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Bulletin #0204-E

Enforcement
MFDA imposes lifetime ban and $10,000 fine on Donald Kent Coleman

Mutual Fund Dealers Association of Canada
Association canadienne des courtiers de fonds mutuels
121 King Street West, Suite 1000, Toronto, Ontario, M5H 3T9
TEL: 416-361-6332 FAX: 416-943-1218 WEBSITE: www.mfda.ca

Contact: Hugh Corbett
BULLETIN # 0204 – E
Director of Litigation
July 5, 2006
Phone: 416-943-4685
Email: hcorbett@mfda.ca

MFDA Bulletin

Enforcement

For Distribution to Relevant Parties Within your Firm

MFDA imposes lifetime ban and $10,000 fine on Donald Kent Coleman

Nature of
A Hearing Panel of the Ontario Regional Council of the Mutual Fund Dealers
Proceeding
Association of Canada (“MFDA”) has imposed disciplinary penalties on
Donald Kent Coleman, a former Approved Person of the MFDA.

By-Laws,
Following a hearing on March 21, 2006, the Hearing Panel found that:
Rules, Policies
Violated
1. Coleman failed to deal fairly, honestly and in good faith with two

clients by misappropriating from them the total amount of
approximately $18,234, contrary to MFDA Rule 2.1.1.

2. Coleman failed to deal fairly, honestly and in good faith with two
clients by processing redemptions in their mutual fund accounts
without obtaining instructions, authorization or approval from the
clients, contrary to MFDA Rule 2.1.1.

MFDA Rule 2.1.1 states that:

Each Member and each Approved Person of a Member shall:
(a) deal fairly, honestly and in good faith with its clients;
(b) observe high standards of ethics and conduct in the transaction of
business;
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(c) not engage in any business conduct or practice which is unbecoming
or detrimental to the public interest; and
(d) be of such character and business repute and have such experience
and training as is consistent with the standards described in this Rule
2.1.1, or as may be prescribed by the Corporation.

Penalty
The Hearing Panel imposed the following penalties on Coleman:

1. A permanent prohibition of the authority of Coleman to conduct
securities related business in any capacity;

2. A fine in the amount of $10,000; and

3. Costs in the amount of $2,500.

Summary of
From March 1994 to August 2004, Coleman was registered in Ontario as a
Facts
mutual fund salesperson with PFSL Investments Canada Ltd. (“PFSL”), a
Member of the MFDA. Beginning November 11, 2003, Coleman also served
as a branch manager.

Between March 10, 2004 and July 9, 2004, Coleman processed redemptions
from the mutual fund accounts of two clients without obtaining instructions,
authorization or approval from the clients. He misappropriated the net
proceeds from those redemptions totaling approximately $18,234. Both
clients were vulnerable to Coleman’s misconduct. One client was elderly and
suffering from medical complications, while the other lacked sophistication
with respect to financial investments.

Coleman carried out the unauthorized redemptions by submitting a photocopy
of a previously completed redemption request form that he had altered.
Coleman caused the net proceeds of the redemptions to be transferred
electronically to his personal bank account by attaching to the redemption
request forms a photocopy of a cheque for his personal bank account which
he had altered by “cutting and pasting” the client’s name on to the cheque. In
order to conceal his conduct, Coleman changed the clients’ addresses in
PFSL’s records to fictitious addresses so they would not receive statements
disclosing the activity in their account.

From time to time, Coleman deposited funds to one of the client’s bank
accounts. Coleman led this client to believe that the deposits were the
proceeds of redemptions that the client had authorized Coleman to make on
her behalf. The client was unaware that Coleman had made other
unauthorized redemptions from her mutual fund account, all or part of which
he had misappropriated.
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In August 2004, Coleman’s conduct came to the attention of PFSL. PFSL
conducted an investigation and terminated Coleman for cause. PFSL
provided full compensation to the clients.

Coleman cooperated with the investigations that were conducted by both
PFSL and the MFDA. He also partially reimbursed PFSL for the payments it
made to the clients as compensation for the amounts misappropriated from
them. As of the date of the hearing, Coleman had paid $6,000 to PFSL and
was promising to repay the $12,245 that remained outstanding.

In determining the appropriate penalty to impose on Coleman, the Hearing
Panel noted that under normal circumstances it would be appropriate to
impose a higher fine in a case involving misappropriation by a branch
manager. However, in this particular case, the Hearing Panel reduced the fine
on the basis Coleman’s agreement to complete his restitution payments to
PFSL, his undertaking to pay the fine, his cooperation with both
investigations, his admission of misconduct at the outset of the investigations,
his expression of remorse and other mitigating factors.

For more information, see the Decision and Reasons posted on the MFDA’s
website under “Enforcement”.

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