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IN THE MATTER OF THE MUTUAL FUND DEALER RULES

Re: Stephen Patrick Laporte

NOTICE OF HEARING

NOTICE is hereby given that a disciplinary proceeding has been commenced by the Canadian Investment Regulatory Organization (“CIRO”) against Stephen Patrick Laporte (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 February 1, 2024, 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 February 26, 2016 and June 8, 2021, the Respondent failed to record and maintain adequate evidence of client trade instructions with respect to transactions that the Respondent processed pursuant to Limited Trade Authorizations, contrary to the Dealer Member’s Policies and Procedures and Mutual Fund Dealer Rules 2.1.1, 5.1(b), 1.1.2 (as it relates to Rule 2.5.1). (formerly MFDA Rule 2.1.1, 5.1(b), 1.1.2, and 2.5.1).

Allegation #2: Between April 7, 2015 and February 26, 2020, the Respondent altered, and used to process transactions, 44 account forms in respect of 33 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 #3: Between February 13, 2018 and October 28, 2019, the Respondent obtained, possessed and used to process transactions, two pre-signed account forms in respect of two clients, contrary 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. Since January 1, 1998, the Respondent has been registered in the securities industry in Ontario as a dealing representative with Desjardins Financial Security Investments Inc., a Dealer Member of CIRO (the “Dealer Member”), formerly a Member of the MFDA.[2]
  2. At all material times, the Respondent conducted business in the Ottawa, Ontario area.

Allegation #1 – Failure to Record and Maintain Adequate Evidence of Client Instructions

  1. At all material times, the Dealer Member’s policies and procedures required that for phone or verbal Limited Trade Authorization orders, the appropriate Letter of Direction and related sections must be duly completed by the advisor to document the discussion held with the client as evidence to support the recommendation for the trade.
  2. Between February 26, 2016 and June 8, 2021, the Respondent processed 14 trades in the accounts of five clients pursuant to Limited Trading Authorizations that had been executed by the clients.
  3. The Respondent failed to record and maintain adequate evidence of client trade instructions in the Letter of Direction or elsewhere, including recording client instructions in respect of the timing of the trade, the amount of the trade, or the security to be traded.
  4. By virtue of the foregoing, the Respondent engaged in conduct that was contrary to the Dealer Member’s policies and procedures and Mutual Fund Dealer Rule 2.1.1, 5.1(b), and 1.2 (as it relates to Rule 2.5.1) (formerly MFDA Rule 2.1.1, 5.1(b), 1.1.2 and 2.5.1).

Allegation #2 – Altered Account forms

  1. At all material times, the Dealer Member’s policies and procedures required that any and all strikeouts or changes made to documents signed by a client (regardless of whether the change was made prior to the client signing) must be accompanied by the client’s initials, or the advisor must otherwise provide the client’s written authorization demonstrating the client’s awareness and authorization of the change.
  2. Between April 7, 2015 and February 26, 2020, the Respondent altered, and used to process transactions, 44 account forms in respect of 33 clients by altering information on the account forms without having the clients initial the account forms.
  3. The account forms consist of:
    • Five Account Opening forms;
    • 19 Letter of Direction forms
    • Nine Know Your Client Update forms;
    • One Authorization to Transfer Form;
    • 8 Application Forms, and
    • Two TARI Forms.
  4. The alterations the Respondent made to the account forms included alterations to risk tolerance, investment knowledge, transfer instructions, investment objectives, net worth, client information source of funds and fund code/name.
  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 #3 – Pre-Signed Account Forms 

  1. At all material times, the Dealer Member’s policies and procedures relating to pre-signing forms prohibited clients from signing a blank or partially completed form.
  2. Between February 13, 2018 and October 28, 2019, the Respondent obtained, and used to process transactions, 2 pre-signed account forms in respect of 2 clients.
  3. The account forms consist of a New Account Application Form (Investment Application) and a Letter of Direction.
  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).

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
Suite 800 Bow Valley Square 3
255 5th Ave. SW. Calgary, AB   T2P 3G6
Attention: Jennifer Galarneau
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 conduct addressed in this proceeding, the Respondent contravened MFDA Rules 5.1(b), 1.1.2(as it relates to Rule 2.5.1), and 2.1.1, which is now incorporated into Mutual Fund Dealer Rules 5.1(b), 1.1.2 (as it relates to Rule 2.5.1), and 2.1.1 referred to in this proceeding.

[2] The Respondent is also registered in Alberta since January 31, 2017.

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.