Notice of Hearing

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

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 April 1993, the Respondent was registered in the securities industry.
2. Between April 1, 1993 and November 12, 2018, the Respondent was registered in Ontario as a dealing representative with Investors Group Financial Services Inc. (the “Member”)[4], a Member of the MFDA.
3. On November 12, 2018, the Member terminated the Respondent as a result of the matters described herein.
4. At all material times, the Respondent conducted business from a branch office of the Member located in Toronto, Ontario.

Allegation #1 – The Respondent Failed to Notify the Member that he Accepted a Power of Attorney for a Related Client and Continued to Service the Client’s Accounts

5. At all material times, the Member’s policies and procedures permitted its Approved Persons to accept appointments as Power of Attorney (“POA”) for their immediate family members, including parents, subject to the following conditions:
   1. the Approved Person was required to give written notification to the Member’s compliance department of such appointment; and
   2. all accounts held with the Member by such family members had to be transferred to and serviced by a different Approved Person of the Member.
6. Client CS is the mother of the Respondent. At all material times, client CS was a client of the Member whose accounts were serviced by the Respondent.
7. On May 27, 2012, shortly after client CS’s husband passed away, the Respondent was appointed by client CS as her continuing POA for property.
8. At this time, the Respondent’s mother was 88 years of age and suffered from health problems. Client CS was a vulnerable client.
9. The Respondent failed to notify the Member that he had been appointed as POA for client CS in accordance with the Member’s requirements.
10. The Respondent also continued to service client CS’s accounts at the Member while appointed as her POA. The investment accounts of client CS were not transferred to a different Approved Person in accordance with the Member’s requirements.
11. As described below, the Respondent acted on the POA to borrow or otherwise obtain monies from client CS’s account for his personal use.
12. By accepting and acting upon a POA from a related client without notifying the Member and transferring the accounts to another Approved Person in accordance with the Member’s requirements, the Respondent engaged in conduct contrary to the Member’s policies and procedures and MFDA Rules 2.3.1, 1.1.2, 2.5.1, and 2.1.1.

Allegation #2 – Personal Financial Dealings with a Client

13. At all material times, the Member’s policies and procedures prohibited its Approved Persons from borrowing monies from a client under any circumstances.
14. From September 2012 until December 2016, the Respondent acted on the POA from client CS to borrow or otherwise obtain for his personal use at least $149,358 from accounts of client CS. In particular:
    1. between September 2012 and December 2016, the Respondent withdrew at least $95,000 from lines of credit that client CS held with two separate banks; and
    2. between January 2015 and December 2016, the Respondent withdrew at least $52,481 by processing 22 separate transactions from bank accounts of client CS and transferred the proceeds to the Respondent’s personal bank account.
15. Interest of approximately $27,000 has accrued on the $95,000 that the Respondent withdrew from lines of credit of client CS.
16. Approximately $21,224 of the $52,481 that the Respondent withdrew from bank accounts of client CS described above, were the proceeds of redemptions of mutual funds that the Respondent facilitated from client CS’s investment accounts at the Member.
17. The Respondent used the monies taken from client CS to support his gambling activities, pay his personal expenses and to otherwise fund his lifestyle.
18. To date, the Respondent has repaid only approximately $54,358 of the total amount of $149,358 that he withdrew from accounts of client CS while acting as her POA. He has not paid to or otherwise reimbursed client CS the interest accrued on her lines of credit.
19. The Respondent failed to maintain a record of any borrowing or other arrangements with client CS, including evidence that any arrangement was authorized by client CS.
20. The Respondent failed to disclose to the Member that he borrowed or otherwise obtained any monies from client CS as described above.
21. By acting on the POA from client CS to borrow or otherwise obtain monies from client CS’s accounts for his personal use and benefit, the Respondent engaged in personal financial dealings with a client which gave rise to a conflict or potential conflict of interest which 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 client, contrary to the Member’s policies and procedures, and MFDA Rules 2.1.4, 2.3.1, 2.1.1, 2.5.1 and 1.1.2.

Allegation #3 – Misleading the Member on Annual Compliance Questionnaires

22. Between 2013 and 2018, the Respondent completed each year responses to annual compliance questionnaires from the Member.
23. Among other things, the compliance questionnaires required the Respondent to advise:
    1. whether he held a POA for clients, including his spouse, parent or child; and
    2. whether he had borrowed money from a client.
24. Between 2013 and 2018, the Respondent denied on each annual compliance questionnaire:
    1. that he held a POA in favour of a client; and
    2. that he had borrowed money from a client.
25. As described above, the Respondent’s answers were false or misleading.
26. The Respondent’s answers to the Member’s annual compliance questionnaires interfered with the Member’s ability to supervise his conduct.
27. By providing false or misleading responses to the Member, the Respondent engaged in conduct contrary to MFDA Rule 2.1.1.

Allegation #4 – Failed to Report to the Member that he had Arrangements with his Creditors

28. At all material times, the Member’s policies and procedures required its Approved Persons to notify the Member within two business days if an Approved Person becomes bankrupt or suspends payment of debts generally or makes an arrangement with creditors or makes an assignment or is deemed insolvent.
29. On March 15, 2016, the Respondent filed a Consumer Proposal pursuant to the Bankruptcy and Insolvency Act (Canada) which proposed an arrangement with his creditors for the payment of his personal debts (the “Consumer Proposal”).
30. The Respondent failed to disclose to the Member that he made the Consumer Proposal within two business days, as required.
31. In October 2018, the Respondent disclosed to the Member his Consumer Proposal from 2016 further to a request by the Member after it commenced an investigation into the conduct described above with respect to Allegations #1 and #2.
32. By failing to disclose to the Member within two days that he had entered into an arrangement with his creditors, the Respondent acted contrary to the Member’s policies and procedures, section 4.1(g) of MFDA Policy No. 6 and MFDA Rules 1.2.2(b) [now Rule 1.4], 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: Francis Roy
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.

[1] MFDA Rule 2.3.1 was amended effective July 19, 2017.  The Respondent’s conduct contravened the Rule as it existed both prior to and after the amendment.
[2] See Note 1.
[3] On March 17, 2016, MFDA Rule 1.2.2(b) was renumbered to MFDA Rule 1.4(b).  The content of the Rule did not change.
[4] Since February 8, 2002, Investors Group has been a Member of the MFDA.