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MFDA Notice of Hearing

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HomeCurrent Hearings201967 - Rohit Jaswal › NOH201967

201967

IN THE MATTER OF A DISCIPLINARY HEARING PURSUANT TO SECTIONS 20 AND 24 OF BY-LAW NO. 1 OF THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA

Rohit Jaswal

NOTICE OF HEARING

NOTICE is hereby given that a first appearance will take place by teleconference before a hearing panel of the Pacific Regional Council (“Hearing Panel”) of the Mutual Fund Dealers Association of Canada (“MFDA”) in the hearing room at the MFDA offices, 650 West Georgia Street, Suite 1220, Vancouver, British Columbia on January 7, 2020 at 9:00 a.m. (Pacific), or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against Rohit Jaswal (the “Respondent”).

DATED: Nov 12, 2019

"Michelle Pong"

Michelle Pong

Director, Regional Councils

Mutual Fund Dealers Association of Canada
121 King St. West, Suite 1000
Toronto, ON M5H 3T9
Telephone: 416-945-5134
Fax: 416-361-9781
E-mail: corporatesecretary@mfda.ca



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

Allegation #1: In or around July 2017, the Respondent processed two unauthorized trades in accounts of client PS, contrary to the Member’s policies and procedures, and MFDA Rules 2.3.1(b), 2.1.1, 2.5.1, 2.10, and 1.1.2.

Allegation #2: Between June and July 2017, the Respondent processed three trades in three client accounts without maintaining adequate records of client trade instructions, contrary to the policies and procedures of the Member, and MFDA Rules 5.1(b), 2.5.1, 2.10, 1.1.2, and 2.1.1.

Allegation #3: Between May and June 2017, the Respondent obtained, possessed, and used to process transactions, seven pre-signed account forms in respect of four clients, contrary to the Member’s policies and procedures and MFDA Rules 2.1.1, 2.5.1, 2.10, and 1.1.2.

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 has been registered in British Columbia as a dealing representative since October 2013.
  2. From November 17, 2015 to September 5, 2017, the Respondent was registered in British Columbia as a dealing representative with Credential Asset Management Inc. (the “Member”), a Member of the MFDA.
  3. On July 28, 2017 when the Member became aware of some of the conduct described below, the Member suspended the Respondent pending the completion of an internal investigation of his conduct. On September 5, 2017 when it completed its investigation, the Member terminated the Respondent.
  4. The Respondent is not currently registered in the securities industry in any capacity.
  5. At all material times, the Respondent carried on business in the Surrey, British Columbia area from a credit union branch affiliated with the Member (the “Branch”).

Allegation #1 – Unauthorized Trading

  1. At all material times, the Member’s policies and procedures prohibited its Approved Persons from engaging in unauthorized or discretionary trading.
  2. At all material times, client PS was a client of the Member who maintained mutual fund accounts at the Branch, including an individual Registered Retirement Savings Plan (“RRSP”) and spousal Registered Retirement Savings Plan (“SRRSP”).
  3. On one occasion in spring of 2017, client PS attended at the Branch. Client PS was informed that the Approved Person who had provided investment advice to her in the past was on leave. Client PS was introduced to the Respondent but the Respondent told client PS that he was busy and did not have time to discuss her mutual fund accounts that day. The Respondent asked her to write down her name and sign her name on a blank piece of paper. The Respondent told her that he would contact her later to schedule a meeting to discuss her mutual fund accounts.
  4. The Respondent did not contact client PS after she left the Branch and client PS did not have further communication with the Respondent.
  5. In or about July 2017, the Respondent submitted for processing two switches (one in her RRSP and one in her SRRSP) into a socially responsible investment (“SRI”) mutual fund that was being promoted at the Branch, as described below:

Account

Fund

Transaction

Transaction Date

Transaction Amount

RRSP

IA Clarington Canadian Conservative Equity Fund A

Switch Out

17-Jul-17

 $     (14,912.53)

RRSP

IA Clarington Inhance Canadian Equity SRI Class A

Switch In

17-Jul-17

 $       14,912.53

SDSRSP

IA Clarington Canadian Conservative Equity Fund A

Switch Out

17-Jul-17

 $       (2,794.04)

SDSRSP

IA Clarington Inhance Canadian Equity SRI Class A

Switch In

17-Jul-17

 $         2,794.04

  1. In order to process the switches in the accounts, the Respondent falsified client PS’s signature on two Investment Instruction forms and two Pre-Trade Disclosure forms.
  2. The Respondent was eligible to earn additional compensation as a result of the switches into the SRI mutual fund.
  3. On or before July 14, 2017 when the Respondent submitted the switches for processing, client PS was not contacted by the Respondent with respect to the trades and did not authorize them.
  4. When client PS received notification that trades had been processed in her accounts, she attended at the Branch to ask how these transactions had been processed, and informed the Branch that she had not been contacted about the transactions and had not authorized them.
  5. The Member commenced an investigation into the Respondent’s conduct and subsequently reversed the unauthorized switches.
  6. By engaging in the conduct described above, the Respondent processed two unauthorized trades in client PS’s account, thereby engaging in conduct contrary to MFDA Rules 2.3.1(b) and 2.1.1. The Respondent’s conduct was also contrary to the Member’s policies and procedures, and MFDA Rules 5.1, 2.10 and 1.1.2.

Allegation #2 – Failure to Maintain Evidence of Trade Authorizations

  1. At all material times, the Member’s policies and procedures required its Approved Persons to obtain and maintain evidence of client authorization before processing a trade order in a client’s account. Specifically, the Member’s policies and procedures require that Approved Persons obtain a client signature on an Investment Instruction form, or a signed and dated Letter of Direction, before processing a trade in a client’s account. If there is a limited trading authorization (“LTA”) on file for the client or if the client account is a nominee name account, trades can be processed based upon telephone instructions obtained from a client but if an Approved Person relies upon telephone instructions, the Approved Person is required to prepare and maintain detailed notes of any instructions that were received by telephone.
  2. Between June and July 2017, the Respondent submitted three trades in client accounts for clients KK, PB and RG in order to purchase or switch into SRI mutual funds, as described below:

Client

Account

Fund

Transaction

Transaction Date

Transaction Amount

KK

SD OPEN

BMO Guar Lifestg Plus 2017 Adv S DC

Sell

23-Jun-17

 $     (16,144.24)

IA Clarington Inhance Conservative SRI Port T6

Buy

28-Jun-17

 $       16,144.24

PB

RESP-F

IA Clarington Canadian Balanced Fund Series A

Switch Out

4-Jul-17

 $     (33,797.38)

IA Clarington Inhance Balanced SRI Portfolio A

Switch In

4-Jul-17

 $       33,762.74

RG

RRSP

BMO Guar Lifestg Plus 2017 Adv S DC

Sell

23-Jun-17

 $     (11,333.12)

RRSP

IA Clarington Inhance Conservative SRI Port T6

Buy

26-Jun-17

 $       11,333.12

  1. The Respondent was eligible to earn additional compensation as a result of the trades into the SRI mutual funds.
  2. The Respondent did not obtain signed Investment Instruction forms or Letters of Direction from the clients to evidence authorization to process these trades.
  3. There were no LTAs on record for any of the clients.
  4. The Respondent did not create and maintain any notes or other evidence of trading instructions if he received telephone instructions from any of the clients concerning these trades.
  5. By engaging in the conduct described above, the Respondent processed three trades in three client accounts without maintaining adequate records of client trade instructions, contrary to the Member’s policies and procedures, and MFDA Rules 5.1(b), 2.5.1, 2.10, 1.1.2, and 2.1.1.

Allegation #3 – Pre-Signed Account Forms

  1. At all material times, the Member’s policies and procedures prohibited its Approved Persons from holding, obtaining, or using pre-signed account forms.
  2. Between May and June 2017, the Respondent obtained, possessed, and used to process transactions, 7 pre-signed account forms in respect of four clients.
  3. The pre-signed account forms consisted of Investment Instruction forms, Pre-Trade Disclosure forms and Know-Your-Client Update forms.
  4. By engaging in the conduct described above, the Respondent failed to observe high standards of ethics and conduct in the transaction of business, and engaged in conduct unbecoming an Approved Person, contrary to MFDA Rule 2.1.1. The Respondent’s conduct was also contrary to the Member’s policies and procedures, and MFDA Rules 5.1, 2.10 and 1.1.2.

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
Prairie Regional Office
Suite 850, 800 – 6th Ave SW
Calgary, AB T2P 3G3
Attention: Sakeb Nazim
Email: snazim@mfda.ca

A Reply shall be filed by:

  1. providing four 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 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.

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