TORONTO, July 5, 2018 /CNW/ - A settlement hearing in the matter of International Capital Management Inc. ("ICM"), John Paul Sanchez ("John Sanchez") and Javier Andreas Sanchez ("Javier Sanchez") (collectively the "Respondents") was held on June 21, June 26 and June 29, 2018 in Toronto, Ontario before a Hearing Panel of the Central Regional Council of the Mutual Fund Dealers Association of Canada ("MFDA").
The Hearing Panel approved the settlement agreement dated June 29, 2018 ("Settlement Agreement") between Staff of the MFDA and the Respondents, as a consequence of which the following sanctions were imposed on the Respondents:
- commencing June 29, 2018, the authority of John Sanchez to conduct securities related business while in the employ of, or associated with, any Member of the MFDA is permanently prohibited;
- commencing June 29, 2018, the authority of the Javier Sanchez to conduct securities related business while in the employ of, or associated with, any Member of the MFDA is permanently prohibited;
- John Sanchez shall pay a fine in the amount of $100,000;
- John Sanchez paid $30,000 of the $100,000 fine on the date of the settlement hearing and shall pay the balance in equal monthly installments of $5,833.33 per month payable on the first day of each month between August 1, 2018 and July 1, 2019;
- Javier Sanchez shall pay a fine in the amount of $50,000;
- Javier Sanchez paid $20,000 of the $50,000 fine on the date of the settlement hearing and shall pay the balance in equal monthly installments of $2,500 per month payable on the first day of each month between August 1, 2018 and July 1, 2019;
- on June 29, 2018, the Respondents paid costs in the amount of $25,000; and
- the membership in the MFDA of ICM shall be terminated effective on June 29, 2018 and thereafter, ICM shall cease to have any of the rights and privileges of Membership in the MFDA.
In the Settlement Agreement, the Respondents admitted that:
- between 2006 and 2016, the Respondents engaged in securities related business that was not carried on for the account of ICM, through the facilities of ICM or recorded on the books and records of ICM, contrary to MFDA Rules 1.1.1 and 2.1.1.
- since 2006, John Sanchez and Javier Sanchez engaged in outside activities that were not approved by ICM in writing or reflected on the books and records of ICM, contrary to MFDA Rule 1.3.2(c);
- since 2006, John Sanchez and Javier Sanchez solicited at least $27.44 million from ICM clients for investment in two non-arm's length companies, thereby engaging in conduct that gave rise to conflicts of interest which the Respondents failed to address by the exercise of responsible business judgment influenced only by the best interests of the clients, contrary to MFDA Rules 2.1.4 and 2.1.1;
- between 2006 and 2016, the Respondents recommended that approximately 170 ICM clients purchase investments distributed by two non-arm's length companies, without conducting adequate due diligence to know the products and did not maintain sufficient records to demonstrate that they complied with the obligation Know-Your-Client and to ensure that the products recommended and the orders obtained from clients were suitable, contrary to MFDA Rules 2.2.1;
- since October 2006, the Respondents have not complied with the terms of an Agreement and Undertaking entered into between the Respondents and Staff, thereby engaging in conduct contrary to MFDA Rule 2.1.1 and engaging the authority of the Hearing Panel to impose a penalty on the Respondents pursuant to sections 24.1.1 and 24.1.2 of MFDA By-law No. 1;
- between 2008 and December 2016, the Respondents failed to cooperate with Staff's investigations into their conduct by providing inaccurate or misleading statements to Staff and withholding information about some of their business activities in response to questioning by MFDA compliance staff during compliance examinations and by MFDA enforcement staff during investigations of their conduct, and by initially withholding access to electronic records including emails on ICM's systems during an on-site inspection at ICM's office that was conducted by Staff on November 15, 2016, contrary to sections 22.1 and 22.2 of MFDA By-law No. 1;
- since February 2009, the Respondents have not established, implemented and maintained policies and procedures required to ensure that adequate account and trade supervision was conducted, contrary to MFDA Rules 2.5.1 and 2.5.7, and MFDA Policy No. 2.
The MFDA is the self-regulatory organization for Canadian mutual fund dealers, regulating the operations, standards of practice and business conduct of its Members and their approximately 82,000 Approved Persons with a mandate to protect investors and the public interest. For more information about the MFDA's complaint and enforcement processes, as well as links to 'Check an Advisor' and other Investor Tools, visit the For Investors page on the MFDA website.
SOURCE Mutual Fund Dealers Association of Canada
For further information: Charles Toth, Director, Litigation, 416-943-4619, [email protected]