MFDA Notice of Hearing

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202135

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

Laura Lynn Monteiro

NOTICE OF HEARING

NOTICE is hereby given that a first appearance will take place by teleconference before a hearing panel of the Pacific Regional Council (the “Hearing Panel”) of the Mutual Fund Dealers Association of Canada (the “MFDA”) on October 15, 2021 at 9:00 a.m. (Pacific) or as soon thereafter as the hearing can be held, concerning a disciplinary proceeding commenced by the MFDA against Laura Lynn Monteiro (the “Respondent”). Members of the public who would like to listen to the teleconference should contact hearings@mfda.ca to obtain particulars.

DATED: Jul 16, 2021

"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
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: In February 2017, the Respondent processed 13 switches in the accounts of 3 clients without obtaining the clients’ authorization, contrary to the policies and procedures of the Member and MFDA Rules 2.1.1, 2.5.1 and 1.1.2.

Allegation #2: Between January 2017 and March 2017, the Respondent processed 34 switches in the accounts of 8 clients, without obtaining client instructions in respect of the timing of the switches, thereby engaging in discretionary trading, contrary to the policies and procedures of the Member and MFDA Rules 2.3.1(b), 2.1.1, 2.5.1 and 1.1.2.

Allegation #3: In February 2017, the Respondent made changes to Know-Your-Client Information of 3 clients without obtaining the clients’ authorization, thereby failing to use due diligence to learn and accurately record the essential facts relative to each client and to each order or account accepted, contrary to MFDA Rules 2.2.1 and 2.1.1.

Allegation #4: Between January 2017 and March 2017, the Respondent failed to document and maintain records of Know-Your-Client information that she obtained with respect to the accounts of 9 clients, contrary to the Member’s policies and procedures and MFDA Rules 2.1.1, 2.5.1, 1.1.2 and MFDA Policy No. 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. Commencing in April 2005, the Respondent has been registered in British Columbia as a dealing representative with Sun Life Financial Services Inc. (the “Member”), a Member of the MFDA.
  2. At all material times, the Respondent carried on business in the Vancouver, British Columbia area.

Allegations #1 and #2 - Unauthorized and Discretionary Trading

  1. At all material times, the Member’s policies and procedures required its Approved Persons to obtain and maintain evidence of client authorization before executing trades in a client’s account.
  2. At all material times, the Member’s policies and procedures also prohibited its Approved Persons from engaging in discretionary trading.
  3. At all material times, clients GG, MN, BP, MA, RA, JB, HK, MS, KB, DR, JD and MR were clients of the Member (collectively, the “Clients”) whose accounts were serviced by the Respondent.
  4. In December 2016, the Member reviewed the suitability of the accounts of clients whose holdings did not align with its concentration risk policy, which policy limited the percentage of high-risk asset class category mutual funds that clients could hold in their accounts. The Member directed the Respondent to contact the clients to update their Know-Your-Client (“KYC”) information and rebalance their accounts to align with the concentration risk policy.
  5. Between January 23 and January 28, 2017, the Respondent directed her licensed assistant to send e-mails (the “E-mails”) to the Clients in order to advise them that the Respondent would like to process mutual fund switches to Portfolio Series Managed Solutions funds in their investment accounts. In the E-mails, the Respondent also requested that the Clients confirm their approval of the switches, and stated that if the Clients did not respond by a specific date, the Respondent would proceed with the switches.
  6. Clients GG, MN and BP did not respond to the E-mails, and the Respondent did not communicate further with them to obtain their authorization to proceed with the switches that she had recommended.
  7. On February 27 and February 28, 2017, the Respondent processed a total of 13 unauthorized switches in the accounts of clients GG, MN and BP. The Respondent processed these switches in order to bring the clients’ holdings in line with the Member’s concentration risk policy.
  8. According to the Respondent, between January 8, 2017 and February 22, 2017, she spoke with clients MA, RA, HK, MS, KB, DR, JD and MR prior to processing the switches in their investment accounts that she recommended, and obtained their authorization to process the switches. However, the Respondent did not obtain specific instructions regarding the timing of when these switches would be processed.
  9. Between January and March 2017, the Respondent, or her licensed assistant acting pursuant to the Respondent’s directions, processed 34 switches in the investment accounts of clients MA, RA, HK, MS, KB, DR, JD and MR, without obtaining client instructions with respect to the timing of the switches.
  10. By virtue of the foregoing, the Respondent processed 13 switches in the accounts of clients GG, MN and BP without obtaining the clients’ authorization, thereby engaging in conduct contrary to the Member’s policies and procedures and MFDA Rules 2.1.1, 2.5.1 and 1.1.2.
  11. By virtue of the foregoing, the Respondent processed 34 switches in the accounts of clients MA, RA, HK, MS, KB, DR, JD and MR, without obtaining client instructions in respect of the timing of the switches, thereby engaging in discretionary trading, contrary to the policies and procedures of the Member and MFDA Rules 2.3.1(b), 2.1.1, 2.5.1 and 1.1.2.

Allegations #3 and #4 - Unauthorized Changes to KYC Information and Failure to Maintain Detailed Records of Client Conversations and KYC Changes

  1. At all material times, the Member’s policies and procedures required its Approved Persons to document and maintain detailed notes of client instructions received by means of conversations with clients prior to making changes to clients’ documented KYC information. The information detailed in client notes must be able to explain to Supervisory Staff the premise for any changes to KYC, product recommendations and suitability assessments conducted for the client. Specifically, the Member required Approved Persons to document the following:
    1. Evidence of client authorization for verbal KYC updates through client file notes;
    2. KYC updates and material changes to a client’s personal circumstances; and
    3. KYC information (income, net worth, investment knowledge, investment objective, risk tolerance, time horizon) and notes explaining changes that have occurred and why.
  2. As described above at paragraph 6, the Member directed the Respondent to contact the Clients to update their KYC information and recommend that they rebalance their accounts to align with the concentration risk policy.
  3. In addition to processing the unauthorized switches in the accounts of clients GG, MN and BP described above at paragraph 9, the Respondent also made unauthorized changes to the KYC information on record with the Member for these clients without speaking with the clients about the changes. The Respondent made these KYC changes in order to match the clients’ documented KYC information with the changes that the Respondent intended to make to the clients’ account holdings to bring those holdings into line with the Member’s concentration risk policy.
  4. In particular, the Respondent changed the investment objective and risk tolerance information on record with the Member for clients GG, MN and BP without speaking with the clients. The Respondent thereby failed to use due diligence to learn and accurately record the essential facts relative to these clients and each order and account accepted for these clients.
  5. In addition to processing discretionary switches in the investment accounts of clients MA, RA, HK, MS, KB, DR, JD and MR as described above at paragraph 11, between January 2017 and March 2017, the Respondent, or other individuals at the Member acting under the direction of the Respondent, also made changes to the investment objectives and risk tolerance information on record with the Member for these clients, as well as client JB.
  6. According to the Respondent, she spoke with and obtained the authorization of clients JB, MA, RA, HK, MS, KB, DR, JD and MR prior to making changes to their KYC information, but she failed to record: the details of the conversations she had with the clients, the details pertaining to the KYC changes made on client files, and the reasons for the KYC changes, as required by the Member’s policies and procedures manual.
  7. By virtue of the foregoing, the Respondent made changes to KYC information of clients GG, MN and BP without the client’s authorization, thereby failing to use due diligence to learn and accurately record the essential facts relative to each client and to each order or account accepted, contrary to MFDA Rules 2.2.1 and 2.1.1.
  8. By virtue of the foregoing, the Respondent failed to document and maintain records of KYC information that she obtained with respect to the accounts of clients JB, MA, RA, HK, MS, KB, DR, JD and MR, contrary to the Member’s policies and procedures and MFDA Rules 2.1.1, 2.5.1, 1.1.2, and MFDA Policy No. 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
Prairie Regional Office
Suite 850, 800 – 6th Ave SW
Calgary, AB T2P 3G3
Attention: Sakeb Nazim
Email: snazim@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.

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