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Decision and Reasons

Re:

Decision and Reasons


File No. 200706

MUTUAL FUND DEALERS ASSOCIATION OF CANADA

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

RE: Cory Piggott

DISCIPLINARY HEARING

Heard: June 28, 2007
Toronto, Ontario

DECISION and REASONS

Hearing Panel of the Ontario Regional Council:

Thomas J. Lockwood, Q.C.
Chair
Paul Griffin

Panel Member
Linda Anderson

Panel Member

Appearances:

Jason Bennett
)
for Mutual Fund Dealers Association

)
of Canada

Cory Piggott )
In Person
) (via teleconference)

Page 1 of 22

1.
THE ALLEGATIONS

By Notice of Hearing, dated the 21st day of March, 2007, the fol owing
al egations were made against Cory Piggott (“Respondent”):

Al egation #1:
Between February 2005 and December 2005, the
Respondent misappropriated approximately $64,000 from two mutual fund
clients, thereby failing to deal with the clients fairly, honestly and in good faith,
contrary to MFDA Rule 2.1.1.

Al egation #2:
Commencing May 2006, the Respondent failed to
provide a report in writing as requested by the MFDA in the course of an
investigation, contrary to Section 22.1 of MFDA By-law No. 1.

2.
SERVICE

The Notice of Hearing provided for a First Appearance by teleconference
before the Hearing Panel at 121 King Street West, Suite 1000, Toronto, Ontario,
on Tuesday, May 15, 2007, at 10:00 a.m.

On May 15, 2007, the Respondent appeared by way of teleconference.
He requested an adjournment of the proceedings as he stated that he was in the
process of retaining counsel. On consent of al parties, the matter was adjourned
to June 1, 2007, at 10:00 a.m.

On June 1, 2007, the Respondent appeared by way of teleconference. He
had not, as yet, retained counsel. He also had not served and filed a Reply to
the Notice of Hearing, as required by Rule 8.1(1) of the MFDA Rules of
Procedure. The Respondent requested additional time to serve and file his
Reply.

Page 2 of 22

After hearing submissions from both Enforcement Counsel and the
Respondent, and with the consent of al parties, the fol owing Order was made:

“1.
The hearing on the merits in this matter shal take place before the
Hearing Panel in the hearing room located at 121 King Street West, Suite 1000,
Toronto, Ontario on Thursday, June 28, 2007 commencing at 1:00 p.m. (Eastern)
or as soon thereafter as the hearing can be held.

2.
Counsel for Staff of the MFDA shal , by Wednesday, June 6, 2007,
provide the Respondent with copies of al documents, and a list of items other
than documents, upon which Counsel intends to rely at the hearing on the merits.

3.
Counsel for Staff of the MFDA shal provide the Respondent with a copy of
any affidavit upon which Counsel intends to rely at the hearing on the merits by
Wednesday, June 6, 2007, or as soon thereafter as reasonably practicable, but
in any event at least 14 days prior to the commencement of the hearing on the
merits.

4.
The Respondent shal , despite the expiration of time for serving and filing
a Reply under Rule 8.1(1) of the Rules of Procedure, serve a Reply on Counsel
for Staff of the MFDA and file a copy of the Reply with the Office of the Corporate
Secretary by Friday, June 15, 2007 and in accordance with the requirements set
out at pages 6-8 of the Notice of Hearing.”

3.
HEARING ON THE MERITS

The Hearing on the merits took place on June 28, 2007. The Respondent
participated by way of teleconference.

At the commencement of the proceedings, the Respondent indicated that
he wished to seek an adjournment.
Page 3 of 22

Enforcement Counsel had marked, as Exhibit 2, a chain of e-mail
correspondence. The first e-mail in the chain was sent by the Respondent at
9:27 a.m. on June 28, 2007, the date set for the Hearing on the merits. This e-
mail stated:

“Jason,

I had a family emergency in Florida and won’t be back til
Friday morning. I made a big mistake and thought the hearing was
scheduled for Friday, as al other hearing (sic) was on a Friday.
What should I do? Can it be rescheduled? Let me know ASAP.

Cory”

Yvette MacDougal , the MFDA Hearings Co-Ordinator, immediately
responded to the Respondent’s e-mail, in part, as fol ows:

“Good Morning Mr. Piggott,

Thank you for your e-mail respecting this afternoon’s hearing.

In light of your being out-of-town, we are making a teleconference
facility available to al ow you to participate in the hearing this
afternoon. Please note that the Hearing Panel has discretion to
proceed in your absence therefore it is important that you
participate if there is any information you wish to provide.”

Teleconference information was provided, which the Respondent utilized
to participate in the Hearing.

Enforcement Counsel also sent an e-mail to the Respondent at 10:37
a.m., as fol ows:

“Mr. Piggott,

It is my intention to proceed with today’s hearing in any event,
however the decision is ultimately that of the Hearing Panel. You
Page 4 of 22

may wish to use the cal -in numbers below to advise the Hearing
Panel of the reasons you believe an adjournment is warranted.

You have been notified that today, June 28, 2007, is the date of the
hearing on the fol owing occasions:

– Friday, June 1, 2007 – First Appearance (continued from May 15,
2007) in which C. Piggott participated and acknowledged June 28,
2007 as the hearing date;
– Friday, June 1, 2007 – Email from J. Bennett to C. Piggott at
11:53 am, attaching draft Order showing June 28, 2007 as the date
for Hearing on the Merits;
– Tuesday, June 5, 2007 – Email from J. Bennett to C. Piggott at
4:32 pm, attaching final Order showing June 28, 2007 as the date
for Hearing on the Merits;
– Monday, June 25, 2007 – Email from J. Bennett to C. Piggott at
4:07 pm, attaching Submission of MFDA Staff and stating hearing
date of June 28, 2007.

Furthermore, a News Release was issued June 1, 2007 and posted
the MFDA website notifying the public that a hearing would be held
on Thursday, June 28, 2007 in this matter.

Please govern yourself accordingly.

Regards,

Jason Bennett
Enforcement Counsel”

The Respondent conceded that he had received from Enforcement
Counsel the documents referred to in paragraphs 2 and 3 of our Order of June 1,
2007. He indicated that he had not filed a Reply as required by paragraph 4 of
the said Order. He stated that he had not done so as the disclosure was much
more voluminous than anticipated and also a family emergency occurred.

The Respondent advised that, on June 10, 2007, he learned that his
brother was going to have a kidney transplant on June 11, 2007, in Florida. The
Respondent flew to Florida on June 11, 2007, and was stil there at the time of
the Hearing.

Page 5 of 22


Despite the various items of notification as to the date and time of the
Hearing referred to in Enforcement Counsel’s e-mail, the Respondent stated that
he thought the Hearing was on Friday, June 29, 2007, at 1:00 p.m. He said that
he had made arrangements to fly to Toronto on June 29, 2007, and would arrive
at 9:30 a.m. He indicated that he was prepared to proceed with the Hearing on
June 29, 2007.

The Respondent indicated that he did not intend to retain counsel. He
further stated that he had not had an opportunity to review the disclosure,
although he had received the documents on June 6, 2007.

The Respondent advised that he had no documents which he wished to
file at the Hearing. However, he intended to make submissions.

Enforcement Counsel told the Hearing Panel that he wished to proceed,
that the Respondent knew about the Hearing date, had received the documents
as ordered and had not filed a Reply. He submitted that the Respondent could
make any submissions he wished to make by telephone.

The Hearing Panel retired to consider the matter. We then reconvened
the Hearing and advised that we were going to proceed. We provided brief oral
reasons for our decision, indicating that ful er written reasons would be
forthcoming.

4.
THE RULING

The Notice of Hearing was issued in this matter on March 21, 2007. The
First Appearance was on May 15, 2007. Various attempts were made to serve
the Respondent with the Notice. These are detailed in a document entitled
“Service Brief”, which was marked as Exhibit 6 to these proceedings.

Page 6 of 22


Service was successful in that the Respondent attended the First
Appearance via teleconference and sought an adjournment, which was granted,
to June 1, 2007.

On June 1, 2007, the Respondent agreed that the Hearing on the merits
would proceed on June 28, 2007, at 1:00 p.m. At that time, we ordered that the
Respondent be provided with disclosure by June 6, 2007. This Order was
complied with by Staff of the MFDA. The Respondent acknowledged that he had
the disclosure before he left for Florida on June 11, 2007.

Prior to June 11, 2007, he had also received copies of al of the Affidavit
material upon which Enforcement Counsel intended to rely at the Hearing.

On June 1, 2007, at the Respondent’s request, he was given until June
15, 2007, to serve and file his Reply. He chose not to do so.

Rule 8.4(1) of the MFDA Rules of Procedure states as fol ows:

8.4
Effect of Failure to Deliver a Proper Reply

(1)
Where a Respondent fails to serve and file a Reply in accordance with the
requirements of Rules 8.1 and 8.2, the Hearing Panel may do any one or
more of the fol owing:

(a)
proceed with the hearing without further notice to and in the
absence of the Respondent;

(b)
accept the facts as al eged and conclusions drawn by the
Corporation in the Notice of Hearing as proven and impose any of
the penalties and costs described in Sections 24.1 and 24.2
respectively of MFDA By-law No. 1;
Page 7 of 22


(c)
order that the Respondent pay costs, at any stage of the
proceeding, regardless of the outcome of the proceeding and in
addition to any other penalties and costs imposed on the
Respondent, in an amount which reflects the extent to which, in the
Hearing Panel’s discretion, the hearing wil be or has been
unnecessarily prolonged or complicated by the failure of the
Respondent to deliver a proper Reply;

(d)
prohibit, restrict, or place terms on the right of the Respondent to
cal witnesses or present evidence at the hearing.

We chose not to impose any restrictions or sanctions on the Respondent
for his failure to serve and file a Reply. Instead, we decided to proceed with the
Hearing on the merits on June 28, 2007, and permit the Respondent to ful y
participate in same by teleconference.

We were persuaded that this was the appropriate course of action as it
was clear that the Respondent had received al of the material that was going to
be presented to the Hearing Panel by Enforcement Counsel a sufficient amount
of time prior to the Hearing so that he could review it and make whatever
submissions he felt were appropriate.

Also, although the Respondent stated that he had left for Florida on June
11, 2007, the first contact he had with the MFDA, subsequent to June 1, 2007,
was his e-mail message at 9:27 a.m. on the date set for the Hearing on the
merits.

We advised the Respondent that we were anxious to hear from him in
response to the al egations. He had previously stated that he did not wish to
present any documentary evidence. We, however, made it clear that he could
Page 8 of 22

ful y participate in the Hearing and make whatever submissions he deemed to be
appropriate.

In our view, it was in the public interest that this matter proceed as
scheduled and we so ordered.

5.
MANNER OF PROCEEDING

Although, as indicated above, Rule 8.4(1)(b) of the Rules of Procedure
authorized the Hearing Panel to accept the facts al eged and conclusions drawn
by the Corporation in the Notice of Hearing as proven, where the Respondent
fails to serve and file a Reply in accordance with the requirements of Rules 8.1
and 8.2, Enforcement Counsel sought to prove the Al egations by means of
admissible evidence. We agreed with that approach.

6.
PRESENTATION OF EVIDENCE

The evidence before the Hearing Panel with respect to this matter
consisted of the fol owing Affidavits and the Exhibits referred to therein.

(a)
An Affidavit of Thomas MacKichan, Director, Complaint Investigation and
Management with Investors Group Financial Services Inc. (“Investors Group”),
sworn June 5, 2007, along with 12 Exhibits. A redacted version of this Affidavit,
removing personal information relating to the former clients of the Respondent,
was marked as Exhibit 4. A ful and unredacted version had been provided to the
Respondent.

(b)
An Affidavit of Ian R. Smith, a Senior Investigator with the MFDA, sworn
June 5, 2007, along with 4 Exhibits. This was marked as Exhibit 5.

Rule 1.6(1) of the MFDA Rules of Procedure provides, in part, that:

“(1) a Panel may admit as evidence any testimony, document or other
thing, including hearsay, which it considers to be relevant to the matters
before it and is not bound by the technical or legal rules of evidence.”
Page 9 of 22

Accordingly, we ruled that Exhibits 4 and 5 formed admissible evidence
before us.

7.
THE EVIDENCE

The admissible evidence before us established the fol owing:

From January 17, 2003, to March 1, 2006, the Respondent was registered
in Ontario as a mutual funds salesperson with Investors Group. On February 28,
2006, the Respondent was terminated for cause by Investors Group as a result
of the conduct which was the subject matter of this proceeding. Investors Group
filed a Notice of Termination with the Ontario Securities Commission, effective
March 1, 2006, which stated that the Respondent was dismissed for cause.

Al egation No. 1

From February 17, 2004, to January 12, 2006, the Respondent was the
mutual fund salesperson at Investors Group responsible for the accounts of C.O.
and L.O.

Between February 25, 2005, and December 13, 2005, the Respondent
made 11 redemptions from the accounts of C.O. and L.O. at Investors Group
totaling $64,065.22 without the knowledge or authorization of his clients.

The Respondent, without the knowledge or authorization of his clients,
directed that the net redemption proceeds of $59,452.91 be deposited into one of
two bank accounts held in his name or under his control.

Details of the redemptions and the amounts misappropriated are set out in
the chart below:

Page 10 of 22


Client
Mutual
Date of
Gross
Net
Name
Fund
Redemption
Redemption Redemption
Account
Proceeds
Proceeds
1.
CO & LO
1331590
February 25, 2005
$20,727.65
$19,587.62
2.
CO & LO
1331590
April 12, 2005
$10,575.25
$10,000.00
3.
CO & LO
1331590
May 9, 2005
$7,367.90
$6,974.43
4.
CO & LO
1331590
July 7, 2005
$2,279.83
$2,154.44
5.
CO & LO
1331590
July 26, 2005
$492.89
$492.89
6.
CO & LO
1331590
August 31, 2005
$8,465.41
$8,000.00
7.
CO & LO
1331590
September 26, 2005
$2,632.76
$2,487.95
8.
LO
603579
November 17, 2005
$6,156.17
$4,924.95
9.
LO
174976
November 22, 2005
$2,222.22
$2,000.00
10
LO
174976
December 1, 2005
$1,552.61
$1,397.35
11
LO
174976
December 13, 2005
$1,592.53
$1,433.28

$64,065.22
$59,452.91

The Respondent misappropriated the net redemption proceeds, taking the
fol owing steps:

(a)
He substituted his own bank account information, as wel as the bank
account information of an individual with the same last name as the Respondent,
who would appear to be his father, for that of C.O. and L.O. by circumventing
Investors Group’s internal controls;

(b)
He then processed a number of unauthorized redemptions, which resulted
in the net proceeds being deposited into either his own bank account or another
account under his control;

(c)
He twice falsified C.O.’s and L.O.’s mailing address on record at Investors
Group in order to misdirect the clients’ mutual fund statements and thereby
conceal his conduct;
Page 11 of 22

At the Hearing on June 28, 2007, the Respondent stated that he did not
have “any position” with respect to the evidence presented on the first al egation.

On the evidence, we have no hesitation in concluding that the Respondent
misappropriated $64,065.22 from C.O. and L.O. and received for his own benefit
the net redemption proceeds in the amount of $59,452.91.

Al egation No. 2

On February 28, 2006, Investors Group terminated the Respondent for
cause. Investors Group then filed with the MFDA a copy of the Notice of
Termination with an effective date of March 1, 2006.

By letter, dated April 18, 2006, sent to the Respondent by both registered
and regular mail to the last known address of the Respondent as recorded in the
National Registration Database, the MFDA requested that the Respondent
provide information pertaining to his termination. Both the registered and regular
letters were returned to the MFDA,

By letter, dated May 17, 2006, sent by both registered and regular mail, to
an address identified by Investors Group as being where the Respondent was
believed to be living, the MFDA requested the Respondent to submit a report in
writing concerning the circumstances of his termination. A response was
requested by May 31, 2006. The Respondent signed for the registered letter on
May 24, 2006. The MFDA did not receive a response to this letter.

By letter, dated October 10, 2006, sent to the Respondent by both
registered and regular mail at the same address as the May 17, 2006 letter, the
MFDA requested the Respondent to provide a written report pursuant to Section
22.1 of MFDA By-law No. 1. The Respondent was advised that, if he failed to
respond in writing by October 24, 2006, authorization might be sought to
Page 12 of 22

commence enforcement proceedings against him for failure to co-operate with
the MFDA investigation. A delivery notification was left with respect to the
registered letter. When the letter remained undelivered, it was returned to the
MFDA. The letter sent by regular mail was not returned. The MFDA did not
receive a response to this letter.

In fact, no response in writing had been made by the Respondent to the
MFDA up to and including the date of the Hearing on June 28, 2007.

We are, unanimously, of the opinion that the Respondent has failed to
submit a report in writing as required by the MFDA in the course of an
investigation contrary to Section 22.1(a) of MFDA By-law No. 1.

8.
APPLICABLE RULES

Al egation No. 1, in the Notice of Hearing, al eges a breach of MFDA Rule
2.1.1. This Rule states:

“2.1.1 Standard of Conduct. Each Member and each
Approved Person of a Member shal :
(a)
deal fairly, honestly and in good faith with its
clients;

(b)
observe high standards of ethics and conduct
in the transaction of business;

(c)
not engage in any business conduct or practice
which is unbecoming or detrimental to the
public interest; and

(d)
be of such character and business repute and
have such experience and training as is
consistent with the standards described in this
Rule 2.1.1, or as may be prescribed by the
Corporation.”

Page 13 of 22


Al egation No. 2, in the Notice of Hearing, al eges a breach of Section 22.1
of MFDA By-law No. 1. This Section states:

“22. INVESTIGATORY POWERS
22.1 For the purpose of any examination or investigation
pursuant to this By-law, a Member, Approved Person
of a Member or other person under the jurisdiction of
the Corporation pursuant to the By-laws or the Rules
may be required by the Corporation:

(a)
to submit a report in writing with regard to any
matter involved in any such investigation;

(b)
to produce for inspection and provide copies of
the books, records and accounts of such
person relevant to the matter being
investigated; and

(c)
to attend and give information respecting any
such matters;

(d)
to make any of the above information available
through any directors, officers, employees,
agents and other persons under the direction
or control of the Member, Approved Person or
other person under the jurisdiction of the
Corporation;

and the Member or person shal be obliged to submit
such report, to permit such inspection, provide such
copies and to attend, accordingly. Any Member or
person subject to an investigation conducted pursuant
to this By-law may be invited to make submission by
statement in writing, by producing for inspection
books, records and accounts and by attending before
the persons conducting the investigation. The person
conducting the investigation may, in his or her
discretion, require that any statement given by any
Member or person in the course of an investigation be
recorded by means of an electronic recording device
or otherwise and may require that any statement be
given under oath.”

Page 14 of 22


9.
FINDINGS AND THE LAW

Enforcement Counsel presented the Hearing Panel with written
Submissions, as wel as a very extensive Casebook, for which we are indebted.

Al egation No. 1

We have found, as a fact, that between February 25, 2005, and December
13, 2005, the Respondent misappropriated $64,065.22 from his clients C.O. and
L.O. and directed $59,452.91 of that amount into one of two bank accounts held
in his name or under his control.

The Respondent, at al material times, was an Approved Person as that
term is defined in Section 1 of By-law No. 1 of the MFDA. There, an Approved
Person is defined as fol ows:

“”Approved Person” means, in respect of a Member,
an individual who is a partner, director, officer,
compliance officer, branch manager, or alternate
branch manager, employee or agent of the Member
who conducts or participates in the dealer business of
the Member and who (i) is registered, licensed or
approved in the appropriate category, where required
by applicable securities legislation, by the securities
commission having jurisdiction, and (i ) is designated
and qualified as such in accordance with the Rules, or
(i i) is otherwise subject to the jurisdiction of the
Corporation;”

In our view, misappropriation of client’s funds by an Approved Person is
dishonest conduct which is inconsistent with the standard of conduct set out in
MFDA Rule 2.1.1.

In the Matter of Robert Roy Parkinson [2005], MFDA File No. 200501, decision dated
April 29, 2005 (“Parkinson”).

In the Matter of Raymond Brown-John, [2005], MFDA File No. 200502, decision dated
June 27, 2005 (“Brown-John”).
Page 15 of 22


In the Matter of Earl Crackower, [2005], MFDA File No. 200506, decision dated August
22, 2005 (“Crackower”).

In the Matter of Stephan Headley [2006], MFDA File No. 200509, decision dated
February 21, 2006 (“Headley”).

In the Matter of Dale Michael Graveline [2006], MFDA File No. 200606, decision dated
December 20, 2006 (“Graveline”).

The evidence clearly establishes that on 11 separate occasions the
Respondent obtained funds from his clients without their knowledge or consent
and took the majority of these funds for his own use. Despite numerous
requests, he has never accounted for these funds.

In our view, it is clear that the Respondent did not deal fairly, honestly and
in good faith with his clients, C.O. and L.O., as al eged in the first Al egation. We,
unanimously, find that MFDA Rule 2.1.1 has been breached by the Respondent
and that Al egation No. 1 has been established.

Al egation No. 2

The evidence clearly establishes that the MFDA made repeated requests
of the Respondent for a report in writing relating to its investigation of the
circumstances of his termination for cause by Investors Group. As indicated
above, no response has ever been made in writing by the Respondent up to and
including the date of the Hearing in June of 2007.

We agree with the submissions of Staff that the MFDA has a duty to
conduct such examinations and investigations of a Member, an Approved Person
or any other person under its jurisdiction as it considers necessary or desirable in
connection with any matter related to that Member’s or person’s compliance with,
inter alia, the By-laws, Rules and Policies of the MFDA.

Page 16 of 22


We, further, agree with Staff that in carrying out this duty, the MFDA is
authorized to require an Approved Person, such as the Respondent, to submit a
written report concerning any matter being investigated by the MFDA.

In our view, the failure of an Approved Person to comply with repeated
requests by the MFDA for a written report, made pursuant to Section 22.1(a) of
the By-law, is serious misconduct.

The actions of the Respondent subverted the ability of the MFDA to
perform its regulatory functions by ful y investigating these al eged
misappropriations and determining, in an expeditious manner, al of the relevant
facts. The repeated failure by the Respondent to provide the written report
requested, in our view, undermined the integrity of the self-regulatory system and
the effectiveness of its operations.

Other MFDA Panels have come to the same conclusion. See:

Re: Parkinson, supra p.25.
Re: Brown-John, supra p. 4.
Re: Crackower, supra pp. 9-10.
Re: Headley, supra pp. 22-23.
Re: Graveline, supra pp. 6-7.

We are, unanimously, of the view that Al egation No. 2 has been
established.

10.
PENALTY REQUESTED

Enforcement Counsel sought the fol owing sanctions:
(a)
A permanent prohibition of the authority of the Respondent to conduct
securities related business in any capacity while in the employ of or associated
with any MFDA member;
(b)
A fine in the amount of $65,000 for misappropriation of client funds
contrary to MFDA Rule 2.1.1.
Page 17 of 22

(c)
A fine in the amount of $50,000 for failure to co-operate contrary to
Section 22.1 of MFDA By-law No. 1; and
(d)
Costs attributable to conducting the investigation and prosecution of this
matter in the amount of $7,500.00.

The Respondent advised the Hearing Panel that he had no submissions to
make with respect to penalty.

11.
FACTORS TO BE CONSIDERED

The primary goal of securities regulation is the protection of the investor.

Pezim v. British Columbia (Superintendent of Brokers) [1994] 2 S.C.R. 557 at paragraph
59.

Parkinson, supra, at pages 20-21.

In the Matter of Arnold Tonnies [2005] MFDA File No. 200503, decision dated June 27,
2005, at page 21.

Sanctions should be preventative, protective and prospective in nature.

Tonnies, supra, at page 22.

Headley, supra, at page 24.

In exercising its discretion to impose a penalty, the Hearing Panel should
take into account the fol owing considerations:
(a)
the protection of the investing public;
(b)
the integrity of the securities markets;
(c)
specific and general deterrence;
(d)
the protection of the MFDA’s membership; and
(e)
the protection of the integrity of the MFDA’s enforcement
processes.

Parkinson, supra, at page 21.

Tonnies, supra, at page 22.

Headley, supra, at page 24.

Page 18 of 22


Previous Hearing Panels have set out a number of additional factors
which should be considered when determining an appropriate penalty. These
include:
(a) The seriousness of the al egations proved against the
respondent;
(b) The respondent’s experience in the capital markets;
(c) The level of the respondent’s activity in the capital markets;
(d) The harm suffered by investors as a result of the respondent’s
activities;
(e) The benefits received by the respondent as a result of the
improper activity;
(f) The risk to investors and the capital markets in the jurisdiction,
were the respondent to continue to operate in capital markets in
the jurisdiction;
(g) The damage caused to the integrity of the capital markets in the
jurisdiction by the respondent’s improper activities;
(h) The need to deter not only those involved in the case being
considered, but also any others who participate in the capital
markets, from engaging in similar improper activity;
(i) The need to alert others to the consequences of inappropriate
activities to those who are permitted to participate in capital
markets; and
(j) Previous decisions made in similar circumstances.

Parkinson, supra, at page 22.

Tonnies, supra, at page 23.

Headley, supra, at pages 25 and 26.

Page 19 of 22


We considered the fol owing aggravating factors:
1.
The actions of the Respondent in misappropriating funds from C.O. and
L.O. were planned and deliberate.
2.
His status as an Approved Person permitted the Respondent to gain the
trust of his clients.
3.
The Respondent abused this trust in the most fundamental fashion.
4.
The above continued over more than a 10 month period.
5.
The Respondent actively concealed his misappropriations from his clients
by diverting their quarterly account statements and other correspondence
from Investors Group away from their home address.
6.
The Respondent intentional y circumvented Investors Group’s internal
controls and abused his access to its electronic trading system.
7.
The Respondent has not demonstrated any remorse, despite being given
ample opportunity to do so at the Hearing on the merits.
8.
The Respondent has made no attempt at restitution of the
misappropriated funds, nor has he attempted to reimburse Investors
Group for its efforts to compensate the clients for their losses.
9.
The Respondent failed to co-operate with the investigation of the MFDA
into these matters.
10.
The Respondent personal y benefited from his misconduct in the amount
of $59,452.91.

On the mitigating side, we considered that the Respondent did participate
in the proceedings before the Hearing Panel on May 15, June 1 and June 28,
2007. We also considered that the Respondent has no discipline history.

12.
PENALTIES IMPOSED
(a)
Al egation No. 1

In our view, it is incumbent upon the Hearing Panel to communicate to the
Respondent, to the public and to the mutual fund industry as a whole that serious
consequences wil befal those who are engaged in activities similar to those of
Page 20 of 22

the Respondent. In our view, there should be a permanent prohibition on the
authority of the Respondent to conduct securities related business in any
capacity while in the employ of or associated with any MFDA member.

We are also firmly of the view that the fine which should be imposed in
cases of this nature, pursuant to the provisions of Section 24.1.1(b) of MFDA By-
law No. 1, should, at a minimum, be approximately equal to the amount
misappropriated by the Approved Person where that amount has not been repaid
by the time of the Hearing.

Accordingly, we are unanimously of the view that a fine in the amount of
$64,065.22 should be imposed with respect to Al egation No. 1.

(b)
Al egation No. 2

Enforcement Counsel provided us with a series of Decisions outlining the
views of various Hearing Panels as to the appropriate fine to be imposed in the
case of an individual who breaches Section 22.1 of MFDA By-law No. 1. These
cases included:

Parkinson, supra, page 25.

Crackower, supra, pages 9-10.

Tonnies, supra, pages 26-27.

Headley, supra, page 30.

In each case, the fine imposed was $50,000.

In our view, the appropriate penalty for failure to co-operate must be such
as to communicate to both the public and the mutual fund industry that serious
consequences wil befal those who seek to frustrate the MFDA in performing its
regulatory mandate.

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Accordingly, with respect to Al egation No. 2, we believe it is appropriate
to fol ow the consistent lead of previous Hearing Panels and impose a fine in the
amount of $50,000.

(c)
Costs

Section 24.2 of By-Law No. 1 provides that:
“A Hearing Panel may in any case in its discretion require that the .
. . Approved Person pay the whole or part of the costs of the
proceedings before the Hearing Panel and any investigations
relating thereto.”

Staff of the MFDA requested that an Order for Costs be made against the
Respondent in the amount of $7,500 as that amount wil permit the MFDA to
recover from the Respondent a portion of the costs attributed to conducting the
investigation and prosecution of this matter.

We believe that the imposition of costs in the circumstances of this case is
appropriate and order same to be fixed in the amount of $7,500.

Dated at Toronto, this 29th day of October 2007.

“Thomas J. Lockwood”

Thomas J. Lockwood, Q.C.

Chair

“Paul Griffin”

Paul Griffin

Panel Member

“Linda Anderson”

Linda Anderson

Panel Member

Doc #122960
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