MFDA Notice of Hearing

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201908

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

Madrie Ann Secord

NOTICE OF HEARING

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, 121 King Street West, Suite 1000, Toronto, Ontario on April 9, 2019 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 Madrie Ann Secord (“Respondent”).

DATED: Jan 31, 2019

"Michelle Pong"

Michelle Pong

Director of Regional Councils

Mutual Fund Dealers Association of Canada
121 King St. West, Suite 1000
Toronto, ON M5H 3T9
Telephone: 416-945-5134
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: Commencing in July 2015, the Respondent engaged in personal financial dealings by borrowing $7,000 from client DH, which gave rise to a conflict or potential conflict of interest that the Respondent failed to disclose to the Member or address by the exercise of responsible business judgment influenced only by the best interests of the clients, contrary to the Member’s policies and procedures, and MFDA Rules 2.1.4, 1.1.2, 2.5.1, and 2.1.1.

Allegation #2: In March 2016, the Respondent misled the Member by falsely denying that she had borrowed money from a client, thereby interfering with the ability of the Member to supervise the Respondent’s activities, failing to observe high standards and conduct in the transaction of business, and engaging in conduct that is unbecoming and detrimental to the public interest, contrary to MFDA Rules 2.1.1, 1.1.2 and 2.5.1.

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. From August 2008 to December 2016, the Respondent was registered in Ontario as a mutual fund salesperson (now known as a dealing representative)[1] with Investors Group Financial Services Inc. (“Investors Group”), a Member of the MFDA.
  2. Investors Group terminated the Respondent on December 13, 2016. The Respondent has not been registered in the securities industry in any capacity since her termination.
  3. At all material times, the Respondent conducted business in Huntsville, Ontario.

Allegation #1: Borrowing Monies from a Client

  1. At all material times, Investors Group policies and procedures expressly prohibited its Approved Persons from borrowing money from clients.
  2. In 2014, client DH became a mutual fund client of Investors Group. At all material times, the Respondent was the mutual fund salesperson responsible for servicing client DH’s account at Investors Group.
  3. On or about July 15, 2015, the Respondent borrowed $7,000 from client DH (the “Loan”).
  4. At the time of the Loan, client DH was 72 years old, retired, and had limited income and net worth. Client DH was a vulnerable client.
  5. To fund the Loan, the Respondent facilitated a redemption of $7,402.66 from client DH’s Tax Free Savings Account. Client DH incurred deferred sales charges of $402.66 as a result of the redemption.
  6. Client DH received the net proceeds of the redemption in her personal bank account. Client DH then wrote a cheque in amount of $7,000 payable to the Respondent to fund the Loan.
  7. At about the time the Respondent received the Loan from client DH, the Respondent provided client DH with a post-dated cheque dated July 31, 2015 in the amount of $7,000 payable to client DH for repayment of the Loan (the “Repayment Cheque”).
  8. The Respondent has stated she used the proceeds of the Loan to pay for her son’s university tuition.
  9. On or about July 31, 2015, client DH attempted to cash the Repayment Cheque but it was returned uncashed due to insufficient funds in the Respondent’s account.
  10. The Respondent did not disclose to Investors Group that she had borrowed monies from a client.
  11. In or around December 2016, client DH’s son-in-law contacted Investors Group and raised concerns that, amongst other things, the Respondent had borrowed money from client DH.
  12. The Respondent subsequently repaid the Loan on about December 16, 2016.
  13. By virtue of the foregoing conduct, the Respondent engaged in personal financial dealings with a client which gave rise to a conflict or potential conflict of interest between the Respondent and the client that the Respondent failed to disclose to Investors Group or address by the exercise of responsible business judgment influenced only by the best interests of the client, contrary to MFDA Rules 2.1.1 and 2.1.4.

Allegation #2: Misleading the Member

  1. On March 2, 2016 (while the Loan from client DH was still outstanding), the Respondent completed Investors Group’s 2016 Annual Consultant Certificate in which she falsely responded to an inquiry from Investors Group by denying that she had borrowed money from a client.
  2. The Annual Consultant Certificate is a tool used by Investors Group to supervise its Approved Persons, and detect actual or potential conflicts of interest that may need to be addressed.
  3. By engaging in the conduct described above, the Respondent mislead the Member, thereby interfering with its ability to supervise the Respondent’s conduct, failing to observe high standards of ethics and conduct in the transaction of business, and engaged in conduct detrimental to the public interest, contrary to MFDA Rules 2.1.1, 1.1.2 and 2.5.1.

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; and
  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 Office of the Corporate Secretary 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: H. C. Clement Wai
Email: cwai@mfda.ca

A Reply shall be filed by:

  1. providing four copies of the Reply to the Office of the Corporate Secretary 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 one electronic copy of the Reply to the Office of the Corporate Secretary 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] In September 2009, when National Instrument 31-103 came into effect, the registration category ‘mutual fund salesperson’ was changed to ‘dealing representative – mutual fund dealer’.