WHEREAS on December 16, 2016, the Mutual Fund Dealers Association of Canada (the “MFDA”) issued a Notice of Settlement Hearing pursuant to section 24.4 of By-law No. 1 in respect of Desjardins Financial Security Investments Inc. (the “Respondent”);
AND WHEREAS the Respondent entered into a settlement agreement with Staff of the MFDA, dated June 16, 2017 (the “Settlement Agreement”), in which the Respondent agreed to a proposed settlement of matters for which the Respondent could be disciplined pursuant to ss. 20 and 24.1 of By-law No. 1;
AND WHEREAS on the basis of the admissions made by the Respondent in the Settlement Agreement, the Hearing Panel is of the opinion that:
- commencing in December 2008, after discovering that Approved Person Conrad Eagan had engaged in unauthorized outside business activities preparing wills (including a will for client JK) and accepted an appointment as estate trustee for client JK, it failed to conduct a reasonable supervisory investigation to investigate the full nature and extent of Eagan’s misconduct, or take other supervisory and disciplinary measures warranted by the results of its investigation, contrary to MFDA Rules 1.1, 2.1.4, 1.1.5, 2.5 and MFDA Policy No. 2.
- commencing in December 2008, after becoming aware that an actual or potential conflict of interest had arisen as a result of Conrad Eagan’s appointment as estate trustee of the estate of client JK and that Conrad Eagan had thereby accepted discretionary authority over the accounts of client JK in contravention of MFDA Rule 2.3.1, the Respondent failed to take steps to ensure that the resulting conflict was addressed by the exercise of responsible business judgment influenced only by the best interests of the client and failed to take steps to prevent Conrad Eagan from exercising discretionary authority over the account, contrary to MFDA Rules 2.1.1, 2.1.4, 2.3.1, 1.1.5 and 2.5;
- between August 5, 2008 and April 2010, the Respondent failed to conduct adequate trade supervision or implement sufficient internal controls to detect or prevent the processing of potentially unauthorized and/or unsuitable trades in the accounts of clients JK, PL, ES and JR and including an off-book trade processed in the account of client ES by Conrad Eagan, contrary to MFDA Rules 1.1.5, 2.2.1, 2.5 and MFDA Policy No. 2;
- after receiving a client complaint on September 12, 2012 from a beneficiary of the estate of deceased client JK concerning the proceeds from the redemption of investments from the accounts of the estate of JK that were held with the Respondent that Eagan failed to distribute to the beneficiaries or otherwise account for, the Respondent failed to handle the complaint fairly, contrary to MFDA Rules 2.1.1, 2.1.4, 1.1.5, 2.11 and MFDA Policy No. 3.
IT IS HEREBY ORDERED THAT the Settlement Agreement is accepted, as a consequence of which:
- The Respondent shall pay a fine in the amount of $200,000 within 7 days of the date of this Order pursuant to s. 24.1.2(b) of MFDA By-law No. 1; and
- The Respondent shall pay costs in the amount of $25,000 within 7 days of the date of this Order pursuant to s. 24.2 of MFDA By-law No. 1.
Frederick W. ChenowethFrederick W. ChenowethChair
Joan SmartJoan SmartIndustry Representative
Kenneth MannKenneth MannIndustry Representative