Notice of Hearing

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

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 December 21, 2004 to January 18, 2017, the Respondent was registered in Ontario and Alberta as a mutual fund salesperson (now known as a dealing representative) with Global Maxfin Investments Inc. (the “Member”), a Member of the MFDA. He was also designated as a branch manager with the Member from September 28, 2009 to January 19, 2017.
2. At all material times, the Respondent conducted business in Brampton, Ontario.

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

Allegation #1 – The Respondent Collected, Maintained or Used Pre-Signed and Photocopied Account Forms

4. At all material times, the Member’s policies and procedures prohibited its Approved Persons, including the Respondent, from obtaining or using pre-signed account forms.

5. In December 2014, the Member conducted an audit of the Respondent’s trading activities during which it identified, among other deficiencies, that commencing in at least February 2008, the Respondent had collected, maintained or used 152 pre-signed and photocopied client account forms for the accounts of 28 clients.

6. In February 2015, the Member sent letters to all clients whose accounts were serviced by the Respondent asking whether or not those clients had been asked to sign incomplete or blank account forms by the Respondent. In response, 6 additional clients informed the Member that they had signed incomplete or blank documents at the Respondent’s request.

7. By collecting, maintaining or using at least 158 blank pre-signed and photocopied client account forms in respect of 34 clients, the Respondent failed to observe high standards of ethics and conduct in the transaction of business and engaged in conduct unbecoming an Approved Person and detrimental to the public interest, contrary to MFDA Rule 2.1.1.

Allegation #2 – Discretionary Trading

8. Commencing in at least 2011, the Respondent developed and implemented what he described as a “market rotation” investment strategy for clients whereby the Respondent conducted frequent trading activity by processing switches in client accounts in an attempt to time the market.

9. From at least December 2011 to January 2015, the Respondent implemented his “market rotation” investment strategy in respect of at least 22 clients and in at least 75 client accounts.

10. The Respondent processed switches in the clients’ accounts as described above using either limited trading authorizations or blank or photocopied pre-signed transaction forms provided to him by the clients.

11. The Respondent failed to obtain specific instructions from the clients concerning which securities he was going to switch, the amount of each switch and the timing of the switches before processing the switches, and thereby engaged in discretionary trading contrary to MFDA Rules 2.3.1 and 2.1.1.

12. In addition, the Respondent’s conduct gave rise to a conflict of interest or potential conflict of interest with the interest of clients, which 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 clients, contrary to MFDA Rule 2.1.4.

13. The “market rotation” strategy resulted in a significant economic benefit to the Respondent, who received switch fees from the transactions. The Respondent’s above-described trading activities earned him at least $232,909 in sales commissions, including at least $96,906 in switch fees.

Allegation #3 – Failure to Maintain Evidence of Client Trade Instructions

14. At all material times, the Member’s policies and procedures required its Approved Persons, including the Respondent, when processing trades, including switches, using limited trading authorizations, to:
    1. document all trade instructions received from clients; and
    2. maintain in client files evidence of trades instructions received from clients including, among other things, notes, emails, particulars of the mutual funds to be traded such as date, time, manner in which the instructions were provided to the Approved Persons, and confirmation of discussions relating to any fees or charges to be paid.

15. In the event that the Respondent did not engage in discretionary trading as set out in paragraphs 10 and 11 above, the Respondent processed switches or other transactions in the clients’ accounts as described above without recording or maintaining adequate evidence of any trade instructions provided by clients, contrary to the Member’s policies and procedures, and MFDA Rules 5.1(b), 2.5, 1.1.2, and 2.1.1.

Allegation #4 – The Respondent Mislead MFDA Sales Compliance Staff

16. In July 2012, MFDA Staff conducted an examination of the Respondent’s branch as part of a scheduled sales compliance examination of the Member.

17. On July 24, 2012, during an interview of the Respondent conducted by MFDA Staff, the Respondent falsely represented to MFDA Staff that he:
    1. had not obtained and did not maintain blank pre-signed and photocopied client account forms in client accounts; and
    2. did not charge switch fees to clients as part of his trading activities.

18. By engaging in the conduct described above, the Respondent misled MFDA Staff during the course of a sales compliance examination of the Respondent’s branch, 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; and
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: Francis Roy
Email: froy@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) 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.