MFDA Notice of Hearing

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202109

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

Liliana Marin

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 (the “Hearing Panel”) of the Mutual Fund Dealers Association of Canada (the “MFDA”) on May 14, 2021 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 Liliana Marin (the “Respondent”). Members of the public who would like to listen to the teleconference should contact hearings@mfda.ca to obtain particulars.

DATED: Mar 17, 2021

"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
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 January 2016 and November 2019, the Respondent engaged in personal financial dealings with a client by depositing cheques from the client into a bank account that she could access or control and made payments to the client or to third parties on behalf of the client, thereby engaging in conduct which gave rise to a conflict or potential conflict of interest that the Respondent failed to disclose to the Member or otherwise ensure was addressed by the exercise of responsible business judgment influenced only the best interests of the client, contrary to the Member’s policies and procedures and MFDA Rules 2.1.4, 1.1.2, 2.5.1, and 2.1.1.

Allegation #2: Between January 2016 and November 2016, the Respondent engaged in an outside activity by operating a tax preparation and bookkeeping services business that was not disclosed to or approved by the Member, contrary to the Member’s policies and procedures and MFDA Rules 1.2.1(c) (now MFDA Rule 1.3)[1], 1.1.2, 2.5.1 and 2.1.1.

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. Since 1994, the Respondent has been registered in the securities industry.
  2. From September 1, 2006 to November 4, 2016 in Ontario, and from September 1, 2006 to February 11, 2016 in British Columbia, the Respondent was registered as a dealing representative with FundEX Investments Inc. (“FundEX”), a Member of the MFDA.
  3. Since November 7, 2016 in Ontario, and since April 18, 2019 in British Columbia, the Respondent has been registered as a dealing representative with Monarch Wealth Corporation (“Monarch”), a Member of the MFDA.
  4. At all material times, the Respondent conducted business in the Greater Toronto Area.

Allegation #1 – Personal Financial Dealings with a Client

  1. At all material times, FundEX and Monarch had policies and procedures that required its Approved Persons to immediately disclose to the Member if they became aware of any conflicts or potential conflicts of interest between an Approved Person and a client of the Member.
  2. At all material times, the Respondent and her spouse, MN, operated ML Tax and Financial Services (“MLTF”), a business that offered tax preparation services.
  3. At all material times, the Respondent and MN jointly operated and controlled a bank account that they used for MLTF business (the “MLTF Bank Account”).
  4. Commencing in 2005, client GL became a client of FundEX. The Respondent was responsible for servicing client GL’s registered retirement savings plan (“RRSP”) account at FundEX.
  5. In or about October 2015, the Canada Revenue Agency (the “CRA”) began garnishing money deposited into client GL’s personal bank account to address client GL’s outstanding tax liability.
  6. In or about January 2016, the Respondent and MN agreed to deposit cheques payable to client GL that client GL received from her business into the MLTF Bank Account and to apply the funds in accordance with client GL’s future directions. At this time, the Respondent was aware of client GL’s outstanding tax liability and the CRA’s ongoing collection efforts described in paragraph 9 above.
  7. Starting in January 2016, while the Respondent was registered at FundEX and continuing after she subsequently became registered at Monarch in November 2016, the Respondent or MN accepted from client GL approximately 181 cheques totaling $100,300 that were payable to client GL (the “Cheques”) for deposit into the MLTF Bank Account. Client GL endorsed each of the Cheques that she delivered to the Respondent or MN in order to facilitate the deposit of the Cheques into the MLTF Bank Account. After receiving the Cheques, the Respondent or MN deposited the Cheques into the MLTF Bank Account and then:
    1. made payments to the CRA on client GL’s behalf to gradually pay down client GL’s outstanding tax liability;
    2. remitted cash to client GL as requested by client GL; and
    3. purchased bank drafts on at least two occasions, which were intended to facilitate contributions into client GL’s RRSP account at Monarch.
  8. MLTF charged client GL a fee for services that MLTF provided to client GL including those described above in paragraph 11.
  9. The Respondent failed to disclose to FundEX, and FundEX did not approve the Respondent’s involvement with MLTF, including her role in providing tax preparation services through MLTF, her acceptance of the Cheques received from client GL that were deposited into the MLTF Bank Account, and her role in making payments on behalf of client GL and remitting money to client GL in accordance with instructions received from client GL (as described in paragraph 11 above).
  10. In November 2016, the Respondent transferred her registration to Monarch and became an Approved Person of Monarch. Client GL subsequently transferred her RRSP account from FundEX to Monarch where the Respondent continued to service her account.
  11. The Respondent disclosed to Monarch that she engaged in the provision of tax preparation and bookkeeping services through MLTF and Monarch granted its approval of her participation in that outside activity.
  12. At the time that she disclosed to Monarch and obtained its approval of her outside activity providing tax preparation and bookkeeping services through MLTF, the Respondent did not disclose to Monarch that she was engaging in personal financial dealings with client GL by accepting the Cheques from client GL, depositing them into the MLTF Bank Account, and making payments on client GL’s behalf to CRA and remitting cash to client GL, as described above in paragraph 11.
  13. In February 2019, client GL provided four of the Cheques to the Respondent, which the Respondent deposited into the MLTF Bank Account. The Respondent subsequently issued a $500 bank draft and attempted to facilitate a $500 contribution to client GL’s RRSP account. However, the contribution was not processed by Monarch because Monarch was informed that the CRA had served a requirement to pay on a mutual fund company that issued a mutual fund that client GL held in her RRSP account.
  14. The Respondent’s Branch Manager asked the Respondent about the source of the $500 bank draft. The Respondent admitted that the source of the monies used to issue the bank draft were cheques payable to client GL that were deposited into the MLTF Bank Account. The Branch Manager referred the matter to Monarch’s compliance department and Monarch commenced an investigation.
  15. On or about July 9, 2019, Monarch issued a letter to the Respondent, which provided, among other things, that the Respondent was prohibited from accepting cheques endorsed to her from mutual fund clients.
  16. Between July 9, 2019 and November 2019, in approximately 6 instances, the Respondent or MN continued to accept Cheques from client GL and deposited the Cheques into the MLTF Bank Account.
  17. By virtue of the foregoing, the Respondent engaged in personal financial dealings with a client which gave rise to a conflict or potential conflict of interest that the Respondent failed to dis/close to the Member or otherwise ensure was addressed by the exercise of responsible business judgment influenced only the best interests of the client, contrary to the Member’s policies and procedures and MFDA Rules 2.1.4, 1.2, 2.5.1, and 2.1.1.

Allegation #2 – Unapproved Outside Activity

  1. At all material times, FundEX’s policies and procedures required its Approved Persons to disclose to FundEX and obtain its approval prior to engaging in any outside activities.
  2. As described above at paragraph 13, the Respondent failed to disclose to or obtain approval from FundEX to provide tax preparation and bookkeeping services through MLTF.
  3. By virtue of the foregoing, the Respondent engaged in an outside business activity that was not disclosed to or approved by FundEX, contrary to FundEX’s policies and procedures and MFDA Rules 1.2.1(c) (now MFDA Rule 1.3), 2.1.1, 2.5.1 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
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.

[1] MFDA Rule 1.2.1(c) was amended and renumbered as MFDA Rule 1.3 effective March 17, 2016.

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