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 January 2017 until March 2020, the Respondent was registered in Manitoba, Alberta and Ontario as a dealing representative with Investors Group Financial Services Inc. (the “Member”), a Member of the MFDA.
2. On or about March 2020, the Member terminated the Respondent, and he is not currently registered in the securities industry in any capacity.
3. At all material times, the Respondent conducted business in the Winnipeg, Manitoba area.

Allegation #1 – Failure to Report Client Complaints and Paying Compensation Directly to Clients

4. At all material times, the Member’s policies and procedures:
   1. required Approved Persons to report all client complaints to their branch manager; and
   2. prohibited Approved Persons from settling or attempting to settle a client claim directly.
5. In May 2019, 13 clients (the “Clients”) whose accounts were serviced by the Respondent, redeemed their investments in a certain real estate mutual fund (the “Property Fund”) and as a result were subject to a redemption fee of 2% of the net value of their assets invested (the “Liquidity Fee”) as set out below:

6. In or around May and June 2019, several of the Clients complained to the Respondent about the redemption of the Property Fund, which he failed to report to the Member.
7. Commencing in May 2019, the Respondent paid compensation directly to at least 5 of the 13 Clients in respect of the Liquidity Fees that those 5 Clients had incurred, as follows:

8. The payments listed in paragraph 7 above were made without the prior knowledge or authorization of the Member.
9. In May 2019, one of the clients (client JK) also complained to the Respondent regarding income taxes that he had incurred following the redemption of a mutual fund (not the Property Fund) that he held in his account at the Member. After receiving this complaint, the Respondent also paid $10,336.84 to client JK in order to compensate client JK for income taxes that client JK incurred as a result of the redemption from his account.
10. The Respondent made the payment to client JK described in paragraph 9 above without the prior knowledge or authorization of the Member.
11. By virtue of the foregoing, the Respondent failed to report the client complaints to the Member and paid compensation to 5 clients without the Member’s prior written authorization, contrary to the Member’s policies and procedures, and MFDA Rules 1.4, 2.1.4, 2.1.1, and 1.1.2 (as it relates to Rule 2.5.1), MFDA Policy No. 3, and MFDA Policy No. 6.

Allegation #2 – False or Misleading Statement to the Member During its Investigation

12. In or around June 2019, the Respondent informed the Member that client JK had complained about the redemption of the Property Fund as described in paragraph 6 above. The Member subsequently commenced an investigation into the Respondent’s conduct.
13. In or around March 2020, during the Member’s investigation into the Respondent’s conduct, the Member requested a statement from the Respondent with respect to the Clients who had communicated complaints to the Respondent and to whom he had provided direct compensation.
14. The Respondent provided a statement to the Member which represented that he had compensated all of the Clients for fees and taxes that the Clients had paid.
15. The Respondent’s statement to the Member was false or misleading at the time when he made this statement, as the Respondent had paid compensation to only 5 of the 13 Clients listed in paragraph 7, above.
16. By virtue of the forgoing, the Respondent engaged in 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
Prairie Regional Office
Suite 850, 800 – 6th Ave 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.