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

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1 Notice of Hearing File No 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: Piotr (Peter) Lipski NOTICE OF HEARING NOTICE is hereby given that a first appearance will take place by teleconference before a hearing panel (the Hearing Panel ) of the Pacific Regional Council of the Mutual Fund Dealers Association of Canada (the MFDA ) in the hearing room located in the MFDA offices at 650 West Georgia Street, Suite #1220, Vancouver, British Columbia on July 20, 2010 at 10:00 a.m. (Pacific), or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against Piotr (Peter) Lipski (the Respondent ). DATED this 14 th day of May, Jason D. Bennett Jason D. Bennett Corporate Secretary Mutual Fund Dealers Association of Canada 121 King St. West, Suite 1000 Toronto, Ontario M5H 3T9 Telephone: Facsimile: corporatesecretary@mfda.ca Page 1 of 9

2 NOTICE is further given that the MFDA alleges the following violations of the By-laws, Rules or Policies of the MFDA: Allegation #1: Between July 2005 and December 2007, the Respondent prepared and submitted new account application forms and loan applications for clients which he knew contained false and misleading information, thereby failing to observe the high standards of ethics and conduct in the transaction of business and be of such character and business repute as is consistent with the standards prescribed by MFDA Rule Allegation #2: Between July 2005 and December 2007, the Respondent recommended to clients that they borrow monies to invest and assisted the clients to obtain investment loans without: (a) learning the essential facts relative to each client, contrary to MFDA Rules 2.2.1(a) and 2.1.1; and (b) ensuring the leveraging recommendations were suitable for the clients and in keeping with the clients investment objectives, contrary to MFDA Rules 2.2.1(c) and Allegation #3: Between May 2005 and April 2008, the Respondent had and continued in another gainful occupation that was not properly disclosed to or approved by the Member, contrary to MFDA Rule 1.2.1(d). Allegation #4: Between March 2008 and April 2008, the Respondent provided false and misleading information to the Member and the MFDA during the course of their respective investigations of the Respondent s conduct, thereby failing to observe the high standards of ethics and conduct in the transaction of business, contrary to MFDA Rule and section 22.1 of MFDA By-law No. 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: Page 2 of 9

3 Registration History 1. The Respondent was registered in British Columbia as a mutual fund salesperson with Aegon Dealer Services of Canada Inc. ( Aegon ) from May 26, 2005 until April 2, 2008, when he was terminated as a result of the events described below. The Respondent is not currently registered in the securities industry in any capacity. 2. Aegon became a member of the MFDA on March 13, Aegon amalgamated with Investia Financial Services Inc. ( Investia ) on September 30, 2008 and thereafter continued to operate as Investia. Investia has been a member of the MFDA since June 7, Allegation #1: False and Misleading NAAFs and Loan Applications 3. Between July 2005 and December 2007, the Respondent prepared Aegon new account application forms ( NAAFs ) and AGF Trust loan applications ( Loan Applications ) for signature by 12 clients which he knew contained false and misleading information in so far as the Respondent had, among other things: (a) inflated the incomes of at least 9 clients in their NAAFs and Loan Applications; (b) falsely indicated that at least three clients held employment positions, which they did not in fact hold, in their NAAFs and Loan Applications; (c) created and submitted with the Loan Applications at least 10 fictitious employment pay stubs; (d) altered and submitted with the Loan Applications at least three Notices of Assessment purportedly issued by the Canada Revenue Agency; and (e) created, signed and submitted with the Loan Application at least one letter from a fictitious employer. 4. The Respondent submitted the NAAFs and Loan Applications to open new accounts at and obtain investment loans from Aegon and AGF Trust respectively for the 12 clients. 5. By virtue of the foregoing, the Respondent failed to observe the high standards of ethics and conduct in the transaction of business and be of such character and business repute as is Page 3 of 9

4 consistent with the standards prescribed by MFDA Rule Allegation #2: Failure to Learn Essential Facts of Clients and Ensure Suitability of Loans 6. Based upon accurate Know Your Client information for the 12 clients, the investment loans obtained for the clients as a result of the Respondent s actions were unsuitable for 8 of the 12 clients. 7. The Respondent thereby failed to ensure the investment loans were suitable for the clients and in keeping with the clients investment objectives, contrary to MFDA Rules 2.2.1(c) and Allegation #3: Undisclosed Dual Occupation 8. Stantax Services Inc. ( Stantax ) is a corporation which was registered pursuant to the laws of British Columbia on August 18, At all material times, the Respondent owned and operated Stantax and through it, personally provided income tax preparation, bookkeeping and payroll services to clients and other individuals. 10. The Respondent did not disclose to and obtain approval from Aegon to operate Stantax and personally provide tax preparation, bookkeeping and payroll services to clients and other individuals. 11. On or about May 12, 2005, the Respondent completed an Aegon Representative Agreement ( Representative Agreement ) and a Registered Representative Personal Profile ( Representative Profile ) in order to become registered as a mutual fund salesperson with Aegon. The Representative Agreement and Representative Profile required the Respondent to identify any interests he held in other businesses. The Respondent did not disclose his interest in and operation of Stantax. 12. On or about March 22, 2006, the Respondent completed an Aegon Dual Occupations Page 4 of 9

5 disclosure form. The Respondent did not disclose his interest in and operation of Stantax. 13. On or about July 31, 2007, the Respondent completed an Aegon Compliance Certification form, in which he disclosed that he used the business or trade name Stantax Services Inc. in relation to Member business but did not disclose the nature of his association with Stantax or any details regarding the business conducted by Stantax. Among other things, the Respondent did not disclose that: (1) he owned and operated Stantax; (2) Stantax provided income tax preparation, bookkeeping and payroll services to clients and other individuals; and (3) the Respondent personally prepared income tax returns and provided bookkeeping services to clients and other individuals. 14. On or about January 30, 2008, the Respondent completed an Aegon Dual Occupations disclosure form. The Respondent described the nature of the business conducted by Stantax but failed to disclose, and subsequently denied in a written statement to Aegon dated April 7, 2008, that he personally provided income tax preparation, bookkeeping and payroll services to clients and other individuals. 15. By virtue of the foregoing conduct, the Respondent had and continued in another gainful occupation that was not disclosed to and approved by the Member, contrary to MFDA Rule 1.2.1(d). Allegation #4: False and Misleading Responses to the Member and the MFDA 16. In November 2007, AGF Trust notified Aegon that the Loan Applications and supporting documents submitted by the Respondent contained questionable income and employment information. Aegon immediately suspended the Respondent s leveraging privileges and commenced an internal investigation, which it concluded in April The MFDA commenced its own investigation with regards to the Respondent s conduct in April Between December 2007 and February 2008, Aegon made repeated requests to meet with the Respondent to discuss the client information contained in NAAFs, Loan Applications and supporting documents. In response to each request, the Respondent indicated that he was unavailable to meet with Aegon due to vacation or illness. As a result, Aegon was unable to complete its investigation until about April Page 5 of 9

6 18. The Respondent provided false and misleading information to Aegon and the MFDA during the course of their respective investigations into his conduct, as set out below. 19. In an to Aegon dated March 3, 2008, the Respondent claimed that his clients had obtained, and submitted to the Respondent in support of their loan applications, inaccurate financial documentation which had been provided to them by an alleged mortgage broker, MW). MW is unknown to the clients and did not provide any financial documentation to them. 20. In response to a telephone call from Aegon on March 28, 2008, the Respondent answered the telephone as, and pretended to be, an individual named PK. The Respondent, while pretending to be PK, advised Aegon that he employed a client and had previously sent a letter to Aegon detailing the client s employment history and earnings. 2 The client was not employed by PK and PK is not known to the client. 21. In an to Aegon dated April 7, 2008 and in a letter to MFDA Staff dated June 3, 2008, the Respondent stated that: (1) he did not personally prepare income tax returns for clients and other individuals; and (2) all income tax preparation services were performed by his wife. At all material times, all income tax preparation services provided to the clients were performed solely by the Respondent. 22. By virtue of the foregoing conduct, the Respondent failed to observe the high standards of ethics and conduct in the transaction of business, contrary to MFDA Rule and section of MFDA By-law No. 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: 2 As described in paragraph 3(e) above. Page 6 of 9

7 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: a) a reprimand; b) a fine not exceeding the greater of: i. $5,000, per offence; and ii. an amount equal to three times the profit obtained or loss avoided by such person as a result of committing the violation. c) 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; d) 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; e) revocation of the authority of such person to conduct securities related business; f) prohibition of the authority of the person to conduct securities related business in any capacity for any period of time; g) 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 Corporate Secretary within twenty (20) days from the date of service of this Page 7 of 9

8 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, Ontario M5H 3T9 Attention: Charles A. Toth Facsimile: ctoth@mfda.ca A Reply shall be filed by: a) providing 4 copies of the Reply to the Corporate Secretary by personal delivery, mail or courier to: Mutual Fund Dealers Association of Canada 121 King Street West, Suite 1000 Toronto, Ontario M5H 3T9 Attention: Office of the Corporate Secretary; or b) transmitting 1 copy of the Reply to the Corporate Secretary by fax to fax number , provided that the Reply does not exceed 16 pages, inclusive of the covering page, unless the Corporate Secretary permits otherwise; or c) transmitting 1 electronic copy of the Reply to the Corporate Secretary by at CorporateSecretary@mfda.ca. A Reply may either: i.) 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 ii.) 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: Page 8 of 9

9 a. to serve and file a Reply; or b. 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. Doc Page 9 of 9