File No. 201774
IN THE MATTER OF A SETTLEMENT HEARING PURSUANT TO SECTION 24.4 OF BY-LAW NO. 1 OF THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA
Re: Stefan Christopher Markus
Heard: December 14, 2017 in Toronto, Ontario
Reasons for Decision: February 7, 2018
Reasons for Decision
Hearing Panel of the Central Regional Council:
- Joan Smart, Chair
- Rob Christianson, Industry Representative
- Robert J. Wright, Industry Representative
- Sarah Glickman, Counsel for the Mutual Fund Dealers Association of Canada
Stefan Christopher Markus, Respondent, in person
- Proceedings were commenced against Stefan Christopher Markus (“Respondent”) by Notice of Settlement Hearing, dated August 8, 2017. The settlement hearing was held under Section 24.4 of By-law No. 1 of the Mutual Fund Dealers Association of Canada (“MFDA”) on December 14, 2017 in respect of a settlement agreement, dated August 8, 2017, (“Settlement Agreement”) entered into between Staff of the MFDA (“Staff”) and the Respondent.
- The Hearing Panel accepted the proposed Settlement Agreement at the conclusion of the hearing. These are our Reasons for Decision.
II. Respondent’s Admission of Violation
- The Respondent admitted that on or about November 27, 2015 he signed the signature of one client on an account form contrary to MFDA Rule 2.1.1.
III. Agreed Facts
- Since March, 2015, the Respondent has been registered as a mutual fund salesperson with BMO Investments Inc. (“BMO”), a Member of the MFDA.
- At all material times, client MR was a client of BMO whose account was serviced by the Respondent.
- On April 17, 2015, client MR signed an account form in order to complete a purchase of a mutual fund with a risk rating of “low to medium”, which the Respondent submitted to BMO for processing.
- BMO subsequently identified an inconsistency between the risk rating of the mutual fund selected by client MR and the “low” risk tolerance for client MR on file at BMO. As a result, BMO asked the Respondent to contact the client to re-attend at the bank to discuss her account and the “Know Your Client” account information on file.
- On or about November 27, 2015, rather than contact client MR, the Respondent completed a Non-Financial Account Amendment Form on which he indicated that client MR had a “low to medium” risk tolerance, signed client MR’s signature on the form (“Account Form”), and submitted it to BMO.
- On November 27, 2015, BMO’s compliance department became aware of the Respondent’s conduct after his branch manager identified that the client signature on the Account Form was in the Respondent’s handwriting.
- BMO contacted client MR, who confirmed her risk tolerance was “low to medium” and signed an updated Know Your Client form to that effect.
- BMO reviewed approximately 40 transactions processed by the Respondent and identified no other concerns.
- On January 13, 2016, BMO issued a warning letter to the Respondent.
IV. Terms of Settlement
- Staff and the Respondent agreed on the following terms of settlement:
- the Respondent shall pay a fine in the amount of $5,000 pursuant to section 24.1.1 (b) of MFDA By-law No. 1;
- the Respondent shall pay costs in the amount of $2,500 pursuant to section 24.2 of MFDA By-law No. 1; and
- the Respondent shall in the future comply with MFDA Rule 2.2.1.
- In determining whether to accept the Settlement Agreement, the Hearing Panel considered whether it was reasonable and proportionate, having regard to the Respondent’s conduct; whether it would serve as a specific and general deterrent; and whether it fell within a reasonable range, having regard to MFDA guidance and other similar cases.
- When an Approved Person signs a client’s signature on an account form it is a serious breach of MFDA Rule 2.1.1, which requires that the Approved Person deal fairly, honestly and in good faith with clients; observe high standards of ethics and conduct in the transaction of business; and refrain from any business conduct or practice which is unbecoming or detrimental to the public interest.
- We note that the MFDA has been warning the industry against signing client’s names for a number of years, most recently by way of MFDA Bulletin #0661-E, dated October 2, 2015, in which the MFDA warned that it would be seeking increased penalties in upcoming cases involving signature falsification.
- In deciding to accept the Settlement Agreement, the Panel took into consideration several mitigating factors concerning the Respondent, including that there was no evidence of financial loss suffered by the client; there was no evidence that the Respondent received any financial benefit from the misconduct beyond usual commissions and fees from the transaction; and the Respondent recognized the seriousness of his misconduct. We also noted that the Respondent has not previously been subject to MFDA disciplinary proceedings.
- The proposed penalty is consistent with the MFDA’s Penalty Guidelines, which suggest a minimum fine of $5000 for a violation of MFDA Rule 2.1.1, and is also consistent with other similar cases when considering MFDA Bulletin #0661-E.
- We concluded that the agreed penalty was reasonable and proportionate, having regard to the Respondent’s conduct, would serve as a specific and general deterrent and fell within a reasonable range, having regard to MFDA guidance and precedents. Accordingly, we concluded that it was in the public interest to accept the Settlement Agreement and we did so.
DATED: Feb 7, 2018
"Robert J. Wright"
Robert J. Wright