January 8, 2021 (Toronto, Ontario) – The Mutual Fund Dealers Association of Canada (“MFDA”) has commenced disciplinary proceedings in respect of Scott Charles Nichols (“Respondent”). In its Notice of Hearing dated December 31, 2020 (“Notice of Hearing”), Staff of the MFDA alleges that the Respondent engaged in the following conduct contrary to the By-laws, Rules and/or Policies of the MFDA:
Allegation #1: Between September 2013 and April 2014, the Respondent allowed an unregistered individual to open new accounts at the Member and make investment recommendations for clients who the Respondent had not met, thereby facilitating stealth advising by the unregistered individual and failing to perform the necessary due diligence to learn the essential facts relative to the clients, contrary to MFDA Rules 2.2.1 and 2.1.1.
Allegation #2: Between April 2014 and September 2014, the Respondent signed and submitted account forms to process switches and redemptions in the investment accounts of a client who the Respondent had not met, based on instructions received from a third party who did not have trading authorization on the accounts without confirming the trading instructions with the client, thereby engaging in unauthorized trading in the client’s accounts, contrary to MFDA Rules 2.3.1(a) [now MFDA Rule 2.3.1(b)], 2.1.1, 2.5.1 and 1.1.2.
Allegation #3: In April 2014, in response to a supervisory query from the Member, the Respondent falsely stated to the Member that he had spoken with a client to update her Know-Your-Client (“KYC”) information when he had not spoken with her, and signed and submitted a KYC update form as the Approved Person responsible for servicing the account when he had not communicated with the client to obtain instructions concerning the KYC update, thereby misleading the Member and undermining its trade supervision process, contrary to MFDA Rule 2.1.1.
The first appearance in this proceeding will take place by teleconference before a Hearing Panel of the MFDA’s Atlantic Regional Council on February 23, 2021 at 10:00 a.m. (Atlantic ), or as soon thereafter as the appearance can be held, to schedule a date for the commencement of the hearing on the merits and to address any other procedural issues. The appearance will be open to the public, except as may be required for the protection of confidential matters. Members of the public who would like to listen to the teleconference should contact firstname.lastname@example.org to obtain particulars.
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 81,000 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.