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 History

1. From January 9, 2003 to December 6, 2012, the Respondent was registered in Ontario as a mutual fund salesperson (now known as a dealing representative)^[1] with Sun Life Financial Investment Services (Canada) Inc. (“Sun Life”), a Member of the MFDA.

2. From December 14, 2012 to November 20, 2015, the Respondent was registered in Ontario as a mutual fund salesperson with Hub Capital Inc. (“Hub”), a Member of the MFDA. Hub terminated the Respondent on November 20, 2015. At the time of termination, the Respondent was also registered as a mutual fund salesperson in Alberta, Saskatchewan and British Columbia.

3. The Respondent has not been registered in the securities industry in any capacity since his termination at Hub. 

4. At all material times, the Respondent conducted business in Owen Sound, Ontario.

Allegation #1: Personal Financial Dealings

5. At all material times, Sun Life’s policies and procedures required Approved Persons to cease activities that give rise to a conflict of interest, and Hub’s policies and procedures expressly prohibited its Approved Persons from borrowing money from clients.

Client MP

6. In August 2006, client MP became a mutual fund client of Sun Life. The Respondent was the mutual fund salesperson responsible for servicing client MP’s account at Sun Life.

7. On December 20, 2010, the Respondent borrowed $10,000 from client MP (the “Loan”). The Loan was documented by a signed promissory note stating:  “I, Jeremy Travis agree to pay [Client MP] $11,500.00 on December 20th 2011, as agreed upon December 20th 2010.”

8. The Respondent did not provide client MP with any collateral in respect of the amount that he borrowed.

9. The Respondent did not inform or otherwise disclose to Sun Life that he had obtained the Loan from client MP.

10. Contrary to the terms of the promissory note, the Respondent did not repay the amount borrowed or the $11,500 that he promised to pay client MP by December 2011.

11. On December 19, 2011, client MP transferred her account with Sun Life to another dealer.

12. As stated above, on December 14, 2012, the Respondent became registered with Hub.

13. On March 6, 2013, client MP opened a non-registered and locked-in retirement account at Hub. The Respondent was assigned responsibility for servicing client MP’s accounts at Hub.

14. The Loan remained outstanding at the time that client MP became a client of Hub.

15. The Respondent did not inform or otherwise disclose to Hub that he had obtained the Loan from client MP or had failed to repay the amounts borrowed from client MP in accordance with the terms of the promissory note.

16. During the period when the Respondent was an Approved Person of Hub, client MP purchased two return airline tickets for flights between Toronto, Ontario and Edmonton, Alberta for the Respondent at a cost of approximately $2,200. The Respondent did not repay client MP for the costs of those flights.

17. In or around October 2015, the Respondent made a payment to client MP in the amount of $3,200 to repay a portion of the amount that he had borrowed.

18. The Respondent has not repaid or otherwise accounted for the balance of the amounts that he borrowed from client MP.

19. By virtue of the foregoing conduct, the Respondent engaged in personal financial dealings with a client which gave rise to a conflict or potential conflict of interest between the Respondent and the client that the Respondent failed to disclose to the Member or address by the exercise of responsible business judgment influenced only by the best interests of the client, contrary to MFDA Rules 2.1.1 and 2.1.4.

Allegation #2: Misleading the Member

20. On March 19, 2015, the Respondent was interviewed by compliance staff from Hub during a scheduled audit of his branch that was conducted by the Member in compliance with MFDA Policy No. 5. During the interview, the Respondent was asked: “Have you ever loaned money to a client, borrowed money from a client or do you have any other personal financial dealings (i.e. investment clubs, joint ventures) with clients?” The Respondent falsely answered “No” to the auditor’s question.

21. On November 2, 2015, Hub received an anonymous telephone call from an individual who reported that she was a client of Hub and the mutual fund salesperson handling her accounts (who she refused to identify) had borrowed funds from her and that the loan had not been repaid.

22. Hub identified the Respondent as the mutual fund salesperson who serviced the anonymous caller’s accounts.

23. On November 3, 2015, the branch manager responsible for supervision of the Respondent (the “BM”) contacted the Respondent by telephone to tell the Respondent that the Member was investigating an allegation that an Approved Person had borrowed money from a client. The BM asked the Respondent if he had borrowed money from a client.  The Respondent initially falsely answered “I don’t know” and subsequently falsely answered “No.

24. On November 5, 2015, client MP spoke with senior members of the compliance department at Hub and reported that the Respondent had borrowed money from her which had not been repaid.

25. On November 9, 2015, the BM called the Respondent and told him that client MP had reported the Loan to the Member. In response, the Respondent admitted that he had borrowed monies from client MP and was unable to repay the Loan.

26. As stated above, on November 20, 2015, Hub terminated the Respondent.

27. By virtue of the foregoing, the Respondent misled the Member by falsely denying that he had borrowed money from a client, thereby interfering with the ability of the Member to supervise the Respondent’s activities and engaging in conduct that is unbecoming and detrimental to the public interest, contrary to MFDA Rules 1.1.2, 2.5.1 and 2.1.1.

Allegation #3: Failure to Cooperate

28. Between July 12, 2016 and October 12, 2016, Staff sent correspondence to the Respondent on 6 occasions requesting that he provide banking documentation including bank statements, cheques and deposit records relevant to Staff’s investigation of his conduct. Staff intended to obtain copies of the banking documentation prior to conducting an interview with the Respondent.

29. The Respondent failed to provide Staff with most of the documentation that was requested.

30. On October 13, 2016, the Respondent attended an interview with Staff. He did not bring copies of the requested banking documentation to the interview. 

31. During the interview, the Respondent provided undertakings to Staff promising to provide the outstanding banking documentation to Staff within 10 business days of the interview.

32. Following the interview, between October 13, 2016 and November 7, 2016, Staff sent correspondence to the Respondent on three occasions requesting that the Respondent fulfill his undertakings to produce, among other things, the banking documentation that Staff had requested.

33. The Respondent failed to fulfill his undertakings and has not provided any of the banking documentation that Staff requested.

34. By virtue of the forgoing, commencing in July 2016, the Respondent failed to cooperate with Staff’s investigation into his conduct by failing to produce banking documentation requested by Staff that is relevant to matters under investigation, contrary to section 22.1 of MFDA By-law No. 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: H. C. Clement Wai
Fax: (416) 361-9073
Email: cwai@mfda.ca

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 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] In September 2009, when National Instrument 31-103 came into effect, the registration category ‘mutual fund salesperson’ was changed to ‘dealing representative – mutual fund dealer’.