On July 20, the Disciplinary Committee of the Chambre de la sécurité financière found plan dealer Zahir Ahmed Fancy (Certificate No. 111944, NRD 1555821) guilty of all 68 counts.

The penalty will be determined following a future hearing. The decision was published in English.

On 18 of these counts, where the respondent was found guilty of contravening section 16 of the Act respecting the distribution of financial products and services, the Committee ordered a conditional suspension of proceedings.

For all other counts, the violations are related to section 17 (18 counts) or section 35 (32 counts) of the Code of Ethics of the Chambre. The Committee ordered a conditional suspension of proceedings with respect to the remaining provisions alleged in support of the complaint.

The evidence submitted by the syndic was not contradicted by the respondent at the three-day hearing held in December 2019, because the plan dealer was conspicuously absent from the hearing. The representative represented himself during the preliminary stages of the disciplinary process, which spanned several years.

The committee allowed the syndic to present her evidence despite the absence of the respondent, who had been duly summoned.

The facts

The acts of which the respondent is accused took place in Montreal between April 2009 and September 2011. The respondent used a similar scheme that allowed him to misappropriate funds entrusted to him by at least ten clients rather than making the mandated investments on their behalf.

The alleged modus operandi reported in the complaint was to convince his clients to replace their existing policies with London Life with universal life insurance policies with Industrial Alliance. The respondent promised that the funds from the cash surrender values from the London Life policies would be invested in the second insurer's products, which it claimed were more profitable.

Instead, the respondent diverted the funds to a non-segregated account belonging to his personal holding company, Fancy Financial Services (Fancy Inc.), whose address was the same as his principal residence.

The firm had an agency agreement with Industrial Alliance between April 2001 and October 2011. Fancy was using Maxplan as its managing general agent (MGA).

The London Life cheque was remitted to the respondent. He gave it to Maxplan, who then deposited it in a non-segregated account of Fancy Inc. MGA would then write a cheque for the same amount to Fancy, which would be deposited into an account that was used solely by respondent.

The respondent claimed that these were his commissions and the fact that the amounts were the same was “mere coincidence.” The committee did not accept his version of events.

The respondent referred to an override commission of 140 per cent in the agreement with Maxplan, but the said contract only refers to a commission of 120 per cent. The respondent never provided the documentation required by the syndic to confirm his claims.

For each of the clients mentioned in the complaint, the same process unfolded: The respondent did not deposit the cheque from the first insurer or the MGA into a segregated account, nor did he invest the funds with the second insurer, as he promised the clients.

Appropriation

The payments from the first insurer were never invested in Industrial Alliance products. When clients noticed the problem, the respondent promised to sue the person responsible and subsequently reimburse them, which he did not do. Some of the victims of this fraud were relatives of the representative.

As the Committee points out, whatever override commission agreement may have existed, it should have been paid by the second insurer after the funds were invested as foreseen in the new policies the respondent was writing for the clients.

The respondent claimed to his clients that the Maxplan representative was solely responsible not remitting the funds between the two insurers. Had this allegation been believed by the committee, it would have meant that the respondent was aware that Maxplan was breaching an undertaking to remit the funds to the second insurer, and yet continued to receive cheques from Maxplan.

The Maxplan representative was previously sanctioned in 2014. She testified before the committee. At her request, only her initials appear in the committee's decision.

New address

In order to carry out his scheme, the respondent repeatedly used false photocopies of his clients' signatures and sent change of address notices to insurers (counts 62-67) without obtaining his clients’ consent.

For the addresses, the respondent sent such notices on 41 occasions on behalf of 38 clients. Each time, he gave the address of his main residence in the borough of Saint-Laurent. These notices were sent between December 2007 and September 2018 (count 64).

Between March 2009 and August 2010, the respondent repeated this method for 23 separate clients, this time falsely advising iA of the clients’ change of address to that of space that his sister, Parveen Fancy, was renting in Montreal (count 65).

Between June 2010 and September 2011, he went on to repeat this scheme 32 times, for 31 different clients. Specifically, he filed notices to change clients’ addresses to that of this same sister’s residence in Saint-Laurent (count 66).

Finally, in 2011, between April and September, he again submitted change of address notices concerning 11 clients by giving the address of one of his employees in Pierrefonds (counts 62, 63 and 67).

Thus, the clients never received the statements from the second insurer. The Committee did not find the respondent's explanations for these address changes credible. The clients testified that they never authorized such a change of address.

The cheques paid by the first insurer ranged from $3,346 to $12,552, and the total amount misappropriated is approximately $101,659, according to The Insurance Portal’s calculations. 

Very long recourse

The trustee's complaint was filed on December 14, 2014. The text of the July 20, 2022 decision does not specify why it took so long for the syndic to submit her evidence to the disciplinary committee or why the committee took over two and a half years to submit its findings. We had to rummage through the committee’s previous decisions to find the reason.

On December 6, 2019, the Disciplinary Committee had denied the respondent's request for a postponement of the hearing. The respondent had not even appeared to defend his request at the hearing held two days earlier. The committee's decision states that the respondent had not appeared in December 2015 at the first scheduled hearing due to health issues.

A new hearing was scheduled for December 2016, but by the end of October, the respondent's wife mentioned that his health had not improved. The committee subsequently held several conference calls to monitor the case. In February 2019, the respondent told the syndic that he had not renewed his licence in Ontario, which turned out to be incorrect information.

Suspended licence  

At the time of the events, the respondent was certified in life and health insurance with the Autorité des marchés financiers. The judgment regarding the respondent’s guilt does not specify when his certificate was suspended.

The AMF obtained a judgment from the Financial Markets Administrative Tribunal (TMF) on May 30, 2019, which was made public on June 27, 2019, against the respondent, his colleague and wife Rashida Lila, and the Fancy Firm. Several orders were then issued against these respondents, including a ban on conducting any business as an advisor, securities broker or life and health insurance representative.

The TMF also ordered a respondent insurer not to pay out, in whole or in part, the cash value of policies held by the respondents to anyone. The insurer was also prohibited from allowing any borrowing from these policies. The AMF emphasized the urgency of obtaining the orders because the respondents were residing in Ontario.

On August 30, 2021, the AMF announced that it was instituting criminal proceedings against the same respondents on 20 counts of various violations of the Securities Act.

Process maintained

On May 21, 2019, the Chambre’s syndic had submitted a motion to withdraw the complaint against the respondent. Upon learning of the AMF’s complaint shortly thereafter, the syndic found that some of the failures complained of in the documentation provided to the TMF were related to activities that occurred after December 2, 2015, when the respondent was supposedly hospitalized and undergoing treatment.

The AMF’s allegations showed that the respondent continued to practise in 2016 and 2017, during which time his wife claimed that he suffered from chronic depression and was inactive.

At the December 2019 hearing on the motion to defer, the respondent's treating psychiatrist at the Jewish General Hospital in Montreal testified before the committee. However, the psychiatrist declined to comment on the respondent's ability to participate in the disciplinary process. In 2019, meetings with therapists at the hospital were cancelled several times at the respondent's request.

At the same December 4, 2019 hearing, the consumer mentioned in counts 29-34 of the complaint testified about a May 2016 meeting with the respondent and his wife. At that time, Fancy allegedly never discussed his health problems and promised a refund of the money owed.