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MFDA Notice of Hearing

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201758

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

Sarah Solis Maria Suzarah Del Rosario

NOTICE is hereby given that a first appearance will take place by teleconference before a hearing panel of the Central Regional Council (“Hearing Panel”) of the Mutual Fund Dealers Association of Canada (“MFDA”) in the hearing room at the MFDA offices, located at 121 King Street West, Suite 1000, Toronto, Ontario on November 30, 2017 at 9:00 a.m. (Eastern), or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against Sarah Solis Maria Suzarah Del Rosario (“Respondent”).

DATED: May 12, 2017

"Sarah Rickard"

Sarah Rickard

Director of Regional Councils

Mutual Fund Dealers Association of Canada
121 King St. West, Suite 1000
Toronto, ON M5H 3T9
Telephone: 416-945-5143
Fax: 416-361-9781
E-mail: corporatesecretary@mfda.ca



NOTICE is further given that the MFDA alleges the following violations of the By-laws, Rules or Policies of the MFDA:

Allegation #1: On or about April 24, 2014, the Respondent failed to ensure that a trade in a client account was suitable for the client having regard to the essential Know-Your-Client (“KYC”) factors, including the client’s time horizon and investment objectives, contrary to MFDA Rules 2.2.1 and 2.1.1.

Allegation #2: On or about April 24, 2014, the Respondent processed a trade in a client account without obtaining client instructions in respect of the mutual fund to be purchased, thereby engaging in discretionary trading, contrary to MFDA Rules 2.3.1 and 2.1.1.

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PARTICULARS

NOTICE is further given that the following is a summary of the facts alleged and intended to be relied upon by the MFDA at the hearing:

Registration History

  1. Since 2002, the Respondent has been registered in Ontario as a mutual fund salesperson (now known as a Dealing Representative) with Sun Life Financial Services (Canada) Inc. (“Sun Life”)[1], a Member of the MFDA.
  1. Between September 2009 and May 2015, Sun Life designated the Respondent as a branch manager.
  1. At all material times, the Respondent conducted business in the Ottawa, Ontario area.

Misconduct

  1. At all material times, Sun Life’s policies and procedures permitted clients to sign a Limited Trade Authorization (“LTA”), a document that authorizes Approved Persons to accept verbal instructions from a client in certain circumstances.
  1. At all material times, Sun Life’s policies and procedures prohibited its Approved Persons, including the Respondent, from engaging in discretionary trading.
  1. On February 6, 2014, client JR opened a mutual fund account at the Member (the “Mutual Fund Account”) and completed a KYC form, on which form client JR indicated that the time horizon for her investment in the Mutual Fund Account was less than five years, and that her risk tolerance was low to medium. Client JR also signed a LTA at this time.
  1. Client JR informed the Respondent that she intended to use the monies invested in the Mutual Fund Account to pay taxes on a property within a period of less than five years.
  1. In March 2014, in accordance with client JR’s instructions, the Respondent processed a purchase in a money market fund in the Mutual Fund Account.
  1. On April 24, 2014, client JR verbally instructed the Respondent to process a switch in the Mutual Fund Account to transfer the monies to another fund with a risk rating of low to medium called the Signature Diversified Yield Fund (the “Switch”).
  1. Prior to accepting the order for the Switch, client JR advised the Respondent that client JR did not need the invested monies immediately. The Respondent failed to ask any further questions to determine client JR’s time horizon for the invested monies.
  1. Without obtaining instructions from client JR, the Respondent used her discretion to select a version of the Signature Diversified Yield Fund that was subject to a 7 year deferred sales charge (“DSC”), and processed the Switch. The Respondent incorrectly assumed that client JR’s time horizon for the investment had changed so that a DSC fund would be appropriate.
  1. In order to process the Switch, the Respondent also inaccurately updated client JR’s time horizon to five to nine years on Sun Life’s system.
  1. At the time of the Switch, the Respondent did not inform client JR that she would incur DSC fees if she redeemed monies from the investment within seven years.
  1. On April 25, 2015, client JR redeemed her investment and incurred $6,052.29 in DSC fees.

Allegation #1 – Unsuitable Trade

  1. By engaging in the conduct above, on or about April 24, 2014, the Respondent failed to ensure that a trade in a client account was suitable for the client having regard to the essential Know-Your-Client (“KYC”) factors, including the client’s time horizon and investment objectives, contrary to MFDA Rules 2.2.1 and 2.1.1.

Allegation #2 – Discretionary Trading

  1. By engaging in the conduct described above, on or about April 24, 2014, the Respondent processed a trade in a client account without obtaining client instructions in respect of the mutual fund to be purchased, thereby engaging in discretionary trading, contrary to MFDA Rules 2.3.1 and 2.1.1.

NOTICE is further given that the Respondent shall be entitled to appear and be heard and be represented by counsel or agent at the hearing and to make submissions, present evidence and call, examine and cross-examine witnesses.

NOTICE is further given that MFDA By-laws provide that if, in the opinion of the Hearing Panel, the Respondent:

  • has failed to carry out any agreement with the MFDA;
  • has failed to comply with or carry out the provisions of any federal or provincial statute relating to the business of the Member or of any regulation or policy made pursuant thereto;
  • has failed to comply with the provisions of any By-law, Rule or Policy of the MFDA;
  • has engaged in any business conduct or practice which such Regional Council in its discretion considers unbecoming or not in the public interest; or
  • is otherwise not qualified whether by integrity, solvency, training or experience,

the Hearing Panel has the power to impose any one or more of the following penalties:

  1. a reprimand;
  2. a fine not exceeding the greater of:
    1. $5,000,000.00 per offence; and
    2. an amount equal to three times the profit obtained or loss avoided by such person as a result of committing the violation;
  3. suspension of the authority of the person to conduct securities related business for such specified period and upon such terms as the Hearing Panel may determine;
  4. revocation of the authority of such person to conduct securities related business;
  5. prohibition of the authority of the person to conduct securities related business in any capacity for any period of time;
  6. such conditions of authority to conduct securities related business as may be considered appropriate by the Hearing Panel;

NOTICE is further given that the Hearing Panel may, in its discretion, require that the Respondent pay the whole or any portion of the costs of the proceedings before the Hearing Panel and any investigation relating thereto.

NOTICE is further given that the Respondent must serve a Reply on Enforcement Counsel and file a Reply with the Director of Regional Councils within twenty (20) days from the date of service of this Notice of Hearing.

A Reply shall be served upon Enforcement Counsel at:

Mutual Fund Dealers Association of Canada
121 King Street West
Suite 1000
Toronto, ON M5H 3T9
Attention: Sarah Glickman
Fax: (416) 361-9073
Email: sglickman@mfda.ca

A Reply shall be filed by:

  1. providing 4 copies of the Reply to the Director of Regional Councils by personal delivery, mail or courier to:
    1. The Mutual Fund Dealers Association of Canada
      121 King Street West
      Suite 1000
      Toronto, ON M5H 3T9
      Attention: Office of the Corporate Secretary; or
  2. transmitting 1 copy of the Reply to the Director of Regional Councils by fax to fax number 416-361-9781, provided that the Reply does not exceed 16 pages, inclusive of the covering page, unless the Director of Regional Councils permits otherwise; or
  3. transmitting 1 electronic copy of the Reply to the Director of Regional Councils by e-mail at CorporateSecretary@mfda.ca.

A Reply may either:

  1. specifically deny (with a summary of the facts alleged and intended to be relied upon by the Respondent, and the conclusions drawn by the Respondent based on the alleged facts) any or all of the facts alleged or the conclusions drawn by the MFDA in the Notice of Hearing; or
  2. admit the facts alleged and conclusions drawn by the MFDA in the Notice of Hearing and plead circumstances in mitigation of any penalty to be assessed.

NOTICE is further given that the Hearing Panel may accept as having been proven any facts alleged or conclusions drawn by the MFDA in the Notice of Hearing that are not specifically denied in the Reply.

NOTICE is further given that if the Respondent fails:

  1. to serve and file a Reply; or
  2. attend at the hearing specified in the Notice of Hearing, notwithstanding that a Reply may have been served,

the Hearing Panel may proceed with the hearing of the matter on the date and the time and place set out in the Notice of Hearing (or on any subsequent date, at any time and place), without any further notice to and in the absence of the Respondent, and the Hearing Panel may accept the facts alleged or the conclusions drawn by the MFDA in the Notice of Hearing as having been proven and may impose any of the penalties described in the By-laws.

End.

[1] Between 2002 and 2005, the Respondent was registered with Clarica Investco. Inc. (“Clarica”); in 2005, Clarica merged with Sun Life.