: Outside Business Activities
- At all material times, Investors Group maintained policies and procedures which required its Approved Persons to refrain from engaging in outside business activities unless the Approved Person had disclosed and obtained prior approval from the Member authorizing engagement in contemplated outside business activities.
- The Respondent did not, at any time, disclose to Investors Group his involvement with 7982577 Canada Inc., Trova Capital or Trova Real Estate, and Investors Group did not authorize or approve his involvement in business activities associated with those companies.
- By participating in the conduct described above, the Respondent engaged in conduct contrary to MFDA Rules 1.2.1(c) (now MFDA Rule 1.3), and 2.1.1.
Allegation #3: Failure to Cooperate and Misleading Staff
- On February 10, 2015, Staff sent a letter to the Respondent’s counsel requesting the following information and documents:
- a list of all business and personal bank accounts in which the Respondent had a beneficial interest;
- copies of all bank account statements for the period September 1, 2011 to May 31, 2013 for any bank account in which the Respondent had a beneficial interest;
- copies of all bank account statements for the period September 1, 2011 to May 31, 2013 for bank accounts of Trova Real Estate Properties LLC; and
- copies of all bank statements for the period September 1, 2011 to May 31, 2013 for bank accounts of Trova Capital Corp.
- On April 21, 2015, the Respondent’s counsel provided Staff with some of the requested information and documentation but the material produced by the Respondent was incomplete and insufficiently responsive to Staff’s inquiries. In particular, the Respondent did not provide Staff with copies of bank statements for the Trova Account.
- On May 8, 2015, Staff received a sworn Affidavit of the Respondent which listed the accounts in which the Respondent had a beneficial interest during the specified period. The Affidavit omitted reference to the Trova Account into which the 9 bank drafts that the Respondent had obtained from client BC were deposited (see paragraph 15 above).
- On May 12, 2015, Staff sent an email to the Respondent’s counsel requesting an explanation for the omission of the Trova Account which should have been included in the list produced to Staff by the Respondent.
- On May 20, 2015, Staff received a letter from the Respondent’s counsel in which she claimed that in October 2011, the Respondent ceased to have any interest in the Trova Account.
- In light of the fact that the Respondent had continued to be the sole signing officer on the Trova Account after October 2011 and had deposited the nine bank drafts that he had obtained from client BC into the Trova Account after October 2011, the Respondent’s assertion that after October 2011, he ceased to have an interest in the Trova Account is false and misleading.
- From May 26, 2015 to December 2, 2015, Staff and the Respondent’s counsel exchanged correspondence for the purpose of trying to arrange for the production of outstanding documentation relevant to Staff’s investigation and to schedule an interview between Staff and the Respondent.
- On November 9, 2015, the Respondent’s counsel informed Staff that the Respondent and his counsel were available and willing to attend an interview on December 7, 2015.
- By letter dated November 25, 2015, Staff wrote to the Respondent’s counsel to confirm that an interview between Staff and the Respondent had been scheduled to take place on December 7, 2015 as the Respondent had proposed. In the November 25, 2015 letter, Staff stated that pursuant to s. 22.1 of MFDA By-law No. 1, the Respondent was required to attend the scheduled interview with Staff.
- By e-mail dated December 2, 2015, the Respondent’s counsel informed Staff that “the Respondent will not be attending any MFDA interview.”
- By e-mail dated December 3, 2015, Staff repeated its assertion to the Respondent’s counsel that the Respondent was required to attend the interview pursuant to section 22.1 of MFDA By-law No. 1 and warned that failure to attend could result in disciplinary action taken by Staff.
- The Respondent did not attend the interview that was scheduled to take place on December 7, 2015 and failed to provide outstanding documents and information that had been requested by Staff for the purpose of completing its investigation of the Respondent’s conduct.
- As described above, the Respondent has failed to cooperate with Staff’s investigation into his conduct by:
- making statements to Staff which were false or misleading;
- failing to provide documents requested by Staff; and
- failing to attend an interview to give information;
contrary to section 22.1 of MFDA By-law No. 1 and 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 reprimand;
- a fine not exceeding the greater of:
- $5,000,000.00 per offence; and
- an amount equal to three times the profit obtained or loss avoided by such person as a result of committing the violation;
- 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;
- revocation of the authority of such person to conduct securities related business;
- prohibition of the authority of the person to conduct securities related business in any capacity for any period of time;
- 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
A Reply shall be filed by:
- 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
- The Mutual Fund Dealers Association of Canada
- 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
- transmitting one (1) electronic copy of the Reply to the Office of the Corporate Secretary by e-mail at firstname.lastname@example.org.
A Reply may either:
- 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
- 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:
- to serve and file a Reply; or
- 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.
When National Instrument 33-102 came into effect on September 28, 2009, the registration category formerly known as ‘mutual fund salesperson’ was changed to ‘dealing representative’.