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IN THE MATTER OF THE MUTUAL FUND DEALER RULES

Re: Erika Fawcett

NOTICE OF HEARING

NOTICE is hereby given that a disciplinary proceeding has been commenced by the Canadian Investment Regulatory Organization (“CIRO”) against Erika Fawcett (the “Respondent”). The first appearance will take place electronically by videoconference before a hearing panel of the Ontario District Hearing Committee of CIRO (the “Hearing Panel”) on November 30, 2023, at 10:00 am Eastern Time or as soon thereafter as the hearing can be held. The Hearing on the Merits will take place at a time and venue to be announced.  Members of the public who would like to attend the first appearance by videoconference as an observer should contact [email protected] to obtain particulars.

  • Michelle Pong
    Michelle Pong
    Director, District Hearing Committees, Mutual Fund Dealer Division

    Canadian Investment Regulatory Organization
    121 King Street West, Suite 1000
    Toronto, ON  M5H 3T9
    Telephone: 416-945-5134
    Email: [email protected]

NOTICE is further given that CIRO alleges the following violations of the Mutual Fund Dealer Rules: [1]

Allegation #1: Between July 28, 2017 and September 28, 2021, the Respondent conducted trading activity in respect of clients who resided in provinces where the Respondent was not registered, contrary to the Dealer Member’s policies and procedures and Mutual Fund Dealer Rules 1.1.5, 2.1.1 and 1.1.2 (as it relates to 2.5.1) (formerly MFDA Rules 1.1.5, 2.1.1, 1.1.2, and 2.5.1).

Allegation #2: Between October 9, 2020 and March 2021, the Respondent photocopied four client account forms that had been previously signed by clients and altered information on the account forms to complete four new transactions, contrary to Mutual Fund Dealer Rule 2.1.1 (formerly MFDA Rule 2.1.1).

Allegation #3: Between March 29, 2020 and January 20, 2021, the Respondent altered and used to process transactions, five account forms in respect of three clients, by altering information on the account forms without having the clients initial the alterations, contrary to Mutual Fund Dealer Rule 2.1.1 (formerly MFDA Rule 2.1.1).

Allegation #4: Between July 29, 2016 and July 15, 2021, the Respondent obtained, possessed and used to process transactions, 32 pre-signed account forms in respect of 9 clients, contrary to Mutual Fund Dealer Rule 2.1.1 (formerly MFDA Rule 2.1.1).

PARTICULARS

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

Registration History

  1. From July 11, 2017 to August 26, 2022, the Respondent was registered in Ontario as a dealing representative with Quadrus Investment Services Ltd., a Dealer Member of CIRO (the “Dealer Member”) (formerly a Member of the MFDA).
  2. On August 26, 2022, the Respondent resigned and is not currently registered in the securities industry.
  3. At all material times, the Respondent conducted business in the London, Ontario area.

Allegation #1 – Out of Province Trading

  1. At all material times, the Dealer Member’s policies and procedures required assistants who were registered to conduct securities related business (“licensed assistant”) to only place trades in jurisdictions in which they are registered.
  2. At all material times, the Respondent was registered solely in the province of Ontario.
  3. The Respondent acted as a licensed assistant for VJ, another dealing representative registered with the Dealer Member. VJ was registered in the provinces of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario and Saskatchewan.
  4. From time to time, Respondent communicated with clients of the Dealer Member whose accounts were serviced by VJ to obtain trade instructions and processed transactions under VJ’s representative code. The Respondent did not have a personal representative code.
  5. Between July 28, 2017 and September 28, 2021, the Respondent contacted clients, obtained trading instructions, and completed client account forms using VJ’s representative code to process 31 transactions in respect of 15 clients who resided in provinces where the Respondent was not registered.
  6. The transactions included subsequent purchases of mutual funds in the clients’ accounts, switches, redemptions, transfers, conversions and a letter of direction.
  7. By virtue of the foregoing, the Respondent conducted trading activity in respect of clients who resided in provinces where the Respondent was not registered, contrary to the Dealer Member’s policies and procedures and Mutual Fund Dealer Rules 1.1.5, 2.1.1 and 1.1.2 (as it relates to 2.5.1) (formerly MFDA Rules 1.1.5, 2.1.1, 1.1.2 and 2.5.1).

Allegation #2 – Re-use of Client Signatures

  1. At all material times, the Dealer Member’s policies and procedures prohibited the falsification of client signatures.
  2. Between October 9, 2020 and March 22, 2021, the Respondent photocopied four client account forms that had been previously signed by clients and altered information on the account forms to complete four new transactions.
  3. The re-used account forms include transfer forms and conversion forms, and the information the Respondent altered on the account forms included client investment instructions and fund information.
  4. By virtue of the foregoing, the Respondent failed to observe a high standard of conduct and ethics in the transaction of business and engaged in conduct unbecoming of an Approved Person, contrary to Mutual Fund Dealer Rule 2.1.1 (formerly MFDA Rule 2.1.1).

Allegation #3 – Altered Account Forms

  1. At all material times, the Dealer Member’s policies and procedures prohibited its dealing representatives from altering information on account forms without having the client initial the alterations.
  2. Between March 29, 2020 and January 20, 2021, the Respondent altered and used to process transactions five account forms in respect of three clients by altering information on the account forms without having the clients initial the alterations.
  3. The altered account forms include transfer forms and conversion forms.
  4. The information the Respondent altered on the account forms without having the client initial the alterations included the dates of the client signatures.
  5. By virtue of the foregoing, the Respondent failed to observe a high standard of conduct and ethics in the transaction of business and engaged in conduct unbecoming of an Approved Person, contrary to Mutual Fund Dealer Rule 2.1.1 (formerly MFDA Rule 2.1.1).

Allegation #4 – Pre-Signed Account Forms

  1. At all material times, the Dealer Member’s policies and procedures prohibited its dealing representatives from using pre-signed account forms.
  2. Between July 29, 2016 and July 15, 2021, the Respondent obtained, possessed and used to process transactions, 32 pre-signed forms in respect of 9 clients.
  3. The pre-signed account forms include transfer forms, conversion forms, Registered Education Savings Plan withdrawal request forms, redemption forms and subsequent investment forms.
  4. The information that the Respondent added to the account forms after the clients had already signed the forms, included transfer instructions, fund information, client administrative information and dates.
  5. By virtue of the foregoing, the Respondent failed to observe a high standard of conduct and ethics in the transaction of business and engaged in conduct unbecoming of an Approved Person, contrary to Mutual Fund Dealer Rule 2.1.1 (formerly MFDA Rule 2.1.1).

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 pursuant to Mutual Fund Dealer Rule 1A that any person subject to the jurisdiction of the Mutual Fund Dealers Association of Canada prior to January 1, 2023 remains subject to the jurisdiction of CIRO in respect of any action or matter that occurred while that person was subject to the jurisdiction of the Mutual Fund Dealers Association of Canada at the time of such action or matter.

NOTICE is further given that the Mutual Fund Dealer Rules provide that if, in the opinion of the Hearing Panel, the Respondent:

  • has failed to carry out any agreement with CIRO;
  • has failed to comply with or carry out the provisions of any federal or provincial statute relating to the business of the Dealer Member or of any regulation or policy made pursuant thereto;
  • has failed to comply with the provisions of the Mutual Fund Dealer Rules of CIRO;
  • has engaged in any business conduct or practice which such Hearing Panel 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, Mutual Fund Dealer Division within twenty (20) days from the date of service of this Notice of Hearing.

A Reply shall be served upon Enforcement Counsel at:

Canadian Investment Regulatory Organization
Mutual Fund Dealer Division
121 King Street West, Suite 1000
Toronto, ON M5H 3T9
Attention: Molly McCarthy, Enforcement Counsel
Email:  [email protected]

A Reply shall be filed by:

  1. providing 4 copies of the Reply to the Office of the Corporate Secretary, Mutual Fund Dealer Division by personal delivery, mail or courier to:

    Canadian Investment Regulatory Organization
    Mutual Fund Dealer Division
    121 King Street West, Suite 1000
    Toronto, ON M5H 3T9
    Attention: Office of the Corporate Secretary; or

  2. transmitting 1 electronic copy of the Reply to the Office of the Corporate Secretary, Mutual Fund Dealer Division by e-mail at [email protected].

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 CIRO in the Notice of Hearing; or
  2. admit the facts alleged and conclusions drawn by CIRO 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 CIRO 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 CIRO in the Notice of Hearing as having been proven and may impose any of the penalties described in the Mutual Fund Dealer Rules.

End.

[1] Staff alleges that, at the time of the misconduct, the Respondent contravened MFDA Rules 1.1.5, 2.1.1, 1.1.2 and 2.5.1, which are now incorporated into Mutual Fund Dealer Rules 1.1.5, 2.1.1, 1.1.2 and 2.5.1 referred to in this proceeding. On July 7, 2022, amendments to MFDA Rule 1.1.2 came into effect. As the conduct addressed in this proceeding pre-dated the amendment to that Rule, the version of MFDA Rule 1.1.2 that was in effect between February 23, 2001 and July 7, 2022 is applicable to this proceeding.

On January 1, 2023, the Investment Industry Regulatory Organization of Canada (“IIROC”) and the Mutual Fund Dealers Association of Canada (the “MFDA”) were consolidated into a single self-regulatory organization recognized under applicable securities legislation. The New Self-Regulatory Organization of Canada (referred to herein as the “Corporation”) adopted interim rules that incorporate the pre-amalgamation regulatory requirements contained in the rules and policies of IIROC and the by-law, rules and policies of the MFDA (the “Interim Rules”). The Interim Rules include (i) the Investment Dealer and Partially Consolidated Rules, (ii) the UMIR and (iii) the Mutual Fund Dealer Rules. These rules are largely based on the rules of IIROC and certain by-laws, rules and policies of the MFDA that were in force immediately prior to amalgamation. Where the rules of IIROC and the by-laws, rules and policies of the MFDA that were in force immediately prior to amalgamation have been incorporated into the Interim Rules, Enforcement Staff have referenced the relevant section of the Interim Rules. Pursuant to Mutual Fund Dealer Rule 1A and s.14.6 of By-Law No.1 of the Corporation, contraventions of former MFDA regulatory requirements may be enforced by the Corporation.