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Reasons For Decision

Re:

Reasons For Decision

Reasons for Decision
File No. 201627



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: Charles Albert Martin

Heard: October 12, 2016, in Toronto, Ontario
Reasons for Decision: November 11, 2016

REASONS FOR DECISION


Hearing Panel of the Central Regional Council:

Mark J. Sandler
Chair

Gunther W.K. Kleberg
Industry Representative

Kenneth P. Mann
Industry Representative

Appearances:

Francis Roy
)
Counsel for the Mutual Fund Dealers

)
Association of Canada
)

Charles Albert Martin
)
Not in attendance nor represented by counsel
)

)

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Introduction

1.
On March 21, 2016, the Mutual Fund Dealers Association of Canada (the “MFDA”)
issued a Notice of Hearing in respect of a disciplinary proceeding commenced against Charles
Albert Martin (the “Respondent”). It contained six allegations.

2.
Staff ultimately proceeded against the Respondent respecting three of the original
allegations:

Allegation #4: Between February 6, 2013 and September 20, 2013, the Respondent
disregarded directives from the Member to cease charging service fees or engaging in fee
for service activities with clients outside the Member, and then misled the Member about
accepting service fees and engaging in fee for service activities with clients, thereby
interfering with the ability of the Member to supervise the Respondent and comply with
its obligations under MFDA Rule 2.9 and MFDA Policy No. 4, contrary to MFDA Rules
1.1.2, 1.1.5, 2.10 and 2.1.1;

Allegation #5: On May 29, 2014, the Respondent misled Staff during the course of its
investigation when he falsely stated during an interview with Staff that he had ceased
charging service fees to clients in December 2012, contrary to section 22.1 of MFDA By-
law No. 1; and

Allegation #6: Between 2004 and September 20, 2013, the Respondent solicited clients
JM and DM to appoint a corporation that he controlled as a trustee in the clients’ Will,
and thereafter failed to renounce or disclose the appointment to the Member, thereby
giving rise to a conflict or potential conflict of interest between the Respondent and
clients JM and DM which he failed to address by the exercise of responsible business
judgment influenced only by the best interests of clients JM and DM, contrary to MFDA
Rules 2.3.1, 2.1.4 and 2.1.1.

3.
On May 24, 2016, the Chair of this Hearing Panel ordered that Staff’s attempts to serve
the Notice of Hearing on the Respondent and otherwise inform him of these proceedings
constituted valid service of the Notice of Hearing, pursuant to Rules 4.2(1) and 4.8 of the MFDA
Rules of Procedure. Oral reasons were given for that decision. The Chair further ordered that the
hearing on the merits take place on October 11-12, 2016. When it became clear that the hearing
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would only take one day, the Hearing Panel agreed to proceed on October 12, 2016, the second
scheduled date for hearing.

4.
The Respondent did not attend the hearing. Enforcement Counsel relied upon the
affidavit of Lucy Alfenore, a Senior Investigator with the MFDA, sworn on September 7, 2016
and the documents marked as exhibits to her affidavit. This was clear, cogent and convincing
evidence that satisfied us, on a balance of probabilities, that the Respondent engaged in the
professional misconduct contained in the three remaining allegations.

The Evidence Respecting Allegations #4 and #5

5.
From November 2003 to September 2013, the Respondent was registered in Ontario and
British Columbia as a mutual fund salesperson (now known as a dealing representative) with
Investia Financial Services (“Investia”), a Member of the MFDA. At all material times, he
conducted business from an Investia branch located in Kitchener, operating under the trade
name, Martin Wealth Management Ltd. (“MWM”).

6.
In 1998, prior to becoming registered with Investia, the Respondent incorporated a
company known as MWM Financial Counsel Inc. (“MWM FC”). He was its sole shareholder.
MWM FC was apparently incorporated for the purpose of providing investment advice to clients,
portfolio management services, insurance, tax and estate planning advice, and legal services.

7.
The evidence disclosed that while the Respondent was registered with Investia, he
continued to operate a fee for services business for Investia clients pursuant to which he solicited
and accepted service fees from clients, directly or indirectly through MWM FC, totaling between
0.5% and 2.5% of the value of the clients’ mutual fund accounts (the “Service Fees”).

8.
Commencing in November 2012, a number of clients made complaints against the
Respondent, alleging, among other things, that he misrepresented the nature of his compensation
to them and charged them excessive Service Fees. As a result of these complaints, Investia sent
letters to the Respondent specifically instructing him to cease charging and accepting Service
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Fees from clients and cease engaging in fee for service activities with clients, whether through
MWM FC or other corporations he owned.

9.
In response to Investia’s specific instructions to cease charging and accepting Service
Fees from clients, the Respondent stated to Investia that he had ceased doing so. He signed an
acknowledgement and undertaking on February 6, 2013 confirming that he had ceased this
activity and undertaking not to resume it. In an interview on May 29, 2014, the Respondent
advised the MFDA that he had, either personally or through any corporation, ceased collecting
Service Fees from Investia clients as of at least December 1, 2012 – that is, almost immediately
after the complaints were made against him.

10.
In fact, the Respondent did not cease charging and collecting Services Fees from Investia
clients either in February 2013 or, as he stated to Staff, as of December 1, 2012. The
documentary evidence is clear that he solicited and accepted payment of Service Fees from at
least three clients between May 27, 2013 and August 6, 2013, and otherwise engaged in fees for
services activities with at least four other clients on June 4, 2013, June 20, 2013 and August 28,
2013.

11.
Based on this evidence, which we accept, the Respondent:

(a)
disregarded directives from Investia to cease charging Service Fees to, or
engaging in fee for service activities with, clients and then misled Investia about
having engaged in such activities, thereby interfering with the Member’s ability to
supervise the Respondent and comply with its regulatory obligations; and
(b)
misled Staff about the date on which he ceased engaging in fees for service
activities and charging Service Fees, thereby interfering with, and complicating,
Staff’s ability to properly investigate the Respondent and the complaints made
against him.



Page 4 of 7

Evidence Respecting Allegation #6

12.
In 2004, clients JM and DM named the Respondent’s corporation, MWM FC, as a trustee
in their wills. This was based on the Respondent’s advice and recommendation and pursuant to
the fee for services arrangement they had entered into with the Respondent. The Respondent,
through MWM FC, remained a trustee for JM and DM’s estates until January 2014 despite the
following:

(a)
a 2008 change to Investia’s policies and procedures manual prohibiting its
Approved Persons from accepting an appointment as “power of attorney…
or other similar authorization” on behalf of clients on the basis that such
appointments could create a conflict of interest between Approved Persons
and clients; and
(b)
a request from AM, the Respondent’s daughter and one of his branch
managers, to rescind and renounce MWM FC’s appointment as a trustee
of the clients’ estates after she became aware of the appointment in 2011.

13.
Despite the updates to Investia’s policies and procedures manual in 2008 and
AM’s request in 2011, the Respondent did not renounce MWM FC’s appointment or
inform Investia of the appointment so that it could reassign the clients to another
Approved Person.

14.
Based on this evidence, which we accept, the Respondent was in a conflict or potential
conflict of interest which he failed to address through the exercise of responsible business
judgment influenced only by the best interests of his clients.

Penalty

15.
The misconduct here was serious. The Respondent engaged in a pattern of misconduct.
He deliberately misled the Member as well as his regulator. He continued to engage in
prohibited conduct despite being instructed to stop, and despite signing an undertaking to stop.
The effect of his misconduct was to prevent or make more difficult the ability of the Member to
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supervise and monitor compliance. The effect of his misconduct was also to prevent or make
more difficult the ability of the Respondent’s regulator to perform its duties. Investors were
placed at risk as a result.

16.
The Respondent has no prior disciplinary record. However, we see nothing else that
potentially mitigates the seriousness of his misconduct. He was an experienced registrant. His
deceit in dealing with both the Member and his regulator was obviously motivated by self-
interest. He has shown no remorse or acceptance of responsibility.

17.
Any penalty imposed must meet the ends of specific and general deterrence, protect the
investing public and MFDA’s membership, the integrity of the securities market and the
MFDA’s enforcement processes.

18.
In our view, only a permanent prohibition from conducting securities related business,
together with a significant monetary penalty, can adequately protect the public from future risk,
meets the ends of deterrence, and maintain confidence in the integrity of the industry and in its
enforcement processes.

19.
We have considered the penalties imposed in prior cases, as well as the MFDA Penalty
Guidelines. In the circumstances, the appropriate disposition is as follows:
(a)
The Respondent is permanently prohibited from conducting securities related
business in any capacity over which the MFDA has jurisdiction, pursuant to s.
24.1.1(e) of MFDA By-law No. 1;
(b)
The Respondent shall pay, no later than 6 months after the date of this order, a
fine in the amount of $75,000, pursuant to s. 24.1.1(b) of MFDA By-law No.1;
and
(c)
The Respondent shall pay, no later than 6 months after the date of this order, costs
of this proceeding in the amount of $7,500, pursuant to s. 24.1 of MFDA By-law
No. 1.

20.
We note that Enforcement Counsel only sought costs of $7,500 though these did not
represent the full costs of the investigation and hearing.
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21.
We wish to thank Enforcement Counsel and the affiant for their careful presentations.

DATED this 11th day of November, 2016.

“Mark J. Sandler”
Mark J. Sandler
Chair
“Gunther W.K. Kleberg”
Gunther W.K. Kleberg
Industry Representative
“Kenneth P. Mann”
Kenneth P. Mann
Industry Representative

DM 509433 v1
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