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MFDA Notice of Hearing

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HomeCompleted Hearings2018123 - Nadine Wighton › NOH2018123

2018123

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

Nadine Wighton

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, 121 King Street West, Suite 1000, Toronto, Ontario on July 9, 2019 at 9:30 a.m. (Eastern), or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against Nadine Wighton (“Respondent”).

DATED: May 17, 2019

"Michelle Pong"

Michelle Pong

Director, Regional Councils

Mutual Fund Dealers Association of Canada
121 King St. West, Suite 1000
Toronto, ON M5H 3T9
Telephone: 416-945-5134
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 December 24, 2009 and February 12, 2013, the Respondent failed to conduct adequate due diligence to learn, or accurately record on account documents, Know-Your-Client information for client X, contrary to MFDA Rules 2.2.1 and 2.1.1.

Allegation #2: Between December 24, 2009 and February 12, 2013, the Respondent arranged for client X’s account statements to be delivered to a third party without the consent of client X, thereby failing to ensure that the confidential information relating to client X was maintained in confidence, contrary to the policies and procedures of the Member and MFDA Rules 2.1.1, 2.5, 2.10, and 1.1.2.

Allegation #3: On January 26, 2011, the Respondent accepted and acted upon trade instructions regarding two purchases in client X’s investment account that the Respondent received from a third party who did not possess trading or signing authority over the investment accounts of client X, and submitted the trades for processing without obtaining authorization from client X, thereby engaging in unauthorized trading, contrary to the policies and procedures of the Member and MFDA Rules 2.1.1, 2.5, 2.10, and 1.1.2.

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. From August 31, 1998 to June 9, 2017, when she was terminated in connection with the events described herein, the Respondent was registered in Ontario as a mutual fund salesperson (now known as a dealing representative)[1] with Scotia Securities Inc. (the “Member”), a Member of the MFDA.
  2. The Respondent is not currently registered in the securities industry in any capacity.
  3. At all material times, the Respondent carried on business from a branch located in Hamilton, Ontario.

Background

  1. In or about December 2004, the Respondent started servicing the mutual fund accounts of client X and her family, including client X’s father, siblings and other relatives. Client X’s family operates a business.
  2. Client X held a Tax-Free Savings Account, Registered Retirements Savings Plan and Registered Education Savings Plan at the Member.
  3. The Respondent continued servicing the mutual fund accounts of client X until approximately November 2013.

Allegation #1 – Respondent Failed to Learn and Record Accurate KYC Information

  1. From January 21, 2010 to February 12, 2013, the Respondent prepared Know-Your-Client (“KYC”) update forms for client X’s accounts by reproducing the client’s KYC information from KYC forms on file from previous years, without meeting or speaking with the client to determine whether any KYC information had changed.
  2. During this period, the Respondent periodically dropped off client X’s KYC update forms and other account documents at the family business for signature, and later returned to collect them. Client X did not sign the account documents. In the circumstances, the Respondent did not take adequate steps to ensure that the KYC update forms were signed by the client.
  3. The Respondent recorded on client X’s KYC update forms that client X had:
    • “expert” or “high” investment knowledge and investment experience; and
    • income of “$75,000 - $100,000” or “over $100,000”.
  4. At all material times, the Respondent knew, or ought to have known, that client X:
    • had “low” investment knowledge;
    • had limited investing experience;
    • depended on her then spouse’s income; and
    • earned limited income from employment of less than $10,000 annually derived from her periodic part-time retail positions.
  5. On account documents dated December 24, 2009 and January 27, 2011, the Respondent recorded that client X was employed as “Administrator” at the family business. The Respondent knew or ought to have known that X was not employed by the family business.
  6. By engaging in the conduct described above, the Respondent failed to conduct adequate due diligence to learn, or accurately record on account documents, KYC information for client X, contrary to MFDA Rules 2.2.1 and 2.1.1.

Allegation #2 – Respondent Improperly Disclosed Confidential Client Information

  1. At all material times, the Member’s policies and procedures required that:
    • personal client information be kept confidential in order to protect clients’ privacy and confidentiality; and
    • client consent be obtained prior to disclosing any client’s personal or confidential information.
  2. The Member generally sent client account statements to clients quarterly.
  3. Between December 24, 2009 and February 12, 2013, without the knowledge, authorization, or consent of client X, the Respondent recorded client X’s address on file with the Member as that of the family business instead of client X’s residential address. Consequently, client X’s account statements were sent to the family business and not to client X herself.
  4. By arranging for client X’s account statements to be sent to a third party address instead of to client X’s residential address without the authorization of client X, the Respondent failed to ensure that reporting about client X’s investment accounts was maintained in confidence, contrary to the policies and procedures of the Member and MFDA Rules 2.1.1, 2.5, 2.10, and 1.1.2.

Allegation #3 – Respondent Engaged in Unauthorized Trading

  1. At all material times, the Member’s policies and procedures provided that the client’s specific instructions (or someone with trading authority or an involved party with signing authority) were required for any kind of investment direction.
  2. On January 26, 2011, the Respondent received email instructions from MJ, an employee of the family business that instructed the Respondent to, among other things, process two purchases in client X’s accounts.
  3. MJ was not a co-account holder and did not have trading or signing authority over the investment accounts of client X.
  4. The Respondent did not communicate with client X to inform client X about the email that the Respondent had received from MJ or to obtain trading instructions from client X concerning the purchases that MJ had instructed the Respondent to process in the account of X.
  5. The Respondent relied upon MJ’s instructions and executed the two purchases in client X’s accounts totaling approximately $12,462 without the knowledge or consent of client X.
  6. By accepting and acting upon trade instructions regarding two purchases in client X’s investment account that the Respondent received from a third party who did not possess trading or signing authority over the investment accounts of client X, and submitting the trades for processing without obtaining authorization from client X, the Respondent engaged in unauthorized trading, contrary to the policies and procedures of the Member and MFDA Rules 2.1.1, 2.5, 2.10, and 1.1.2.

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; and
  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: Lyla Simon
Email: lsimon@mfda.ca

A Reply shall be filed by:

  1. providing four 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 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.

[1] On September 28, 2009, as a result of the implementation of National Instrument 31-103, the mutual fund salesperson registration category was changed to “dealing representative – mutual fund dealer”.

 

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