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MFDA Agreed Statement of Facts

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Home › ASF201713

File No. 201713

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: Chun-Yi Tay

Agreed Statement of Facts

I. INTRODUCTION

  1. By Notice of Hearing dated February 8, 2017, the Mutual Fund Dealers Association of Canada (“MFDA”) commenced a disciplinary proceeding against Chun-Yi Tay (“Respondent”) pursuant to ss. 20 and 24 of MFDA By-law No. 1.
  1. The Notice of Hearing set out the following allegations:
    1. Allegation #1: Between May 26, 2015 and June 3, 2015, the Respondent processed two redemptions in the total amount of $51,200 USD based upon email instructions received from a third party who gained unlawful access to a client’s email account and subsequently misappropriated the proceeds of the redemptions, thereby failing to comply with the Member’s policies and procedures that prohibited its Approved Persons from accepting instructions from clients by email, contrary to MFDA Rules 1.1.2, 2.5.1, and 2.1.1.
    2. Allegation #2: On or about June 3, 2015, the Respondent falsely represented to the Member that she had spoken with a client to confirm the client’s instructions to process a transaction, thereby failing to observe high standards of ethics and conduct in the transaction of business, contrary to MFDA Rule 2.1.1.

II. IN PUBLIC/ IN CAMERA

  1. 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

  1. 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 MFDA By-law No. 1.
  1. Staff and the Respondent jointly request that the Hearing Panel determine, on the basis of this Agreed Statement of Facts, the appropriate penalty to impose on the Respondent.

IV. AGREED FACTS

  1. 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.
  1. Nothing in this Part IV is intended to restrict the Respondent from making full answer and defence to any civil or other proceedings against her.

Registration History

  1. The Respondent is not currently registered in the securities industry.
  1. Between June 17, 2016 to August 11, 2017, the Respondent was registered in British Columbia as a dealing representative with Royal Mutual Funds Inc., a Member of the MFDA.
  1. From February 15, 2013 to December 20, 2015, the Respondent was registered in British Columbia as a mutual fund salesperson (now known as a dealing representative) with BMO Investments Inc. (“BMO”), a Member of the MFDA.
  1. At all material times, the Respondent carried on business in the Richmond, British Columbia area.

Contravened Member’s Policies and Procedures by Processing Redemptions Based on Email Instructions

  1. At all material times, BMO’s policies and procedures prohibited its Approved Persons from accepting financial instructions from clients by email.
  1. On December 5, 2014, client X signed a Message Agreement with BMO that allowed BMO to accept instructions from client X by telephone or fax transmission. The Message Agreement specifically states that BMO “will not accept or act upon email instructions.”
  1. On May 26, 2015, the Respondent received an email from client X’s email account requesting that he transfer $21,200 USD from his BMO account by wire transfer to a certain bank account purporting to belong to client X in the United Kingdom.
  1. Unbeknownst to the Respondent at the time, client X’s email account had been unlawfully accessed by an unknown person, who proceeded to use client X’s email account to communicate via email with the Respondent, ultimately resulting in redemptions being facilitated by the Respondent in the account of client X. The proceeds of the redemptions were deposited into bank accounts, which unbeknownst to the Respondent at the time, did not belong to client X.
  1. After receiving the email from client X’s email account on May 26, 2015, the Respondent states that she also attempted to contact client X using a phone number on file but could not reach with client X by phone. The Respondent states that she replied to the email and asked for an additional phone number in order to contact client X and confirm the redemption instructions. The Respondent states that she received a reply to her email that: did not provide a phone number; advised that client X was boarding a flight to the United Kingdom; and advised that client X required the monies redeemed and wired immediately.
  1. On May 28, 2015, based on the instruction received from client X’s email account on May 26, 2017, the Respondent completed 2 BMO redemption forms, one for $21,000 USD and the other for $200 USD to redeem monies from client X’s mutual fund account at BMO. Both forms were signed by the Respondent, and on the accountholder’s signature line, the Respondent wrote that there was a Message Agreement on file with the date of the accountholder’s authorization listed as May 26, 2015. The Respondent states she completed the form and inputted the redemption on BMO’s online system to process the transaction, and then filed the redemption form. The Respondent states she then presented the required information to the Customer Service Representative, an employee of the Bank of Montreal (“CSR”) for the wire transfer of $21,200 USD to the bank account specified in the email that the Respondent received on May 26, 2015.
  1. On June 1, 2015, the Respondent, received another email from client X’s email account requesting that the Respondent redeem $32,020 USD from client X’s BMO account and advising that client X would provide the Respondent with wire transfer instructions in the future.
  1. After receiving this email, the Respondent states that she left a telephone voicemail message seeking authorization for the transaction on June 3, 2015 at approximately 2:10pm. The Respondent states she also replied to the email and asked for a contact number to confirm the instructions. The Respondent states she did not receive a telephone call from client X, but instead received an email from client X’s email account stating that client X was traveling and could not provide a phone number.
  1. On June 3, 2015, the Respondent received another email from client X’s email account providing the Respondent with instructions to wire transfer the monies to a certain account in the United Kingdom.
  1. On June 3, 2015, based on the instructions received from client X’s email account on June 1, 2015, the Respondent completed a BMO redemption form to redeem $32,020 USD from client X’s mutual fund account at BMO. The Respondent signed the form and on the accountholder’s signature line, the Respondent wrote that there was a Message Agreement on file with the date of the accountholders authorization listed as June 1, 2015. The Respondent states she completed the form and inputted the redemption on BMO’s online system to process the transaction, and then filed the redemption form.
  1. On June 3, 2015 after processing the redemption described above at paragraph 21, the Respondent then presented the client’s email instructions, which were used to process the wire transfer for $30,000 USD from client X’s account to the account in the United Kingdom, to the CSR who then prepared, printed, and stamped the wire transfer request form and a second form entitled Wire Payment via Telephone Instructions &/or Callback Confirmation (together the “Wire Transfer Forms”). On the printed and stamped Wire Transfer Forms, the Respondent signed both forms and indicated on both forms that she had contacted client X by telephone and obtained instructions on June 3, 2015 at 2:10 PM, when in fact the Respondent states that she had called client X by telephone at that time, but did not speak with client X to obtain instructions and instead left a telephone voicemail message for client X. The Respondent states that at the time she provided the client’s email instructions to the CSR, the she told the CSR that client X could not be reached by phone in order to obtain verbal confirmation.
  1. On June 11, 2015, client X emailed the Respondent from a different email address and advised that the email address from which the Respondent had received the instructions described above had been compromised, that the Respondent should not wire any monies without speaking with client X, and that the Respondent should no longer communicate with client X through that email address. On June 11, 2015, the Respondent reported to BMO that client X’s email had been compromised.
  1. BMO was able to recover a portion of the monies transferred to the bank account in the United Kingdom, and reimbursed client X for the remaining amounts of the redemptions.

Misrepresented To The Member About Receiving Phone Instructions From The Client

  1. Contrary to the Member’s policies and procedures, prior to processing the transaction on June 3, 2015 as described above at paragraphs 21 and 22, the Respondent did not speak with or fax client X to confirm the redemptions or the wire transfer instructions she received by email purportedly from client X. As described above at paragraph 22, the Respondent misrepresented to the Member on the Wire Transfer Forms that she had contacted client X by telephone and obtained instructions on June 3, 2015 at 2:10 PM to process the transaction, when she had not done so.

BMO’s Investigation

  1. BMO conducted an investigation into this matter and, on July 2, 2015, issued a reprimand letter to the Respondent.

Additional Factors

  1. The Respondent has not previously been the subject of MFDA disciplinary proceeding.
  1. There is no evidence that the Respondent received any financial benefit from engaging in the misconduct beyond the commissions or fees to which she would have been ordinarily entitled had the transactions in the clients’ accounts been carried out in the proper manner.

Misconduct Admitted

  1. By engaging in the conduct described above, the Respondent admits that she:
    1. between May 26, 2015 and June 3, 2015, processed two redemptions in the total amount of $51,200 USD, based upon email instructions received from a third party individual, who gained unlawful access to a client’s email account and subsequently misappropriated the proceeds of the redemptions, thereby failing to comply with the Member’s policies and procedures that prohibited its Approved Persons from accepting instructions from clients by email, contrary to MFDA Rules 1.1.2, 2.5.1, and 2.1.1; and
    2. on or about June 3, 2015, misrepresented to the Member that she had spoken with a client to confirm the client’s instructions to process a transaction, thereby failing to observe high standards of ethics and conduct in the transaction of business, contrary to MFDA Rule 2.1.1.

Execution of Agreed Statement of Facts

  1. This Agreed Statement of Facts may be signed in one or more counterparts which together shall constitute a binding agreement.
  1. A facsimile copy of any signature shall be effective as an original signature.

DATED: Jan 14, 2018

"Chun-Yi Tay"

Chun-Yi Tay

 

“Shaun Devlin ”

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

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