June 21, 2017 (Toronto, Ontario) – A settlement hearing in the matter of Desjardin Financial Security Services Inc. (“Respondent”) was held on June 20, 2017 in Toronto, Ontario before a three-member Hearing Panel of the Central Regional Council of the Mutual Fund Dealers Association of Canada (“MFDA”).
The Hearing Panel accepted the settlement agreement (“Settlement Agreement”) between Staff of the MFDA and the Respondent, as a consequence of which the following sanctions were imposed on the Respondent:
- a fine in the amount of $200,000, payable within seven (7) days of the date of the Hearing Panel’s Order; and
- costs in the amount of $25,000, payable within seven (7) days of the date of the Hearing Panel’s Order.
In the Settlement Agreement, the Respondent admitted 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; and
- 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.
The MFDA is the self-regulatory organization for Canadian mutual fund dealers, regulating the operations, standards of practice and business conduct of its Members and their approximately 83,000 Approved Persons with a mandate to protect investors and the public interest. For more information about the MFDA’s complaint and enforcement processes, as well as links to ‘Check an Advisor’ and other Investor Tools, visit the For Investors page on the MFDA website.
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