MFDA Notice of Hearing

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202054

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

King Kwong Clement Chow

NOTICE OF HEARING

NOTICE is hereby given that a first appearance will take place by teleconference before a hearing panel of the Prairie Regional Council (“Hearing Panel”) of the Mutual Fund Dealers Association of Canada (“MFDA”) on December 8, 2020 at 9:30 a.m. (Mountain), or as soon thereafter as the appearance can be held, concerning a disciplinary proceeding commenced by the MFDA against King Kwong Clement Chow (“Respondent”). Members of the public who would like to listen to the teleconference should contact hearings@mfda.ca to obtain particulars.

DATED: Oct 7, 2020

"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: Commencing in November 2018, the Respondent failed to cooperate with an investigation by MFDA Staff into his conduct, contrary to section 22.1 of MFDA By-Law No. 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. Between June 2012 and December 2017, and between March 2018 and June 2018, the Respondent was registered as a dealing representative with WFG Securities Inc. (the “Member”), a Member of the MFDA.
  2. On June 28, 2018, the Member terminated the Respondent, and he is not currently registered in the securities industry in any capacity.
  3. At all material times, the Respondent conducted business in the Edmonton, Alberta area.

Background

  1. In October 2018, MFDA Staff (“Staff”) commenced an investigation into the suitability of the Respondent’s leveraging recommendations to clients, and use by the Respondent, without obtaining the Member’s prior written approval, of leverage risk acknowledgement letters (“Leverage Risk Acknowledgement Letters”), wherein the clients acknowledged that they were aware of and were prepared to accept the risks associated with borrowing to invest. The Leverage Risk Acknowledgment Letters did not specify what risks were explained to or understood by the clients.
  2. In particular, the Respondent recommended leveraging to the following 4 clients and had them sign Leverage Risk Acknowledgement Letters at the time that the Respondent facilitated the opening of leveraged accounts for the four clients:

Client

Date of Leverage Risk Acknowledgement Letters

Amount of leverage in client’s accounts

SL

July 15, 2013

$90,000

KH

October 24, 2013

$135,000

XF

August 26, 2013

$90,000

BP

November 8, 2013

$75,000

Allegation #1 - Failure to Cooperate

  1. On November 19, 2018, Staff sent a letter by regular and registered mail to the Respondent requesting that he provide a written statement by December 7, 2018, describing the circumstances and reasons for having clients sign the Leverage Risk Acknowledgement Letters, and an explanation of how he determined in the case of each client that the recommendation to borrow to invest was suitable. On November 22, 2018, the Respondent received and signed for the November 19, 2018 letter which was sent by registered mail. The Respondent did not respond to Staff’s November 19, 2018 letter or otherwise provide the information that was requested in the letter.
  2. On December 17, 2018, Staff sent a letter by regular and registered mail to the Respondent stating that if he did not provide a written response by January 7, 2019, Staff would consider commencing disciplinary proceedings to address his failure to co-operate with the MFDA investigation into his conduct. The December 17, 2018 letter was sent by registered mail and was delivered on December 21, 2018. The Respondent did not respond to the December 17, 2018 letter.
  3. On May 10, 2019, Staff sent a letter to the Respondent requesting that he contact Staff to schedule an interview by May 19, 2019. Staff sent the May 10, 2019 letter by regular and registered mail. On May 15, 2019, the Respondent received and signed for the copy of the May 10, 2019 letter that had been sent by registered mail. The Respondent did not respond to the May 10, 2019 letter from Staff.
  4. On July 3, 2019, Staff sent another letter to the Respondent requesting that he contact Staff by July 31, 2019 to schedule an interview in August 2019. The letter also warned the Respondent that if he did not contact Staff by July 31, 2019, then an interview would be scheduled on August 15, 2019. The letter could not be delivered to the Respondent by personal service despite multiple attempts because the Respondent would not agree to accept delivery of the letter from the process server who contacted him to arrange to deliver the July 3, 2019 letter from Staff.
  5. On October 21, 2019, Staff sent a letter by registered and regular mail to the Respondent informing him of Staff’s previous attempts to schedule an interview with him and that in light of the Respondent’s failure to respond to Staff’s request for an interview, Staff would seek authorization to commence enforcement proceedings against the Respondent to address his failure to co-operate with the Staff’s investigation. On October 23, 2019, the copy of the October 21, 2019 letter that was sent by registered mail was delivered to the Respondent’s residence. The Respondent did not reply to Staff’s October 23, 2019 letter.
  6. The Respondent has failed to provide Staff with a written statement, and did not contact Staff to schedule an interview to give information relevant to matters under investigation.
  7. Due to the Respondent’s failure to cooperate with Staff’s investigation, Staff was unable to determine the full nature and extent of the Respondent’s conduct in relation to the leveraged investment recommendations that he made to clients. Among other things, Staff was unable to ascertain whether or not the leveraged investment recommendations that the Respondent made to clients were suitable, whether the Respondent adequately described the risks associated with the leveraged investment strategies that he recommended to the clients, and whether the Leverage Risk Acknowledgement Letters that he asked clients to sign were false or misleading.
  8. By virtue of the foregoing, the Respondent failed to cooperate with an investigation by Staff into his conduct, contrary to section 22.1 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; 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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