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: Between 2012 and 2015, the Respondent engaged in securities related business that was not carried on for the account of the Member and through its facilities by recommending, selling, facilitating the sale of, and/or making referrals in respect of the sale of investments to approximately 24 clients and 3 individuals totaling approximately $2,016,660, contrary to the Member’s policies and procedures and MFDA Rules 1.1.1, 2.1.1, 2.4.2, 2.5.1 and 1.1.2 and the requirements of sections 13.7 and 13.8 of National Instrument 31-103.

Allegation #2: The Respondent had and continued in another gainful occupation, which was not disclosed to and approved by the Member, when:

1. between 2012 and 2014, he recommended, sold, facilitated the sale of, and/or made referrals in respect of the sale of investments outside the Member to approximately 24 clients and 3 individuals totaling approximately $2,016,660.00;
2. between 2011 and 2015, he was an officer and director of a company, and a partner of a company, which the Respondent operated to accept referral fees outside the Member; and
3. in 2015, he failed to disclose that he had transferred his mortgage license to a new mortgage broker company,

contrary to the Member’s policies and procedures and MFDA Rules 1.2.1(c) (now MFDA Rule 1.3), 2.1.1, 2.4.2, 2.5.1 and 1.1.2, and the requirements of sections 13.7 and 13.8 of National Instrument 31-103.

Allegation #3: Between 2012 and 2015, the Respondent had unapproved referral arrangements with three other Approved Persons who referred clients to invest outside the Member through the Respondent in exchange for referral fees paid directly or indirectly by the Respondent, contrary to the Member’s policies and procedures, MFDA Rules 2.1.1, 2.4.2, 2.5.1 and 1.1.2, and the requirements of sections 13.7 and 13.8 of National Instrument 31-103.

Allegation #4: On November 15, 2015, the Respondent misled the Member during an investigation by falsely stating that he had not referred any clients to invest in a real estate and development company, contrary to MFDA Rule 2.1.1.

Allegations #5: Commencing on or about April 1, 2016, the Respondent failed to cooperate with the MFDA during the course of an investigation into his conduct, contrary to section 22.1 of MFDA By-law No. 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. The Respondent was registered in the mutual fund industry commencing in about March 2001.

2. The Respondent was registered as a mutual fund salesperson (now known as dealing representative) in Ontario from June 20, 2006 to January 20, 2016, and in British Columbia from June 25, 2007 to January 20, 2016, with Investia Financial Services Inc. (“Investia”), a Member of the MFDA.

3. Between November 21, 2006 and January 20, 2016, Investia designated the Respondent as a branch manager.

4. The Respondent resigned from Investia on January 20, 2016, and is not currently registered in the securities industry in any capacity.

5. At all material times, the Respondent was also a licensed insurance agent and mortgage broker.

6. At all material times, the Respondent conducted business in the Richmond Hill, Ontario area.

Misconduct

7. As described in greater detail below, between 2012 and 2015, the Respondent had referral arrangements with Titan Equity Group Ltd. (“Titan”), Fortress Real Capital (“Fortress”) and Tier 1 Mortgages (“Tier 1”), which were real estate and development companies (the “Companies”) that offered investments. The investments included syndicated or pooled mortgages, promissory notes and/or preference shares offered for sale by Titan, and syndicated mortgage investments offered by Fortress and Tier 1 (collectively, the “Investments”). The Respondent referred clients of Investia to invest in the Investments outside the accounts and facilities of Investia without Investia’s knowledge or approval. In addition, other Approved Persons at Investia referred clients to the Respondent to invest in the Investments through the Respondent. The Respondent obtained referral fees from the Companies, and also paid fees to the Approved Persons for their referrals of clients to him.

8. Between 2012 and 2014, the Respondent recommended, sold and/or facilitated the sale of the Investments to at least 24 Investia clients and 3 individuals totaling approximately $2,016,660, as described in the table below:

	Investor	Amount of Investment	Investment
Client	MM	$25,000	Titan (10703 Bathurst Street property)
Client	WCHS	$50,000	Titan (10703 Bathurst Street property)
Client	MN	$260,000	Titan (Britannia Block property)
Client	MC	$50,000	Titan (Britannia Block property)
Client	EH	$32,000	Titan (Britannia Block property)
Client	ONL	$17,000	Titan (Britannia Block property)
Client	SM	$60,007	Titan (Pine Valley property)
Client	CVL	$20,010	Titan (Pine Valley property)
Client	CVL	$25,000	Titan (Pine Valley property)
Client	MC	$21,600	Titan (Pine Valley property)
Client	HKFL	$21,600	Titan (Pine Valley property)
Client	EH	$27,000	Titan (Pine Valley property)
Client	MC	$60,849	Titan (Pine Valley property)
Client	MN	$121,699	Titan (Pine Valley property)
Client	SM	$81,781	Titan (Pine Valley property)
Client	MM	$19,400	Titan (Pine Valley property)
Client	MM	$13,400	Titan (Pine Valley property)
Client	WCHS	$32,800	Titan (Pine Valley property)
Client	KYAS (referred to the Respondent by Approved Person, YHSC)	$25,000	Titan (10703 Bathurst Street property)
Client	HC (referred to the Respondent by Approved Person, GWY)	$25,000	Fortress (Brant Park property)
Client	HC (referred to the Respondent by Approved Person, GWY)	$25,000	Titan (Britannia Block property)
Client	EC (referred to the Respondent by Approved Person, GWY)	$25,000	Titan (Britannia Block property)
Client	YSG (referred to the Respondent by Approved Person, GWY)	$42,500	Titan (Britannia Block property)
Client	MHL (referred to the Respondent by Approved Person, YHSC)	$35,000	Titan (Britannia Block property)
Client	CNW (referred to the Respondent by Approved Person, YHSC)	$25,000	Titan (Britannia Block property)
Client	MOMW (referred to the Respondent by Approved Person, YHSC)	$33,500	Titan (Britannia Block property)
Client	KCW (referred to the Respondent by Approved Person, YHSC)	$26,800	Titan (Britannia Block property)
Client	CNW (referred to the Respondent by Approved Person, YHSC)	$30,000	Titan (Pine Valley property)
Client	KCW (referred to the Respondent by Approved Person, YHSC)	$25,000	Titan (Pine Valley property)
Client	MHL (referred to the Respondent by Approved Person, YHSC)	$29,800	Titan (Pine Valley property)
Client	KCW (referred to the Respondent by Approved Person, YHSC)	$16,000	Titan (Pine Valley property)
Client	AC (referred to the Respondent by Approved Person, GWY)	$25,000	Fortress (Port Place property)
Client	JH (referred to the Respondent by Approved Person, GWY)	$25,000	Titan (Vista Bahia property)
Client	AC (referred to the Respondent by Approved Person, GWY)	$50,000	Titan (Villa del Sol property)
Client	JF (referred to the Respondent by Approved Person, GWY)	$25,000	Fortress (Brant Park property)
Client	JH (referred to the Respondent by Approved Person, GWY)	$25,000	Tier 1 (Silver Seven property)
Client	CH (referred to the Respondent by Approved Person, GWY)	$25,000	Tier 1 (Memory Care property)
Client	BN (referred to the Respondent by Approved Person, GWY)	$30,000	Fortress (Helen Avenue property)
Client	EU (referred to the Respondent by Approved Person, GWY)	$25,000	Tier 1 (Memory Care property)
Client	JW (referred to the Respondent by Approved Person, GWY)	$25,000	Fortress (6th & 10th property)
Approved Person	Approved Person, GWY	$84,000	Fortress (SoBa property)
Approved Person	Approved Person, GWY	$100,000	Tier 1 (Silver Seven property)
Approved Person	Approved Person, GWY	$25,000	Titan (Britannia Block property)
Approved Person	Approved Person, GWY	$50,000	Titan (Villa del Sol property)
Approved Person	Approved Person, YHSC	$49,910	Titan (Pine Valley property)
Approved Persons	Aegis Investment Partners (“Aegis”) (general partnership between Approved Person, YHSC and the Respondent)	$100,004	Titan (Pine Valley property)
Approved Person	Approved Person, PKCP	$50,000	Titan (Britannia Block property)
TOTAL	24 Clients 3 Individuals (Approved Persons)	$2,016,660

9. The Respondent did not disclose to Investia that he was recommending, selling, facilitating the sale of and/or making referrals in respect of the sale of the Investments to clients.
10. Investia did not approve the Investments for sale to its clients by its Approved Persons, including the Respondent.

11. None of the purchases of the Investments by clients described above in paragraph 8 were carried on for the account of Investia or through its facilities.

12. The Respondent had referral arrangements with the Companies for referring clients to purchase the Investments, and received a referral fee for doing so.

13. Between 2012 and 2014, the Respondent failed to disclose to, or obtain approval from, Investia to have any referral arrangements with the Companies.

14. Titan made the fee payments to two entities the Respondent owned or operated, Kirin Capital Corporation (“Kirin”) and Access Real Capital (“Access”). While registered with the Investia, the Respondent was an officer and director of Kirin, and a partner in a general partnership for which Access was the business name.

15. Between 2013 and 2015, the Respondent received at least $67,645 in referral fees.

16. The Respondent never disclosed to Investia his involvement with Kirin and Access, nor did he disclose that he accepted through these companies any payments for his activities recommending, selling, facilitating the sale of, and/or making referrals in respect of the Investments to clients.

17. Investia was not a party to any referral arrangements with the Companies for the sale of Investments to its clients as described above at paragraph 8.

18. In addition, between 2012 and 2015, the Respondent had an arrangement with GWU, YHSC and PKCP, who were Approved Persons of Investia, whereby these Approved Persons referred clients to the Respondent to invest in the Investments through the Respondent.

19. The Respondent paid GWU, YHSC and PKCP a referral fee of 5% of the total amount invested in Titan by an investor that was referred to the Respondent by GWU, YHSC or PKCP.

20. Between August 20, 2013 and July 1, 2015, the three Approved Persons received referral fees totaling approximately $31,988, as described below:

 

Date	Approved Person	Referral Fee
August 20, 2013	GWU	$2,500
November 11, 2013	GWU	$2,500
December 16, 2013	GWU	$4,625
February 1, 2014	GWU	$1,250
December 16, 2013	YHSC	$6,076
October 22, 2013	YHSC	$9,000
February 1, 2014	YHSC	$2,345
July 1, 2015	YHSC	$1,192
April 11, 2014	PKCP	$2,500
October 22, 2013	Aegis	$5,495
February 1, 2014	Aegis	$1,350
April 11, 2014	Aegis	$4,500
TOTAL		$43,333

 

21. None of the referral fees that the Respondent received from the Companies, nor any of the payments the Respondent made to Approved Persons GWU, YHSC, and PKCP, were disclosed to Investia by the Respondent or flowed through the books and records of Investia.

Allegation #1 – Securities Related Business and Unapproved Referral Arrangements

22. At all material times, Investia’s policies and procedures required that its Approved Persons:
    1. only offer investment products to its clients that it had approved for sale, and required all products be sold through Investia; and.
    2. only participate in referral arrangements that it had approved, and that all fees or commissions must flow through the books and records of Investia.

23. As described above at paragraphs 8 and 15, between 2012 and 2014, the Respondent engaged in securities related business that was not carried on for the account of the Member and through its facilities by recommending, selling, facilitating the sale, and/or making referrals in respect of the Investments to approximately 24 clients and 3 individuals totaling approximately $2,016,660.00, contrary to the Member’s policies and procedures, MFDA Rules 1.1.1, 2.1.1, 2.4.2, 2.5.1 and 1.1.2, and the requirements of sections 13.7 and 13.8 of National Instrument 31-103.

Allegation #2 – Undisclosed and Unapproved Outside Business Activity

24. At all material times, Investia’s policies and procedures required its Approved Persons to disclose, and obtain approval in order to engage in any outside business activities.

25. To the extent any of the Respondent’s activities with respect to the sale of the Investments to 24 clients and 3 individuals as described above at paragraph 8 do not constitute securities related business, then the Respondent had and continued in another gainful occupation that was not disclosed to and approved by the Member by recommending, selling, facilitating the sale of and/or making referrals in respect of the sale of the Investments.

26. In addition, the Respondent did not:
    1. disclose to or obtain the approval of Investia to be an officer and director of Kirin, or a partner in Access, as described above at paragraphs 14 to 16; and
    2. disclose to Investia that Access and Kirin accepted referral fees, as described above at paragraphs 14 to 16.

27. Further, in 2015, the Respondent failed to disclose to Investia that he had transferred his mortgage license from his mortgage broker, Matrex Financial to another mortgage broker, Lend at Ease Mortgage Brokers (“Lend”).

28. By virtue of the foregoing, the Respondent had and continued in another gainful occupation, which was not disclosed to and approved by the Member, when:
    1. between 2012 and 2014, he recommended, sold, facilitated the sale of, and/or made referrals in respect of the sale of the Investments to approximately 24 clients and 3 individuals totaling approximately $2,016,660.00;
    2. between 2011 and 2015, he was an officer and director of Kirin, and a partner of Access, which the Respondent operated to accept referral fees outside the Member; and
    3. in 2015, he transferred his mortgage license to a new mortgage broker company,

contrary to the Member’s policies and procedures and MFDA Rules 1.2.1(c) (now MFDA Rule 1.3), 2.1.1, 2.4.2, 2.5.1 and 1.1.2, and the requirements of sections 13.7 and 13.8 of National Instrument 31-103.

Allegation #3 – Unapproved Referral Arrangements with other Approved Persons

29. At all material times, Investia’s policies and procedures required that its Approved Persons only participate in referral arrangements that it had approved, and that all fees or commissions must flow through the books and records of Investia.

30. As described above at paragraphs 18 to 21, between 2012 and 2015, the Respondent had unapproved referral arrangements with Approved Persons GWU, YHSC and PKCP who referred clients to invest in the Investments through the Respondent in exchange for referral fees paid directly or indirectly by the Respondent, contrary to the Member’s policies and procedures, MFDA Rules 2.4.2, 1.1.2 and 2.1.1, and the requirements of sections 13.7 and 13.8 of National Instrument 31-103.

Allegation #4 – Misleading the Member

31. On November 15, 2015, Investia interviewed the Respondent as part of its investigation into the Respondent’s conduct described above. During the course of the interview, the Respondent misled Investia when he stated that he did not process any Titan transactions with clients and that he only conducted business with Approved Person GWU and her clients for the Titan syndicated mortgage.

32. The Respondent’s statement to Investia was false and misleading as:

• Between 2012 and 2014, the Respondent recommended, sold, facilitated the sale of and/or made referrals in respect of the sale of the Investments to at least 24 clients and 3 individuals totaling approximately $2,016,660.00; and
• Between 2012 and 2015, the Respondent had referral arrangements with Titan and three Approved Persons, GWU, YHSC and PKCP.

33. By virtue of the foregoing, on November 15, 2015, the Respondent misled Investia during an investigation by falsely stating that he had not referred any clients to invest in a real estate and development company, contrary to MFDA Rule 2.1.1.

Allegation #5 – Failed to Cooperate with the MFDA Investigation

34. Commencing on April 1, 2016, the Respondent has failed to cooperate with Staff’s investigation into the matters described above. As set out in the chart below, Staff has made a number of attempts to contact the Respondent to obtain bank records relating to Kirin, and to arrange his attendance at an interview with Staff:

 

Date	Communications	Method of delivery	Result
April 1, 2016	Staff sent a letter requesting the bank records of Kirin from the Respondent prior to April 15, 2016.	Registered mail	No response from the Respondent.
April 25, 2016	Staff sent a letter requesting bank records from the Respondent by April 20, 2016.	Email and regular mail	On April 26, 2016, the Respondent stated that he had no control over Kirin which was owned by a friend, and his friend would not provide any bank records of Kirin.
April 26, 2016	Staff requested that the Respondent request the bank records from his friend again and if his friend refused, send Staff an email setting out his attempts to obtain the bank records and the reasons why he was unable to do so.	Telephone
May 2, 2016	Staff sent a letter requesting that the Respondent provide no later than May 8, 2016, the bank records; or a detailed statement explaining why he was unable to comply with Staff’s requests; copies of cheques payable to the Respondent from Kirin; and a copy of the income tax form provided to Kirin.	Email and regular mail	The Respondent stated that he communicated with Kirin and they told him that they have no dealings with mutual funds or the MFDA, and will be unable to share any banking information as these are confidential. The Respondent provided copies of the T4As that were issued to him.
May 4, 2016	Staff requested that the Respondent provide no later than May 8, 2016, a detailed statement explaining why he was unable to comply with Staff’s requests; copies of cheques payable to the Respondent from Kirin; and a copy of the income tax from provided to Kirin.	Email	On May 5, 2016, the Respondent stated that he was unable to obtain the bank statements and cheques from Kirin; and has requested copies of the cheques from his bank. On May 9, 2016, the Respondent stated that his bank was unable to provide the cheques.
May 9, 2016	Staff requested that the Respondent provide a copy of his email to his bank and its response; and a written explanation of his bank’s record retention policy.	Email	On May 10, 2016, the Respondent provided a copy of his bank’s response.
May 25, 2016	Staff advised the Respondent that Staff had contacted his bank and was advised that cheque images are available.  Staff requested that the Respondent provide prior to May 30, 2016 copies of his bank statements and prior to June 6, 2016, copies of cheques payable to the Respondent from Kirin.	Email	On May 25, 2016, the Respondent advised Staff that he wanted to consult with his lawyer.
May 25, 2016	Staff extended the deadline to provide the bank statements to June 6, 2016.	Email	On June 3, 2016, the Respondent advised that he had decided to decline further participation in the MFDA’s investigation.
June 7, 2016	Staff sent a letter detailing previous requests for the bank records; and requested that the Respondent provide copies of the bank records no later than June 14, 2016.	Email	No response from the Respondent.
August 3, 2016	Staff sent a letter requesting that the Respondent provide copies of the bank records no later than August 10, 2016.	Email	No response from the Response.
August 12, 2016	Staff sent a letter requesting that the Respondent provide copies of the bank records immediately; and attend an interview with Staff on September 28, 2016.	Personal service on the Respondent	Personal service on the Respondent on August 15, 2016.   No response to Staff’s letter, and the Respondent did not attend the scheduled interview.

 

35. Although the Respondent provided some information to Staff, he did not provide Staff with the bank records requested, and has failed or refused to attend for an interview requested by Staff.

36. Due to the Respondent’s failure to cooperate with the MFDA’s investigation, Staff has not been able to determine the full nature and extent of the Respondent’s conduct in relation to Allegations #1, #2, and 3, and the extent to which he may have engaged in similar conduct with other clients and individuals.

37. By virtue of the foregoing, the Respondent has failed to cooperate with an MFDA investigation into his conduct, 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: Michelle Pong
Fax: (416) 361-9073
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.