Agreed Statement of Facts

I. INTRODUCTION

1. By Notice of Hearing dated April 30, 2021, the Mutual Fund Dealers Association of Canada (the “MFDA”) commenced a disciplinary proceeding against Wayne Brian Charlton (the “Respondent”) pursuant to ss. 20 and 24 of MFDA By-law No. 1.
2. The Notice of Hearing set out the following allegations:
   1. Allegation #1:   Between October 3, 2017 and November 26, 2018, the Respondent engaged in discretionary trading when he processed 7 redemptions for 3 clients without obtaining instructions from the clients with respect to the mutual funds to be redeemed in the clients’ accounts, contrary to MFDA Rules 2.3.1(b) and 2.1.1; and
   2. Allegation #2: Between October 3, 2017 and November 26, 2018, the Respondent failed to record and maintain evidence of client trade instructions with respect to 4 redemptions in 4 client accounts, contrary to the Member’s policies and procedures and MFDA Rule 1.1.2, 2.5.1 and 5.1(b).

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 MFDA By-law No. 1.
5. 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

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 information, facts or documents, subject to the content of this paragraph and paragraph 7 below.
7. In the event that the Hearing Panel advises one or both of Staff and the Respondent of any additional facts that it considers necessary in order to determine the issues before it, Staff and the Respondent agree that such additional facts may be provided to the Hearing Panel, either: (a) with the consent of both Staff and the Respondent if the additional facts are agreed upon; (b) if the Respondent is not present at the hearing, Staff may disclose additional relevant facts, at the request of the Hearing Panel; or (c) if the parties are both present at the hearing and are not in agreement about the additional facts requested by the Hearing Panel, the parties will be given a reasonable opportunity to lead evidence concerning the additional facts. In circumstances where a party leads evidence concerning additional facts requested by the Hearing Panel, the opposing party may cross-examine any witness tendered to lead such evidence and shall be given a reasonable opportunity to lead responding evidence if they wish to do so.
8. 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

9. The Respondent has been registered in the securities industry since October 1996.
10. Since August 4, 2017, the Respondent has been registered in Ontario and British Columbia as a dealing representative with Investia Financial Services Inc., a Member of the MFDA (the “Member”).
11. The Respondent is currently registered in the securities industry with the Member.
12. At all material times, the Respondent conducted business in the Oakville, Ontario area.
13. The Respondent has not previously been the subject of disciplinary proceedings

Facts

Allegation #1 – Discretionary Trading

14. At all material times, the Member’s policies and procedures prohibited its Approved Persons from engaging in discretionary trading.
15. Between October 3, 2017 and November 26, 2018, the Respondent obtained written communications from 3 clients requesting redemptions from their client Member accounts. The written communications from the clients specified the amount of the redemption and when the redemption was to occur, but did not specify which mutual funds to sell to fulfill the redemption request. Using his own discretion, the Respondent selected which mutual funds would be redeemed without obtaining those instructions from the client.

Allegation #2 – Failure to Record and Maintain Evidence of Client Instructions

16. At all material times, the Member’s policies and procedures required its Approved Persons to maintain a record of all client instructions and to make them available to the Member upon request.
17. In accordance with Member’s policies and procedures, Approved Persons were required to maintain notes that included the following information:
    1. who gave the client instructions;
    2. the date and time the instructions were given;
    3. the location where the meeting took place (in person, on location, by phone or by email);
    4. what was discussed;
    5. what recommendations were made (whether the transactions were executed or not);
    6. any actions resulting from the meeting;
    7. particulars of the securities to be purchased, switched or redeemed and to which account;
    8. confirmation as to the discussion of any fees or charges to be paid on the transaction; and
    9. in the case of redemptions, instructions as to where the proceeds of the redemption are to be sent or whether they are to be reinvested and how they are to be reinvested.
18. Between October 3, 2017 and November 26, 2018, the Respondent processed 4 redemptions in the accounts of 4 clients, pursuant to Letters of Direction that had been executed by clients.
19. The Respondent states that he received verbal instructions from the clients with respect to the mutual funds to be redeemed, but failed to make a written record of the clients’ instructions.

The Member’s Investigation

20. On November 20, 2018, the Member identified potential discretionary trading activity during a branch audit.
21. On or about February 4, 2019, the Member conducted a full review of the client files maintained by the Respondent.
22. On March 8, 2019, the Member placed the Respondent on strict supervision during which the Member required that: all of the Respondent’s trades be pre-approved by the corporate branch manager; the Respondent cease using Limited Trading Authorizations; and written instructions with an original client signature would be required to process transactions.
23. On May 1, 2019, the Member contacted and sent transaction histories for a 3 year period to all clients whose accounts were serviced by the Respondent. The letters requested that the clients review their transaction histories to ensure that all trading activity was executed accurately and to advise the Member of if the trading activity within the client accounts was not accurate.  No clients reported any concerns to the Member in response to its letters.
24. The Respondent paid an administrative fee of $755 to the Member for the costs associated with the client mailing.
25. On July 22, 2019, the Member issued a Warning Letter to the Respondent for the conduct described herein and discontinued its strict supervision of his trading activity. The Respondent was also required to sign a Letter of Undertaking agreeing to abide by all Member policies and procedures, MFDA rules, and provincial securities regulations.

Additional Facts

26. There is no evidence that the Respondent received any financial benefit from the misconduct described above beyond the commissions or fees that he would ordinarily be entitled to receive had the transactions been carried out in the required manner.
27. There is no evidence of client loss or client complaints associated with the underlying transactions.

Misconduct Admitted

28. By engaging in the conduct described above, the Respondent admits that:
    1. between October 3, 2017 and November 26, 2018, the Respondent engaged in discretionary trading when he processed 7 redemptions for 3 clients without obtaining instructions from the clients with respect to the mutual funds to be redeemed in the clients’ accounts, contrary to MFDA Rules 3.1(b) and 2.1.1; and
    2. between October 3, 2017 and November 26, 2018, the Respondent failed to record and maintain evidence of client trade instructions with respect to 4 redemptions in 4 client accounts, contrary to the Member’s policies and procedures and MFDA Rules 1.1.2, 2.5.1 and 5.1(b).

Execution of Agreed Statement of Facts

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