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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: Md Ashanur Rahman

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 February 23, 2021 at 11:00 a.m. (Eastern), or as soon thereafter as the appearance can be held, concerning a disciplinary proceeding commenced by the MFDA against Md Ashanur Rahman (“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
    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: In 2017 and 2018, the Respondent engaged in personal financial dealings with clients by borrowing monies from clients, lending monies to a client, or depositing monies belonging to clients to his personal bank account, all of which gave rise to conflicts or potential conflicts of interest that the Respondent failed to disclose to the Member or otherwise address by the exercise of responsible business judgment influenced only by the best interests of the clients, contrary to MFDA Rules 2.1.4 and 2.1.1.

Allegation #2: Between May and June 2018, the Respondent aided a client to falsely portray monies as a gift to assist the client to secure a mortgage, thereby failing to observe high standards of ethics and conduct in the transaction of business and engaging in conduct or a practice which is unbecoming or detrimental to the public interest, contrary to MFDA Rule 2.1.1.

Allegation #3: On October 24, 2017, the Respondent deposited $20,000 in cash, which he borrowed from a client, into bank accounts that he controlled in three separate transactions of less than $10,000 each, thereby circumventing the large cash transaction reporting requirements to the Financial Transaction and Reports Analysis Centre of Canada, contrary to MFDA Rule 2.1.1.

Allegation #4: In 2018, the Respondent made false or misleading statements to the Member during the course of an investigation into his conduct, 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. From July 23, 2013 to October 11, 2018, the Respondent was registered in Ontario as a dealing representative with Royal Mutual Funds Inc. (the “Member”), a Member of the MFDA.
  2. On October 11, 2018, the Respondent resigned from the Member and he is not currently registered in the securities industry in any capacity.
  3. At all material times, the Respondent conducted business in the Toronto, Ontario area.

Allegation #1 – Personal Financial Dealings with Clients

Borrowing from Client AA
  1. At all material times, client AA was a client of the Member whose accounts were serviced by the Respondent. Client AA was also the Respondent’s realtor in connection with the Respondent’s sale of his condominium and purchase of a new home in 2017.
  2. During 2017, the Respondent borrowed $54,000 from client AA as follows:
    1. $9,000 on or about September 20, 2017 to fund part of the deposit on the purchase of a new home by the Respondent;
    2. $20,000 on or about October 24, 2017 to repay monies borrowed by the Respondent from another client, which is discussed further below; and
    3. approximately $25,000 in 2017 so that the Respondent could pay personal expenses.
  3. In each case, the Respondent promised to repay client AA from the proceeds of the eventual sale of his condominium. None of the loans were recorded in writing.  None of the loans specified a repayment date or an interest rate, and the Respondent did not provide client AA with any security for the loans.
  4. The Respondent did not disclose to the Member that he had borrowed $54,000 from client AA.
  5. In December 2017, the Respondent’s sale of his condominium closed. On December 29, 2017, the Respondent repaid $54,000 to client AA.
Borrowing from Client SH
  1. At all materials times, client SH was a client of the Member whose accounts were serviced by the Respondent.
  2. In or around October 2017, the Respondent met with client SH and asked to borrow $20,000. The Respondent wished to use the monies borrowed from client SH to pay down the Respondent’s spouse’s line of credit to improve their ability to secure a mortgage to purchase a new home.  The Respondent promised client SH that he would repay the loan within seven days.
  3. Client SH did not have $20,000 available, but offered to borrow from his line of credit in order to lend the monies to the Respondent. The Respondent agreed to pay the interest incurred by client SH on the line of credit.
  4. On or around October 17, 2017, client SH borrowed the $20,000 from a personal line of credit, and had the monies transferred to a bank account that the Respondent held jointly with his spouse. The Respondent used the $20,000 to pay down his spouse’s line of credit.
  5. The loan agreement between the Respondent and client SH was not recorded in writing and the Respondent did not provide client SH with any security for the loan.
  6. On October 24, 2017, the Respondent repaid the $20,000 loan to client SH plus $19 in interest. The source of the $20,000 that the Respondent used to repay client SH was monies that he borrowed from client AA, as described above.
Depositing Cash Belonging to Client AA
  1. On January 23, 2018, a business associate of client AA attended at the Respondent’s branch and asked if the Respondent could hold $9,000 in cash to pass on to client AA. The Respondent agreed to do so.
  2. Later the same day, client AA contacted the Respondent and told him that he would not be able to make it to the branch that day, and asked the Respondent to continue to hold the money for him.
  3. The Respondent deposited the $9,000 into his personal bank account, thereby commingling the $9,000 with his own monies.
  4. Later the same day, client AA attended at the Respondent’s branch to obtain the $9,000. The Respondent withdrew the $9,000 from his personal bank account and provided it to client AA.
Depositing Cash Belonging to Client BT
  1. On or about May 30, 2018, client BT asked the Respondent if he would deposit $9,000 cash from client BT into the Respondent’s personal bank account and provide client BT with a cheque for $9,000.
  2. The purpose of the transaction was to make the money falsely appear to be a gift, so client BT could build up a down payment and meet the bank’s requirements to secure a mortgage for the purchase of a new home.
  3. On May 30, 2018, the Respondent received $9,000 cash from client BT, which he deposited into his personal bank account thereby commingling money from client BT with his own savings. On the same day, he repaid the $9,000 to client BT by cheque.
  4. On June 8, 2018, client BT provided the Respondent with a further amount of $5,900 in cash for the same purpose described above. The Respondent again deposited the money that he received from client BT into his personal bank account and on the same day repaid the money to client BT by cheque.
Lending to Client BT
  1. At all material times, client BT was a client of the Member whose accounts were serviced by the Respondent. Client BT was also an unregistered employee of the bank affiliated with the Member, who worked in the same branch location where the Respondent conducted business.
  2. In or around June 2018, client BT asked the Respondent to lend him $25,000 for a down payment on the purchase of a new home.
  3. The Respondent agreed to loan client BT the money that he requested, and on June 21 and June 29, 2018, the Respondent borrowed $11,000 and $14,000, respectively, from his personal line of credit, and transferred the money to client BT’s personal bank account.
  4. On August 31, 2018, client BT repaid $25,000 to the Respondent.
  5. The loan agreement was not recorded in writing.
  6. By virtue of the foregoing, the Respondent engaged in personal financial dealings with clients by borrowing monies from clients (clients AA and SH), lending monies to a client (client BT), and depositing monies belonging to clients (clients AA and BT) to his personal bank account, all of which gave rise to conflicts or potential conflicts of interest that the Respondent failed to disclose to the Member or otherwise address by the exercise of responsible business judgment influenced only by the best interests of the clients, contrary to MFDA Rules 2.1.4 and 2.1.1.

Allegation #2 – Conduct Unbecoming

  1. As described above at paragraphs 19 to 22, the Respondent deposited into his bank account a total of $14,500 from client BT and provided client BT with cheques totaling $14,500, for the purpose of making the monies falsely appear to be a gift, so client BT could meet the bank’s requirements to secure a mortgage for the purchase of a new home.
  2. By virtue of the foregoing, the Respondent failed to observe high standards of ethics and conduct in the transaction of business and engaged in conduct or a practice which is unbecoming or detrimental to the public interest, contrary to MFDA Rule 2.1.1.

Allegation #3 – Avoiding Large Cash Transaction Reporting Requirements

  1. At all material times, Approved Persons of the Member were required to adhere to a code of conduct, which, among other things, required its Approved Persons to know and comply with all policies designed to detect and deter money laundering. These policies included that all large cash transactions of $10,000 or more be reported to the Financial Transaction and Reports Analysis Centre of Canada (“FINTRAC”).
  2. On October 24, 2017, the Respondent borrowed $20,000 from client AA, which the Respondent used to repay monies he borrowed from client SH, as described above at paragraph 14. Client AA provided the $20,000 to the Respondent in cash.
  3. The Respondent deposited the $20,000 cash he obtained from client AA into bank accounts that the Respondent controlled in three separate transactions of less than $10,000 each, thereby circumventing the large cash transaction reporting requirements of FINTRAC.
  4. By depositing the cash in this manner, the Respondent hindered the Member’s ability to supervise his conduct and potentially detect that the Respondent had borrowed money from client AA.
  5. By depositing $20,000 in cash into bank accounts that he controlled in three separate transactions of less than $10,000 each, the Respondent circumvented the large cash transaction reporting requirements to FINTRAC, contrary to MFDA Rule 2.1.1.

Allegation #4 – Misleading the Member

  1. At all material times, the Member’s policies and procedures required Approved Persons to cooperate with internal and external investigations, and to provide “honest, accurate, complete and timely information.”
  2. In 2018, following the events described above, the Member interviewed the Respondent. During the interview, when asked about the $9,000 transaction involving client BT described above at paragraphs 19 to 21, the Respondent stated that the $9,000 was his own money that he loaned to client BT.
  3. The Respondent’s statement to the Member was false or misleading because, as described above, the $9,000 was cash the Respondent received from client BT, that the Respondent deposited into his own bank account and subsequently returned to client BT, so that client BT could falsely portray the money as a gift for the purpose of securing a mortgage.
  4. By making misleading statements to the Member, the Respondent interfered with the Member’s supervisory investigation, 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: Alan Melamud
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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