MFDA bans former Ontario mutual fund salesman

The case concerned Are’s involvement in the selling of promissory notes offered by a U.S. farming business known as the Jenkins Dairy Farm, JYL Agribusiness or JYL Dairy Partners LLC, collectively known as JYL. The sales occurred between August 2005 and January 2008 while he was registered in Ontario with Dundee Private Investors Inc. (Dundee), between May 2004 and November 2006, and FundEX Investments Inc. (FundEX), between December 2006 and January 2008.

Are received at least US$528,000 in commission and fees from JYL and its principals between Sept. 27, 2006 and Dec. 31, 2008, the hearing panel’s decision states.

The MFDA alleged that Are conducted this securities-related business outside of the facilities of his dealer member. The respondent’s argument was that the promissory notes were not securities because they contained a provision stating they are governed by the laws of the State of Delaware and that Delaware does not define these notes as securities.

“It is our opinion that the issue of whether the JYL Notes are securities must be determined under the law of Ontario. This is a disciplinary hearing dealing with alleged breaches by the respondent of the rules and by-laws of the MFDA which the respondent was bound to observe,” states the decision. “He is alleged to have breached those obligations while he was a registered sales person for two members of the MFDA in Ontario. The complaints against the respondent were made by residents of Ontario who were clients of those members of the MFDA.”

It was also alleged that Are did not disclose the selling of these securities to his dealers though both Dundee and FundEX require written disclosure of outside business activities.

FundEX did not discover Are’s outside business until after the firm’s compliance department audited him in June 2007. He was told he must sell securities-related products or limited market products through FundEX. However, Are continued to process the acquisitions of the JYL notes outside of the FedEX books until he left the firm in January 2008.

The MFDA also alleged that Are failed to co-operate with MFDA staff’s investigation into his conduct, which began in May 2011, when he refused to submit documents and other information in their entirety to MFDA staff.

Are asked MFDA staff repeatedly to explain the relevance of the information they required, the hearing panel found and when staff did not do so, he determined his own level of relevancy by making partial submissions from the information the MFDA requested. Although the panel acknowledged Are’s frustration at the lack of response from the MFDA’s investigation team, it stated that Are did not have the unilateral right to determine relevance.

Are is currently not registered in the securities industry in any capacity, the decision notes.