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. The Respondent was registered in Ontario as a mutual fund salesperson (now known as a dealing representative) commencing in 2006.^[1]

2. From December 2012 to August 9, 2016 when he resigned, the Respondent was registered in Ontario as a mutual fund salesperson with Shah Financial Planning Inc. (“Shah”), a Member of the MFDA.

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

4. At all material times, the Respondent conducted business in the Mississauga, Ontario area.

Allegation #1 – Falsified Loan Applications

The Respondent’s Applications

5. At all material times, EL was registered as a mutual fund salesperson with Investors Group Financial Services Inc. (“Investors Group”), a Member of the MFDA. EL was authorized by Investors Group to offer Solutions Banking loans and lines of credit to clients and other individuals.

6. In about June 2015, the Respondent contacted EL and requested to meet with her to discuss the financial services that she offered.

7. On July 3, 2015, the Respondent met with EL and applied for a Solutions Banking Registered Retirement Savings Plan (“RRSP”) loan in the amount of $70,000.

8. Based on the information that the Respondent provided to her, EL completed the application form (the “RRSP Loan Application Form”) in respect of the RRSP loan described above. Unbeknownst to EL, the Respondent had provided her with false and misleading information. As a result, the RRSP Loan Application Form:
   • falsely stated that the Respondent held assets at “Hamptons Securities” valued at $462,000; and
   • failed to disclose the Respondent’s outstanding loan from B2B Bank in the amount of approximately $200,000, which the Respondent had obtained in April 2014.

9. The Respondent signed the RRSP Loan Application Form during the meeting on July 3, 2015.

10. In order to substantiate the false information regarding the Respondent’s assets at “Hampton Securities” contained in the RRSP Loan Application Form, the Respondent provided EL with a fabricated account statement purportedly issued by Hampton Securities Ltd. (“Hampton”). The fabricated account statement falsely stated that, on June 30, 2015, the Respondent held assets at Hampton valued at $462,700.48. In fact, the actual value of the assets that the Respondent held at Hampton on June 30, 2015 was only $200.48.

11. On July 15, 2015, Solutions Banking approved the Respondent’s RRSP loan application.

12. EL subsequently advised the Respondent that he had been pre-approved for a Solutions Banking line of credit.

13. On July 30, 2015, the Respondent met with EL and signed a line of credit application form (the “LOC Application Form”) requesting a Solutions Banking line of credit in the amount of $60,000.

14. The LOC Application Form contained the same false and misleading information that was in the RRSP Loan Application Form described above in paragraph 8.

15. On August 12, 2015, Solutions Banking approved the Respondent’s line of credit application.

16. The Respondent obtained at least $58,000 from the line of credit and at least $69,480 from the RRSP loan.

RV and KM’s Applications

17. At all material times, JF was registered as a mutual fund salesperson with Investors Group. JF was authorized by Investors Group to offer Solutions Banking loans and lines of credit to clients and other individuals.

18. In November 2015, the Respondent contacted SS (who was a mutual fund salesperson and JF’s colleague at Investors Group) and requested to meet with her. SS was unable to meet with the Respondent and she provided his contact information to JF. JF subsequently contacted the Respondent.

19. In February 2016, the Respondent and JF met for the first time. During the meeting, the Respondent advised JF that he was a financial consultant who sold investments but did not offer other financial services to his clients.  The Respondent asked JF if he could refer some of his clients to him so that JF could provide them with financial services other than selling investments, and JF agreed.

RV

20. On March 14, 2016, the Respondent and RV (who was registered as a mutual fund salesperson with Shah and was also a client of Shah whose accounts were serviced by the Respondent) met with JF.

21. During the meeting, the Respondent or RV provided JF with an application form (the “RV Application Form”) requesting a line of credit for RV from Solutions Banking in the amount of $60,000. The Respondent had partially completed the RV Application Form prior to the meeting.

22. Unbeknownst to JF, the partially completed RV Application Form contained false information. In particular, it falsely stated that RV held assets at “Hampton Sec” valued at $319,289.65 and assets at “Marquest” valued at $188,115.29.  The Respondent knew, or ought to have known, that this information was false.

23. During the meeting described above, JF completed the remainder of the RV Application Form based on the information that RV provided to him, and RV signed the RV Application Form.

24. In order to substantiate the false information contained in the RV Application Form, RV either provided the following fabricated documents to JF at the direction of the Respondent, or he provided them to the Respondent who then provided them to JF:
    • a fabricated account statement purportedly issued by Hampton, which falsely stated that on December 31, 2015, RV held assets at Hampton valued at $319,289.65 (in fact, RV did not hold any such assets and did not have an account at Hampton); and
    • a fabricated account statement purportedly issued by Shah which falsely stated that, on December 31, 2015, RV held units of the “Marquest Monthly Pay Fund Class A” mutual fund valued at $188,115.29 (in fact, the value of these units on December 31, 2015 was only $121,915.29).

25. The Respondent knew, or ought to have known, that RV’s account statements described above were fabricated and that Solutions Banking would rely on the representations about RV’s net worth that were submitted to support RV’s loan application when determining whether to approve a line of credit for RV.

26. Solutions Banking subsequently approved RV’s line of credit application.

27. RV obtained at least $49,386 from the line of credit.

28. On March 18, 2016, the Respondent and another individual, KM, met with JF. The Respondent advised JF that KM was his client.

29. During the meeting, the Respondent or KM provided JF with an application form (the “KM Application Form”) requesting a line of credit for KM from Solutions Banking in the amount of $60,000. The Respondent had partially completed the KM Application Form prior to the meeting.

30. Unbeknownst to JF, the partially completed KM Application Form contained false information. In particular, it falsely stated that KM held assets at “Qtrade” valued at $704,817.79.  The Respondent knew, or ought to have known, that this information was false.

31. During the meeting described above, JF completed the remainder of the KM Application Form based on the information that KM provided to him, and KM signed the KM Application Form.

32. In order to substantiate the false information contained in the KM Application Form, the Respondent provided JF with a fabricated account statement purportedly issued by “Qtrade Investor” which falsely stated that, on February 29, 2016, KM held assets at “Qtrade Investor” valued at $747,435.75. In fact, KM did not hold any of the assets listed on the fabricated Qtrade account statement and did not have an account at Qtrade Asset Management Inc. (“Qtrade”) or any entities affiliated with Qtrade.

33. The Respondent knew, or ought to have known, that KM’s Qtrade account statement was fabricated and that Solutions Banking would rely on the representations about KM’s net worth (including the fabricated Qtrade account statement) that were submitted to support KM’s loan application when determining whether to approve a line of credit for KM.

34. Solutions Banking subsequently approved KM’s line of credit application.

RD’s Application

35. On March 30, 2016, RD (who was a client of Shah whose accounts were serviced by the Respondent) signed a loan application form (the “RD Application Form”) requesting an RRSP loan from Manulife Bank in the amount of $100,000. The Respondent signed the RD Application Form as RD’s “Representative”.

36. The RD Application Form falsely stated, among other things, that the total value of RD’s assets was $824,157.71.

37. In order to substantiate the information contained in the RD Application Form including the purported total value of RD’s assets, the Respondent submitted a fabricated account statement purportedly issued by Hampton (“RD’s Hampton Account Statement”) which falsely stated that, on December 31, 2015, RD held assets at Hampton valued at $573,781.08. In fact, RD did not hold any such assets and did not have an account at Hampton.

38. The Respondent knew, or ought to have known, that RD’s Hampton Account Statement was fabricated and that Manulife Bank would rely on the representations about RD’s net worth (including the fabricated Hampton Account Statement) that were submitted to support RD’s loan application when determining whether to approve a loan for RD.

39. Manulife Bank subsequently approved RD’s RRSP loan application.

40. RD obtained at least $95,849.45 from the RRSP loan.

41. By engaging in the conduct described above, the Respondent failed to observe high standards of ethics and conduct in the transaction of business, or engaged in conduct which is unbecoming and detrimental to the public interest, contrary to MFDA Rule 2.1.1.

Allegation #2 – Failure to Cooperate With Staff’s Investigations

42. Commencing in December 2016, the Respondent failed to cooperate with Staff’s investigation into the matters described above in Allegation #1. As set out in the table below, Staff has made a number of requests to the Respondent to provide information and to attend an interview with Staff.  The Respondent provided Staff with misleading information and failed to attend an interview.

Date	Communication	Method of Delivery	Result
14/11/2016	Staff sent a letter requesting a written response from the Respondent concerning the matters under review.  Response requested by December 6, 2016.	Registered and regular mail	The Respondent did not respond by December 6, 2016.
7/12/2016	Staff sent a letter requesting a response to Staff’s requests in the November 14, 2016 letter.  Response requested by December 21, 2016.	Registered and regular mail	On December 21, 2016, the Respondent sent an email to Staff to which he attached his written response.  The written response was misleading.  In particular, it falsely stated that the Respondent: did not apply for a $60,000 line of credit from Solutions Banking; did not, at any time, have an account at Hampton; and did not refer RV and KM to JF to apply for Solutions Banking lines of credit.
27/7/2017	Staff sent a letter advising the Respondent that he was required to attend an interview with Staff on September 13, 2017, and was required to confirm by August 8, 2017 that he would attend the interview.	Personal service	Process server was unable to locate the Respondent.
31/7/2017	Staff sent a letter advising the Respondent that he was required to attend an interview with Staff on September 13, 2017, and was required to confirm by August 8, 2017 that he would attend the interview.	Email	The Respondent did not respond and he did not attend the scheduled interview.

43. As a result of the Respondent’s failure to cooperate with Staff’s investigation, Staff has been unable to determine the full nature and extent of his conduct, including the extent of the Respondent’s role in producing fabricated account statements and whether he provided fabricated account statements for individuals other than RV, KM and RD.

CP’s Complaint

44. On July 15, 2016, CP submitted a complaint to Shah alleging that the Respondent had misappropriated money that her fiancé RC had transferred from a locked-in pension to a self-directed registered pension plan based upon the advice of the Respondent, and had facilitated the sale of off-book investments. Neither CP nor RC were clients of Shah.

45. Upon receipt of the complaint, Shah reported CP’s complaint to the MFDA and Staff commenced an investigation into the allegations made by CP^[2].

46. After Shah reported the complaint from CP and RC to the MFDA, Staff became concerned that the Respondent might be engaged in potentially ongoing misconduct involving, among other things, unapproved outside business activities, securities related business that was not conducted through the Member, fraudulent investment schemes, and/or activities that gave rise to conflicts of interest that had not been disclosed to the Member and had not been addressed by the exercise of responsible business judgment influenced only by the best interests of clients.

47. Accordingly, Staff elected to attend at the Respondent’s office without prior notice to the Respondent in order to collect material information relevant to its investigation.

48. Shah advised Staff that on August 4, 2016, the Respondent had changed his office location to an address on Robert Speck Parkway, Mississauga, Ontario (the “Robert Speck Address”).

49. On August 11, 2016, Staff attended at the Robert Speck Address for the purpose of examining the Respondent’s books and records for information and documents relevant to its investigation. The Respondent was not present at the Robert Speck Address when Staff arrived.

50. Later on August 11, 2016, Staff attended at the Respondent’s residential address (the “Residential Address”). The Respondent was present at the Residential Address.

51. During Staff’s attendance at the Residential Address, Staff requested that the Respondent permit Staff to conduct inspections of documents, files, correspondence and other records at the Robert Speck Address and the Residential Address. Staff also requested access to his laptop computer to facilitate the investigation of electronic records relevant to Staff’s investigation. The Respondent refused to cooperate with Staff’s requests for access to documents and other records that Staff requested contrary to s. 22.2 of MFDA By-law No. 1.

52. Between August 22, 2016 and October 21, 2016, Staff made several requests to the Respondent to attend an interview and provide Staff with the following:
    • a list of all bank accounts in which the Respondent had a beneficial interest for the period between June 1, 2013 and August 31, 2016 (the “Account List”); and
    • copies of all account statements in respect of any bank account in which the Respondent had a beneficial interest for the period between June 1, 2013 and August 31, 2016 (the “Account Statements”).

53. On November 8, 2016, the Respondent attended an interview with Staff. At that time, he had not provided Staff with the requested Account List or Account Statements as Staff had previously requested.

54. During the interview, the Respondent gave undertakings (the “Undertakings”) to provide Staff with, among other things, the Account List and Account Statements.

55. On November 11, 2016, Staff sent a letter to the Respondent by registered mail and email requesting that he provide the Undertakings by November 25, 2016.

56. The Respondent did not provide the Undertakings to Staff.

57. On December 1, 2016, the Respondent sent an email to Staff requesting that the deadline for him to provide the Undertakings be extended to December 16, 2016.

58. On December 2, 2016, Staff sent an email to the Respondent agreeing to extend the deadline for him to provide the Undertakings to December 16, 2016.

59. The Respondent failed to provide the Undertakings by December 16, 2016.

60. On December 21, 2016, the Respondent sent an email to Staff purporting to provide his response to the Undertakings. The Respondent’s response was inadequate as it did not include the requested Account List and included account statements for an account that the Respondent appeared to hold at Tangerine Bank which were redacted to such an extent that none of the information that Staff required for purposes of its investigation could be inspected.

61. Between January 6, 2017 and June 8, 2017, Staff made numerous requests to the Respondent to provide the Account List and un-redacted copies of the Tangerine Bank account statements, and also asked the Respondent to schedule and attend a second interview with Staff. These requests were communicated in letters delivered by registered mail and process servers and by emails addressed to email addresses to and from which Staff had communicated with the Respondent in the past.

62. The Respondent sent emails to Staff on May 24 and 30, 2017, but failed to provide the Account List or un-redacted copies of the Tangerine Bank account statements and failed to schedule or attend a second interview with Staff to give information relevant to Staff’s investigation.

63. As a result of the Respondent’s failure to cooperate with Staff’s investigation, Staff has been unable to determine the full nature and extent of his conduct including whether he misappropriated RC’s monies as CP alleged in her complaint.

64. By virtue of the foregoing, the Respondent failed to cooperate with Staff’s investigations into his conduct, contrary to section 22.1 and 22.2 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: Paul Blasiak
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) 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. [1] In September 2009, the registration category mutual fund salesperson was changed to “dealing representative” when National Instrument 31-103 came into force.
2. [2] Upon the receipt of the complaint by CP, the MFDA opened a new investigation into the complaint which was separate and distinct from the ongoing investigation into the Respondent’s conduct relating to the falsification of loan applications.