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. Between February 24, 2017 and October 4, 2019, the Respondent was registered in Ontario as a dealing representative with Royal Mutual Funds Inc. (the “Member”), a Member of the MFDA. At all material times, the Respondent was also employed with a bank (the “Bank”) that is affiliated with the Member.
2. Between April and May 2013, the Respondent was also previously registered in Ontario with another Member of the MFDA.
3. On October 4, 2019, the Member terminated the Respondent as a result of the conduct described below, and he is no longer registered in the securities industry in any capacity.
4. At all material times, the Respondent conducted business in the Ottawa, Ontario area.

Allegation #1 –Misappropriation or Failure to Account for Monies

5. At all material times, clients A and X (collectively, the “Clients”) were clients of the Member whose accounts were serviced by the Respondent. The Clients were also clients of the Bank.
6. At all material times, individuals 1, 2, 3, and 4, (“collectively, the “Individuals”) were clients of the Bank and were not clients of the Member.
7. Between October 2017 and October 4, 2019, the Respondent misappropriated or failed to account for at least $309,956.99 that he obtained from the Clients and other Individuals, as follows:

Client A and Individuals 1, 2, 3, and 4

8. As described in the above chart, with respect to client A and Individuals 1, 2, 3 and 4, the Respondent misappropriated their monies by processing early redemptions of guaranteed investment certificates (“GICs”), or by obtaining access to their bank accounts and making withdrawals, without their knowledge or authorization.

Clients X and Y

9. At all material times, the Respondent serviced the investment account at the Member of client X and his spouse, client Y.
10. In or around April 2019, the Respondent recommended that client Y invest in securities through a brokerage located outside Canada that the Respondent told her that he would manage the overseas account on her behalf. Client Y provided $51,700 to the Respondent to invest in purported securities outside of Canada (the “Purported Foreign Investment”). The $51,700 was comprised of proceeds from redemptions from client X’s investment account at the Member that were processed by the Respondent. The Respondent also arranged for the proceeds to be wired to a bank account outside of Canada.
11. In or around July 2019, client Y contacted the Respondent and asked him to sell some of the Purported Foreign Investment. In response to her request, and unbeknownst to client Y, the Respondent transferred $15,066.79 to a bank account belonging to clients X and Y from monies that he had previously misappropriated from client A.
12. Beginning in or around October 2019, client Y attempted to contact the Respondent to ask him about the status of the Purported Foreign Investment, but the Respondent failed to respond. Neither client X nor client Y have heard from the Respondent since October 2019.
13. The Respondent used the approximately $309,956 that he obtained from the Clients and other Individuals described above at paragraph 7, as follows:
    1. he purchased GICs in his spouse’s name totaling $45,000;
    2. he deposited $125,033.35 into his spouse’s tax free savings account (“TFSA”) with the Member;
    3. he deposited $2,000 into his spouse’s RBC bank account;
    4. he withdrew and used for his own benefit $124,856.84; and
    5. he paid client X $15,066.79 with monies that he had misappropriated from client A, as described above at paragraph 11.
14. On or about September 2, 2019, the Bank alerted the Member that it had discovered that the Respondent had misappropriated monies and engaged in unusual account activity. The Member commenced an investigation into the Respondent’s conduct (the “Investigation”).
15. The Bank was able to seize approximately $92,000 from the TFSA of the Respondent’s spouse.
16. The Member or the Bank subsequently compensated the 2 Clients and the other 4 Individuals for the amounts that the Respondent misappropriated or for which he has failed to account.
17. By misappropriating or failing to account for monies that he obtained from the Clients and other Individuals as described above, the Respondent engaged in conduct that was contrary to MFDA Rule 2.1.1.

Allegation #2 –Failure to Cooperate with MFDA Staff’s Investigation

18. On September 10, 2019, the Member advised Staff of the MFDA (“Staff”) of allegations that the Respondent had misappropriated monies from clients and other individuals, and engaged in unusual account activity. In particular, the Member advised Staff that the Respondent may have opened at least 31 bank accounts for Bank and Member clients in order to qualify for a promotional offer by the Bank to earn the new account holder a free iPad, for which the Bank and Member clients did not actually qualify (the “Promotional Offer”).
19. On November 19, 2019, Staff sent a letter by registered and regular mail to the Respondent’s last known address advising him that it was conducting an investigation into his conduct as it related to the Promotional Offer, and the misappropriation of monies relating to activities described in Allegation #1 above. Staff requested that the Respondent provide a written statement in response to these matters.
20. On November 27, 2019, the Respondent responded to Staff’s letter dated November 19, 2019 and denied that the bank accounts opened as part of the Promotional Offer were opened inappropriately. The Respondent failed to respond to Staff’s questions concerning the misappropriation of client monies in his response to Staff.
21. On January 27, 2020, Staff sent another letter to the Respondent’s last known address advising him that this matter had been escalated to the Investigation group at the MFDA. The letter was returned to Staff with handwriting on the envelope stating “No such person”.
22. Staff sent further communications to the Respondent, including the following:
    1. an email attaching a copy of the January 27, 2020 letter described above to an email address of the Respondent that the Respondent had communicated from in the past;
    2. a further letter to the Respondent at his last known address dated March 10, 2020 (the “March 2020 Letter”), by registered and regular mail and requested, among other things:
       1. that the Respondent confirm his contact information;
       2. the reason why the Respondent opened the bank accounts referenced in paragraph 18 above and whether the clients had received the promotional reward that was provided by the bank in connection with the Promotional Offer;
       3. the location of the monies that had been misappropriated; and
       4. provide copies of the Respondent’s bank account statements.

       The letter also informed the Respondent that his failure to respond may result in Staff commencing a disciplinary proceeding against him for failing to co-operate with the investigation into his conduct.  After sending the March 2020 letter by regular and registered mail, Staff obtained the results of a driver’s license search and a land registry search in order to verify the accuracy of Staff’s record of the Respondent’s address.  The search results indicated that the Respondent’s address was the same address where Staff had previously sent letters to the Respondent between November 2019 and March 2020 as described above.

23. The Respondent has not contacted Staff, other than his November 27, 2019 incomplete response described above, which failed to respond to Staff’s request for a statement about allegations that he misappropriated monies.
24. As a result of the Respondent’s failure to co-operate with Staff’s investigation, Staff is unable to determine the full nature and extent of the Respondent’s misconduct described above, including:
    1. whether he misappropriated monies from other clients or other individuals in addition to those referenced above;
    2. information accounting for the use and whereabouts of the monies that the Respondent misappropriated as described above in paragraph 7; and
    3. information explaining how and why he opened accounts related to the Promotional Offer, whether those accounts were opened with client consent, and what happened to the promotional awards that the new account holders were entitled to receive in connection with the Promotional Offer.
25. 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
121 King Street West
Suite 1000
Toronto, ON M5H 3T9
Attention: Sarah Glickman
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.