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NEW SELF-REGULATORY ORGANIZATION OF CANADA, a consolidation of IIROC and the MFDA

IN THE MATTER OF A DISCIPLINARY HEARING PURSUANT TO SECTIONS 20 AND 24 OF BY-LAW NO. 1 OF THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA

Re: Wenyuan (Simon) Fan

NOTICE OF HEARING

NOTICE is hereby given that a first appearance will take place by videoconference before a hearing panel of the Central Regional Council (the “Hearing Panel”) of the Mutual Fund Dealers Association of Canada (the “MFDA”) on February 2, 2023, at 10:00 a.m. (Eastern) or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against Wenyuan (Simon) Fan (the “Respondent”). Members of the public who would like to listen to the teleconference should contact [email protected] to obtain particulars.

  • Michelle Pong
    Michelle Pong
    Director, Regional Councils

    New Self-Regulatory Organization of Canada

    121 King St. West, Suite 1000

    Toronto, ON M5H 3T9

    Telephone: 416-945-5134

    E-mail: mailto:[email protected]

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

Allegation #1: In January 2021, the Respondent opened a new account for client YQ and processed transactions in the client’s account:

  1. without the authorization of the client; or
  2. based on false or misleading statements he made to the client,

contrary to the Member’s policies and procedures and MFDA Rules 2.1.1, 1.1.2 (as it relates to MFDA Rule 2.5.1), or 2.1.4.[1]

Allegation #2: In January 2021, the Respondent signed the signature and initials of client YQ on an account opening form and submitted it to the Member for processing, contrary to MFDA Rule 2.1.1.

Allegation #3: Between January and February 2021, the Respondent recorded false or misleading notes on the Member’s system, contrary to MFDA Rule 2.1.1.

Allegation #4: In February 2021, the Respondent made false or misleading statements to client YQ after opening the new account for client YQ and processing transactions in the client’s account, contrary to MFDA Rule 2.1.1.

Allegation #5: In February 2021, the Respondent made false or misleading statements to the Member during the course of an investigation into his conduct, contrary to MFDA Rule 2.1.1.

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 November 30, 2020 to March 9, 2021, the Respondent was registered in Ontario as a dealing representative with CIBC Securities Inc. (the “Member”), a Member of the MFDA.
  2. The Respondent was also registered with the Member from November 21, 2018 to December 14, 2020 in Nova Scotia, and from December 29, 2020 to March 9, 2021 in Québec. The Respondent moved to Ontario in or around 2020.
  3. On March 9, 2021, the Respondent resigned from the Member, 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 the Member (the “Bank”), and carried on business at a branch of the Member located in Ottawa, Ontario (the “Branch”).

The Member’s Policies and Procedures

  1. At all material times, the Member’s policies and procedures provided, among other things, that:
    1. New Account Application Forms (“NAAF”) were required to be signed by account holders at the time of account opening in the presence of Approved Persons;
    2. its Approved Persons were required to obtain explicit approval from a client before processing transactions in their accounts;
    3. its Approved Persons were required to give clients written disclosures, including copies of applicable agreement and disclosure booklets explaining how the accounts worked and Fund Facts; and
    4. the falsification of client signatures or initials was prohibited.

Allegation #1 – Unauthorized Transactions and False and Misleading Statements to the Client

  1. On or about January 28, 2021, the Respondent called client YQ to discuss opening a mutual fund account at the Member and transferring monies to the Member that client YQ held at the time in a Tax Free Savings Account (“TFSA”) at the Bank.
  2. On January 28, 2021, the Respondent:
    1. prepared a NAAF to open a new TFSA for client YQ at the Member (the “New TFSA”), and without client YQ’s knowledge or authorization, signed the client’s signature and three sets of initials on the NAAF and submitted it to the Member for processing;
    2. prepared and submitted to the Member a form entitled Transfer Authorization for Registered Investments (“TARI”) to transfer the entire balance of YQ’s TFSA at the Bank totaling $55,696 to the New TFSA (the “Transfer”); and
    3. purchased a money market mutual fund in the New TFSA on behalf of client YQ (the “Purchase”).
  3. The Respondent did not have client YQ’s authorization to open the New TFSA and the Transfer and the Purchase.
  4. During the investigation of his conduct, the Respondent told Staff that he falsely represented to client YQ that, due to a system issue at the Branch, client YQ was required to open the New TFSA at the Member, and transfer the entire balance that she held in her TFSA at the Bank, and invest the monies in a money market mutual fund in the New TFSA. The Respondent’s representations to client YQ were false or misleading, as there was no system issue at the Branch.
  5. The Respondent processed these transactions to increase his sales volume in order to try to meet his weekly sales goal and thereby potentially increase his compensation.
  6. On or about February 1, 2021, client YQ complained to the Member that the Respondent opened the New TFSA and processed the Transfer without her authorization.
  7. By virtue of the foregoing, the Respondent opened a new account for client YQ, and processed transactions in the client’s account without the authorization of the client, or based on false or misleading statements he made to the client, contrary to the Member’s policies and procedures and MFDA Rules 2.1.1, 1.1.2 (as it relates to MFDA Rule 2.5.1), or 2.1.4.

Allegation #2 – Signing a Client’s Signature and Initials

  1. As described in paragraph 7(a) above, the Respondent signed the signature and initials of client YQ on an account opening form and submitted it to the Member for processing, contrary to MFDA Rule 2.1.1.

Allegation #3 – Creating False or Misleading Notes

  1. On January 28, 2021, the same day that the Respondent processed the transactions in YQ’s TFSA described at paragraph 7 above, the Respondent recorded a note as follows:
    1. “Indicate if all disclosure are provided – Yes
    2. [The Respondent] meet [client YQ] on Jan28 at10 am @186 discussing TFSA investment.
    3. Reviewed KYC as client is looking for short term with safety investments as funds are saved for future renovation. Recommend [money market fund] as a 100% safety and client is happy […] did [TARI form][2] to transfer [TFSA] to MF. all verbal and written disclosure have been given.”
  2. The Respondent’s notes were false or misleading as he had not met with client YQ in person at the Branch and he had not provided her with any written disclosures.
  3. The Respondent recorded these false notes in order to make it appear as though client YQ had attended at the Branch and signed the NAAF, and to conceal from the Member that he had signed the client’s signatures and initials on the NAAF without the client’s knowledge or authorization, as described above at paragraph 7.
  4. By virtue of the foregoing, the Respondent recorded false or misleading notes on the Member’s system, contrary to MFDA Rule 2.1.1.

Allegations #4 and #5 – False or Misleading Statements to the Member and Client YQ

  1. As described above, on February 1, 2021, client YQ complained to the Member that the Respondent opened the New TFSA and processed the Transfer without her authorization.
  2. In response to client YQ’s complaint, the Member commenced an investigation into the Respondent’s conduct.
  3. On or about February 1, 2021, the Respondent falsely represented to client YQ over the phone that the Transfer was the result of a system error. At this time, client YQ requested that her monies be transferred back to the TFSA she held at the Bank.
  4. On February 3, 2021, in response to YQ’s complaint, the Respondent processed transactions to reverse the Transfer and Purchase described above at paragraph 7.
  5. On February 18, 2021, in response to questioning from his branch manager about client YQ’s complaint, the Respondent failed to inform the Member that he had signed the client’s signatures and initials on the NAAF in order to open her new account.
  6. On February 19, 2021, in response to further questioning from the Member, the Respondent stated:
    1. “I met the client discussing the TFSA MF investment. Client has 55k in [TFSA] and I was providing potential MF options”;
    2. client YQ was “comfortable about investment”; and
    3. “I suggested client to move funds into [money market mutual fund]…Client agreed…”
  7. As described above, these statements were false or misleading as the Respondent had not attended an in person meeting with client YQ and the Respondent either never received client YQ’s authorization to the Transfer and Purchase or he processed these transactions based on false or misleading statements he made to the clients.
  8. On or about March 4, 2021, client YQ called the Member and informed it that she never attended at the Branch to sign account opening forms.
  9. On March 5, 2021, the Member interviewed the Respondent again, at which time he admitted to signing client YQ’s signature and initials on the NAAF.
  10. On March 9, 2021, the Respondent resigned from the Member.
  11. By virtue of the foregoing, the Respondent made false or misleading statements to client YQ after opening the new account for client YQ and processing transactions in the client’s account, contrary to MFDA Rule 2.1.1.
  12. By virtue of the foregoing, the Respondent made false or misleading statements to the Member during the course of an investigation into his conduct, 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: Samantha Wu
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, amendments to MFDA Rule 2.1.4 came into effect. As the conduct addressed in this proceeding, pre-dated the amendment to the Rule, any reference to MFDA Rule 2.1.4 in this proceeding is to the version of the Rule that was in effect between January 2021 and June 30, 2021.

[2] “TARI” was a form entitled Transfer Authorization for Registered Investments, as described at paragraph 7(b).

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