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 October 1989, the Respondent was registered in the securities industry.
2. From November 2014 to December 2019, the Respondent was registered in Alberta and British Columbia as a dealing representative with Investia Financial Services Inc., a Member of the MFDA (the “Member”).
3. On December 31, 2019, the Respondent’s mutual fund registration was terminated as a result of the conduct described below.
4. The Respondent is not currently registered in the securities industry in any capacity.
5. At all material times, the Respondent carried on business in the Calgary, Alberta area.

Client DC

6. At all material times, client DC was a client of the Member whose accounts were serviced by the Respondent.
7. Commencing in November 2014, client DC opened three accounts at the Member consisting of a non-registered account, a Registered Retirement Savings Plan (“RRSP”) account, and a Locked In Retirement Account (“LIRA”). At the time, client DC’s spouse, MC, also became a client of the Member, whose accounts were serviced by the Respondent.  DC and MC were the parents of 3 children.
8. In early 2017, client DC and his spouse divorced. In or about May 2017, the Respondent recommended that MC transfer her accounts to a new advisor and from that point on the Respondent ceased to be the Approved Person responsible for servicing the investment accounts of MC at the Member.
9. On September 25, 2017, client DC signed a letter of direction designating the Respondent as the beneficiary on his RRSP account at the Member. On October 4, 2017, the Respondent forwarded client DC’s letter of direction to the applicable fund company to effect this change in beneficiary designation. The Respondent continued to be the Approved Person responsible for servicing client DC’s RRSP account at the Member after he had been designated a beneficiary on this account.
10. The designation of the Respondent as beneficiary of client DC’s RRSP account gave rise to a conflict or potential conflict of interest.
11. The Respondent did not disclose to the Member that he had been named as the beneficiary of client DC’s RRSP account or send the Member a copy of the letter of direction that named the Respondent as beneficiary or client DC’s RRSP account.
12. On March 9, 2018, client DC signed a further letter of direction which designated the Respondent as the beneficiary on client DC’s LIRA at the Member. On March 14, 2018, the Respondent forwarded client DC’s letter of direction to the applicable fund company to effect the change in beneficiary designation. The Respondent continued to be the Approved Person responsible for servicing client DC’s LIRA after he had been designated a beneficiary on this account.
13. The designation of the Respondent as beneficiary of the client DC’s LIRA account gave rise to a conflict or potential conflict of interest.
14. The Respondent did not disclose to the Member that he had been named as the beneficiary of client DC’s LIRA or send the Member a copy of the letter of direction that named the Respondent as beneficiary of the LIRA.
15. On March 16, 2018, client DC signed an enduring power of attorney (the “POA”), which appointed the Respondent as power of attorney for client DC’s financial affairs. The POA granted the Respondent authority to make decisions with respect to client DC’s financial affairs even while client DC was capable to do so himself, as well as in in the event of any incapacity of client DC.
16. On or about March 21, 2018, the Respondent signed the POA acknowledging his appointment as well as an accompanying statutory declaration.
17. The acceptance of power of attorney for client DC’s financial affairs contravened the Member’s policies and procedures and gave rise to a conflict or potential conflict of interest.
18. The Respondent did not disclose to the Member that he had been appointed as power of attorney and was granted authority to make financial decisions for client DC until August 22, 2019, as described below.
19. In August 2019, client DC was hospitalized in a coma and therefore, he could no longer make decisions with respect to his financial affairs.
20. On August 22, 2019, the Respondent notified his branch manager about client DC’s health condition and disclosed for the first time that he had been appointed as power of attorney and had thereby acquired authority to make decisions with respect to client DC’s financial affairs.
21. Subsequently, on or about August 27, 2019, the Member discovered that the Respondent had been named as beneficiary of the LIRA and RRSP account of client DC.
22. On August 29, 2019, the Respondent was informed by the Member that he could no longer service the investment accounts of client DC at the Member.
23. The Respondent invoked his authority as power of attorney and transferred client DC’s investment accounts from the Member to another mutual fund dealer.
24. On September 4, 2019, the Respondent opened an RRSP account and LIRA at another mutual fund dealer on behalf of client DC, and transferred in assets from client DC’s Member accounts into the two new accounts, with a value of $147,948 and $69,735 respectively.
25. On September 26, 2019, client DC passed away.
26. Following the death of client DC, the Respondent received the after-tax proceeds from the RRSP account and LIRA of client DC.
27. On December 31, 2019, the Member terminated the Respondent’s registration as a result of the conduct described in paragraphs 9-16, above.

Allegation #1 – The Respondent was Named as a Beneficiary on a Client’s Investment Accounts

28. At all material times, the Member’s policies and procedures required its Approved Persons to, among other things:
    1. avoid activities that might interfere or appear to interfere with the best interests of the clients; and
    2. disclose any actual or potential conflicts of interest to the Member.
29. When the Respondent became aware that he was the designated beneficiary of client DC’s LIRA and RRSP accounts, those circumstances gave rise to a conflict or potential conflict of interest which he was required to immediately disclose to the Member.
30. By failing to disclose the conflict or potential conflict of interest, the Member was deprived of an opportunity to investigate the circumstances that gave rise to the conflict or potential conflict of interest, disclose the conflict or potential conflict of interest to client DC, or to take steps to ensure that the conflict was addressed by the exercise of responsible business judgment influenced only by the best interests of the client.
31. As described above, the Respondent was named as a beneficiary of a client’s investment accounts, which gave rise to a conflict or potential conflict of interest between the client and the Respondent that the Respondent failed to disclose to the Member or otherwise ensure was addressed 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, 2.5.1, 1.1.2, and 2.1.1.

Allegation #2 – The Respondent Accepted an Appointment as Power of Attorney

32. At all material times, the Member’s policies and procedures prohibited its Approved Persons from having full or partial authority over the financial affairs of a client, including accepting or acting upon a power of attorney of a client.
33. As described above, accepting a power of attorney for client DC’s financial affairs also gave rise to a conflict or potential conflict of interest. The Respondent did not disclose to the Member that he had been appointed as power of attorney until after client GC was no longer able to make decisions with respect to his financial affairs. As a result, the Member was deprived of an opportunity to investigate the circumstances that gave rise to the conflict or potential conflict of interest, or to take steps to ensure that the conflict was addressed by the exercise of responsible business judgment influenced only by the best interests of the client.
34. By accepting an appointment as power of attorney for a client’s property as described above at paragraph 16, the Respondent engaged in conduct contrary to the Member’s policies and procedures, as well as MFDA Rules 2.3.1(a), 2.5.1, 1.1.2, 2.1.1, or 2.1.4.

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: jdunphy@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.