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

Allegation #1: In November 2007, the Respondent recommended and facilitated unsecured loans from client JS to a third party borrower in exchange for a fee from the borrower, thereby engaging in outside business activities which were not disclosed to and approved by the Member, and/or conduct giving rise to a 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 the policies and procedures of the Member and MFDA Rules 2.1.1, 2.1.4, 1.2.1(d)[1], 2.5.1, and 1.1.2.

Allegation #2: Between December 2010 and March 2015, the Respondent failed to report a complaint by client JS to the Member, and engaged in complaint handling including compensating client JS without the prior written consent of the Member, contrary to the policies and procedures of the Member, and MFDA Rules 2.1.1, 2.1.4, 1.2.2(b), 2.11 and 1.1.2 and MFDA Policy Nos. 3 and 6.

Allegation #3: In May 2015, seven blank pre-signed account forms in respect of four clients were found in the Respondent’s client files, which were obtained and maintained by the Respondent, contrary to MFDA Rule 2.1.1.

[1]Since November 2007 when the alleged conduct took place, MFDA Rules have been amended and renumbered.  The conduct regulated by MFDA Rule 1.2.1(d) in November 2007 is now addressed in MFDA Rule 1.3 concerning outside activities.

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 at least 1994.
2. Between May 15, 2000 and September 25, 2015, the Respondent was registered in Ontario as a mutual fund salesperson / dealing representative[1] with IPC Investment Corporation (“IPC”), a Member of the MFDA. The Respondent was also a licensed insurance agent and mortgage broker.
3. The Respondent resigned from IPC on September 25, 2015.
4. At all material times, the Respondent conducted business in Midland, Ontario.
5. The Respondent is not currently registered in the securities industry in any capacity. 

Allegation #1 – The Respondent Arranged for Client JS to Loan Monies to PH

6. At all material times, client JS was a client of IPC whose accounts were serviced by the Respondent.
7. In November 2007, the Respondent agreed to assist PH to obtain financing to complete a renovation project that PH had been hired to perform by DN (the “Renovation Project”). PH was the principal of 1674509 Ontario Inc., operating as Millennium Homes, which purported to be in the business of renovating homes. PH was not a mutual fund client of IPC.
8. At all material times, IPC required Approved Persons to disclose and obtain approval of any outside business activities.
9. In November 2007, the Respondent recommended to client JS that she borrow $45,000 from her Home Equity Line of Credit (“HELOC”) and to lend the money to PH for the Renovation Project. The Respondent assured client JS that PH could be relied upon to repay her money upon completion of the Renovation Project.
10. PH agreed to pay the Respondent a $1,000 fee for his role in arranging the loan with client JS.
11. Based upon the Respondent’s advice, client JS agreed to loan $45,000 to PH.
12. On or about November 16, 2007, client JS withdrew $25,000 from her HELOC and loaned the monies to PH. At that time, client JS and PH signed a promissory note which stated, among other things, that the loan would be repaid within 45 days and client JS would receive interest of 15%, compounded monthly, on any outstanding balance after January 1, 2008. Client JS also received a letter of direction signed by PH and DN, which confirmed that DN had hired PH to perform the Renovation Project and directed DN to pay $25,000 directly to JS (instead of paying PH) upon completion of the Renovation Project.
13. On or about November 23, 2007, client JS withdrew $20,000 from her HELOC and loaned the monies to PH. At that time, client JS and PH signed a second promissory note which stated, among other things, that the loan would be repaid within 60 days and client JS would receive interest of 15%, compounded monthly, on any outstanding balance after 60 days.
14. The Respondent signed the two promissory notes and the letter of direction as “witness”.
15. PH did not use the money that he borrowed from client JS to complete the Renovation Project for DN. Instead, PH used the money that he had borrowed from client JS to start another business.
16. PH did not repay the loans within the time periods set out in the promissory notes. Instead, PH began making monthly payments to client JS. Client JS received monthly payments from PH until 2010 when a cheque from PH was returned to client JS by the bank due to non-sufficient funds (“NSF”) in PH’s bank account. Client JS told the Respondent about the NSF cheque from PH and the Respondent advised client JS that he would speak to PH about it. A short time later, in or about December 2010, client JS received a cash payment from PH.
17. On or about January 27, 2011, a second cheque from PH was returned to client JS by the bank due to NSF. Client JS informed the Respondent of the second NSF cheque. The Respondent made several telephone calls to PH concerning the amounts owed to client JS.
18. Client JS received several small additional payments from PH, none of which exceeded $200. Thereafter, all payments from PH ceased. Client JS spoke to the Respondent again about the amounts owed to her and the Respondent contacted PH to try to address the amounts owed.
19. On October 28, 2011, PH was charged with 11 counts of fraud over $5,000 under the Criminal Code, R.S.C., 1985, c. C-46. In March 2012, PH was charged with 21 additional counts of fraud over $5,000. In August 2015, PH was sentenced to two years imprisonment for fraud.
20. Between August 2013 and November 2014, client JS received several additional payments of approximately $150 each from PH.
21. As described in greater detail below, in about March 2015, the Respondent personally paid approximately $400 to client JS in respect of the monies owed to her for the Renovation Project.
22. To date, client JS is owed at least $45,000 plus interest in respect of the loans to PH.
23. The Respondent did not disclose his activities (including the compensation he received) with respect to facilitating the loans from client JS to PH, and the Member did not approve these activities.
24. On or about June 24, 2008, the Respondent failed to disclose to the Member in his response to the Member’s annual compliance questionnaire that he received compensation from an outside business activity.
25. By virtue of the foregoing, the Respondent recommended and facilitated unsecured loans from client JS to a third party borrower in exchange for a fee from the borrower, thereby engaging in outside business activities which were not disclosed to and approved by the Member, and/or conduct giving rise to a 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 the policies and procedures of the Member and MFDA Rules 2.1.1, 2.1.4, 1.2.1(d), 2.5.1, and 1.1.2.

Allegation #2 – Failure to Comply with Reporting Requirements

26. Between about December 2010 and March 2015, client JS repeatedly complained to the Respondent about the amounts owed for the monies she loaned in respect of the Renovation Project. The Respondent was required to report these complaints to the Member in accordance with the requirements set out in MFDA Policies Nos. 3 and 6.
27. On several occasions, client JS advised the Respondent that she wanted to approach the police about PH. The Respondent advised client JS that if the police became involved, PH would be inclined to leave the jurisdiction and client JS would be unlikely to recover the monies she had loaned in respect of the Renovation Project.
28. The Respondent advised client JS that if she went to the police the publicity would negatively impact his reputation and career.
29. Client JS advised the Respondent that she intended to speak with her lawyer about PH and the monies owed to her. In response, the Respondent expressed concerns to client JS about the cost of retaining counsel and whether this would be the best approach for getting her money back.
30. In March 2015, client JS advised the Respondent that she would not pursue formal police charges against PH if she received two monthly payments of $200 each in cash going forward.
31. The Respondent subsequently transferred two payments of $200 each from his personal bank account to client JS. The Respondent thereby engaged in complaint handling without the prior written consent of the Member.
32. At all material times, the Respondent discouraged client JS from reporting her complaints to IPC or other authorities which might result in IPC becoming aware of the Respondent’s conduct in respect of the Renovation Project.
33. The Respondent’s treatment of the complaints by client JS gave rise to a conflict of interest which the Respondent failed to address by the exercise of responsible business judgment influenced only by the best interests of the client.
34. By virtue of the foregoing, the Respondent failed to report a complaint by client JS to the Member, and engaged in complaint handling including compensating client JS without the prior written consent of the Member, contrary to the policies and procedures of the Member, and MFDA Rules 2.1.1, 2.1.4, 1.2.2(b), 2.11 and 1.1.2 and MFDA Policy Nos. 3 and 6.

Allegation #3 – Blank Signed Account Forms 

35. In July 2009, IPC conducted a review of the Respondent’s branch office and found that the Respondent maintained blank pre-signed account forms in client files. IPC sent a warning letter to the Respondent dated August 14, 2009 advising the Respondent that he was not permitted to obtain pre-signed accounts forms and that any future violations of this nature would result in the impositions of fines or his termination.
36. In about May 2015, IPC conducted a review of the Respondent’s client files in response to a complaint from client JS with regards to the events described above. During this review, IPC identified that the Respondent had obtained and maintained seven blank pre-signed account forms in respect of four clients. The accounts forms consisted of order entry forms, which the Respondent could use to place trades in client accounts. 
37. By virtue of the foregoing, the Respondent engaged in conduct 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:

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: Michelle Pong

            Fax: 416-361-9073

            Email: mpong@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

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:

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.

[1] On September 28, 2009 when National Instrument 31-103 came into force, the Respondent’s registration category was changed from mutual fund salesperson to dealing representative.