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: On or about November 13, 2013, the Respondent performed eight (8) trades in the accounts of clients RB and CO without the knowledge, instructions or approval of the clients, thereby engaging in discretionary trading, 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. Since May, 1994, the Respondent has been registered in Ontario as a mutual fund salesperson (now known as a dealing representative) with Investors Group Financial Services Inc. (“Investors Group”), a Member of the MFDA.

2. At all material times, the Respondent conducted business in Newmarket, Ontario.

Allegation #1 – Discretionary Trading 

3. At all material times, clients RB and CO (“Clients”) were clients of Investors Group and the Respondent was the mutual fund salesperson assigned to service their accounts.

4. On or about November 13, 2013, the Clients met with the Respondent. During the meeting, the Clients asked the Respondent to let them know at their next meeting which was scheduled for November 22, 2013, whether or not they could redeem $150,000 of mutual funds without incurring deferred sales charges (“DSC”)[1].

5. Immediately following the November 13, 2013 meeting, the Respondent processed 8 trades totaling $43,225.55, which consisted of switches of matured fund units (i.e., units where the DSC schedule had expired) held by the Clients to units of a new fund, as described below:

6. The Respondent processed the trades using a Limited Trade Authorization provided by the Clients.

7. Prior to processing the trades described above in paragraph 5, the Respondent did not obtain instructions from the Clients with respect to:
   1. the amounts of the trades;
   2. which funds that would be redeemed;
   3. which funds would be purchased; and/or
   4. the timing of the trades.

8. On or about November 22, 2013, the Clients had a telephone conversation with the Respondent. During the telephone conversation, the Clients learned that the Respondent had processed the trades described above. The Clients subsequently complained to Investors Group regarding the Respondent’s conduct.

9. By engaging in the conduct described above, the Respondent engaged in discretionary trading, 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: Michelle Pong

            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.

[1] A deferred sales charge is a back-end fee that is charged to a mutual fund investor if he/she redeems his/her investment prior to the expiry of the deferred sales charge schedule (generally, ranging from 5 to 7 years in length). The deferred sales charge declines over the course of the deferred sales charge schedule.