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Reasons For Decision

Re:

Reasons For Decision


Reasons for Decision (Misconduct)
File No. 201561


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: Gilles Robert Latour

Heard: May 30, 2016 in Toronto, Ontario
Reasons for Decision (Misconduct): June 7, 2016


REASONS FOR DECISION
(Misconduct)

Hearing Panel of the Central Regional Council:

Paul M. Moore, Q.C.
Chair

Guenther W. K. Kleberg
Industry Representative

Kenneth P. Mann
Industry Representative

Appearances:

David Halasz
)
Counsel for the Mutual Fund Dealers

)
Association of Canada
)

Gilles Robert Latour
)
In attendance by teleconference; not represented
)
by counsel

)

)

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The Allegations

1.
By Notice of Hearing (“Notice of Hearing”) dated November 18, 2015, Staff of the
MFDA (“Staff”) alleged that Gilles Robert Latour (the “Respondent”) engaged in the following
conduct:

Allegation #1: Between May 2007 and October 31, 2014 the Respondent solicited and
accepted a total of at least $651,946 from at least three clients, which the Respondent has
failed to return or otherwise account for, contrary to MFDA Rules 2.1.1 and 2.1.4.

Allegation #2: Commencing August 22, 2014, the Respondent failed or refused to
provide documents and information, and attend an interview, as requested by MFDA
Staff during the course of an investigation into his conduct, contrary to section 22.1 of
MFDA By-law No.1.

Failure of Respondent to file a Reply or otherwise defend

2.
In an email on the date of the hearing (the latest email) to Staff, the chair of the panel,
and the MFDA Manager of Hearings Administration, the Respondent stated that "As mentioned
on a number of occasions, I fully intend on defending myself".

3.
However, the Respondent never at any time filed a Reply and never filed any
documentation or submitted any evidence or other information or gave any testimony to defend
himself.

4.
In the latest email, the Respondent stated: "…you only have one side of the story.
Important items missing in the 'Repayment' and the participation of the 'as you referred to 'the
client' and several other items including 'disclosures'". Although the Respondent was present at
the hearing by teleconference, and had the opportunity to testify, he chose not to testify and did
not provide any information or particulars about repayment or disclosures. Nor did the
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Respondent at any time leading up to or during the hearing challenge or bring into question the
truth of any of the evidence submitted by Staff.

Burden of proof

5.
Staff bears the burden of demonstrating, on a balance of probabilities, that allegations
against the Respondent have been proved. Staff must present evidence that is sufficiently clear,
cogent and convincing to establish that it is more likely than not that the alleged misconduct
occurred.

6.
However, the Rules of the MFDA provide, and the Notice of Hearing clearly states, that a
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.

Decision

7.
The panel reviewed all the evidence submitted by Staff. This included three affidavits and
a multitude of documentary exhibits to the affidavits that supported the testimony in the
affidavits. The panel found the evidence submitted by Staff to be clear, cogent and convincing
and concluded that Staff had satisfied the burden of proof and that the allegations had been
proven.

Preliminary matters

8.
A first appearance in this matter occurred on February 2, 2016. In view of the non-
cooperation of the Respondent to that point in time, Staff requested an order that a Reply be
delivered by February 19, 2016. Staff also requested firm dates for the Hearing on the Merits.
The Respondent attended the first appearance by teleconference and was not represented by
counsel. The panel requested the Respondent to make arrangements for representation by
counsel in a timely manner if he chose to be represented, and warned the Respondent that the
panel would not entertain kindly any last-minute request for an adjournment because of the
failure of the Respondent to arrange representation.
Page 3 of 13

9.
On several occasions prior to the hearing on the merits, Staff requested the Respondent to
file a Reply and to provide the name of his counsel, if any, and reminded the Respondent that the
hearing of this matter on its merits would take place on May 30 and 31, 2016, commencing at
10:00 a.m.

10.
On May 10, Staff advised the Respondent that he had not advised whether he intended to
participate in the hearing. Staff advised the Respondent that the documents it intended to rely on
at the hearing and witness statements were available if he would like to inspect them or to
receive copies of them.

11.
On May 16, the Respondent replied to Staff and stated: "I fully intend on defending
myself. At the request of both my lawyers, they are asking for an adjournment till after the
criminal pre-trial dated June 15–17, 2016. All of my efforts and resources are dedicated to those
three days in Cornwall. They also requested not to attend any hearing without proper counsel.
We would appreciate an adjournment till after the dates from above. ".

12.
On May 16, Staff replied: "Staff does not agree to your request for an adjournment. This
hearing date was known to you since February 2, 2016 when you participated in the first
appearance on this matter. You have not since participated in this proceeding as described in my
emails below. You are free to bring your request for an adjournment to the Hearing Panel by
motion. Given the pending hearing, you should bring the motion in advance of the hearing. You
can obtain a motion date by contacting Marco Wynnyckyj, the Manager of Hearings at the
MFDA,[ …] and file motion materials in accordance with Rule 6 of the MFDA's Rules of
Procedure available on the MFDA's webpage […]. Should you bring the motion, I expect my
instructions will be to oppose it. Staff intends on proceeding with the hearing on the merits on
May 30–31 as scheduled.”

13.
On May 25, Staff advised the Respondent: "We have not heard from you further to our
email below. As indicated, Staff intends on proceeding with the hearing on May 30–31, 2016, as
scheduled. Attached are the affidavits of [Client #1] and [BC] which Staff intends to file in
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advance of the hearing. We do not intend to have [Client #1] and [BC] attend at the hearing on
Monday. If you have any questions about this, or the matter in general, please contact me. Please
note that Staff is having its documentation on this matter delivered to you by process server […]"

14.
On May 25, the Respondent advised Staff: "At this point I am ‘Unrepresented’ and I
am NOT comfortable about dealing with the issues below without representation. I would like to
have the opportunity to defend myself. I am asking to have the proceedings remanded in
such time to be able to secure representation. Please advise.”

15.
On May 25, Staff requested a teleconference on this matter before the panel on an urgent
basis to seek directions with respect to the upcoming hearing.

Appearance of May 27, 2016

16.
An appearance before the panel was held on May 27, 2016. The Respondent attended by
teleconference. Staff submitted an email thread of the communications between Staff and the
Respondent.

17.
Although the appearance was held at the request of Staff, and the Respondent had made
no motion for adjournment, the panel decided to address the questions of adjournment raised by
the Respondent in his emails.

Adjournment based on co-temporal criminal proceedings

18.
The original request for adjournment was based on the fact that the Respondent was
subject to criminal charges and that a pre-trial hearing would be taking place on June 15–16 and
17, 2016 in Cornwall.

19.
The panel refused an adjournment based on the ongoing criminal proceedings against the
Respondent, in the absence of extra-ordinary and exceptional circumstances.

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20.
The panel based its decision on the reasoning in two MFDA decisions and the cases cited
in those decisions: Reeves (201509), dated March 30, 2016; and Scribnock (201322), dated
August 19, 2014.

21.
Those decisions make it clear that a panel has the discretion whether or not to adjourn a
hearing. The authorities referenced in the decisions consistently confirm that the exercise of that
discretion is bound by the principle that a disciplinary hearing before a professional tribunal
should not be adjourned pending completion of a co- temporal criminal prosecution, addressing
the same or closely related allegations, in the absence of "extra-ordinary and exceptional
circumstances".

Adjournment to retain counsel

22.
The panel refused an adjournment based on the request of the Respondent for time to
arrange legal representation.

23.
When questioned by the panel about references in his e-mails with Staff referring to
consultations by the Respondent with his counsel, and the fact that the Respondent had been
warned at the first appearance not to delay arranging for representation until the last minute, the
Respondent stated that the reason he did not have counsel was that he had no funds to pay
counsel a retainer, and that without any source of income he had no prospects of acquiring funds
in the future for such purpose. It, therefore, appeared to the panel that an adjournment to allow
the Respondent time to accumulate funds in order to retain counsel would, in effect, require an
indefinitely delayed adjournment.

The latest email

24.
At the commencement of the hearing on May 30, 2016, Staff filed an email from the
Respondent dated May 30, 2016. The Respondent was in attendance at the hearing by
teleconference.

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25.
The Respondent did not raise any new matter or information that was not fully addressed
in the appearance on May 27, 2016, except for the following. In the email the Respondent stated:
"I've spent every moment perusing the over 6000 pages (received less than five days ago) and as
late as last night. Even if I was able to secure counsel (which I will) there is no way anyone can
get through the amount of material that was sent to me just a few days ago."

26.
The panel considered that the Respondent had been advised on several occasions that the
material that Staff would be relying on at the hearing was available to him and that copies could
be delivered to him. The fact the Respondent failed to avail himself of the opportunity to review
the materials on a timely basis was not a reason to delay the hearing.

27.
Furthermore, Staff advised that the materials (the three affidavits and their
exhibits) amounted to far less than 6000 pages as stated by the Respondent. The panel noted that
it had received on the evening of May 27, 2016, the materials that Staff was submitting at the
hearing, and that each member of the panel had been able to consider it on his own in reasonable
detail in approximately three hours.

28.
The panel refused to adjourn the matter in order to give the Respondent more time to
review the materials.

Evidence

29.
Rule 1.6 of the MFDA Rules of Procedure permits a hearing panel to admit as evidence
any testimony, document or other thing, including hearsay, which it considers to be relevant to
the matters before it and is not bound by the technical or legal rules of evidence.

30.
Rule 13.4 of the MFDA Rules of Procedure permits a hearing panel to allow evidence of
a witness or proof of a particular fact or document to be given by sworn statement unless an
adverse party reasonably requires the attendance of the witness at the hearing for cross-
examination.

Page 7 of 13


31.
Several of the potential witnesses and victims of the Respondent in this matter were
located in Cornwall, Ontario. Many were old and/ or infirm and/or in other respects
incapacitated. Furthermore, the Respondent had not filed a Reply, and it appeared he was not
going to challenge the evidence submitted by Staff or otherwise question the evidence against
him. Indeed, the Respondent was advised by Staff that it would be proceeding by way of
affidavit evidence and would not have available at the hearing the persons swearing the
affidavits, other than Lara Rowles, Staff Investigator. The Respondent had been invited by Staff
to ask any questions or otherwise comment on this proposed procedure. The Respondent did not
object to this procedure and did not ask any questions.

Facts

32.
The relevant facts in this matter are set out in:

(a) the Notice of Hearing;
(b) the affidavit of Lara Rowles sworn May 27, 2016;
(c) the affidavit of Client #1 sworn May 19, 2016; and
(d) the affidavit of BC sworn May 25, 2016.

33.
We had no reason to believe that any of the testimony in the three affidavits was
untrue. Accordingly, the panel found as fact the matters testified to as facts in the affidavits.

34.
In this case:

(a) At all material times, the Respondent was an Approved Person at Equity Associates
Inc. (Equity), a Member of the MFDA, and clients #1, #2, and #3 mentioned in the
Notice of Hearing, were clients of Equity.
(b) The clients were seniors and were vulnerable clients.
(c) The Respondent obtained monies from the clients as loans, and provided promissory
notes.
Page 8 of 13


(d) The Respondent has not repaid or otherwise accounted for the monies obtained from
the clients.
(e) Equity was not aware that the Respondent was obtaining monies, including for
personal loans, from any client. As a result, Equity could not ensure that conflicts of
interest were addressed by the exercise of responsible business judgment influenced
only by the best interests of the clients. In any event, these transactions were
prohibited by Equity’s policies and procedures
(f) The Respondent has failed to cooperate with Staff's investigation into the matter's
outlined in the Notice of Hearing. Staff made a number of attempts to contact the
Respondent to obtain a written statement and documents, and to arrange his
attendance at an interview with Staff. The Respondent did not comply with any of
this.

Allegation #1- Conflicts of interest and Standard of Conduct

35.
Since February 27, 2006, MFDA Rule 2.1.4 explicitly imposes obligations on Approved
Persons to be aware of the possibility of conflicts of interest or potential conflicts of interest with
clients, to disclose such conflicts to the Member and together with the Member, to ensure that
any conflict is addressed by the exercise of responsible business judgment influenced only by the
best interest of the client. The rule states:

“ 2.1.4 Conflicts of Interest

a) Each Member and Approved Person shall be aware of the possibility of
conflicts of interest arising between the interests of the Member or Approved
Person and the interests of the client. Where an Approved Person becomes aware
of any conflict or potential conflict of interest, the Approved Person shall
immediately disclose such conflict or potential conflict of interest to the Member.

(b) In the event that such a conflict or potential conflict of interest arises, the
Member and the Approved Person shall ensure that it is addressed by the exercise
of responsible business judgment influenced only by the best interest of the client
and in compliance with Rules 2.1.4(c) and (d).

Page 9 of 13


(c) Any conflict or potential conflict of interest that arises as referred to in Rule
2.1.4(a) shall be immediately disclosed in writing to the client by the Member, or
by the Approved Person as the Member directs, prior to the Member or Approved
Person proceeding with the proposed transaction giving rise to the conflict or
potential conflict of interest.

(d) Each Member shall develop and maintain written policies and procedures to
ensure compliance with Rules 2.1.4 (a),(b),and (c).”

36.
An MFDA hearing panel considered the meaning and implications of the previous
version of Rule 2.1.4, which contained much of the same language as the current version of the
rule, and stated that:

"The phrase ‘responsible business judgment ‘, which is contained in the Rule, is not
defined by the Rules. However, a reasonable interpretation would suggest that it requires
the exercise of care and diligence in the circumstances to address the conflict or potential
conflict of interest always subject to being in the best interest of the client […]. In cases
involving a significant and actual conflict of interest, the exercise of responsible business
judgment may require a blanket prohibition on, or refusal to proceed with, the type of
transaction giving rise to the conflict." Tonnies (Re) (2005), Decision of a Hearing Panel of the
Prairie Regional Council, MFDA File No. 200503 (“Tonnies
”) at page 13-14.

37.
MFDA Staff Notices provide non-binding guidance to the industry about Staff’s position
with respect to certain types of conduct and Staff’s interpretation of the application of MFDA
Rules and Policies. In MFDA Staff Notice MSN – 0047 dated October 3, 2005, Staff informed
the industry of the MFDA's view that:

"Borrowing from a client by either the Member or Approved Person raises a significant
and direct conflict that in almost all cases will be impossible to resolve in favour of the
client. While such activity is not explicitly prohibited under MFDA Rules, MFDA Staff
are unaware of any circumstances were Members or Approved Persons proposing to enter
into any such arrangement would be able to demonstrate that the conflict has been
properly dealt with." MSN-0047 – Personal Financial Dealings

38.
MFDA hearing panels have consistently held that borrowing from clients gives rise to a
conflict of interest and the failure of an Approved Person to address the conflict by the exercise
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of responsible business judgment influenced only by the best interests of the client constitutes a
serious contravention of MFDA Rule 2.1.4

Frank (Re), (2015) Decision and Reasons of a Hearing Panel of the Central Regional Council, MFDA
File No. 201407
Tonnies
, supra,
Brown-John
, (2005) Decision and Reasons (Misconduct) of the Hearing Panel of the Pacific Regional
Council (“Brown-John
”) MFDA File No. 200502
Brauns (Re)
(2013), Decision and Reasons (Misconduct) of a Hearing Panel of the Central Regional
Council, MFDA File No. 201203
Greyeyes (Re)
, (2006) Decision and Reasons of the Hearing Panel of the Prairie Regional Council
MFDA File No. 200510
Ryan (Re)
, (2011) Decision and Reasons of the Hearing Panel of the Central Regional Council, MFDA
File NO. 201014
Wellings (Re)
(2011) Reasons for Decision of the Hearing Panel of the Central Regional Council,
MFDA File No. 201121

39.
MFDA hearing panels have consistently held that an Approved Person who engages in
personal financial dealings with a client by borrowing money from a client, and particularly in
circumstances where the Approved Person later fails to pay back or otherwise account for all or
part of the amount obtained, contravenes the standard of conduct, contrary to MFDA Rule 2.1.1.

Tonnies, supra
Brown-John
, supra
Greyeyes
, supra
Lui (Re),
(2011) Reasons for Decision of a Hearing Panel of the Central Regional Council, MFDA File
201124
Nunweiler (Re), (2011) Reasons for Decision of a Hearing Panel of the Pacific Regional Council,
MFDA File No. 201030

Allegation #2 – Failure to cooperate with an investigation

40.
Section 22.1 of MFDA By-law No. 1 states that:

“For the purpose of any examination or investigation pursuant to this By -law, the
Member, Approved Person of a Member or other person under the jurisdiction of the
Corporation pursuant to the By-laws or the Rules may be required by the Corporation:

(a) To submit a report in writing with regard to any matter involved in any such
investigation;
Page 11 of 13

(b) To produce for inspection and provide copies of the books, records and accounts of
such person relevant to the matters being investigated; and

(c) To attend and give information respecting any such matters;

[…]”

41.
This provision of the By-law empowers the MFDA to require individuals under its
jurisdiction to attend interviews and to provide information and produce documents relevant to
investigations undertaken by Staff.

42.
Pursuant to section 24.1.4 of MFDA By-law No. 1, for purposes of the enforcement
processes set out in sections 20–24 of MFDA By-law No. 1, the MFDA retains jurisdiction over
a Member, Approved Person or other person subject to the jurisdiction of the MFDA
notwithstanding the fact that the person has ceased to be an Approved Person. Accordingly, the
Respondent continued to be bound to comply with section 22.1 of MFDA By-law No. 1 even
after his termination by Equity.

43.
In this case, the Respondent failed to provide documentation and information and did not
attend for an interview with Staff during Staff’s investigation into his conduct.

44.
The information and documentation that the Respondent failed to answer or provide was
highly material to Staff’s investigation including information and documentation relating to
loans that the Respondent obtained from individuals described in the Notice of Hearing, and the
extent to which he may have engaged in similar conduct with other clients and individuals,
including clients and individuals described in the particulars in the Notice of Hearing and those
described in the charges against the Respondent under the Criminal Code.

45.
Hearing panels have consistently held that failure to cooperate with an investigation by
the MFDA by attending interviews if requested, or by providing relevant information and
documentation requested by Staff constitutes a contravention of section 22.1 of MFDA By-law
No. 1 and subverts the MFDA’s ability to perform its regulatory functions.
Page 12 of 13

Tonnies, supra
Brown-John
, supra
Ryan
, supra
Wellings
, supra,
Nunweiler
, supra

Conclusion

46.
In summary, the evidence and the law support findings that each of the allegations of
Staff set out in the Notice of Hearing has been established, and, accordingly, that the Respondent
has contravened his regulatory obligations and engaged in the regulatory misconduct as alleged
by Staff.


DATED this 7th day of June, 2016.

“Paul M. Moore”
Paul M. Moore, Q.C.

Chair

“Guenther W. K. Kleberg”
Guenther W. K. Kleberg

Industry Representative

“Kenneth P. Mann”
Kenneth P. Mann

Industry Representative

DM 486350 v1
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