Notice of Hearing

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

1. From September 28, 2009 to June 5, 2012, the Respondent was registered in British Columbia as a mutual fund salesperson (now known as a dealing representative) with Sun Life Investment Services (Canada) Inc., a Member of the MFDA.

2. From September 29, 2014 to April 27, 2016, the Respondent was registered in British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Quebec, Ontario, and Saskatchewan as a mutual fund salesperson with HSBC Investment Funds (Canada) Inc. (“HSBC”), a Member of the MFDA.

3. HSBC terminated the Respondent’s employment on April 27, 2016 as a result of the conduct described below.

4. The Respondent is not currently registered in the securities industry.

5. At all material times, the Respondent conducted business from an HSBC call center located in the Burnaby, British Columbia area (the “Call Centre”).

Background

6. The Call Centre permitted clients to contact HSBC by telephone and request mutual fund transactions in their accounts. The Respondent’s role at the Call Centre included answering telephone calls from clients and processing mutual fund transactions requested by them.

7. At all material times, HSBC’s policies and procedures required its Approved Persons to use due diligence to learn and accurately record or update client KYC information prior to processing a transaction in the client’s investment account.

8. Prior to proceeding with a transaction requested by a client, the Respondent was required by HSBC to ask the client a series of questions to determine, verify and/or update the client’s KYC information (the “KYC Questions”) and record the KYC information provided by the client on HSBC’s back office system.

9. The Respondent was also required to obtain or verify the KYC information of a client caller before providing investment recommendations or accepting instructions concerning transactions to be processed in the client’s accounts.

10. HSBC records the telephone conversation conducted at the Call Centre, and maintains the recordings as a record of the discussions that occurred and the client information and instructions communicated during the calls.

Allegation #1 – The Respondent Failed To Use Due Diligence To Learn And Accurately Record Client KYC Information

11. Between September 29, 2014 and April 27, 2016, the Respondent prompted, coached or otherwise influenced at least 21 clients who contacted the Call Centre to select certain responses to the KYC Questions in order to make the clients’ existing mutual fund investments, or the transactions recommended by the Respondent, appear to be consistent with the clients’ KYC profile and suitable.

12. At all material times, the Respondent failed to learn and record accurate client KYC information before assessing the suitability of the clients’ existing investment holdings, providing investment recommendations, or accepting investment instructions from the clients.

13. In many instances, the Respondent’s conduct caused the client’s risk tolerance to be overstated.

14. In some instances where the client provided responses to the KYC Questions which indicated the client’s existing investments holdings or the transactions recommended by the Respondent were not consistent with the client’s actual KYC profile, the Respondent instructed or coached the client to select a different response to certain KYC Questions to alter the KYC profile. The Respondent engaged in this conduct so that the client’s existing investment holdings, or the transactions recommended by the Respondent, would appear to be suitable for the client.

15. By engaging in the conduct described above, the Respondent failed to use due diligence to learn and accurately record client KYC information for 21 client accounts in order to ensure that the orders accepted from and the investment recommendations made to such clients were suitable, contrary to MFDA Rules 2.2.1 and 2.1.1.

Allegation #2 – Misleading the Member

16. On April 28, 2015, HSBC conducted a branch audit at the Call Centre. During the audit, HSBC discovered that the Respondent had prompted, coached or otherwise influenced the responses that he had received from two clients of HSBC during the process of gathering KYC information during telephone conversations at the Call Center.

17. On July 8, 2015, the Respondent provided HSBC with a verbal statement during the course of its investigation of his conduct. The Respondent claimed that the two clients about whom he was questioned by HSBC were the only two clients of HSBC that he had prompted, coached or otherwise influenced to provide responses to the KYC questions in order to match their KYC records to their account holdings.

18. On August 24, 2015, the Respondent provided HSBC with a second verbal statement about his conduct. Once again, the Respondent claimed that he had only prompted, coached or otherwise influenced two clients of HSBC to answer KYC questions in a way that would make their existing account holdings and proposed transactions that the clients were calling to request appear to be suitable.

19. Between August 17, 2015 and November 30, 2015, HSBC reviewed the recordings of 97 telephone conversations that the Respondent had with clients during the period October 14, 2014 to May 30, 2015. HSBC identified 19 additional instances in which the Respondent had prompted, coached or otherwise influenced the responses that he received from clients while gathering KYC information in order to make the clients’ existing portfolios and prospective purchases appear to be suitable.

20. As described above, the investigation that HSBC conducted revealed that the Respondent had inappropriately influenced responses to KYC questions that he had obtained from at least 21 clients.

21. By stating to HSBC investigators that he had only prompted, coached or otherwise influenced the responses to KYC questions that he had obtained from two clients, the Respondent made false or misleading statements to HSBC in response to its supervisory investigation into his 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
650 West Georgia Street, Suite 1220
Vancouver, B.C. V6B 4N9
Attention: Christopher Corsetti
Fax: 604-683-6577
Email: [email protected]

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 Director of Regional Councils permits otherwise; or
3. 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.