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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: Marc Joseph Robert Bodson

NOTICE OF HEARING

NOTICE is hereby given that a first appearance will take place by teleconference before a hearing panel of the Central Regional Council (“Hearing Panel”) of the Mutual Fund Dealers Association of Canada (“MFDA”) in the hearing room at the MFDA offices, located at 121 King Street West, Suite 1000, Toronto, Ontario on March 13, 2018 at 9:00 a.m. (Eastern), or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against Marc Joseph Robert Bodson (“Respondent”).

  • Sarah Rickard
    Sarah Rickard
    Director of Regional Councils

    Mutual Fund Dealers Association of Canada
    121 King St. West, Suite 1000
    Toronto, ON M5H 3T9
    Telephone: 416-943-5143
    Fax: 416-361-9781
    E-mail: corporatesecretary@mfda.ca

NOTICE is further given that the MFDA alleges the following violations of the By-laws, Rules or Policies of the MFDA:

Allegation #1: Between February 2012 to October 2015, the Respondent processed transactions in client accounts without obtaining client instructions in respect of the amount of the transaction and the specific mutual fund purchased, thereby engaging in discretionary trading contrary to MFDA Rules 2.3.1 and 2.1.1, and acting beyond the scope of his registration category as a mutual fund salesperson.

Allegation #2: Between about 2012 and 2015, the Respondent obtained and possessed five (5) pre-signed account forms in respect of five (5) clients, contrary to MFDA Rule 2.1.1 and the policies and procedures of the Member.

Allegation #3: Between October 2012 to March 2016, the Respondent or other persons acting on his behalf altered information on five (5) account forms in respect of three (3) clients without obtaining the clients’ initials or other evidence recording the clients’ authorization of changes to information on the form, contrary to MFDA Rule 2.1.1 and the policies and procedures of the Member.

PARTICULARS

NOTICE is further given that the following is a summary of the facts alleged and intended to be relied upon by the MFDA at the hearing:

Registration History

  1. Since about February 1, 2012, the Respondent has been registered in Ontario as a mutual fund salesperson (now known as a dealing representative) with Investors Group Financial Services Inc. (“IG”), a Member of the MFDA. Since October 2015, Respondent has also been registered in Alberta as a mutual fund salesperson with IG.
  1. At all material times, the Respondent conducted business in Val Caron, Ontario.

Discretionary Trading

  1. At all material times, IG’s policies and procedures prohibited its Approved Persons from engaging in discretionary trading.
  1. An individual who is registered as a mutual fund salesperson is not permitted to accept discretionary trading authority from clients.
  1. In December 2016, the Respondent serviced approximately 120 clients and $8 million in assets under administration.
  1. Between 2012 and 2015, the Respondent’s general practice was to ask clients to complete a risk tolerance form which contained a scale between 1 and 10. This risk tolerance form had not been approved for use by IG. The Respondent would provide clients with Fund Fact sheets for a standard group of 7 to 9 mutual funds that he recommended to all clients whose accounts he serviced. During the meeting, the Respondent would explain his general approach to asset allocation and reference the percentage of particular types of funds (e.g.; equity funds, fixed income funds, etc.) that he typically recommended.
  1. Following his initial meetings with clients, the Respondent’s general practice was to determine the client’s risk tolerance based on the responses that the client recorded on the risk tolerance form that he had asked them to complete. Based in part upon his determination of the client’s risk tolerance, the Respondent exercised his discretion to determine which of the 7 to 9 mutual funds that he had referenced during the meeting should be purchased in the client’s accounts and the amount of each mutual fund that should be purchased.  The Respondent facilitated the processing of purchases of the mutual funds that he selected in the amounts that he determined would be appropriate without further consultation with the clients.
  1. The clients became aware of the specific investment allocations in their portfolios including the specific mutual funds that were purchased and the amounts of each mutual fund that was purchased after the purchase orders had been processed when the clients received their transaction confirmations or quarterly account statements.
  1. By virtue of the foregoing, between February 2012 to October 2015, the Respondent’s general practice was to process transactions in client accounts without obtaining client instructions in respect of the specific mutual funds purchased in the client’s accounts and the amount invested in each mutual fund, thereby engaging in discretionary trading, contrary to MFDA Rules 2.3.1 and 2.1.1 and acting beyond the scope of his registration category as a dealing representative of a mutual fund dealer.

Client Complaints

  1. On or about July 6, 2015, IG received a written complaint from clients WH and LH. Client WH and client LH are spouses. The Respondent was the Approved Person who serviced their accounts. Clients WH and LH complained that, among other things, the Respondent had processed trades to purchase mutual funds that were subject to deferred sales charge fees (“DSC fees”) in their investment accounts without their knowledge, authorization or approval.
  1. On or about August 18, 2015, IG received a written complaint from client MS and on or about August 19, 2015, IG received a written complaint from client AS. Client MS and client AS are spouses. The Respondent was the Approved Person who serviced their accounts.  Clients MS and AS also complained that the Respondent had processed trades to purchase mutual funds that were subject to DSC fees in their investment accounts without their knowledge, authorization or approval.

Pre-Signed Account Forms

  1. At all material times, IG’s policies and procedures prohibited its Approved Persons from using pre-signed account forms.
  2. During IG’s investigation into client complaints described above, IG identified pre-signed account forms in the files of clients whose accounts were serviced by the Respondent as specified below:

 

Client

Account Form

Date of Account Form

Description of Form

CJ

Ontario LIRA addendum

Not dated

Form signed in blank

CJ

Federal Locked-in RRSP addendum

Not dated

Form signed in blank

MS and AS

Pre-Authorized Contribution agreement

Not dated

Form signed in blank

DT

Client Application for Non-registered account.

Not dated

Form signed in blank

SF

Preauthorized contribution agreement

February 25, 2014

Form signed in blank

 

  1. None of the pre-signed forms that IG found in client files had been used.
  1. By virtue of the foregoing, between about 2012 and 2015, the Respondent obtained and possessed 5 pre-signed account forms in respect of 5 clients, contrary to MFDA Rule 2.1.1 and the policies and procedures of IG.

Altered Account Forms

  1. At all material times, IG’s policies and procedures prohibited its Approved Persons from altering account forms without client authorization.
  1. As part of IG’s investigation into client complaints, IG identified altered account forms in the files of clients whose accounts were serviced by the Respondent without evidence of client authorization of the changes that were made to the content of the forms, as specified below:

 

Client

Account Form

Date of Account Form

Description of Alteration

SF

Preauthorized contribution agreement

March 23,2016

Form has been altered, no client initials. Liquid paper used to change information on the form.

FA

Transfer documentation

October 9, 2012

Form has been altered, no client initials. Liquid paper used to change information on the form.

FA

Identity verification of agent

October 9, 2012

Form has been altered (address), no client initials. Liquid paper used to change information on the form.

LT

Preauthorized contribution agreement

March 9, 2015

Form has been altered, no client initials. Liquid paper used to change information on the form.

LT

Preauthorized contribution agreement

March 9, 2015

Form has been altered, no client initials. Liquid paper used to change details of the form.

 

  1. By virtue of the foregoing, between October 2012 to March 2016, the Respondent or other persons acting on his behalf altered information on 5 client account forms in respect of 3 clients without obtaining the clients’ initials or other evidence of client authorization of the changes that were made to information on the account forms, contrary to MFDA Rule 2.1.1 and the policies and procedures of IG.

NOTICE is further given that the Respondent shall be entitled to appear and be heard and be represented by counsel or agent at the hearing and to make submissions, present evidence and call, examine and cross-examine witnesses.

NOTICE is further given that MFDA By-laws provide that if, in the opinion of the Hearing Panel, the Respondent:

  • has failed to carry out any agreement with the MFDA;
  • has failed to comply with or carry out the provisions of any federal or provincial statute relating to the business of the Member or of any regulation or policy made pursuant thereto;
  • has failed to comply with the provisions of any By-law, Rule or Policy of the MFDA;
  • has engaged in any business conduct or practice which such Regional Council in its discretion considers unbecoming or not in the public interest; or
  • is otherwise not qualified whether by integrity, solvency, training or experience,

the Hearing Panel has the power to impose any one or more of the following penalties:

  1. a reprimand;
  2. a fine not exceeding the greater of:
    1. $5,000,000.00 per offence; and
    2. an amount equal to three times the profit obtained or loss avoided by such person as a result of committing the violation;
  3. suspension of the authority of the person to conduct securities related business for such specified period and upon such terms as the Hearing Panel may determine;
  4. revocation of the authority of such person to conduct securities related business;
  5. prohibition of the authority of the person to conduct securities related business in any capacity for any period of time;
  6. such conditions of authority to conduct securities related business as may be considered appropriate by the Hearing Panel;

NOTICE is further given that the Hearing Panel may, in its discretion, require that the Respondent pay the whole or any portion of the costs of the proceedings before the Hearing Panel and any investigation relating thereto.

NOTICE is further given that the Respondent must serve a Reply on Enforcement Counsel and file a Reply with the Office of the Corporate Secretary within twenty (20) days from the date of service of this Notice of Hearing.

A Reply shall be served upon Enforcement Counsel at:

Mutual Fund Dealers Association of Canada
121 King Street West
Suite 1000
Toronto, ON M5H 3T9
Attention: Clement Wai
Fax: (416) 361-9073
Email: cwai@mfda.ca

A Reply shall be filed by:

  1. providing four (4) copies of the Reply to the Office of the Corporate Secretary by personal delivery, mail or courier to:
    1. The Mutual Fund Dealers Association of Canada
      121 King Street West
      Suite 1000
      Toronto, ON M5H 3T9
      Attention: Office of the Corporate Secretary; or
  2. transmitting one (1) copy of the Reply to the Office of the Corporate Secretary by fax to fax number 416-361-9781, provided that the Reply does not exceed 16 pages, inclusive of the covering page, unless the Director of Regional Councils permits otherwise; or
  3. transmitting one (1) electronic copy of the Reply to the Office of the Corporate Secretary by e-mail at CorporateSecretary@mfda.ca.

A Reply may either:

  1. specifically deny (with a summary of the facts alleged and intended to be relied upon by the Respondent, and the conclusions drawn by the Respondent based on the alleged facts) any or all of the facts alleged or the conclusions drawn by the MFDA in the Notice of Hearing; or
  2. admit the facts alleged and conclusions drawn by the MFDA in the Notice of Hearing and plead circumstances in mitigation of any penalty to be assessed.

NOTICE is further given that the Hearing Panel may accept as having been proven any facts alleged or conclusions drawn by the MFDA in the Notice of Hearing that are not specifically denied in the Reply.

NOTICE is further given that if the Respondent fails:

  1. to serve and file a Reply; or
  2. attend at the hearing specified in the Notice of Hearing, notwithstanding that a Reply may have been served,

the Hearing Panel may proceed with the hearing of the matter on the date and the time and place set out in the Notice of Hearing (or on any subsequent date, at any time and place), without any further notice to and in the absence of the Respondent, and the Hearing Panel may accept the facts alleged or the conclusions drawn by the MFDA in the Notice of Hearing as having been proven and may impose any of the penalties described in the By-laws.

End.

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