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MFDA Reasons For Decision

Re: Eronaldo De Souza

Heard: July 28, 2016 in Toronto, Ontario
Reasons For Decision: August 10, 2016

Reasons For Decision

Appearances:

Sarah Glickman|Eronaldo De Souza

Settlement Agreement

1. The Hearing Panel in this matter accepted the settlement agreement dated May 24, 2016 (the “Settlement Agreement”) between the staff of the MFDA (“Staff”) and Eronaldo De Souza (the “Respondent”). A copy of the Settlement Agreement is attached to these reasons as Schedule “1”. The agreed facts are set out in Section III of the agreement.

Contraventions

2. The Respondent admitted that between June 2008 and January 2015, he obtained, possessed, and in two (2) instances, used to process transactions, four (4) pre-signed account forms in respect of one (1) client, contrary to MFDA Rule 2.1.1.

Agreed penalties

3. The agreed penalties were that the Respondent will pay a fine in the amount of $4,500 and costs of in the amount of $2,500.

4. In addition, as a consequence of the misconduct, the Member removed the Respondent from his position as Branch Manager and placed him under close supervision.

Considerations

5. The Hearing Panel determined that it had to be satisfied regarding three considerations before it could accept the Settlement Agreement. Firstly, the agreed penalties had to be within an acceptable range taking into account similar cases. Secondly, the agreed penalties had to be fair and reasonable (i.e. proportional to the seriousness of the contravention and taking into consideration other relevant circumstances) and should appear to be so to members of the public and industry. Thirdly, the agreed penalties should serve as a deterrent to the Respondent and to industry. To be satisfied on these three considerations required an understanding of the particular facts of the case, the circumstances of the Respondent, and the impact on him of the agreed penalties.

Pre-signed account forms

6. Hearing panels have held that obtaining or using pre-signed account forms is a contravention of the standard of conduct under MFDA Rule 2.1.1.

Byce (Re), [2013] Hearing Panel of the Ontario Regional Council, MFDA File No. 201311, Panel Decision dated September 4, 2013,

Price (Re), [2011] Hearing Panel of the Ontario Regional Council, MFDA File No. 200814, Panel Decision (Misconduct) dated April 18, 2011

Certain other factors considered in assessing the appropriateness of the agreed penalties

7. There was no evidence of client harm.

8. There was no evidence that the respondent received any financial benefit from engaging in the misconduct.

9. The respondent has been registered in the mutual fund industry since 2008. The respondent was also registered as a branch manager during the majority of the time period in question. He ought to have known and respected the compliance requirements of the Member and the MFDA.

10. The respondent has not previously been subject to MFDA disciplinary proceedings.

11. By entering into the settlement agreement, the respondent has accepted responsibility for his misconduct and avoided the necessity of the MFDA incurring the time and expense of conducting a full disciplinary hearing.

Deterrence

12. The fine of $4,500 and costs of $2,500, are significant and send a message to the respondent and others in the capital markets with regard to the seriousness of the misconduct at issue in this proceeding.

Penalty guidelines

13. The proposed penalties are consistent with the MFDA Penalty Guidelines. The guidelines suggest a minimum fine of $5,000. The fine of $4,500 is slightly lower than the suggested minimum fine, which reflects the low number of forms and clients identified.

Previous decisions

14. The agreed penalties are within the reasonable range of appropriateness with regard to other decisions made by MFDA hearing panels in similar circumstances. In particular, we reviewed the following cases:

a) Fenton (Re) [2016] Hearing Panel of the Central Regional Council, MFDA File No. 201607, Panel Order dated May 26, 2016, Tab 12,

b) Wilson (Re) [2016], Hearing Panel of the Central Regional Council, MFDA File No. 201562, Panel Order dated February 25, 2016, MFDA Staff’s Book of Authorities, Tab 13

Fair and reasonable

15. We questioned the respondent and were satisfied that although he was not represented by counsel, he understood the settlement agreement and earnestly wanted it accepted. He considered that the agreed penalties were fair and reasonable.

16. Whether agreed penalties are fair and reasonable will depend to a large degree on the particular facts and circumstances of a matter. Where agreed penalties are within an acceptable range based on precedents, and they serve as a specific and general deterrent, and the parties have the means to undergo a contested hearing but have reached a settlement, it is unlikely that a panel would conclude that the agreed penalties were unfair and not reasonable

Costs

17. Costs of $2,500 are reasonable in the circumstances.

Conclusion

18. We concluded that the agreed penalties were within an acceptable range based on precedents, would serve as a specific and general deterrent, and were fair and reasonable. We concluded, therefore, that the settlement agreement was in the public interest and, consequently, we accepted it.

  • Paul M. Moore, Q.C.
    Paul M. Moore, Q.C.
    Chair
  • Wanda Traczewski
    Wanda Traczewski
    Industry Representative

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