INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA IN THE MATTER OF: THE BY-LAWS OF THE INVESTMENT DEALERS ASSOCIATION OF CANADA AND THE DEALER MEMBER RULES OF THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA AND MICHAEL THOMAS JONES NOTICE OF HEARING TAKE NOTICE that pursuant to Part 10 of Dealer Member Rule 20 and Section 1.9 of Schedule C.1 to Transition Rule No.1 of the Investment Industry Regulatory Organization Canada (IIROC), a hearing will be held before a hearing panel of the IIROC (Hearing Panel) on November 23, 2010 at IIROC Boardroom 1, 121 King Street West, Suite 1600 Toronto at 10 am, or as soon thereafter as the hearing can be heard. TAKE FURTHER NOTICE that pursuant to Rule 6.2 of the Dealer Member Rules of Practice and Procedure, that the hearing shall be designated on the: The Standard Track The Complex Track TAKE FURTHER NOTICE that on June 1, 2008, IIROC consolidated the regulatory and enforcement functions of the Investment Dealers Association of Canada (Association) and Market Regulation Services Inc. Pursuant to the Administrative and Regulatory Services Agreement between the IDA and IIROC, effective June 1, 2008, the IDA has retained IIROC to provide services for the IDA to carry out its regulatory functions. THE PURPOSE OF THE HEARING is to determine whether Michael Thomas Jones (Jones or the Respondent) has committed the following contravention that is alleged by the Association:
- 2-1. In or about November 2007, the Respondent, while a registered representative with an IIROC regulated-firm, engaged in business conduct or practice which is unbecoming or detrimental to the public interest in that he misappropriated funds in the amount of $25,000 from one of his clients, contrary to IIROC Rule 29.1. 2. In or about June 2010, the Respondent, while a former registrant of IIROC, failed to co-operate with an IIROC investigation by refusing to give information about his conduct, contrary to IIROC Rule 19.5 PARTICULARS TAKE FURTHER NOTICE that the following is a summary of the facts alleged and to be relied upon by the Association at the hearing: A. Overview 1. In 2007, the Respondent visited his client, IM, at her home while she was recovering from a car accident and on pain medication. IM signed a cheque for $25,000 made payable to Jones for what he said was an insurance premium payment. Jones cashed the cheque and deposited the funds in to his own bank account. No funds were ever forwarded to IM s insurer. Three years later, in 2010, after IM complained to the firm, the Respondent repaid her $25,000 with interest, At an IIROC interview as part of the investigation into this matter, Jones refused to provide evidence in response to IIROC questions. B. Registration History 2. Jones was registered as an RR and worked at RBC Dominion Securities Inc. from 1999 to 2003; and at BMO Nesbitt Burns Inc. (BMO), from 2004 until his termination in February 2010. C. Background to Investigation 3. IIROC received a Notice of Termination dated February 11, 2010 from BMO indicating that Jones had been terminated for cause and that he had admitted to misappropriating funds from IM. 4. On March 5, 2010, IIROC received a public complaint from IM. She complained that Jones had misappropriated $25,000 from her in November 2007. D. Misappropriation of $25,000 5. IM was Jones client from November 2006 to July 2009. 2
- 3-6. In or about late October or early November 2007, when IM was approximately 70 years of age, she was in a car accident that required her to be on pain medication for a period of time. 7. On or about November 16, 2007 Jones visited IM at her home. He recommended that she increase the payment of a premium on one of her insurance policies. 8. IM then signed a cheque dated November 16, 2007 for $25,000 which was made payable to Jones. This cheque was subsequently deposited into Jones bank account at a financial institution unrelated to BMO. 9. In or about the summer of 2009 IM transferred her investment account from BMO, for reasons unrelated to these proceedings, and Jones ceased acting as her advisor. 10. In or about December 2009 IM unsuccessfully attempted to receive an update from Jones on the status of the insurance policy in question. The insurance company later advised her that they had no record of the $25,000 payment. 11. Further, the bank division of BMO advised IM that while her cheque had been cashed, there was no record of it being re-deposited or transferred to any other account for her benefit. 12. In or about early January 2010 IM again contacted Jones who advised her that the insurance company would be returning the $25,000 to her. 13. IM subsequently received a letter dated January 11, 2010, from Jones purporting to explain what had happened with the $25,000 cheque. On or about January 22, 2010 Jones contacted IM to advise that a cheque for the amount in question was available for her to collect. 14. Jones has since been repaid IM the $25,000 with interest. 15. On or about February 3, 2010 Jones admitted to BMO in writing that he had taken the funds from IM. On or about February 4, 2010 Jones was terminated by BMO for cause. E. Failure to Give Evidence 16. On June 28, 2010, Jones attended with counsel at IIROC s offices to answer questions in an interview as part of the investigation into his conduct. 17. Jones refused to answer any questions or give information concerning his conduct in relation to IM or the cheque for $25,000. 18. Jones has not provided any further information to IIROC Staff since that time. 3
- 4 - GENERAL PROCEDURAL MATTERS TAKE FURTHER NOTICE that the hearing and related proceedings shall be subject to the Association s Rules of Practice and Procedure. TAKE FURTHER NOTICE that pursuant to Rule 13.1, the Respondent is entitled to attend and be heard, be represented by counsel or an agent, call, examine and cross-examine witnesses, and make submissions to the Hearing Panel at the hearing. RESPONSE TO NOTICE OF HEARING TAKE FURTHER NOTICE that the Respondent must serve upon the Association a Response to the Notice of Hearing in accordance with Rule 7 within twenty (20) days (for a Standard Track disciplinary proceeding) or within thirty (30) days (for a Complex Track disciplinary proceeding) from the effective date of service of the Notice of Hearing. FAILURE TO RESPOND OR ATTEND HEARING TAKE FURTHER NOTICE that if the Respondent fails to serve a Response or attend the hearing, the Hearing Panel may, pursuant to Rules 7.2 and 13.5: (a) proceed with the hearing as set out in the Notice of Hearing, without further notice to the Respondent; (b) accept as proven the facts and contraventions alleged by the Association in the Notice of Hearing; and (c) order penalties and costs against the Respondent pursuant to By-law 20.33, 20.34 and 20.49. PENALTIES & COSTS TAKE FURTHER NOTICE that if the Hearing Panel concludes that the Respondent did commit any or all of the contraventions alleged by the Association in the Notice of Hearing, the Hearing Panel may, pursuant to By-law 20.33 and By-law 20.34, impose any one or more of the following penalties: Where the Respondent is/was an Approved Person: (a) (b) a reprimand; a fine not exceeding the greater of: 4
- 5 - (i) $1,000,000 per contravention; and (ii) an amount equal to three times the profit made or loss avoided by such Approved Person by reason of the contravention. (c) (d) (e) (f) (g) (h) (i) suspension of approval for any period of time and upon any conditions or terms; terms and conditions of continued approval; prohibition of approval in any capacity for any period of time; termination of the rights and privileges of approval; revocation of approval; a permanent bar from approval with the Association; or any other fit remedy or penalty. Where the Respondent is/was a Member firm: (a) (b) a reprimand; a fine not exceeding the greater of: (i) $5,000,000 per contravention; and (ii) an amount equal to three times the profit made or loss avoided by the Member by reason of the contravention; (c) (d) (e) (f) (g) suspension of the rights and privileges of the Member (and such suspension may include a direction to the Member to cease dealing with the public) for any period of time and upon any conditions or terms; terms and conditions of continued Membership; termination of the rights and privileges of Membership; expulsion of the Member from membership in the Association; or any other fit remedy or penalty. 5
- 6 - TAKE FURTHER NOTICE that if the Hearing Panel concludes that the Respondent did commit any or all of the contraventions alleged by the Association in the Notice of Hearing, the Hearing Panel may pursuant to By-law 20.49 assess and order any investigation and prosecution costs determined to be appropriate and reasonable in the circumstances. DATED at Toronto, this 19th day of October, 2010. JEFFREY KEHOE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA 121 King Street West Toronto, ON M5H 3T9 6