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Reasons For Decision

Re:

Reasons For Decision

Reasons for Decision
File No. 201113



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: Roberto Gabriel Mammone


Heard: March 2, 2012 in Toronto, Ontario
Reasons for Decision: March 12, 2012

REASONS FOR DECISION


Hearing Panel of the Central Regional Council:

The Hon. Patrick T. Galligan, Q.C.
Chair

Vasant Pachapurkar, CFP
Industry Representative

Ronald Willis CLU, CFSB
Industry Representative

Appearances:

Michelle
Pong
)
Counsel, Mutual Fund Dealers Association of

)
Canada (“MFDA”)

Kevin Richard
)
Counsel for the Respondent

)

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1.
The Staff of the Mutual Fund Dealers Association of Canada (“MFDA”) and the
Respondent, Roberto Gabriel Mammone, entered into a Settlement Agreement pursuant to
sections 24.4.1 and 24.4.2 of By-law No. 1 of the MFDA. On recommendation of the MFDA,
and in accordance with section 24.4.3 of the by-law, the Settlement Agreement was then referred
to this Hearing Panel for acceptance or rejection. After hearing counsel for the parties and
considering the exhibits filed, we concluded that we should accept the Settlement Agreement.
We made an Order accepting the Settlement Agreement and indicated that reasons for our
decision would follow in due course. These are those reasons.

2.
There is no dispute about the facts of the case. The parties have agreed that they are as set
out in the Notice of Hearing. The facts are as follows:

Registration History

3.
From July 3, 2007 to May 13, 2009, the Respondent was registered in Ontario as a
mutual fund salesperson with Royal Mutual Funds Inc. (“Royal”). The Respondent was
terminated by Royal as a result of the events described herein and is not currently registered in
the securities industry in any capacity.

4.
The Respondent was previously registered in Ontario as a mutual fund salesperson with
TD Investment Services Inc. from February 2002 to June 2007.

Background

5.
On or about April 17, 2009, the Respondent was requested by his Branch Manager to
obtain client signatures on six account documents that had been identified as missing in Royal’s
monthly Missing Accounts Documentation Aging Report (the “Report”) generated by Royal’s
head office, in preparation for an upcoming internal operational audit commencing on or about
May 5, 2009. The six account documents that were identified in the Report as missing were:

Client
Description of Form
Date on form
DL
1 “account opening information (KYC)” form
March 2, 2009
DL
2 “registered retirement income fund (RRIF) investment March 2, 2009
switch” forms
LL
1 “client acknowledgement” form
January 30, 2009
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Client
Description of Form
Date on form
PC/AC 1 “account opening information (KYC)” form
March 6, 2009
EM
1 “account opening information (KYC)” form
March 3, 2009

6.
The Report is produced monthly as a means of identifying instances where account
documents required for a particular transaction may have not been completed or, if completed,
may have been misfiled, lost or were otherwise not scanned into Royal’s back office system
located at its head office.

7.
Later that same day (i.e. on or about April 17, 2009), the Respondent advised his Branch
Manager that he had obtained all of the required client signatures.

8.
The Branch Manager was suspicious that the Respondent had apparently obtained the
signatures so quickly and advised the Manager of Financial Planning of her concern.

9.
On or about April 24, 2009, the Manager of Financial Planning met with the Respondent
and asked him how he had managed to obtain the client signatures in such a short period of time
and apparently without the clients visiting the branch. The Respondent admitted to the Manager
of Financial Planning that he had falsified the signatures of clients DL, LL, PC and EM on the
six account documents.

10.
All six of the account documents related to trading activity initiated by the client. There
were no client complaints. There was no evidence that the Respondent had used the account
documents to conduct unauthorized or discretionary trading in the clients’ accounts. In the case
of the three “account opening information (KYC)” forms, the Respondent had re-created the
content of the “account opening information (KYC)” forms by using the existing information on
file that had previously been scanned into Royal’s back office system and then falsifying the
clients’ signatures on the new forms.

11.
The Respondent provided the MFDA with the following explanations for falsifying the
signatures on the account documents:

(a) Client DL: the Respondent states that on or about March 2, 2009, DL completed and
signed the “account opening information (KYC)” form and two “registered retirement
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income fund (RRIF) investment switch” forms that were subsequently identified as
missing in the Report. On or about April 17, 2009 (i.e. the date the Respondent was
requested by his Branch Manager to obtain the client’s signatures on the forms), the
Respondent states that he completed new forms to the best of his recollection,
falsified the signature of DL on the forms, and then placed the forms in the client file
until the Respondent could locate DL’s original forms or DL could return to the
branch to complete the forms again;

(b) Client LL: the Respondent states that on or about January 30, 2009, LL met with the
Respondent to discuss her existing RSP account and decided to purchase a market-
linked GIC. The Respondent states that he forgot to ask LL to sign a “client
acknowledgement” form in respect of her GIC purchase. On or about April 17, 2009,
the Respondent states that he falsified the signature of LL on the form and then
placed the form in the client file until LL could return to the branch to sign the form;

(c) Clients PC and AC: the Respondent states that on or about March 6, 2009, PC and his
mother, AC met with the Respondent to review AC’s accounts. The Respondent
states that the “account opening information (KYC)” form subsequently identified as
missing in the Report was signed by PC and AC on that date. On or about April 17,
2009, the Respondent states that he completed a new form, falsified the signature of
PC only on the form, and then placed the falsified form in the client file until PC
could return to the branch to complete the form again; and

(d) Client EM: EM is the Respondent’s father. The Respondent has power of attorney
over EM’s financial matters. On or about March 3, 2009, CM, the Approved Person
responsible for servicing EM’s accounts, conducted a series of transactions involving
EM’s RSP account at the request of the Respondent on behalf of EM. The
Respondent states that he forgot to ask EM to sign an “account opening information
(KYC)” form in respect of one of the transactions. The form was subsequently
identified as missing in the Report. On or about April 17, 2009, the Respondent states
that he falsified the signature of EM on the form and submitted it to the Branch
Manager.

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12.
By falsifying the signatures of clients DL, LL, PC and EM on the account documents in
the manner described above, the Respondent engaged in conduct contrary to MFDA Rule 2.1.1.

13.
It is clear from jurisprudence emanating from the courts, and from MFDA and
Investment Dealers Association of Canada (“IDA”) hearing panels, that our task is not to decide
whether, in this case, we would have arrived at the same decision as that reached by the parties.
Rather, our duty is to determine whether the penalty agreed upon is a reasonable one, that is,
whether it is one which falls within the range of penalties imposed in other cases and whether it
meets the objectives of the disciplinary process which are to maintain the integrity of the
investment industry. As the settlement meets those requirements it is our duty to approve it.

14.
It is useful to refer to one court decision and to certain decisions of hearing panels of the
MFDA and of the IDA. In British Columbia Securities Commission v. Seifert (2008), 72
B.C.L.R. (4th) 72, the British Columbia Court of Appeal adopted the following statement of
principle:

Settlements assist the Commission to ensure that its overriding objective, the protection
of the public, is met. Settlements proscribe activities that are harmful to the public. In so
doing, they are effective in accomplishing the purposes of the statute. They provide
means of reaching a flexible remedy that is tailored to address the interests of both the
Commission and the person under investigation. Enforcement is rarely a concern
because the settlement is voluntary. A person who is the subject of an investigation
retains the option of refusing to settle and proceeding to a hearing. Settlements are also
efficient. Both parties can forego the time and expense of a hearing. Or, they can settle
some matters, and direct their resources to the matters that are in dispute, and therefore to
be resolved by way of a hearing.

15.
A hearing panel of the IDA in Re Clark, [1999] I.D.A.C.D. No. 40 came to the following
conclusion:

It was submitted by staff and accepted by the panel that its role under By-law 20.26 is not
the same as its role under By-law 20.10 following a hearing. In considering a settlement
under By-law 20.26 the panel should not simply substitute its discretion for that of staff
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who negotiated the settlement. The panel must be cognizant of the importance of the
settlement process and should not interfere lightly in a negotiated settlement. In our view,
as a result, panels must also be careful in using previous settlements as precedent. The
settlement process is one of negotiation and compromise and the penalty imposed
following a settlement will often be less onerous than one imposed following a hearing
where similar findings are made.

16.
Similar views were expressed by the hearing panel of the IDA which decided the matter
of Re Milewski, [1999] I.D.A.C.D. No. 17:

Although a settlement agreement must be accepted by a District Council before it can
become effective, the standards for acceptance are not identical to those applied by a
District Council when making a penalty determination after a contested hearing. In a
contested hearing, the District Council attempts to determine the correct penalty. A
District Council considering a settlement agreement will tend not to alter a penalty that it
considers to be within a reasonable range, taking into account the settlement process and
the fact that the parties have agreed. It will not reject a settlement unless it views the
penalty as clearly falling outside a reasonable range of appropriateness. Put another way,
the District Council will reflect the public interest benefits of the settlement process in its
consideration of specific settlements.

17.
The final decision to which we wish to refer is that of a hearing panel of the MFDA in Re
William Todd Gillick, [2009] MFDA File No. 200910. We cite from page 2 of that decision:

3.
It is always desirable that parties settle these matters and the panel should not
lightly fail to approve a settlement if it falls within a reasonable range.

18.
In the light of that jurisprudence, we consider the circumstances of this case. They have
been set out earlier. We do not minimize the seriousness of the Respondent’s conduct. However,
there are a number of things which militate in his favour.

(a) The Respondent has never previously been the subject of a disciplinary proceeding by
the MFDA;
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(b) All account documents related to trading activity were initiated by the clients. There
is no suggestion that the Respondent used the account documents to conduct
unauthorized or discretionary trading in the clients’ accounts;
(c) The Respondent did not falsify the clients’ signatures for the purpose of obtaining any
financial benefit to himself;
(d) The Respondent promptly admitted his misconduct and indicated that he recognized
the seriousness of the misconduct;
(e) By entering into a Settlement Agreement, the Respondent has accepted responsibility
for his misconduct and thereby has avoided the necessary of the MFDA conducting a
lengthy hearing involving considerable expense to the membership of the MFDA; and
(f) No client complained to the employer and there is no evidence of harm to any client.

19.
After considering the factors contained in the Guidelines, the decisions of hearing panels
in similar cases and the need to protect the integrity of the investment industry, we formed the
opinion that the proposed settlement was a reasonable one. As noted above, at the conclusion of
the settlement hearing we approved of it.


DATED this 12th day of March, 2012.

“Patrick Galligan”
The Hon. Patrick T. Galligan, Q.C.,

Chair

“Vasant Pachapurkar”
Vasant Pachapurkar, CFP,

Industry Representative

“Ronald Willis”
Ronald Willis, CLU, CFSB,

Industry Representative

Doc 288545
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