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 June 2007 to January 2020, the Respondent was registered in Ontario as a dealing representative with Equity Associates Inc. (the “Member”), a Member of the MFDA.
2. On January 20, 2020, the Respondent’s registration was terminated as a result of the matters discussed below and he is not currently registered in the securities industry in any capacity.
3. At all material times, the Respondent carried on business in the London, Ontario area.

Overview

4. On or about November 12, 2012, without the approval of the Member, the Respondent began operating Nobis Group Property Management and Leasing (“Nobis”) as a sole proprietorship. The Respondent established Nobis in order to, among other things, purportedly raise capital to provide private mortgage loans to third parties.
5. As set out in the chart below, between March 2014 and July 2019, the Respondent solicited and accepted at least $1,686,522 for the purported investments in Nobis from clients A, B1, B2, C, D1, D2, E, F1, F2, and G (collectively the “Clients”), and from individual 1.

6. The Respondent has failed to repay or otherwise account for at least $1,404,734 from the Clients and Individual 1.
7. As described below, the Respondent also failed to cooperate with Staff of the MFDA (“Staff”) regarding Staff’s investigation into his conduct. As a result, Staff is unable to determine the full nature and extent of the Respondent’s conduct.

Client A

8. Between March 2014 and September 2017, the Respondent solicited and accepted a total of $88,522 from client A to invest with Nobis.
9. In or around August 31, 2017, client A received a payment of $11,300 from the Respondent.
10. Between March 2014 and September 2019, client A and the Respondent continued to sign various agreements provided by the Respondent which extended the investment term of the remaining principal and accrued interest that was earned during the expired investment periods.
11. Commencing in September 2019, client A attempted to contact the Respondent on several occasions to inquire about the status and return of the investments with Nobis. The Respondent failed to respond to client A’s inquiries and failed to make any further interest payments to client A or repay the principal amount invested.
12. In January 2021, client A filed a complaint with the MFDA.

Clients B1 and B2

13. Between December 2014 and March 2019, the Respondent solicited and accepted at least $818,000 from client B1 and her daughter, client B2, to invest in Nobis.
14. Between January 2019 and August 2019, either clients B1 or B2 received interest payments from the Respondent totaling $112,937.
15. In or around August 31, 2019, client B2 requested a redemption of monies invested with the Respondent in order to make a down payment on a property. In or around November 2019, the Respondent paid $80,000 to clients B1 and B2.
16. Between November 2019 and January 2020, clients B1 and B2 attempted to contact the Respondent on several occasions to inquire about the status and return of the investments with Nobis. The Respondent failed to make any further interest payments to clients B1 or B2 or repay the principal amount invested.
17. In or around January 7, 2020, client B1’s son complained to the Member on client B1’s behalf with respect to the outstanding amounts owing.

Client C

18. In or around July 2017, the Respondent solicited and accepted a total of $10,000 from client C to invest with Nobis.
19. In or around December 2019, client C attempted to contact the Respondent to inquire about the status and return of his investment with Nobis. The Respondent failed to respond to client C and failed to make any interest payments or repay the principal amount invested.
20. In or around April 2021, client C filed a complaint with the MFDA.

Clients D1 and D2

21. In or around March 2018, the Respondent solicited and accepted a total of $80,000 from clients D1 and D2 to invest with Nobis.
22. The Respondent represented to clients D1 and D2 that their monies would be used for the purpose of providing private loans to third parties secured against various real estate properties.
23. At the end of the initial 12 month term of their purported investment as described above, the Respondent requested and obtained the consent of clients D1 and D2 for an extension in time for the Respondent to repay the initial $80,000 investment in return for extended interest payments to clients D1 and D2.
24. Between April 2018 and December 2019, clients D1 and D2 received interest payments from the Respondent totaling $26,680, which the Respondent transferred to client D1’s bank account. After December 2019, the Respondent failed to make any further interest payments to clients D1 and D2 or repay their principal amount invested.
25. Commencing in or around September 2019, clients D1 and D2 contacted the Respondent on several occasions to inquire about the status and return of the investment with Nobis. In November 2019, the Respondent admitted to clients D1 and D2 in a meeting that he had used the clients’ monies for his personal use and expenses and not for mortgage investments secured by properties. After December 2019, the Respondent ceased communicating with clients D1 and D2.

Client E

26. In or around April 2018, the Respondent solicited and accepted a total of $30,000 from client E to invest with Nobis.
27. In or around February 2020, client E attempted to contact the Respondent to inquire about the status of his investment. The Respondent failed to respond to client E’s inquiries.
28. On or about February 21, 2020, client E complained to the MFDA with respect to the Respondent’s conduct.

Clients F1 and F2

29. Between November 2018 and January 2019, the Respondent solicited and accepted a total of $430,000 from clients F1 and F2 to invest with Nobis.
30. The Respondent represented to clients F1 and F2 that their monies would be invested in private mortgages secured against two properties located in Middlesex Centre, Ontario.
31. Between November 2018 and June 2019, clients F1 and F2 received at least $13,000 in interest payments from the purported private mortgage investments through Nobis, which were deposited by the Respondent into their Tax Free Savings Account (“TFSA”) at the Member. After June 2019, the Respondent failed to make any further interest payments to clients F1 and F2 or repay their principal amount invested.
32. In or around June 2019, the Respondent advised clients F1 and F2 that he was exercising an option in their investment contract to wind up the clients’ investment with Nobis and that their monies would be returned in 6 months.
33. Between June 2019 and November 2019, clients F1 and F2 contacted the Respondent on several occasions to inquire about the status and return of their investments with Nobis. In November 2019, the Respondent admitted to clients F1 and F2 in a meeting that he had used the clients’ monies for his personal use and expenses and not for mortgage investments secured against properties.
34. On or about December 23, 2019, client F1 commenced a civil claim against the Respondent to seek recovery of the monies invested with the Respondent.

Individual 1

35. In or around February 2019, the Respondent solicited and accepted a total of $100,000 from individual 1 to invest with Nobis. The Respondent represented to Individual 1 that her monies would be invested in private mortgages secured against a property in Komoka, Ontario.
36. When individual 1 invested with the Respondent, she was a senior, retired, and on a fixed income, and was therefore a vulnerable investor.
37. Commencing in March 2019, individual 1 received interest payments totaling approximately $4,669 from the Respondent.
38. Commencing in March 2020, individual 1 attempted to contact the Respondent on several occasions to inquire about the status and return of her investment with Nobis. The Respondent failed to respond to individual 1’s inquiries and failed to make any further interest payments or repay the principal amount invested.

Client G

39. In or around July 2019, the Respondent solicited and accepted a total of $130,000 from client G to invest with Nobis.
40. When client G invested with the Respondent, he was a senior, retired, and on a fixed income, and was therefore a vulnerable investor.
41. Between August 2019 and June 2020, client G received interest payments from the Respondent totaling approximately $30,800. After June 2020, the Respondent failed to make any further interest payments to client G or repay the principal amount invested.

Allegation #1 – Misappropriation or Failure to Account

42. By engaging in the conduct described above at paragraphs 4-41, the Respondent misappropriated or otherwise failed to account for at least $1,404,734 that he obtained from 10 clients and 1 other individual, contrary to MFDA Rule 2.1.1.

Allegation #2 – Securities Related Business or Personal Financial Dealings with a Client

43. At all material times, the Member’s policies and procedures required that all securities related business must be conducted through the Member and prohibited its Approved Persons from engaging in personal financial dealings with clients, including entering into private investment schemes with clients.
44. The Respondent did not disclose to the Member that he was soliciting and accepting money from clients for investment with Nobis, as described above.
45. The Member did not authorize the solicitation or acceptance of monies for investment with Nobis by any of its Approved Persons, including the Respondent.
46. None of the transactions that the Respondent engaged in with clients and another individual to solicit and accept monies for investment with Nobis as described above were carried on for the account of the Member or through the facilities of the Member.
47. By soliciting and accepting at least $1,686,522 from 10 clients and 1 individual as described in paragraphs 4-41, above, the Respondent:
    1. engaged in securities related business that was not carried on for the account of the Member and through the facilities of the Member, contrary to the Member’s policies and procedures and MFDA Rules 1.1.1, 2.1.1, 1.1.2, and 2.5.1; or
    2. engaged in personal financial dealings with the clients, 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 clients, contrary to the Member’s policies and procedures and MFDA Rules 2.1.4, 2.1.1, 1.1.2, and 2.5.1.

Allegation #3 – Outside Business Activities

73. At all material times, the Member’s policies and procedures required its Approved Persons to obtain prior written approval from the Member prior to engaging in any outside business activities.
74. The Respondent did not disclose to or obtain approval from the Member to engage in outside business activities with respect to Nobis.
75. By engaging in unapproved outside business activities as described above, the Respondent engaged in conduct that is contrary to MFDA Rules 1.2.1(c) (now 1.3), 2.1.1, 2.5.1, and 1.1.2.

Allegation #4 – Failure to Cooperate

76. Between January 24, 2020 and February 19, 2020, Staff sent two letters to the Respondent by registered and regular mail to his last known address informing the Respondent that his conduct was under investigation by the MFDA, and requesting information from the Respondent concerning the matters under investigation, including whether he had recommended that clients invest in Nobis and failed to repay the clients their principal investment. The registered mail was returned to Staff as unclaimed and the regular mail was not returned. The Respondent did not respond to Staff’s letters.
77. Between July 2020 and November 2020, Staff made attempts to personally serve the Respondent at his last known address, as well as an earlier address where he previously resided, with letters requesting information from the Respondent concerning the matters that are under investigation.
78. On November 30, 2020, Staff sent an email to the Respondent’s personal email address requesting that he contact Staff with respect to the matters under investigation. The Respondent failed to respond to Staff’s email.
79. On December 9, 2020 and on December 14, 2020, Staff sent letters to the Respondent’s last known address by both ordinary mail and process server, respectively, requesting that he contact Staff with respect to the matters under investigation. The ordinary mail was not returned and the process server left the letter in the mailbox at the Respondent’s last known address.
80. Due to the Respondent’s failure to cooperate with Staff’s investigation, it has not been able to determine the full nature and extent of the Respondent’s conduct described above, including:
    1. how the Respondent used the monies that he obtained from the Clients and individual 1 to invest in Nobis as described above; and
    2. whether he engaged in similar conduct with additional clients or other individuals.
81. By virtue of the foregoing, 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.

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
Suite 850, 800 – 6th Avenue SW
Calgary, AB T2P 3G3
Attention: Justin Dunphy
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] 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.
[2] MFDA Rule 1.2.1(c) was amended and renumbered as MFDA Rule 1.3 effective on March 17, 2016.  In this case, Staff is alleging that the Respondent’s conduct was contrary to both versions of the Rule.