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MFDA Notice of Hearing

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HomeCompleted Hearings201980 - Gurmeet Bagga › NOH201980

This is a Third Party Document.

201980

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

Gurmeet Singh Bagga

NOTICE OF HEARING

NOTICE is hereby given that a first appearance will take place by teleconference before a hearing panel of the Central Regional Council (“Hearing Panel”) of the Mutual Fund Dealers Association of Canada (“MFDA”) in the hearing room at the MFDA offices, 121 King Street West, Suite 1000, Toronto, Ontario on March 10, 2020 at 10:00 a.m. (Eastern), or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against Gurmeet Singh Bagga (“Respondent”).

DATED: Dec 19, 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: Between about April 2014 and June 23, 2014, the Respondent engaged in securities related business that was not carried on for the account of the Member or conducted through its facilities by recommending, selling, or facilitating the sale of syndicated mortgage investments, contrary to the Member’s policies and procedures, and MFDA Rules 1.1.1, 2.1.1, 2.5.1, or 1.1.2.

Allegation #2: Between about April 2014 and June 23, 2014, the Respondent engaged in an outside business activity that was not approved by the Member by working as a mortgage agent for a mortgage brokerage, contrary to the Member’s policies and procedures, and MFDA Rules 1.2.1(c) (now MFDA Rule 1.3), 2.1.1, 2.5.1, or 1.1.2.

Allegation #3: Between about April 2014 and June 23, 2014, the Respondent participated in an unapproved referral arrangement by making referrals in respect of the sale of syndicated mortgage investments to at least 4 individuals, contrary to the Member’s policies and procedures, MFDA Rules 2.4.2, 2.1.1, 2.5.1, or 1.1.2, or the requirements of sections 13.7 to 13.10 of National Instrument 31-103.

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 became registered in Ontario as a mutual fund sales person (now known as a dealing representative) in 2008.
  2. From September 17, 2012 to June 23, 2014, the Respondent was registered in Ontario as a dealing representative with Sterling Mutuals Inc. (“Sterling Mutuals”), 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 carried on business in the Brampton, Ontario area.

Background

  1. On April 12, 2014, while registered with Sterling Mutuals, the Respondent completed his certification as a mortgage agent.
  2. On or about April 24, 2014, the Respondent became licensed with the Financial Services Commission of Ontario (“FSCO”) as a mortgage agent and, without obtaining the prior approval of Sterling Mutuals, began working as a mortgage agent with T1CM Principal Secured Mortgages Inc. (“T1PSM”), a company licensed with FSCO as a mortgage broker.
  3. T1PSM had a referral arrangement with, among others, Terrasan 327 Royal York Rd. Limited (“Terrasan”). Terrasan’s principal asset was a residential condominium development in Toronto, which was marketed to investors as “On the Go Mimico”.
  4. On or about April 28, 2014, the Respondent recommended, sold, facilitated the sale, or made a referral in respect of the sale of a syndicated mortgage investment associated with On the Go Mimico to individual MM, as described in paragraph 26 below.
  5. On April 29, 2014, the Respondent advised Sterling Mutuals that he had completed his certification as a mortgage agent. He did not disclose to Sterling Mutuals his involvement with T1PSM or syndicated mortgage investments.
  6. On the same date, Sterling Mutuals wrote to the Respondent and requested that he provide information in order for Sterling Mutuals to assess whether to approve his outside activity, including the name and address of the mortgage broker he would be doing business through, his title, and a description of his duties.
  7. On or about May 6, 2014, the Respondent recommended, sold, facilitated the sale, or made a referral in respect of the sale of a syndicated mortgage investment associated with On the Go Mimico to individual GB, as described in paragraph 26 below.
  8. On or about the same date, the Respondent recommended, sold, facilitated the sale, or made a referral in respect of the sale of a syndicated mortgage investment associated with On the Go Mimico to individuals NS and SS, as described in paragraph 26 below.
  9. The Respondent did not reply to Sterling Mutuals’ request for information concerning his outside business activities until June 4, 2014. Prior to responding to Sterling Mutuals, the Respondent continued to act as a mortgage agent for T1SPM and continued to engage in activities pertaining to the sale of syndicated mortgages without its approval.
  10. Starting in or about June 2014, while registered with Sterling Mutuals, the Respondent received fees from T1PSM in respect of his syndicated mortgage activities described above totaling approximately $12,800.
  11. On June 4, 2014, the Respondent replied to Sterling Mutuals’ email of April 29, 2014. Among other things, he advised for the first time that he would be doing business through T1PSM, his title was mortgage agent, and his duties included “prospect clients for mortgages, syndicated mortgages, loans and related products”.
  12. On June 6, 2014, Sterling Mutuals advised the Respondent that it could not approve his activity as a mortgage agent unless the Respondent confirmed that he was aware of the prohibition against conducting securities related activities outside of the dealer, including offering syndicated mortgages, and confirmed that he would not refer, sell, or advise in syndicated mortgages or any other securities.
  13. On June 10, 2014, the Respondent advised Sterling Mutuals that he was resigning as a dealing representative.
  14. On June 20, 2014, the Respondent’s registration with Sterling Mutual was terminated.
  15. Prior to the completion of the On the Go Mimico developments, individuals MM, GB, NS, and SS stopped receiving distributions from the syndicated mortgage investment.
  16. On February 24, 2017, pursuant to an order of the Ontario Superior Court of Justice, a receiver was appointed with respect to Terrasan’s assets, including the On the Go Mimico project.
  17. On September 5, 2018, the Superintendent of Financial Services imposed an administrative penalty on T1PSM and revoked its mortgage broker license.
  18. The syndicated mortgage investments described above were not approved by Sterling Mutuals for sale by its Approved Persons, including the Respondent. In addition, none of the syndicated mortgage investments described above were carried on for the account of Sterling Mutuals or through its facilities
  19. The Respondent failed to disclose to, and obtain approval from, Sterling Mutuals his employment with T1PSM as a mortgage agent or acts to sell the syndicated mortgage investments, prior to engaging in the activities described above.
  20. Sterling Mutuals did not approve of, and was not a party to, any referral arrangement for the sale of syndicated mortgage investments to investors.

Allegation #1 – Securities Related Business

  1. At all material times, Sterling Mutuals’ policies and procedures prohibited its Approved Persons from engaging in the sale of securities through any entity other than Sterling Mutuals.
  2. The Respondent recommended, sold, or facilitated the sale of syndicated mortgage investments associated with On the Go Mimico, totaling approximately $128,000 to at least 4 individuals, described in the table below:

Date

Individual

Mutual Fund Client

Amount of Investment

Investment

Fee Received

April 28, 2014

MM

No

$73,000

On the Go Mimico

$7,300

May 6, 2014

GB

No

$30,000

On the Go Mimico

$3,000

May 6, 2014

NS and SS

No

$25,000

On the Go Mimico

$2,500

Total

  

$128,000

 

$12,800

  1. The Respondent engaged in one or more of the following activities in relation to the investments by the Investors in the On the Go Mimico syndicated mortgage:
    1. introduced the individuals to the opportunity to invest in the syndicated mortgage;
    2. provided the individuals with promotional materials about the syndicated mortgage;
    3. discussed the terms and features of investing in the syndicated mortgage with the individuals;
    4. organized and attended meetings between the individuals and other representatives of T1PSM to provide further information about the syndicated mortgage; or
    5. assisted the individuals to complete paperwork for investments in the syndicated mortgage.
  2. As stated above, the Respondent received fees from T1PSM in respect of his syndicated mortgage activities totaling approximately $12,800.
  3. The syndicated mortgage investments described above were not approved by Sterling Mutuals for sale by its Approved Persons.
  4. None of the syndicated mortgage investments described above were carried on for the account of Sterling Mutuals or through its facilities
  5. By virtue of the foregoing, 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, or facilitating the sale of syndicated mortgage investments, contrary to the Member’s policies and procedures, and MFDA Rules 1.1.1, 2.1.1, 2.5.1, or 1.1.2

Allegation #2 – Unapproved Outside Business Activity

  1. At all material times, Sterling Mutuals’ policies and procedures required its Approved Persons to disclose to it and obtain approval to engage in any outside business activities.
  2. The Respondent failed to disclose to, and obtain approval from, Sterling Mutuals his employment or involvement with T1PSM as a mortgage agent or his involvement in the sale of syndicated mortgage investments.
  3. By virtue of the foregoing, the Respondent engaged in conduct contrary to the Member’s policies and procedures, and MFDA Rules 1.2.1(c) (now MFDA Rule 1.3), 2.1.1, 2.5.1, or 1.1.2.

Allegation #3 – Unapproved Referral Arrangements

  1. At all material times, Sterling Mutuals’ policies and procedures required that its Approved Persons only participate in referral arrangements that it had approved, and all fees or commissions must flow through the books and records of Sterling Mutuals.
  2. Sterling Mutuals did not approve of, and was not a party to, any referral arrangement for the sale of syndicated mortgage investments to investors.
  3. In the event that the Respondent referred investors in respect of the sale of the syndicated mortgages, then the Respondent referred at least 4 individuals to a company that sold mortgage investment products and received at least $12,800 in referral fees for doing so, thereby participating in a referral arrangement to which the Member was not a party and which did not otherwise comply with sections 13.7 to 13.10 of National Instrument 31-103, and MFDA Rules 2.1.1 and 2.4.2.

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
121 King Street West
Suite 1000
Toronto, ON M5H 3T9
Attention: David Barbaree
Email: dbarbaree@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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