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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

Re: David Len Carleton Richard

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”) on August 11, 2020 at 9:30 a.m. (Eastern), or as soon thereafter as the appearance can be held, concerning a disciplinary proceeding commenced by the MFDA against David Len Carleton Richard (“Respondent”). Members of the public who would like to listen to the teleconference should contact [email protected] to obtain particulars.

  • 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: [email protected]

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

Allegation #1: Between 2015 and 2018, the Respondent misappropriated or failed to account for approximately $98,550 that he received from two clients, thereby failing to deal fairly, honestly and in good faith with the clients, failing to observe high standards of ethics and conduct in the transaction of business, and engaging in conduct which is unbecoming and detrimental to the public interest, contrary to MFDA Rule 2.1.1.

Allegation #2: In about 2017, the Respondent produced a fabricated account statement which concealed that he had misappropriated or failed to invest a client’s monies, thereby failing to observe high standards of ethics and conduct in the transaction of business, and engaging in conduct which is unbecoming and detrimental to the public interest, contrary to MFDA Rule 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. Commencing in 2007, the Respondent was registered in the mutual fund industry.
  2. From July 2013 to April 2018, the Respondent was registered in Ontario as a dealing representative (formerly known as a mutual fund salesperson) with Assante Financial Management Ltd. (the “Member”), a Member of the MFDA.
  3. On April 18, 2018, 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 conducted business in the Thunder Bay, Ontario area.
  6. At all material times, the Respondent was also licensed as an insurance agent. The Respondent sold insurance products through a company that he owned and operated known as VAST Benefits.

Staff’s Attempts to Contact the Respondent

  1. During the course of Staff’s investigation into the Respondent’s conduct, Staff attempted to contact the Respondent by process server, registered mail, regular mail, email and telephone in order to obtain his statement with regard to the matters described below. Despite numerous attempts, Staff was unable to contact or locate the Respondent.

Misconduct

Client AS
  1. At all material times, the Respondent was the Approved Person at the Member responsible for servicing the accounts of client AS.
  2. Client AS was a vulnerable client. In particular, client AS was a senior, was an unsophisticated investor and suffered from anxiety.
  3. At all material times, the Respondent was in a relationship with client AS’s daughter, MO.
  4. In 2015, the Respondent recommended that client AS invest in an unspecified investment. The Respondent represented to client AS that the unspecified investment would generate high yields, and that she should trust him with regard to the investment.
  5. Between July 2015 and May 2016, the Respondent solicited and accepted 18 payments from client AS totaling approximately $62,200 (the “AS Payments”) purportedly for the purpose of making investments for client AS in the unspecified investment.
  6. Approximately $62,143.30 of the AS Payments were funded by redemptions that the Respondent had processed in client AS’s accounts at the Member. Client AS incurred withholding taxes in the total amount of approximately $904.81 as a result of the redemptions.
  7. Client AS delivered the AS Payments to the Respondent by providing him with cheques or bank drafts payable to “Dave Richard/VAST”, or by endorsing cheques to the Respondent that had been payable to her which comprised the proceeds of the redemptions described above.
  8. The AS Payments are summarized in the table below:

AS Payment No.

Method of Payment

Date on Cheque or Bank Draft

Amount

1

Endorsed Cheque

July 30, 2015

$4,000

2

Endorsed Cheque

August 12, 2015

$2,000

3

Endorsed Cheque

August 14, 2015

$1,500

4

Endorsed Cheque

August 27, 2015

$4,000

5

Bank Draft

September 2015

(day of month unknown)

$5,000

6

Cheque

September 28, 2015

$2,000

7

Cheque

October 8, 2015

$5,000

8

Cheque

October 30, 2015

$4,000

9

Cheque

December 1, 2015

$3,500

10

Cheque

Undated

$3,000

11

Cheque

January 8, 2016

$5,000

12

Cheque

January 29, 2016

$4,000

13

Cheque

February 16, 2016

$2,000

14

Cheque

March 1, 2016

$3,500

15

Cheque

March 17, 2016

$2,500

16

Cheque

April 8, 2016

$3,000

17

Cheque

Undated

$4,500

18

Cheque

May 11, 2016

$3,700

TOTAL

$62,200

  1. After he received the AS Payments from client AS, the Respondent did not use the AS Payments to make any investments for client AS. Instead, the Respondent deposited all or substantially all of the AS Payments into his personal bank accounts. 
  2. To date, the Respondent has not repaid or otherwise accounted to client AS for the AS Payments.
  3. As described above, the Respondent misappropriated or failed to account for approximately $62,200 that he solicited from client AS for investment on her behalf.
The Fabricated Investment Statement
  1. In approximately 2017, client AS’s daughter MO became aware of one of the AS Payments, and she questioned the Respondent about how the money that had been provided to the Respondent by AS had been invested.
  2. In response to MO’s query, the Respondent falsely represented to MO that he had invested the AS Payments for client AS in a product offered by “Fidelity”.
  3. The Respondent produced and provided a fabricated account statement (the “Fabricated Statement”) to MO. The Fabricated Statement falsely indicated that client AS held accounts at “Fidelity Investments” with a total value of $115,310.
  4. In fact, the Respondent did not apply any of the AS Payments to the purchase of investments for client AS in products offered by “Fidelity” or any other investment products.
  5. The Fabricated Statement concealed that the Respondent had misappropriated client AS’s monies or had not invested client AS’s monies as he represented.
  6. Shortly thereafter, the Respondent ceased communicating with client AS and MO.
  7. In 2018, client AS transferred the investments that she held at the Member to another financial institution. In order to facilitate the transfer, client AS provided the other financial institution with a copy of the Fabricated Statement which client AS understood was a record of the investments that the Respondent had purchased for her with the proceeds from the AS Payments.
  8. The other financial institution subsequently informed client AS that the Fabricated Statement was not genuine.
  9. In April 2018, client AS submitted a complaint to the Member concerning the conduct of the Respondent described above.
  10. After receiving and investigating client AS’s complaint, the Member terminated the Respondent’s registration and paid compensation to client AS.
Client AL
  1. At all material times, the Respondent was the Approved Person at the Member responsible for servicing the accounts of AL.
  2. In 2016, the Respondent recommended to client AL that he invest in shares of “BlackBerry”. The Respondent represented to client AL that BlackBerry shares would be a financially lucrative investment, and that the value of BlackBerry shares was increasing each year.
  3. As an Approved Person of an MFDA Member, the Respondent was not permitted to recommend, offer or sell shares of BlackBerry Limited.
  4. Between September 2016 and February 2018, the Respondent solicited and accepted 12 payments from client AL totaling approximately $36,350 (the “AL Payments”) purportedly for the purpose of making investments for client AL in BlackBerry shares.
  5. Approximately $33,698.31 of the AL Payments were funded by redemptions that the Respondent had processed from client AL’s account at the Member. Client AL incurred withholding taxes in the total amount of approximately $5,133.14 as a result of the redemptions.
  6. Client AL delivered the AL Payments to the Respondent by providing him with money orders or bank drafts payable to “Vast/David Richard”, “Vast/Dave Richard” or “Dave Richard/Vast”.
  7. The AL Payments are summarized in the table below:

AL Payment No.

Method of Payment

Date on Money Order or Bank Draft

Amount

1

Bank Draft

September 13, 2016

$10,000

2

Money Order

November 7, 2016

$4,000

3

Money Order

December 13, 2016

$3,000

4

Money Order

March 9, 2017

$2,000

5

Money Order

June 15, 2017

$3,000

6

Money Order

July 18, 2017

$3,000

7

Money Order

October 3, 2017

$2,250

8

Money Order

December 1, 2017

$3,000

9

Money Order

December 20, 2017

$800

10

Money Order

January 26, 2018

$2,300

11

Money Order

February 5, 2018

$500

12

Money Order

February 5, 2018

$2,500

TOTAL

$36,350

  1. The Respondent did not provide client AL with any written documentation evidencing client AL’s purported investment in BlackBerry shares.
  2. After receiving the AL Payments from client AL, the Respondent did not use the AL Payments to purchase any investments for client AL. Instead, the Respondent deposited all or substantially all of the AL Payments into his personal bank accounts.
  3. To date, the Respondent has not repaid client AL or otherwise accounted to AL for the AL Payments.
  4. In 2018, client AL informed the Respondent that he intended to redeem his BlackBerry shares and also requested that the Respondent provide him with evidence documenting his investments. Shortly thereafter, the Respondent ceased communicating with client AL.
  5. In about July 2018, client AL submitted a complaint to the Member concerning the conduct of the Respondent described above.
  6. As described above, the Respondent misappropriated or failed to account for approximately $36,350 that he solicited from client AL for investment on his behalf.
  7. After receiving and investigating client AL’s complaint, the Member paid compensation to client AL.

Allegation #1 – Misappropriation or Failure to Account

  1. As described above, the Respondent misappropriated or failed to account for a total of approximately $98,550 that he received from clients AS and AL.
  2. The Respondent thereby failed to deal fairly, honestly and in good faith with the clients, failed to observe high standards of ethics and conduct in the transaction of business, and engaged in conduct which is unbecoming and detrimental to the public interest, contrary to MFDA Rule 2.1.1.

Allegation #2 – Fabricated Account Statement

  1. As described above, the Respondent produced and provided client AS’s daughter MO with a fabricated account statement purporting to record investments that had been purchased for client AS.
  2. The Respondent’s conduct concealed that he had misappropriated or failed to invest the monies he had solicited from client AS.
  3. The Respondent thereby failed to observe high standards of ethics and conduct in the transaction of business, and engaged in conduct which is unbecoming and detrimental to the public interest, contrary to MFDA Rule 2.1.1.

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; 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: Paul Blasiak
Email: [email protected]

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 [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.

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