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Reasons For Decision

Re:

Reasons For Decision

Reasons for Decision
File No. 201032



IN THE MATTER OF A SETTLEMENT HEARING
PURSUANT TO SECTION 24.4 OF BY-LAW NO. 1 OF
THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA


Re: Partners In Planning Financial Services Ltd.

Heard: November 25, 2010, Regina, Saskatchewan
Reasons for Decision: December 10, 2010

REASONS FOR DECISION

Hearing Panel of the Prairie Regional Council:

Robert
Hucal
Chair

Gary Zeeben
Industry Representative

Richard Sydenham
Industry Representative

Appearances:

Shelly
Feld

) For the Mutual Fund Dealers Association of Canada

)

Tim Pryor
)
Vice-President Legal, Mackenzie Financial
Corporation

)

Carol Krienke
)
Chief Compliance Officer, Partners in Planning
Financial Services

)

Lori Mattis
)
Legal Counsel, Walton International Group Inc.

)
Page 1 of 26

1.
On November 25, 2010, after hearing representations from Enforcement Counsel, we
approved a Settlement Agreement (Appendix “A”) reached between the Mutual Fund Dealers
Association of Canada (“MFDA”) and Partners in Planning Financial Services Ltd. (“the
Respondent”). At the conclusion of the hearing, we signed an Order to that effect, with written
reasons to follow. Put briefly, the Agreement provides that the Respondent pay a fine in the
amount of $20,000; that it retain an Independent Consultant (the “Monitor”) at the Respondent’s
expense to assist in resolving the leverage related deficiencies identified in paragraphs 12 – 16 of
the Settlement Agreement pursuant to the Terms of the Independent Monitor attached to the
Settlement Agreement; and that it pay costs in the amount of $2,500.

AGREED FACTS

Registration History

2.
The Respondent is registered as a mutual fund dealer in all 10 Canadian provinces and in
all three territories and as an exempt market dealer in the provinces of British Columbia, Alberta,
Saskatchewan, Ontario, New Brunswick and Newfoundland and Labrador.

3.
The Respondent has been a Member of the MFDA since December 7, 2001.

Corporate Structure

4.
The Respondent’s head office is located in Regina, Saskatchewan (the “Head Office”).
The Respondent has branch offices located throughout Canada.

The 2009 Compliance Examination

5.
Commencing on November 16, 2009, MFDA Compliance Staff conducted a compliance
examination (the “2009 Examination”) at the Head Office of the Respondent and at branch
offices of the Respondent located in Calgary, Alberta; Guelph, Ontario; and Burnaby and Prince
George, British Columbia, in order to assess the Respondent’s compliance with MFDA By-laws,
Rules and Policies during the period February 1, 2006 to September 30, 2009.
Page 2 of 26

6.
The results of the 2009 Examination were summarized and delivered to the Respondent
in a report dated April 5, 2010 (the “2010 Report”).

7.
The 2010 Report identified compliance deficiencies, including the fact that the
Respondent had established, implemented and maintained insufficient policies and procedures to
supervise leveraged trades and to ensure the suitability of leveraging recommendations made by
Approved Persons to clients.

Inadequate Policies and Procedures for Head Office Supervision of Leveraged Trades

8.
The Respondent failed to establish policies and procedures requiring Head Office
compliance staff to document evidence of any supervisory review of leveraging
recommendations that was conducted, including records of suitability queries made, responses
received and resolutions achieved as a result of supervisory inquiries.

9.
The Respondent failed to establish policies and procedures requiring Head Office
compliance staff to document evidence of any supervisory review of leveraging
recommendations that was conducted, including records of suitability queries made, responses
received and resolutions achieved as a result of supervisory inquiries.

10.
The Respondent failed to detect and query leveraging recommendations in some files that
may have appeared unsuitable in light of the client’s documented KYC information as recorded
on the client’s New Client Application Form, loan application or other documentation contained
in the Respondent’s client files.

Inadequate Supervision of Leverage Trades at the Branches

11.
During the 2009 Examination, MFDA Compliance Staff determined that the Respondent
failed to establish, implement and maintain adequate policies and procedures to ensure that
Branch Managers or other supervisory staff in the Branches assessed the suitability of leveraging
strategies having regard to relevant criteria such as the risk tolerance, age, investment knowledge
and investment objectives of the client to whom a leveraging strategy was recommended.
Page 3 of 26

12.
The Respondent’s branch offices had also failed to adequately implement some of the
Respondent’s established supervisory procedures for the assessment of suitability of leveraged
trades and leveraging recommendations, in that the review of leveraged trading by Branch
Managers or other supervisory staff in the Branches:

(a) sometimes failed to ensure that clients had provided completed documentation
(“Leveraging Documentation”) that the Respondent’s policies and procedures require
clients to submit in cases when clients borrow money to finance the purchase of
investments through an Approved Person of the Respondent;
(b) sometimes failed to maintain evidence that Leveraging Documentation prepared by
an Approved Person for a client of the Respondent was reviewed by the Branch
Manager prior to the implementation of a leveraging strategy as required according to
the Respondent’s policies and procedures; and
(c) sometimes failed to maintain evidence of any steps taken to query proposed trades or
follow-up with Approved Persons in circumstances where leveraging thresholds
established by the Respondent’s policies and procedures were exceeded according to
the Leveraging Documentation prepared for clients of the respondent.

Trades Processed Without Adequate Supervisory Scrutiny

13.
As a result of the Respondent’s failure to establish, implement and maintain adequate
policies and procedures for the supervision of leveraging by individuals responsible for
supervision at the Respondent’s head office and branch offices as described above. leveraged
trade recommendations which may have been unsuitable were processed by the respondent
without first being subject to adequate supervisory scrutiny.

Current Practices

14.
Since the 2010 Report was received by the Respondent, the Respondent has established
adequate changes to its policies and procedures, including its policies and procedures with
respect to the supervision of leveraged trades and leveraging recommendations, in compliance
with MFDA By-Laws, Rules and Policies. During the Hearing, we were advised by the
Page 4 of 26

Respondent that new training programs had been established for all employees of the
Respondent, similar to the programs in place for IGM Financial subsidiaries, of which the
Respondent recently became one.

Contraventions

15.
The Respondent admits the following violations of MFDA Rules and Policies:

(a) That prior to April 2010, it failed to establish, implement and maintain adequate
policies and procedures to supervise leveraged trades and ensure the suitability of
leveraging recommendations made by Approved Persons to clients, contrary to
MFDA Rules 2.2.1, 2.5.1 and 2.10 and MFDA Policy No. 2.
(b) That prior to April 2010, it failed to maintain sufficient records of the supervision of
leveraged trading and leveraging recommendations conducted by its Approved
Persons, including records of trades reviewed, inquiries made, responses received and
resolutions achieved, contrary to MFDA Rule 2.2.1, 2.2(b), 2.5.3(b) and 2.5.4 and
MFDA Policy No. 2.

Discussion

16.
It is generally agreed that the Hearing Panel should not interfere with a negotiated
settlement so long as the penalties agreed upon are within a reasonable range of appropriateness
given the circumstances.

17.
The appropriateness depends on a number of factors and the Hearing Panel has taken into
account the following circumstances when determining whether the proposed settlement should
be accepted

i)
The seriousness of the allegations proved against the Respondent and whether the
proposed settlement will prevent the type of conduct from occurring in the future;
ii)
The Respondent’s past conduct, including prior sanctions and whether or not the
Respondent recognizes the seriousness of the improper activity;
iii)
Whether or not the Settlement Agreement would be in the public interest and whether
the penalties imposed will protect investors, and in that regard, the risk to investors
Page 5 of 26

and capital markets, were the Respondent to continue conducting its business;
iv)
Whether the Settlement Agreement is reasonable having regard to the conduct of the
Respondent;
v)
Whether the Settlement Agreement addresses the issue of both specific and general
deterrents;
vi)
Whether the Settlement Agreement will foster confidence in the integrity of the
Canadian capital markets, the MFDA and the regulatory process;
vii)
Previous decisions made in similar circumstances.

18.
The Respondent has co-operated with MFDA staff and immediately incorporated changes
to its policies and procedures to address the compliance deficiencies; it admitted violation as
soon as pointed out; it demonstrated remorse and incorporated policy changes to effectively
comply with its obligation to properly supervise and maintain adequate records of supervision of
leveraged trades and representation to clients in that regard. A lengthy and costly investigation
and hearing was avoided.

19.
We have reviewed and noted the decisions set out at the foot hereof.

20.
We are conscious of the fact that the fine levied is less than the minimum suggested in
the Penalty Guidelines, but when the costs associated with the retention of a Monitor are taken
into account, the total cost to the Respondent will be substantial (we were told the amount is in
excess of $100,000) and exceed that minimum amount. We are satisfied that the public interest
is served by the Settlement Agreement terms and therefore accept the Agreement.

DATED this 10th day of December, 2010.

“Robert Hucal”
Robert Hucal,

Chair

“Gary Zeeben”
Gary Zeeben,

Industry Representative

“Richard Sydenham”
Richard Sydenham,

Industry Representative
Doc 236380
Page 6 of 26

Appendix “A”
Settlement Agreement

File No. 201032



IN THE MATTER OF A SETTLEMENT HEARING
PURSUANT TO SECTION 24.4 OF BY-LAW NO. 1 OF
THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA
Re: Partners In Planning Financial Services Ltd.


Settlement Agreement

INTRODUCTION
1.
By Notice of Settlement Hearing, the Mutual Fund Dealers Association of Canada (the
“MFDA”) will announce that it proposes to hold a hearing to consider whether, pursuant to
section 24.4 of By-law No. 1, a hearing panel of the Prairie Regional Council (the “Hearing
Panel”) of the MFDA should accept the settlement agreement (the “Settlement Agreement”)
entered into between Staff of the MFDA (“Staff”) and the Respondent, Partners In Planning
Financial Services Ltd. (the “Respondent”).
JOINT SETTLEMENT RECOMMENDATION
2.
Staff conducted an investigation of the Respondent’s activities. The investigation
disclosed that the Respondent had engaged in activity for which the Respondent could be
penalized on the exercise of the discretion of the Hearing Panel pursuant to s. 24.1 of
By-law No.1.
3.
Staff and the Respondent recommend settlement of the matters disclosed by the
investigation in accordance with the terms and conditions set out below. The Respondent agrees
Page 7 of 26

to the settlement on the basis of the facts set out in Part IV herein and consents to the making of
an Order in the form attached as Schedule “A”.
4.
Staff and the Respondent agree that the terms of this Settlement Agreement, including the
attached Schedule “A”, will be released to the public only if and when the Settlement Agreement
is accepted by the Hearing Panel.
ACKNOWLEDGEMENT
5.
Staff and the Respondent agree with the facts set out in Part IV herein for the purposes of
this Settlement Agreement only and further agree that this agreement of facts is without
prejudice to the Respondent or Staff in any other proceeding of any kind including, but without
limiting the generality of the foregoing, any proceedings brought by the MFDA (subject to Part
IX) or any civil or other proceedings which may be brought by any other person or agency,
whether or not this Settlement Agreement is approved by the MFDA.
AGREED FACTS
Registration History
6.
The Respondent is registered as a mutual fund dealer in all 10 Canadian provinces and in
all 3 territories and as an exempt market dealer in the provinces of British Columbia, Alberta,
Saskatchewan, Ontario, New Brunswick and Newfoundland and Labrador.
7.
The Respondent has been a Member of the MFDA since December 7, 2001.
Corporate Structure
8.
The Respondent’s head office is located in Regina, Saskatchewan (the “Head Office”).
The Respondent has branch offices located throughout Canada.
The 2009 Compliance Examination
9.
Commencing on November 16, 2009, MFDA Compliance Staff conducted a compliance
examination (the “2009 Examination”) at the Head Office of the Respondent and at branch
Page 8 of 26

offices of the Respondent located in Calgary, Alberta, Guelph, Ontario, Burnaby, British
Columbia and in Prince George, British Columbia in order to assess the Respondent’s
compliance with MFDA By-laws, Rules and Policies during the period February 1, 2006 to
September 30, 2009
10.
The results of the 2009 Examination were summarized and delivered to the Respondent
in a report dated April 5, 2010 (the “2010 Report”).
11.
The 2010 Report identified compliance deficiencies, including the fact that the
Respondent had established, implemented and maintained insufficient policies and procedures to
supervise leveraged trades and to ensure the suitability of leveraging recommendations made by
Approved Persons to clients.
Inadequate Policies and Procedures For Head Office Supervision of Leveraged Trades
12.
The Respondent failed to establish, implement or maintain adequate policies and
procedures for the supervision of leveraging by compliance staff at Head Office. In particular,
the Respondent failed to establish policies and procedures requiring Head Office compliance
staff to document evidence of any supervisory review of leveraging recommendations that was
conducted including records of suitability queries made, responses received and resolutions
achieved as a result of supervisory inquiries.
13.
The Respondent failed to detect and query leveraging recommendations in some files that
may have appeared unsuitable in light of the client’s documented KYC information as recorded
on the client’s New Client Application Form, loan application or other documentation contained
in the Respondent’s client files.
Inadequate Supervision of Leverage Trades at the Branches
14.
During the 2009 Examination, MFDA Compliance Staff determined that the Respondent
failed to establish, implement and maintain adequate policies and procedures to ensure that
Branch Managers or other supervisory staff in the Branches assessed the suitability of leveraging
strategies having regard to relevant criteria such as the risk tolerance, age, investment knowledge
and investment objectives of the client to whom a leveraging strategy was recommended.
Page 9 of 26

15.
The Respondent’s branch offices had also failed to adequately implement some of the
Respondent’s established supervisory procedures for the assessment of suitability of leveraged
trades and leveraging recommendations in that the review of leveraged trading by Branch
Managers or other supervisory staff in the Branches:
(a) sometimes failed to ensure that clients had provided completed documentation
(“Leveraging Documentation”) that the Respondent’s policies and procedures require
clients to submit in cases when clients borrow money to finance the purchase of
investments through an Approved Person of the Respondent;
(b) sometimes failed to maintain evidence that Leveraging Documentation prepared by an
Approved Person for a client of the Respondent was reviewed by the Branch Manager
prior to the implementation of a leveraging strategy as required according to the
Respondent’s policies and procedures; and
(c) sometimes failed to maintain evidence of any steps taken to query proposed trades or
follow-up with Approved Persons in circumstances where leveraging thresholds
established by the Respondent’s policies and procedures were exceeded according to the
Leveraging Documentation prepared for clients of the Respondent.
Trades Processed Without Adequate Supervisory Scrutiny
16.
As a result of the Member’s failure to establish, implement and maintain adequate
policies and procedures for the supervision of leveraging by individuals responsible for
supervision at the Member’s head office and branch offices as described above in paragraphs 12-
15, leveraged trade recommendations which may have been unsuitable were processed by the
Respondent without first being subject to adequate supervisory scrutiny.
Current Practices
17.
Since the 2010 Report was received by the Respondent, the Respondent has established
adequate changes to its policies and procedures, including its policies and procedures with
respect to the supervision of leveraged trades and leveraging recommendations, in compliance
with MFDA By-Laws, Rules and Policies.
Page 10 of 26

CONTRAVENTIONS
18.
The Respondent admits that prior to April 2010, it failed to establish, implement and
maintain adequate policies and procedures to supervise leveraged trades and ensure the
suitability of leveraging recommendations made by Approved Persons to clients, contrary to
MFDA Rules 2.2.1, 2.5.1 and 2.10 and MFDA Policy No. 2.
19.
The Respondent admits that prior to April 2010, it failed to maintain sufficient records of
the supervision of leveraged trading and leveraging recommendations conducted by its Approved
Persons, including records of trades reviewed, inquiries made, responses received and resolutions
achieved, contrary to MFDA Rules 2.2.1, 2.5.2(b), 2..5.3(b) and 2.5.4 and MFDA Policy No. 2.
TERMS OF SETTLEMENT
20.
The Respondent agrees to the following terms of settlement:
(a)
the Respondent shall pay a fine in the amount of $20,000.00 upon the acceptance of this
Settlement Agreement;
(b)
the Respondent agrees to the appointment of an Independent Consultant (the “Monitor”)
at the Respondent’s expense to assist in resolving the leverage related deficiencies
identified in paragraphs 12-16 of the Settlement Agreement, pursuant to the Terms of the
Independent Monitor, attached to this Settlement Agreement as Schedule “B”;
(c)
the Respondent acknowledges that the obligations of the Respondent for expenses of the
Monitor shall continue notwithstanding any change in the direct or indirect ownership of
the Respondent;
(d)
the Respondent shall pay the costs of this proceeding in the amount of $2,500.00 upon
the acceptance of this settlement;
(e)
in accordance with s. 24.4.2 of the By-law, the Respondent agrees that in the future, the
Respondent shall comply with all MFDA By-laws, Rules and Policies, and all applicable
securities legislation and regulations made thereunder, including MFDA Rules 2.2.1, 2.5
and 2.10 and MFDA Policy No. 2; and
(f)
a senior officer of the Respondent will attend the settlement hearing in person.
Page 11 of 26

STAFF COMMITMENT
21.
If this Settlement Agreement is accepted by the Hearing Panel, Staff will not initiate any
proceeding under the By-laws of the MFDA against the Respondent or any of its officers or
directors in respect of the contraventions described in Part V of this Settlement Agreement,
subject to the provisions of Part IX below. Nothing in this Settlement Agreement precludes Staff
from investigating or initiating proceedings in respect of any contraventions that are not set out
in Part V of this Settlement Agreement or in respect of conduct that occurred outside the
specified date ranges of the contraventions set out in Part V, whether known or unknown at the
time of settlement. Furthermore, nothing in this settlement precludes Staff from investigating or
initiating proceedings in respect of any contraventions of the Respondent’s complaint handling
obligations, including with respect to complaints concerning unsuitable leveraging
recommendations or practices that arose prior to the date of this Settlement Agreement (whether
or not Staff has been informed of such complaints prior to the date of the Settlement
Agreement)1 or which may arise following acceptance of this Settlement Agreement or
contraventions relating to any other aspect of its supervision of the conduct of its Approved
Persons or former Approved Persons.
22.
Furthermore, nothing in this Settlement Agreement shall relieve the Respondent from
fulfilling any continuing regulatory obligations, including, in particular, the Respondent’s
complaint handling obligations with respect to past or future complaints received by the
Respondent that relate to leveraged trades that were facilitated by Approved Persons of the
Respondent.
PROCEDURE FOR APPROVAL OF SETTLEMENT
23.
Acceptance of this Settlement Agreement shall be sought at a hearing of the Prairie
Regional Council of the MFDA on a date agreed to by counsel for Staff and the Respondent.
24.
Staff and the Respondent may refer to any part, or all, of the Settlement Agreement at the
settlement hearing. Staff and the Respondent also agree that if this Settlement Agreement is

1 Staff has advised the Respondent in writing of the complaints concerning the subject matter of this Settlement
Agreement, if any, received prior to the date of this Settlement Agreement that the Respondent has handled in
accordance with its complaint handling obligations under MFDA Rule 2.1l and MFDA Policy No. 3.
Page 12 of 26

accepted by the Hearing Panel, it will constitute the entirety of the evidence to be submitted
respecting the Respondent in this matter, and the Respondent agrees to waive its rights to a full
hearing, a review hearing before the Board of Directors of the MFDA or any securities
commission with jurisdiction in the matter under its enabling legislation, or a judicial review or
appeal of the matter before any court of competent jurisdiction.
25.
Staff and the Respondent agree that if this Settlement Agreement is accepted by the
Hearing Panel, then the Respondent shall be deemed to have been penalized by the Hearing
Panel pursuant to s. 24.1.2 of By-law No. 1 for the purpose of giving notice to the public thereof
in accordance with s. 24.5 of By-law No. 1.
26.
Staff and the Respondent agree that if this Settlement Agreement is accepted by the
Hearing Panel, neither Staff nor the Respondent will make any public statement inconsistent with
this Settlement Agreement. Nothing in this section is intended to restrict the Respondent from
making full answer and defence to any civil or other proceedings against it.
FAILURE TO HONOUR SETTLEMENT AGREEMENT
27.
If this Settlement Agreement is accepted by the Hearing Panel and, at any subsequent
time, the Respondent fails to comply with any of the terms of the Settlement Agreement,
including the Terms of the Independent Monitor, Staff reserves the right to bring proceedings
under the By-laws of the MFDA against the Respondent and any of its officers or directors based
on, but not limited to, the facts set out in Part IV of the Settlement Agreement, as well as the
breach of the Settlement Agreement. If such additional enforcement is taken, the Respondent
agrees that the proceeding(s) may be heard and determined by a hearing panel comprised of all
or some of the same members of the Hearing Panel that accepted the Settlement Agreement, if
available.
NON-ACCEPTANCE OF SETTLEMENT AGREEMENT
28.
If, for any reason whatsoever, this Settlement Agreement is not accepted by the Hearing
Panel or an Order in the form attached as Schedule “A” is not made by the Hearing Panel, each
of Staff and the Respondent will be entitled to any available proceedings, remedies and
Page 13 of 26

challenges, including proceeding to a disciplinary hearing pursuant to sections 20 and 24 of By-
law No. 1, unaffected by this Settlement Agreement or the settlement negotiations.
29.
Whether or not, this Settlement Agreement is accepted by the Hearing Panel, the
Respondent and the MFDA agree that they will not, in any proceeding, refer to or rely upon this
Settlement Agreement, or the negotiation or process of approval of this Settlement Agreement as
the basis for any allegation against the MFDA of lack of jurisdiction, bias, appearance of bias,
unfairness, or any other remedy or challenge that may otherwise be available, unless the
proceeding concerns an allegation by the Respondent that there has been a contravention of
Staff’s Commitment as set out in paragraph 21 of this Settlement Agreement.
DISCLOSURE OF AGREEMENT
30.
The terms of this Settlement Agreement will be treated as confidential by the parties
hereto until accepted by the Hearing Panel, and forever if, for any reason whatsoever, this
Settlement Agreement is not accepted by the Hearing Panel, except with the written consent of
both the Respondent and Staff or as may be required by law.
31.
Any obligations of confidentiality shall terminate upon acceptance of this Settlement
Agreement by the Hearing Panel.
EXECUTION OF SETTLEMENT AGREEMENT
32.
This Settlement Agreement may be signed in one or more counterparts which together
shall constitute a binding agreement.
33.
A facsimile copy of any signature shall be effective as an original signature.

Dated: November 11, 2010

“Adele Fruman”
“Robert
Roy”

Witness – Signature
Partners In Planning Financial Services Ltd.
Robert Roy, President, Chief Executive Officer and
Ultimate Designated Person
Page 14 of 26

Adele Fruman

“Shaun
Devlin”
Witness – Print name

Staff of the MFDA

Per: Shaun Devlin
Vice-President,
Enforcement

Page 15 of 26

Schedule “A”
DM# 222962
Vice-President,
Enforcement
Order

File No. 201032
DM # 222962



IN THE MATTER OF A SETTLEMENT HEARING
PURSUANT TO SECTION 24.4 OF BY-LAW NO. 1 OF
THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA
Re: Partners In Planning Financial Services Ltd.


ORDER

WHEREAS on [date], the Mutual Fund Dealers Association of Canada (the “MFDA”)
issued a Notice of Settlement Hearing pursuant to section 24.4 of By-law No. 1 in respect of
Partners In Planning Financial Services Ltd. (the “Respondent”);
AND WHEREAS the Respondent entered into a settlement agreement with Staff of the
MFDA (“Staff”) dated [date] (the “Settlement Agreement”), in which the Respondent agreed to a
proposed settlement of matters for which the Respondent could be disciplined pursuant to ss. 20
and 24.1 of By-law No. 1;
AND WHEREAS on the basis of the agreed facts contained in Part IV of the Settlement
Agreement and the contraventions admitted by the Respondent in Part V of the Settlement
Agreement, the Hearing Panel is of the opinion that:
(i) prior to April 2010, the Respondent failed to establish, implement and maintain adequate
policies and procedures to supervise leveraged trades and ensure the suitability of leveraging
recommendations made by Approved Persons to clients, contrary to MFDA Rules 2.2.1,
2.5.1; and
Page 16 of 26

(ii) prior to April 2010, the Respondent failed to maintain sufficient records of the supervision
of leveraged trading and leveraging recommendations conducted by its Approved Persons,
including records of trades reviewed, inquiries made, responses received and resolutions
achieved as a result of supervisory inquiries, contrary to MFDA Rules 2.2.1, 2.5.2(b),
2..5.3(b) and 2.5.4 and MFDA Policy No. 2;
IT IS HEREBY ORDERED THAT the Settlement Agreement is accepted, as a
consequence of which:
1.
The Respondent shall pay a fine in the amount of $20,000.00 upon the acceptance
of this Settlement Agreement;
2.
The Respondent shall retain an Independent Consultant (the “Monitor”) at the
Respondent’s expense to assist in resolving the leverage related deficiencies identified in
paragraphs 12-16 of the Settlement Agreement, pursuant to the Terms of the Independent
Monitor, attached to the Settlement Agreement as Schedule “B”;
3.
The obligations of the Respondent for expenses of the Monitor shall continue
notwithstanding any change in the direct or indirect ownership of the Respondent; and
4.
The Respondent shall pay the costs of this proceeding in the amount of $2,500.00
upon the acceptance of this Settlement Agreement.
DATED this [day] day of [month], 201[ ].
Per: _____________

[Name of Public Representative], Chair
Per: _____________

[Name of Industry Representative]
Per: ______________

[Name of Industry Representative]
Page 17 of 26

Schedule “B”
Terms of Monitor

File No. 201032

IN THE MATTER OF A SETTLEMENT HEARING
PURSUANT TO SECTION 24.4 OF BY-LAW NO. 1
OF THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA

Re: Partners In Planning Financial Services Ltd.


TERMS OF THE INDEPENDENT MONITOR

1. Partners In Planning Financial Services Ltd. (the “Member”) acknowledges and agrees that
the Member:
a. Has received a copy of the MFDA’s Compliance Examination Report of the Member
(the “Report”) dated April 5, 2010 and shall resolve the following leverage related
deficiencies (the “Deficiencies”) as identified in paragraphs 12-16 of the Settlement
Agreement;
b. Has retained an independent consultant (the “Monitor”) at the Member’s expense, to
assist in resolving all of the Deficiencies on the following terms:
i. The Member has executed a retainer with the Monitor incorporating the
requirements of the Duties and Standards of the Independent Monitor attached
hereto as Schedule “C” (the “Duties and Standards”) and provided a copy of
the retainer to MFDA Staff (“Staff”);
ii. The Member will fully co-operate with and provide full disclosure to the
Monitor in a timely manner of all matters and information relevant to the
activities of the Monitor hereunder and in accordance with the terms and
conditions of the Duties and Standards; and
iii. Staff has approved the selection of the Monitor and the terms of the Member’s
retainer of the Monitor.
c. Shall resolve all of the Deficiencies in accordance with the terms and conditions of
the Duties and Standards and on the following terms:
i. The Member shall cause the Monitor to develop, in collaboration with the
Member, a written plan containing proposed actions (and timeframes for
implementation of the actions) to remedy the leverage related Deficiencies
Page 18 of 26

(the “Leverage Action Plan”). The Leverage Action Plan shall meet the
requirements of the Duties and Standards and be completed and delivered to
Staff by no later than [A Date To Be Agreed Upon By The MFDA And The
Monitor Following Approval Of The Settlement];
ii. Staff reserves the right to add, delete or change any part of the Leverage
Action Plan provided that the Member is given a reasonable opportunity to
comment on any such addition, deletion or change. Any changes made by
Staff become part of the Leverage Action Plan;
iii. The Member, with the assistance and participation of the Monitor, shall fully
implement the actions identified in the Leverage Action Plan within the time
frames set out therein. The Monitor must review and approve all such actions
as being consistent with the Leverage Action Plan prior to their
implementation. The Monitor may consult informally with the MFDA from
time to time on any issues arising from the implementation of the Leverage
Action Plan;
2. The Leverage Action Plan shall include Testing Procedures the Monitor will perform to
review all leveraged transactions that occurred at the Member that were processed on behalf
of clients of Approved Persons specified by the MFDA, as set out in Part F of the Duties and
Standards of the Independent Monitor
, including procedures to:
a.
Review the client files including the specific documents identified in Schedule 1, Part
A, attached;
b.
Assess whether the leveraged transactions would have been suitable under the
approved new leveraging procedures dated September 30, 2010 and identify any
inaccuracies or discrepancies in the client information taking into account the factors
identified in Schedule 1, Part B, attached;
c.
Where in the review of any transaction, there is a red-flag under the approved new
leveraging procedure or an inaccuracy or discrepancy is identified in the client
information, the Monitor will conduct further due diligence to assess the suitability of
the leverage recommendation. In situations where the Monitor considers the
transaction to be appropriate despite the presence of the red flag, the Monitor shall
provide its full rationale to the MFDA as part of the Recommendation Report (as
defined below);
3. The Report:
a. The Monitor shall discuss with the MFDA the results of its activities under the
Leverage Action Plan, including its assessments, test findings and proposed
recommendations for addressing the deficiencies (the “Recommendation Report”).
b. Where in the review of any transaction, there is a red-flag under the approved new
leveraging procedure, the Monitor will conduct further due diligence to assess the
suitability of the leverage recommendation.
c. The Recommendation Report shall include a procedure for the Member to contact
leveraged clients, which includes a script, a call log, and draft recommendations for
rectifying any unsuitable leveraging or unsuitable leveraging practices;
Page 19 of 26

d. The MFDA reserves the right to add, delete or change any aspect of the proposed
Recommendation Report format, provided that the Member will be given a
reasonable opportunity to comment on any such addition, deletion or change;
e. Once the Recommendation Report has been approved by the MFDA, the Member, in
conjunction with the Monitor, shall perform the activities necessary to implement the
Recommendation Report and provide the results to the MFDA in the format and
within the time frame approved by the MFDA;
f. Where the implementation of the Recommendation Report identifies any continuing
Deficiencies, or where prior to the determination by the MFDA that the Deficiencies
have been resolved, the MFDA becomes aware from other sources that there are
continuing Deficiencies, the MFDA may in its sole discretion do either or both of the
following:
i. Make recommendations to resolve the continuing Deficiencies identified in
the implementation of the Recommendation Report and direct the Member to
implement all such recommendations and have the Monitor conduct any
additional testing within a reasonable time period to be determined by the
MFDA;
ii. Pursue additional enforcement action pursuant to Section 24 of MFDA By-
law No. 1 with regard to the Member’s failure to resolve the Deficiencies.
4. Additional Responsibilities:
a. The Member shall provide a copy of these Terms of the Independent Monitor to all
members of its Board of Directors and provide written confirmation of the same to
the MFDA within four (4) weeks of the date of signing of these Terms of the
Independent Monitor
;
b. The Member shall provide its Board of Directors with copies of the Leverage Action
Plan and the Recommendation Report; and
c. The MFDA shall in its sole discretion determine whether it is satisfied that the
Deficiencies have been resolved and the Member shall not consider the MFDA
satisfied until it has received express written confirmation from the MFDA that the
MFDA is satisfied that the Deficiencies have been resolved.
5. Varying of the terms of the Terms of the Independent Monitor:
a. To the extent that there are fixed timelines in these Terms of the Independent Monitor
or the Leverage Action Plan, the MFDA may abridge or extend any time frame as
may be reasonably be required and with the provision of reasonable notice to the
Member;
b. Other exceptions to the Terms of the Independent Monitor are permissible only with
the prior express written consent of Staff.
I confirm that by my signature, I am authorized to bind the Member to these Terms of the
Independent Monitor
.

“Robert Roy”
Nov 1./10
“Adele Fruman”
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Name: Robert Roy
Date Witness
Title: President & Chief Executive Officer

Partners In Planning Financial Services Ltd.
Name: Adele Fruman

Mutual Fund Dealers Association of Canada

“Shaun Devlin”
Nov 4./10
Shaun Devlin
Date
Vice-President, Enforcement

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“Schedule 1”
Assessment of Leveraged Accounts

Part A

The Monitor shall perform testing procedures to assess the Member’s leveraged accounts. These
procedures shall include reviewing all leveraged client files (or scope otherwise determined by
the MFDA). The client file must be reviewed in its entirety including specifically reviewing:

• the new account application form/ KYC form applicable at the time of the leveraging
recommendation;
• all KYC updates both preceding and subsequent to the leveraging recommendation; and
• the loan application(s).

In addition, the following documents must be specifically reviewed if contained in the client
file:

• documents supporting or pertaining to the client’s income (T-slips, notice of assessment,
etc.)
• financial plan(s);
• documents supporting or pertaining to the client’s net worth including account
statements, property tax assessments, appraisals, etc.
• client risk assessments or investor profile questionnaires;
• any marketing of the leveraged strategy or illustrations/ projections of investment returns
or the future value of the account;
• notes of client meetings or discussions; and
• any other documents relevant to the review of the leverage strategy.

Part B

The objective of the client file review is to assess the suitability of the leveraging
recommendation and identify any instances where the recommendation was not consistent with
the leveraging policies and procedures that were implemented by the Member as of September
30, 2010. The reviewer shall specifically note any instances where:
• red flags regarding age, income, net worth, risk tolerance, time horizon or investment
knowledge are triggered when compared against the KYC form applicable at the time of
the leveraging recommendation;
• red flags are triggered when compared against the client’s current KYC information;
• the client’s occupation is “unemployed”, “retired” or “homemaker”;
• KYC amendments were processed shortly before or at the time of the leveraging
recommendation that resulted in an increase to the client’s stated risk tolerance, time
horizon, investment knowledge, income or net worth;
• client information on the NAAF/ KYC form is inconsistent with the information on the
loan application;
• client financial information (income, net worth) as recorded on the KYC form or loan
application is inconsistent with other client information or supporting documentation (e.g.
client occupation, T4, financial plan);
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• investor profiles/ questionnaires are inconsistent with the client’s stated risk tolerance or
other KYC information as stated on the NAAF/ KYC form;
• client liabilities were not fully disclosed, including situations where investment loans
from one lender were not disclosed on an application to a separate lender;
• misleading information was provided to the client including failure to discuss the risks of
the strategy or illustrations that only present positive returns without illustrating the
effects of negative returns, or illustrations where the loan is self-sustaining using monthly
distributions from the investments to pay the loan interest;
• there is an indication that the loan is currently in arrears or in default; and
• there is evidence of client complaints;

The reviewer must ensure that where the client has obtained multiple loans for the purpose of
investing that the total amount of borrowing is considered in the suitability assessment
including the calculation of the income and net worth tests applicable according to the
Member’s revised leveraging policies and procedures.

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Schedule “C”
Duties & Standards

File No. 201032

IN THE MATTER OF A SETTLEMENT HEARING
PURSUANT TO SECTION 24.4 OF BY-LAW NO. 1
OF THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA

Re: Partners In Planning Financial Services Ltd.


DUTIES AND STANDARDS OF
THE INDEPENDENT MONITOR

A. Defined
Terms
1. Terms defined in the Terms of the Independent Monitor shall have the same meaning in these
Duties and Standards of the Independent Monitor.
B.
Duties of the Independent Monitor
1. The Monitor shall perform its duties with unimpaired professional judgment and objectivity,
and shall be seen to be doing so by a reasonable observer.
2. The Monitor shall be retained and remunerated by Partners In Planning Financial Services
Ltd. (the “Member”).
3. The Monitor shall perform its services in accordance with these Duties and Standards of the
Independent Monitor.
4. The Monitor:
i.
Shall notify the MFDA of any disagreement, dispute or other limitation encountered
with the Member that may result in the Terms of the Independent Monitor not being
satisfied. This includes but is not limited to situations where there is a difference of
opinion between the Monitor and the Member with regard to:
1. The detailed nature of the Deficiencies;
2. The actions necessary to remedy the Deficiencies;
3. The procedures to be used to test the Member’s implementation of the
Leverage Action Plan.
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ii.
May advise the Member of the results during the testing process;
iii. Shall prepare the Recommendation Report in an independent manner without
consultation with the Member as to the content of the report; and
iv.
Shall provide the Recommendation Report directly to Staff, with a copy to the
Member.
C.
QUALIFICATIONS OF THE INDEPENDENT MONITOR
1. The Monitor must exhibit and apply:
i.
An understanding of MFDA requirements generally and MFDA leverage requirement
specifically (i.e. By-laws, Rules, Policies, Notices and Bulletins);
ii.
Familiarity with mutual fund dealer operations and compliance issues; and
iii. Familiarity with adequate Member compliance procedures (i.e. the Monitor should
not be proposing procedures it develops at first instance without an understanding of
procedures compliant Members have instituted to meet MFDA requirements).
D.
Leverage Action Plan
1. The Leverage Action Plan must outline the actions that will remedy the Deficiencies and
specific time frames for the completion of those actions.
E.
Implementation of the Leverage Action Plan
1. The Monitor shall supervise the implementation of the Leverage Action Plan and provide
necessary recommendations so that the plan is implemented to the satisfaction of the
Monitor. The Monitor’s supervision shall include review of the implementation of any
components of the Leverage Action Plan.
F. Testing
Procedures
1. The testing procedures determined by the Monitor shall:
i.
Be sufficient to determine whether the Deficiencies have been resolved or remain
unresolved;
ii.
Specify the objective of the testing procedures, including citing which of the
Deficiencies the testing will address; and
iii. Specify the sampling methodology, including the size of samples to be tested.
2. The Monitor shall prepare and maintain a file of its working papers regarding the testing,
which shall be made available to Staff upon request. The file must contain sufficient
information to enable an experienced individual, having no previous connection to the
engagement, to re-perform the testing procedures and come to the same conclusions. The file
must include appropriate documentation of the procedures performed and the evidence
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obtained, including copies of documents reviewed or sufficiently detailed information to
identify the specific documents reviewed.
G. Recommendation
Report
1. When assessing and making its recommendations with regard to the Member’s Leveraged
Accounts, the Monitor shall:
i. Specify the measurements and criteria used in the assessment;
ii. Adhere to the criteria set out in Schedule 1.
ACKNOWLEDGEMENT
[INSERT MONITOR NAME], the Independent Monitor retained by the Member and approved
by Staff to provide services to the Member in accordance with the Terms of the Independent
Monitor
, hereby acknowledges that the terms of its retainer with the member requires it to
provide those services in accordance with the Terms of the Independent Monitor and these Duties
and Standards of the Independent Monitor
.

Date: ____________________________

Name: ____________________________

Title: ____________________________

Doc 236380
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