Decisions

DAVID YAN SUM SHUM [Decision]

BCSECCOM #:
Document Type:
Decision
Published Date:
1997-12-12
Effective Date:
1997-12-04
Details:


COR#97/239

IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418

AND

IN THE MATTER OF DAVID YAN SUM SHUM

HEARING


PANEL:JOYCE C. MAYKUT, .Q.C..VICE-CHAIR
DIANE K. WOLCHMEMBER
DATE:NOVEMER 17, 1997
APPEARING:JAMES A. ANGUSFOR COMMISSION STAFF


DECISION OF THE COMMISSION


1. INTRODUCTION

This was a hearing under sections 161 and 162 of the Securities Act R.S.B.C. 1996, c. 418. A notice of hearing was issued on October 1, 1997, setting out allegations against David Yan Sum Shum relating to his conduct while he was employed by Toronto Dominion Securities Inc., subsequently, TD Asset Management Inc., (the “TD”) as a mutual fund salesperson from July 10, 1991 until May 31, 1996. Commission staff alleged that Shum fraudulently redeemed mutual fund investments of a client and misappropriated the cash proceeds for his own benefit.

In a letter dated October 7, 1997, Shum advised the Commission that he did not intend to appear at the hearing “as I wish to put this matter behind me”.

2. BACKGROUND

Shum was registered as a mutual fund salesperson from September 8, 1989, until May 30, 1996, under section 34 of the Act. During the course of Shum’s employment at the TD, he acted as personal banker to 79 year old, Olga Louise Monkman, a customer of the TD, from 1991 until about May 30, 1996.

Monkman trusted Shum completely to act in her best interests with regard to her finances and she did not keep an accurate balance of the amount of money in her TD accounts. Monkman did not at any time give Shum the authority to deal with her accounts without her specific instructions. Beginning on or about July 13, 1994, until on or about May 30, 1996, Shum, without instruction or permission from Monkman to do so, cashed in mutual fund investments in Monkman’s account and then placed the money into an internal account run by the TD for its purposes. To facilitate the conversion of investments, Shum forged Monkman’s signature on various documents. After the money was in the TD’s internal account, Shum removed the money and transferred it into an account in his own name, and used it for his own purposes. Shum took money from Monkman’s account for his own use on 13 separate occasions over a period of time from July 1994, until May 30, 1996.

Shum left his employment with the TD to join the Hong Kong Bank of Canada in or about May 30, 1996. Following his departure, the TD discovered evidence of Shum’s thefts. The matter was brought to the attention of the police and charges were laid. Shum pleaded guilty to two counts of fraud and was sentenced, on May 20, 1997, to six months in prison. In addition the court ordered that Shum make restitution to the TD in the amount of $71, 058.77.

The total amount of funds stolen by Shum was $135,230. Of that amount, $130,000 were funds of Monkman and $5,320 were funds of the TD. The TD reimbursed Monkman for her investment losses, including interest and some legal costs. The TD recovered some funds from Shum’s accounts and with further repayments, Shum owed the TD $12,555.84 as of August 6, 1997.

Once the thefts were brought to Shum’s attention by the TD but before charges were laid, Shum wrote to Monkman in an attempt to convince her to work out a settlement out of court with him and to dissuade her from pursuing criminal charges against him. To elicit her sympathy and cooperation, Shum described to Monkman various family problems, including the fact that his two year old daughter had a rare blood disease. This was false.

In his letter to the Commission, Shum states that he is working on a schedule to pay out the balance of the funds owing. He also states that he is not in a position to pay an administrative penalty.

Commission staff submit that it is in the public interest to order that Shum not be allowed to participate in the securities markets for 20 years. Accordingly staff request that Shum be prohibited from acting as an officer or director of any reporting issuer, that the trading exemptions available to him under the Act be withdrawn and that he be prohibited from engaging in investor relations activities for this period. The outstanding issue on which staff seek guidance from the Commission relates to the appropriateness of an administrative penalty.

3. DECISION

Shum was registered as a mutual fund salesperson under the Act when he defrauded his elderly client, Monkman. On 13 occasions over a period of two years, he cashed in Monkman’s investments of $130,000 by forging her signature. His method was systematic and sophisticated. He took advantage of Monkman’s trusting nature and the friendship he had established with her. Even after the fraud was detected, Shum tried to take advantage of his past friendship with Monkman to protect his own interest by lying about his daughter’s health. In our view, his breach of fiduciary duty was of the most egregious kind.

We have also taken into account the fact that Shum has acknowledged his misconduct by pleading guilty and that he has taken steps to repay the money he stole from Monkman and the TD. We also have considered his submission with respect to his ability to pay an administrative penalty.

However, in considering what orders ought to be made against Shum our paramount consideration must be the public interest. The regulatory sanction we impose upon Shum must serve to deter not only him but other registrants who find themselves in similar circumstances. The orders we impose are intended to reflect the seriousness of Shum’s misconduct.

In our view it is necessary and in the public interest to remove Shum from the public markets for a lengthy period of time and to order that Shum pay an administrative penalty.

Accordingly, we order that:

1. under section 161(1)(c) of the Act, the exemptions described in section 44 to 47, 74, 75, 98 and 99 do not apply to Shum for a period of 20 years from the date of this decision;

2. under section 161(1)(d) of the Act, Shum resign any position he holds as a director or officer of any reporting issuer and is prohibited from becoming or acting as a director or officer of any reporting issuer for a period of 20 years from the date of this decision;

3. under section 161(1)(d) of the Act, Shum is prohibited from engaging in investor relations activities for a period of 20 years from the date of this decision; and

4. under section 162 of the Act, Shum pay an administrative penalty of $20,000.


DATED at Vancouver, British Columbia, on December 4, 1997.

FOR THE COMMISSION







Joyce C. Maykut, Q.C.Diane K. Wolch
Vice ChairMember