MFDA Agreed Statement of Facts

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Agreed Statement of Facts
File No. 201519

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: Terry William Sukman



AGREED STATEMENT OF FACTS

I.
INTRODUCTION
1.
By Notice of Hearing issued July 21, 2015, the Mutual Fund Dealers Association of
Canada (the “MFDA”) commenced a disciplinary proceeding against Terry William Sukman
(the “Respondent”) pursuant to ss. 20 and 24 of the MFDA By-law No. 1 (“By-law No. 1”).

2.
The Notice of Hearing set out the following allegations:

Allegation #1: Between August 2012 and May 2013, the Respondent accepted and held a
power of attorney for property from client XX, and was appointed as estate trustee,
executor and trustee of client XX in her Will, contrary to MFDA Rules 2.3.1, 2.1.4 and
2.1.1.

Allegation #2: Between August 2012 and May 2013, the Respondent engaged in
personal financial dealings with client XX by:
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(a) accepting an entitlement to a $10,000 legacy in lieu of executor fees; and

(b) accepting joint ownership in one account and designation as beneficiary of
two accounts held by client XX at the Member,

thereby giving rise to conflicts or potential conflicts of interest between the Respondent
and client XX which the Respondent failed to address by the exercise of responsible
business judgment influenced only by the best interest of client XX, contrary to MFDA
Rules 2.1.4 and 2.1.1.

II.
IN PUBLIC / IN CAMERA

3.
The Respondent and Staff of the MFDA (“Staff”) agree that this matter should be heard
in public pursuant to Rule 1.8 of the MFDA Rules of Procedure.

III.
ADMISSIONS AND ISSUES TO BE DETERMINED

4.
The Respondent has reviewed this Agreed Statement of Facts and admits the facts set out
in Part IV herein. The Respondent admits that the facts in Part IV constitute misconduct for
which the Respondent may be penalized on the exercise of the discretion of a Hearing Panel
pursuant to s. 24.1 of By-law No. 1.

5.
Subject to the determination of the Hearing Panel, Staff submits, and the Respondent
does not oppose, that the appropriate penalty to impose on the Respondent is:

(a) a prohibition on the Respondent’s authority to conduct securities related business
while in the employ of or associated with any MFDA Member for a period of one
year, pursuant to s. 24.1.1(e) of MFDA By-law No. 1;

(b) a fine in the amount of $10,000 pursuant to s. 24.1.1(b) of MFDA By-law No. 1; and
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(c) costs in the amount of $2,500 pursuant to s. 24.2 of MFDA By-law No. 1.

IV. AGREED
FACTS

6.
Staff and the Respondent agree that submissions made with respect to the appropriate
penalty are based only on the agreed facts in Part IV and no other facts or documents. In the
event the Hearing Panel advises one or both of Staff and the Respondent of any additional facts it
considers necessary to determine the issues before it, Staff and the Respondent agree that such
additional facts shall be provided to the Hearing Panel only with the consent of both Staff and
the Respondent. If the Respondent is not present at the hearing, Staff may disclose additional
relevant facts, at the request of the Hearing Panel.

7.
Nothing in this Part IV is intended to restrict the Respondent from making full answer
and defence to any civil or other proceedings against him.

Registration History

8.
Since July 1986, the Respondent has been registered in Ontario as a mutual fund
salesperson (now known as a dealing representative) with Investors Group Financial Services
Inc. (“Investors Group”), a Member of the MFDA.

9.
At all material times, the Respondent operated out of a sub-branch located in
Mississauga, Ontario.

10.
The Respondent has not previously been subject of disciplinary proceedings.

Background

11.
Client XX was born in 1925, and is currently 91 years of age. Client XX is a widow with
no immediate family. Client XX was a client of Investors Group whose accounts were serviced
by the Respondent between approximately 2004 and January 2013.
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12.
Client XX held three accounts at Investors Group consisting of: (1) a non-registered
account; (2) a Registered Retired Income Fund account (“RRIF”); and (3) a Tax Free Savings
Account (“TFSA”) (collectively, the “Accounts”).

13.
At all material times, client XX was unsophisticated financially, and a novice investor.

14.
Over the years that the Respondent serviced client XX’s accounts, the Respondent
assisted client XX with her financial and personal affairs, including accompanying her to the
bank, preparing and filing her income tax returns, and paying her bills. In 2011 and 2012, the
Respondent observed that client XX’s physical and mental health was declining.

15.
In the period that the Respondent serviced client XX’s accounts, client XX amended her
Power of Attorney (“POA”) and Will multiple times.

Appointment as Power of Attorney for Property and as Executor in Client XX’s Will

16.
Beginning in 2011, client XX approached the Respondent about becoming her:

(a) POA for property; and
(b) executor and partial beneficiary of her estate.

17.
The Respondent states that client XX asked the Respondent if he knew a lawyer. The
Respondent states that he provided client XX with the name of a lawyer who he knew did estates
work. The Respondent states that for about a year, client XX continued to ask the Respondent to
take her to that lawyer.

18.
The Respondent kept an electronic written record on the Investors Group interactions log
dated May 2, 2012 of his discussion with client XX, where he wrote:

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“Since having the recent dispute with BNS and her manager and not fully understanding
her billing [XX] is worried about her estate. She has approached me about becoming her
POA both medical and financial as well as the executor and partial beneficiary of her
estate. There is much to talk about but she wants to relieve her old neighbor and current
solicitor from her estate. Her reasoning is that I do almost everything for her and have
become kind of a surrogate family member. I still have to pass this through IG Tom
MacKechan and Ken Beck. This will mean that I will have to relinquish her accounts and
she is aware of this. Her mental faculties are beginning to slow and she is having a harder
time coping with monetary issues. She has indicated that it is her bequest to leave her
house to me.”

19.
In or about August 2012, the Respondent called the lawyer to provide a description of
client XX’s history and asked if the lawyer could assist client XX.

20.
In or about August 2012, at the request of client XX, the Respondent took client XX to
meet with the lawyer. The Respondent states that he was not present at any meetings that client
XX had with her lawyer, and he waited outside while client XX met with the lawyer. The lawyer
advised the Respondent that client XX left him a $10,000 bequest in her Will.

21.
At the request of client XX, the Respondent also took client XX for a second visit to the
lawyer, at which time client XX obtained the signed POA and Will from the lawyer.

22.
On August 7, 2012, client XX appointed the Respondent as her POA for property. Client
XX appointed her family friend as a substitute POA in the event that the Respondent refused or
resigned as a POA.

23.
On August 7, 2012, client XX also appointed the Respondent as her POA for personal
care, jointly and severally, with client XX’s family friend. The Respondent states that it was
during the course of Staff’s investigation in or about May 2014 that he first became aware that he
was appointed as POA for personal care. This does not form part of the allegations of
misconduct in the matter.

24.
On August 16, 2012, client XX executed her Will and designated the Respondent as:

(a) estate trustee, executor and trustee of her Will;
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(b) beneficiary of a $10,000 legacy in lieu of executor fees; and
(c) beneficiary of any residue of her estate.

25.
The Respondent states that it was during the course of Staff’s investigation in May 2014
that he first became aware that he was designated as a beneficiary of any residue of client XX’s
estate. This does not form part of the allegations of misconduct in this matter.

26.
Client XX appointed her family friend as a substitute estate trustee, executor and trustee
of her Will in the event that the Respondent was unable or unwilling to act on her behalf. The
Respondent states that he did not review client XX’s Will nor did he receive a copy of it.

27.
The Respondent was concerned about client XX’s mental health in the period of August
2012 during the time that she amended the POA and Will, as described above.

28.
The Respondent did not disclose to Investors Group that he accepted and held a POA
from client XX or that he was named in any capacity in client XX’s Will.

29.
The Respondent did not exercise his authority as POA or his designations under the Will
at any given time.

30.
The Respondent states that in January or February 2013, he contacted a chartered
accountant that he knew, but who was not previously known to client XX, to replace him as a
POA for client XX and a meeting was held with client XX in this regard. The Respondent
further states that client XX did not appoint this person as her new POA.

Joint Ownership and Designation as Beneficiary of Client XX’s Accounts

31.
On or about January 17, 2013, client XX notified the Respondent that she wanted to leave
her Investors Group assets to him in the event of her death.

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32.
As a result, the Respondent proceeded to transfer the Accounts to a new advisor at
Investors Group (the “New Advisor”). The Respondent chose the New Advisor and introduced
client XX to him. The Respondent provided the New Advisor with client XX’s POA, which was
then submitted to Investors Group on or about January 28, 2013.

33.
The Respondent states that he believed that by transferring the accounts of client XX to
the New Advisor in January 2013 that there would be no conflict of interest between him and
client XX.

34.
The Respondent did not advise Investors Group that client XX notified the Respondent
that she wished to leave her Investors Group assets to him. The Respondent did not notify his
branch manager or anyone else at Investors Group that he was taking steps to transfer client
XX’s Accounts to the New Advisor.

35.
As of about January 17, 2013, the Respondent was no longer the servicing advisor of the
Accounts and had no access to the Accounts.

36.
At a meeting attended by the New Advisor, the Respondent and Client XX on or about
January 23, 2013, the Respondent and client XX signed Investor Group forms that added the
Respondent as:

(a) the sole beneficiary of client XX’s RRIF;
(b) the sole beneficiary of client XX’s TFSA; and
(c) joint owner with client XX on a new non-registered account.

37.
The form naming the Respondent as client XX’s designated beneficiary on the TFSA
account provided that the designated beneficiary is entitled to receive the proceeds of client XX’s
TFSA in the event of her death, and directs Investors Group to pay all of her assets or their value
to the Respondent. The effect of being designated as a beneficiary on client XX’s RRIF is an
entitlement to the proceeds of the RRIF in the event of client XX’s death.

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38.
At all material times, Investors Group’s policies and procedures manual provided that:

(a) joint owners have the right of survivorship, such that on the death of any joint account
owner, the interest in the deceased joint owner will pass directly to the surviving
owners and will not form part of the estate of the deceased owner; and
(b) every owner in a joint account has an equal interest in the account, and share equally
in the income and capital gains generated by the joint account.

39.
As at or about the date the Respondent became a beneficiary, the approximate balance of
the TFSA and RRIF accounts were as follows:

(a) Client XX’s RRIF: $152,714; and
(b) Client XX’s TFSA: $22,194.

40.
In a letter to client XX dated February 4, 2013, a representative of the client services
department at Investors Group acknowledged receipt of the POA and confirmed that the
Respondent may now give instructions on client XX’s behalf with respect to her Accounts. As
described below, Investors Group’s compliance department discovered the POA during its
investigation and advised the Respondent that acting as a POA was contrary to its policies.

Investors Group’s Investigation

41.
At the request of client XX, on or about February 14, 2013, $179,391.75 were transferred
from client XX’s individual account to the joint account held by the Respondent and client XX.

42.
On February 20, 2013, Investors Group conducted a trade review and detected the
transfer of assets to the joint account. Further investigation identified the POA that was granted
on August 7, 2012 that was submitted to Investors Group on January 28, 2013, naming the
Respondent. Investors Group immediately commenced an investigation.

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43.
On or about February 22, 2013, Investors Group reversed the transfer of client XX’s
individual non-registered account to the joint account held by her and the Respondent, and
removed the Respondent as beneficiary of client XX’s RRIF and TFSA accounts.

44.
On or about April 12, 2013, client XX complained to Investors Group about the
Respondent being her POA and being named on her accounts. Client XX advised that she no
longer wished the New Advisor to be her advisor, and instructed the Member to assign a new
advisor from another office as soon as possible.

45.
In response, Investors Group advised client XX that “[i]n light of your intentions and
signing the documentation we conclude you should have been aware of the details outlined in
your Will and you have had appointed [the Respondent] as POA and executor” and that “you felt
he was trustworthy of these roles and considered him to be a surrogate family member”.

46.
It further stated that “we understand that you were not pleased with either [the
Respondent] or [the New Advisor] when they provided you with their opinion regarding your
spending habits, living arrangements or what you should or should not do in your home. These
topics can be sensitive in nature and from the view of a financial advisor it is their duty to ensure
spending habits are brought to your attention and ensure you are on target for your financial
objectives. This does include the possibility of downsizing. In my discussion with [the
Respondent] and [the New Advisor] they were simply giving you their professional advice for
consideration and did not mean to offend you.”

47.
It further stated “In summary of our findings, although we confirmed you agreed and
authorized the appointment of Mr. Sukman as beneficiary on your accounts, POA and Executor,
Mr. Sukman should not have accepted these responsibilities or be the recipient of any bequest
from you. As your financial advisor, this is a conflict of interest. Mr. Sukman understood he
could proceed provided a new servicing consultant was assigned to you. However, having [New
Advisor] assigned to you, did not remove this conflict.”

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48.
On or about May 30, 2013, client XX removed the Respondent as POA and as executor,
beneficiary and trustee in her Will.

49.
Beginning in June 2013, Investors Group placed the Respondent on close supervision.

50.
On February 6, 2014, Investors Group issued a letter of reprimand to the Respondent
advising him that he contravened Investors Group’s policies and regulatory requirements by
being appointed as POA for client XX and an executor for client XX’s Will, and being named as
a beneficiary and joint owner on client XX’s accounts.

Investors Group’s Policies and Procedures

51.
At all material times, Investors Group’s policies and procedures expressly prohibited its
Approved Persons from acting as POA for clients, acting as an executor of a client’s estate, or
being named as a beneficiary to a client’s estate or an Investors Group account, unless the client
is a member of the Approved Person’s immediate family under certain conditions.

Additional Factors

52.
The Respondent has cooperated with Staff throughout the course of Staff’s investigation
and this proceeding.

53.
Client XX received legal advice in respect of the changes to her POA and her Will. Client
XX met with the New Advisor and the Respondent in respect of the changes to her Accounts.
The Respondent states that he did not solicit these changes.

54.
The Respondent has not been the subject of prior MFDA disciplinary proceedings.

55.
The Respondent has retired from the mutual fund industry and presently has no intention
of returning to the industry.

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56.
There is no evidence that:

(a) the Respondent received any financial benefit from client XX; and
(b) Client XX suffered any financial harm as a result of the Respondent’s conduct.

57.
By admitting the facts and contraventions described above, the Respondent has:

(a) expressed remorse for his actions; and
(b) saved the MFDA the time and resources associated with conducting a fully contested
hearing on the merits.

Misconduct Admitted

58.
By engaging in the conduct described above, the Respondent admits that:

(a) between August 2012 and May 2013, he held a POA for property from client XX,
and was appointed as estate trustee, executor and trustee of client XX in her Will,
contrary to MFDA Rules 2.3.1, 2.1.4 and 2.1.1;
(b) between August 2012 and May 30, 2013, he was a beneficiary of a $10,000 legacy in
lieu of executor fees, in the Will of Client XX, contrary to Rules 2.1.4 and 2.1.1; and
(c) in January 2013, he accepted a joint ownership in one account and a designation as
beneficiary of two accounts held by client XX at the Member, contrary to MFDA
Rules 2.1.4 and 2.1.1
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Execution of Agreed Statement of Facts

59.
This Agreed Statement of Facts may be signed in one or more counterparts which
together shall constitute a binding agreement.

60.
A facsimile copy of any signature shall be effective as an original signature.

DATED this 15th day of April, 2016.

“Terry William Sukman”
Terry William Sukman

“Shaun Devlin”

Staff of the MFDA
Per: Shaun Devlin
Senior Vice-President, Member Regulation –
Enforcement

DM 478956 v1
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