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. From March 2, 2017 to May 28, 2018, the Respondent was registered in British Columbia as a dealing representative with TD Investment Services Inc. (“TDSI”), a Member of the MFDA.
2. From January 2015 to May 2015, the Respondent was previously registered in British Columbia with another mutual fund dealer.
3. On May 28, 2018, TDSI terminated the Respondent, and he is not currently registered in the securities industry in any capacity.
4. At all material times, the Respondent was also employed with a bank affiliated with TDSI (the “Bank”).
5. At all material times, the Respondent carried on business in the New Westminster, British Columbia area.

Allegation #1 – Unauthorized Account Opening and Trading

6. At all material times, TDSI’s policies and procedures prohibited its Approved Persons from:
   1. placing an order to trade in mutual funds without the client’s authorization;
   2. falsifying any account information, record or document in any way; and
   3. signing or initialing documentation for or on behalf of clients.
7. At all material times, client JW was a client of TDSI whose Tax Free Savings Account (“TFSA”) at TDSI was serviced by the Respondent.
8. Between on or about May 8 and 10, 2018, without client JW’s knowledge or authorization, the Respondent:
   1. signed client JW’s signature on a Transaction and Account Maintenance form and submitted it to the Member for processing in order to redeem the balance of a mutual fund held by client JW at a market value of approximately $16,699 from client JW’s TFSA;
   2. signed client JW’s signature on a TFSA account opening application form that he then used to open a new TFSA (the “New TFSA”) for client JW;
   3. submitted to TDSI documentation to facilitate the purchases of the same mutual fund in the New TFSA that he had redeemed approximately the previous day from the TFSA and used the proceeds from the redemption from the TFSA to pay for the purchases totaling $16,780; and
   4. registered client JW for a Pre-Authorized Purchase Plan (“PPP”) thereby committing client JW to regular periodic purchases in the amount of $50 per month.
9. The registration of client JW for the PPP and the opening of the new TFSA, as described above, would have ordinarily contributed to the Respondent’s eligibility to receive a semi-annual bonus in January 2019. However, because the Respondent was terminated by TDSI in May 2018 after the conduct described in paragraph 8 above was discovered, the Respondent did not receive a bonus in January 2019.
10. Client JW incurred a tax penalty of approximately $1,593.24 due to the over contribution to his TFSA arising from the Respondent’s actions described above at paragraph 8.
11. In July 2019, client JW complained to TDSI that the redemption from his TFSA and the opening of the New TFSA were both processed without his knowledge or authorization.
12. TDSI reversed the unauthorized transactions that had been processed in client JW’s TFSA and New TFSA. The Bank compensated client JW by reimbursing the $1,593.24 that he had paid for the tax penalty arising from the unauthorized transactions in his TFSA.
13. By virtue of the foregoing, the Respondent opened a new account, processed redemptions, and set up a pre-authorized purchase plan for a client without the authorization of the client, contrary to the Member’s policies and procedures and MFDA Rules 2.5.1, 1.1.2, 2.1.1, or 2.1.4.

Allegation #2 – Signing a Client’s Signature

14. As described above at paragraph 8, the Respondent signed client JW’s signature on a Transaction and Account Maintenance form and a TFSA account opening application form and submitted them to the Member for processing.
15. By signing a client’s signature on two account forms, the Respondent 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: 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.

[1] On June 30, 2021, MFDA Rule 2.1.4 was amended to conform with client focused reform amendments to National Instrument 31-103 that came into effect on the same day.  As the conduct addressed in this Notice of Hearing pre-dated the amendment to this Rule, all allegations set out in this Notice of Hearing that make reference to that Rule concern the version of the Rule that was in effect between February 27, 2006 and June 30, 2021.