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Reasons For Decision

Re:

Reasons For Decision

Reasons for Decision
File No. 201229


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


Re: Imtiaz (“Tim”) Mahamood Mohamed


Heard: December 3, 2012 in Toronto, Ontario
Reasons for Decision: December 21, 2012

REASONS FOR DECISION


Hearing Panel of the Central Regional Council:

Hon. Stanley R. Kurisko, Q.C.
Chair

Glenda Towle
Industry Representative

Guenther W.K. Kleberg
Industry Representative

Appearances:

Lyla Simon
)
Counsel for the Mutual Fund Dealers Association

) of Canada

James Camp
)
Counsel for Imtiaz (‘Tim”) Mahamood Mohamed

) (the
“Respondent”)

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1.
The Staff of the Mutual Fund Dealers Association of Canada (“MFDA”) and the
Respondent entered into a Settlement Agreement which they negotiated pursuant to s. 24.4.1 of
MFDA By-law No. 1. They submitted the Settlement Agreement to this Hearing Panel pursuant
to Rule 15 of the MFDA Rules of Procedure for approval or rejection. After considering the
Settlement Agreement, the other material filed and upon hearing the submissions made by
Enforcement Counsel and by counsel for the Respondent, the Hearing Panel issued an Order
accepting the Settlement Agreement. These are our reasons for making that Order.

AGREED FACTS

Registration History of the Respondent

2.
From 1999 to November 3, 2007, when he was terminated for cause as a result of the
events described herein, the Respondent was registered in Ontario as a mutual fund salesperson
and branch manager with Dundee Private Investors Inc. (“Dundee”).1

3.
Commencing February 26, 2008,2 the Respondent was re-registered in Ontario as a
dealing representative in the categories of mutual fund dealer and exempt market dealer with
Keybase Financial Group Inc. (“Keybase”), a Member of MFDA. He has remained with Keybase
in this capacity to date.

4.
In light of Dundee having terminated the Respondent, the Ontario Securities Commission
(“OSC”) approved his registration with Keybase subject to him providing a sworn affidavit
outlining the circumstances that led to his termination. The affidavit that was provided by the
Respondent is the subject of one of the admitted contraventions herein described in more detail
at paragraphs 7-12 below. The OSC did not impose any further terms and conditions on the
Respondent’s re-registration.

Respondent’s Misconduct

1 From 1999 to 2002, the Respondent was registered with Dundee Private Investors Management Inc. Dundee
Private Investors Inc. has been a Member of the MFDA since February 8, 2002, therefore, only the Respondent’s
conduct since February 8, 2002 is subject to MFDA jurisdiction and is contemplated herein.
2 The Respondent became employed with Keybase on January 11, 2008. However, he was not registered until
February 26, 2008.
Page 2 of 13

5.
On October 17, 2007 Dundee supervisory staff identified an irregularity with one of the
Respondent’s client’s account-opening documents. Dundee made inquiries of the Respondent,
and then arranged to audit the Respondent’s branch.

6.
From October 30, 2007 to November 1, 2007, Dundee supervisory staff carried out an
audit at the Respondent’s branch of all his client files and found, among other things, pre-signed
forms and evidence of discretionary trading.

7.
MFDA Staff conducted an investigation which revealed that the Respondent had (i)
obtained pre-signed forms; (ii) engaged in discretionary trading which the clients were aware of
and authorized; and (iii) swore an affidavit containing misleading information he provided to the
OSC.

Pre-signed Forms

8.
From 2002 to at least April 2007, the Respondent obtained 43 blank or partially
completed pre-signed trade forms (some of which were undated) for 30 clients. He maintained
these forms until November 1, 2007.

9.
At the material time Dundee’s policies and procedures prohibited Approved Persons from
asking clients to sign blank documents of any kind and also prohibited Approved Persons
maintaining pre-signed blank documents in client files.

Discretionary Trading

10.
The Respondent’s general practice was to meet with a client or speak with a client over
the telephone to determine the client’s investing intentions. He would have the client sign the
completed forms in order to carry out the client’s investing intentions. Additionally, many of the
Respondent’s clients held their accounts in nominee name or executed Limited Trade
Authorization forms regarding their accounts held in client’s name.

11.
In some instances, however, the Respondent re-used pre-signed forms either by
photocopying the already existing blank pre-signed form for the new trade or by whiting out the
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trade instructions on an old already signed and populated trade form and entering a new date and
new trade instructions. In all cases the Respondent would then submit the trade for processing.

12.
There have been no client complaints and no known client losses concerning the
discretionary trading engaged in by the Respondent. The last instance of discretionary trading
occurred over seven years ago.

The Affidavit

13.
In or about November 2007, the Respondent applied to the OSC to have his registration
renewed in order to register with Keybase.

14.
On December 4, 2007, the OSC sent the Respondent a letter inquiring as to the
circumstances of his termination from Dundee.

15.
Through his counsel, the Respondent attempted to obtain access from Dundee to the
blank signed forms referred to in its termination letter so that he could properly comment on the
forms in his response to the OSC. Dundee declined to provide access, citing client confidentiality
concerns.

16.
On January 4, 2008, in response to a letter from the OSC, the Respondent swore an
affidavit in which he provided misleading information as follows:

Para. 6 – I do not know what these documents [the blank and partially completed
signed forms] are, and without access to them, I can’t comment on them directly.
If and when I am provided access to them I will be able to provide my comments.

Para 7 – I can, however, advise that is [sic] not my practice to obtain, keep or use
blank signed forms.

17.
The Respondent states that at the time he made the impugned statement that it was “not
[his] practice to obtain, keep or use blank signed forms” he did not believe the statement was
misleading. However, the Respondent now acknowledges that the statement was misleading as
he had in fact obtained, kept, and used blank and partially completed pre-signed forms.

Page 4 of 13

18.
The affidavit was provided to the OSC on January 4, 2008.

19.
After receipt of the Respondent’s affidavit, the OSC completed its review and approved
the Respondent’s registration with no terms or conditions, and he became registered with
Keybase.

CONTRAVENTIONS

20.
The Respondent admits:

i. from 2002 to at least April 2007, he obtained 43 blank or partially completed pre-
signed trade forms for 30 clients, and maintained the said forms until November 1,
2007, contrary to MFDA Rule 2.1.1;

ii. from February 20, 2002 to August 22, 2005, he engaged in 22 instances of
discretionary trading in the accounts of seven clients (all of which was known to and
authorized by the clients), contrary to MFDA Rule 2.1.1; and

iii. on January 4, 2008, he swore an affidavit in which he provided misleading
information to the OSC, contrary to MFDA Rule 2.1.1.

TERMS OF SETTLEMENT

21.
The terms of settlement set out in the Settlement Agreement are as follows:

i. the Respondent shall be suspended from conducting securities related business in any
capacity while in the employ of or associated with any MFDA Member for a period
of one month commencing from the date of the Hearing Panel’s final Order herein,
pursuant to s. 24.1.1(c) of MFDA By-law No. 1;

ii. the Respondent shall successfully complete the IFSE (IFIC) Mutual Fund Dealer
Compliance course within six months of the date of the Hearing Panel’s final Order
herein, pursuant to s. 24.1.1(f) of MFDA By-law No. 1;
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iii. in the event that the Respondent does not successfully complete the Course within six
months of the date of the Hearing Panel’s final Order herein, the Respondent shall be
suspended from conducting securities related business in any capacity while in the
employ of or associated with any MFDA Member until such time as the Respondent
successfully completes the IFSE course, pursuant to s. 24.1.1(c) of MFDA By-law
No. 1;

iv. the Respondent shall pay a fine in the amount of $20,000;

v. the Respondent shall pay costs in the amount of $5,000;

vi. the Respondent shall attend in person at the Settlement Hearing; and

vii. the Respondent shall in future comply with MFDA Rule 2.1.1.

SERIOUSNESS OF THE CONTRAVENTIONS

Pre-signed Forms

22.
At the material time Dundee’s policies and procedures prohibited Approved Persons (i.e.,
the Respondent) from asking clients to sign blank documents of any kind and also prohibited
Approved Persons from maintaining pre-signed blank documents in client files.

23.
The reasons for the prohibition against pre-signed forms are summarized in Price (Re):3

123.
At its worst, pre-signed forms create a mechanism for an Approved Person
to engage in acts of fraud, theft or other forms of harmful conduct towards a
client. While there is absolutely no suggestion that the Respondent engaged in any
of these activities, the rationale for the prohibition on pre-signed forms becomes
clear.

124. Pre-signed forms also subvert the ability of a Member to properly
supervise trading activity. They destroy the audit trail. The presence of the client’s

3 MFDA Case No. 200814, Reasons for Decision (Misconduct) of the MFDA Central Regional Council dated April
18, 2011.
Page 6 of 13

signature on a trade form can no longer be taken as confirmation that the client
authorized a particular trade. It also compromises the ability of the Member to
subsequently investigate and respond to a client complaint concerning the
propriety of trading in his or her account.

Discretionary Trading

24.
As was stated in the case of O’Brien (Re):4

19. …. mutual fund salespeople are not permitted to conduct discretionary
trades and must always contact the client prior to making any transactions.
Where an Approved Person fails to obtain client instructions prior to executing
a trade, he engages in discretionary trading beyond the terms of his or her
registration as a mutual funds salesperson.

25.
Furthermore, even where there is no intent of using it for the purpose of taking advantage
of a client, discretionary trading is prohibited because it may undermine the clients’ rights and
ability to make informed decisions about their financial affairs; it subverts the ability of a
Member to properly supervise trading activity; and it destroys the integrity of the audit trail.

The Affidavit

26.
In Staff’s submission no regulator (in any industry) can police its registrants all the time
and, as such, the trust between a regulator and its participants is especially important. The
MFDA and its Members rightly expect and count on the truthfulness of industry participants.
The Hearing Panel endorses this submission.

MITIGATING FACTORS AND CIRCUMSTANCES

27.
The Respondent is 54 years old, has a Bachelor’s degree in engineering and has worked
in the financial services and insurance industries for most of his career.

28.
There have been no client complaints and no misappropriation or trading that was not
authorized by clients in this matter. There is no evidence of client harm and no known client

4 2008 LNCMFDA 17, Reasons for Decision of the MFDA Atlantic Regional Council dated November 25, 2008.

Page 7 of 13

losses concerning the “authorized” discretionary trading engaged in by the Respondent, the last
instance of which occurred over seven years ago.

29.
There is no evidence that the Respondent received any financial benefit from engaging in
the discretionary trading beyond that to which he would have been ordinarily entitled had the
transactions in the clients’ accounts been carried out in the proper manner (i.e. sales commissions
generated in the normal course).

30.
On August 27, 2008, Keybase conducted an audit of the Respondent’s client files. No
pre-signed forms were identified. On April 14, 2010, Keybase conducted another audit of the
Respondent’s client files. No pre-signed forms were identified.

31.
Since becoming registered with Keybase in 2008, some 4½ years ago, the Respondent
has maintained a clean record and states that he intends to continue in like manner.

32.
The Respondent has demonstrated best efforts in becoming knowledgeable and compliant
with MFDA Rules and policies as evidenced by the two successful Keybase audits of his files.

33.
The Respondent has no prior disciplinary history with the MFDA and has been fully co-
operative with Staff, thus eliminating the need for a full hearing on the merits.

34.
The Respondent successfully completed the IFSE course in September, 2012.

35.
The Respondent has paid the sum of $20,000.00 plus $5,000.00 to MFDA in escrow in
payment of the penalty and costs pending the resolution of this hearing.

THE USE OF PENALTY GUIDELINES

36.
The MFDA Penalty Guidelines are a resource when determining the appropriate penalties
to be imposed. The penalty types and ranges stated in the Penalty Guidelines are not mandatory
or binding;5 however, they provide a basis upon which a hearing panel’s discretion can be
exercised consistently in like circumstances.

5 MFDA Penalty Guidelines at p. 1.
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37.
In cases involving the misconduct of the type admitted to in the present case, the Penalty
Guidelines recommend consideration of the following penalties and factors:

BREACH
PENALTY TYPE & RANGE
SPECIFIC FACTORS TO CONSIDER
Standard of
 Fine (AP): Minimum of $5,000.
 Nature of the circumstances and conduct.
Conduct
 Write or rewrite an appropriate industry
 Number of individuals affected.
(Guidelines, p.
course (e.g. IFIC Officers', Partners' and

27)
Whether the conduct is likely to bring the
Directors' Course or Canadian
individual, the Member or the mutual fund
Investment Funds Course).
industry into disrepute.
 Suspension.
 Permanent prohibition in egregious
cases.
Discretionary
 Fine: Minimum of $5,000.
 Number of trades.
Trading
 Period of increased supervision.
 Whether client provided verbal authority to
(Guidelines, p.

engage in discretionary trading.
26)
Write or rewrite an appropriate industry
course (e.g. Canadian Investment Funds
 Underlying reason for engaging in trading.
Course).
(e.g. for personal financial gain).
 Suspension.
 Number of clients affected.
 Permanent prohibition in egregious
 Period of time over which the trading took
cases.
place.
 Suitability of trades.
 Magnitude of client losses.

OTHER DECISIONS

38.
In Rounthwaite the Respondent engaged in discretionary trading as part of his general
practice and improperly facilitated an investment by a client in a charitable donation program.
The Respondent was ordered to pay a fine of $20,000.00 and costs of $5,000.00. The following
statements in the Reasons for Decision are applicable to the case before this Hearing Panel:

15.
In determining whether a settlement is a reasonable one, the hearing panel
is entitled to look at regulatory guidelines and other decisions. Guidelines are not
binding upon a hearing panel and cannot derogate from its responsibility to decide
what might be an appropriate penalty in a given case. However guidelines are
useful in that they show what penalties Members of the industry consider to be
generally appropriate. In this case the guidelines for discretionary trading suggest
a minimum fine of $5,000.00. The fine agreed to in this case is substantially in
excess of that.
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39.
In addition to Rounthwaite, Counsel for Staff referred the Panel to three decisions which
involved discretionary trading. They were Re O’Brien (supra), Re Price6 and Re Moro7. The fine
agreed to in the present case is well within the range of fines in those cases.

40.
In considering these decisions the following statement in Rounthwaite bears repetition
and must be kept in mind:

16.
Decisions in other cases can often be of some assistance in helping to
indicate what might be a reasonable range of penalties. It is always necessary to
be cautious about relying too heavily on decisions in other cases because no two
cases are ever the same.

41.
By way of substantiating this caution it is noted that in O’Brien a permanent prohibition
against conducting securities business was imposed. The facts in O’Brien were so egregious and
his disciplinary history was so extensive that this Hearing Panel does not consider it to be
comparable to the present case regarding the prohibition aspect of a penalty.

42.
The Price and Moro decisions dealt only with the issue of discretionary trading forms
through the use of blank pre-signed forms. In the present case there is the additional matter of the
affidavit containing misleading information that the Respondent provided to the OSC.

43.
With respect to the matter of the affidavit Counsel for Staff referred to Law Society of
Alberta v. Rigler.8 In support of his application for admission to the Law Society of Alberta as a
Student-at-Law, Mr. Rigler filed a statutory declaration in which he deliberately made a
statement regarding an earlier alcohol-related incident that was untrue and misleading. His
application was approved. In a subsequent proceeding brought by the Law Society for
termination of Mr. Rigler’s registration as a Student-at-Law or a lengthy suspension, Mr. Rigler
admitted that he lied in his statutory declaration.

44.
The Committee hearing the application stated that “the fundamental purpose of the
sanctioning process is to ensure that the public is protected and that the public maintains a high

6 [2011] MFDA No. 200814.
7 [2007] MFDA No. 2007] No. 200714.
8 [2008] L.S.D.D. No. 126 heard July 8, 2008.
Page 10 of 13

degree of confidence in the legal profession.”9

45.
In coming to the conclusion that termination was not appropriate and imposing a three
month period of suspension, the Committee hearing the matter set out the following
considerations:10

 Mr Rigler admitted his guilt and displayed remorse for his conduct.
 There was no suggestion of any prior history of dishonesty or inappropriate conduct.
 Termination was not necessary for the purpose of deterrence as it was clear that the
experience had already had a major impact on his life.
 Mr. Rigler had complied with undertakings he had given to the Practice Review
Committee of the Law Society of Alberta which was satisfied with the steps Mr.
Rigler had taken to address their concerns.
 The key consideration was whether it was necessary for the protection of the public
and the reputation of the legal profession that Mr. Rigler be terminated. The
Committee did not feel it was. In all the circumstances the Committee felt that the
risk of Mr. Rigler re-offending was negligible and that the imposition of a
suspension was sufficient to demonstrate the seriousness with which the Law Society
viewed transgressions related to honesty and integrity.

THE DUTY OF A HEARING PANEL ON A SETTLEMENT HEARING

46.
In the Reasons for Decision dated July 30, 2012 in Rounthwaite (Re)11, the Hearing Panel
stated:

11. It is well settled that our task is not to decide whether, in this case, we would
arrive at the same decision as that reached by the parties in their settlement
agreement. Rather, our duty is to determine whether the penalty is a reasonable
one and whether it meets the objectives of the disciplinary process which are to
maintain the integrity of the Investment Services Industry and to protect the
public.

9 Paragraph 32.
10 Paragraphs 39, 40 and 41.
11 2012 LNCMFDA 60.
Page 11 of 13

47.
In the recent case of Re Vorstadt12 an IIROC Hearing Panel stated:

Before leaving this case we wish to stress the importance of respect for the
settlement process. Settlement leads to fair, efficient and economical
resolution of disciplinary matters. The settlement process should be
encouraged and supported. In Re Clarke, [1999] I.D.A.C.D. No. 40, the
Hearing Panel stated, at p. 3:

The Panel must be cognizant of the importance of the settlement
process and should not interfere lightly in a negotiated settlement.

48.
MFDA Rule of Procedure 15 governing Settlement Hearings authorizes a Hearing Panel
to accept13 or reject14 Settlement Agreement. There is no additional authority to initiate changes
to the Settlement Agreement.

FACTORS CONCERNING ACCEPTANCE OF A SETTLEMENT AGREEMENT

49.
When determining whether a proposed settlement should be accepted, MFDA hearing
panels have typically taken into account whether the proposed Settlement Agreement:15

i. is in the public interest and whether the penalty will protect investors;
ii. is reasonable and proportionate, having regard to the conduct of the Respondent as set
out in the Settlement Agreement;
iii. addresses the issues of both specific and general deterrence;
iv. will prevent the type of conduct described in the Settlement Agreement from
occurring again in the future; and
v. will foster confidence in the integrity of the Canadian capital markets, the securities
industry, the MFDA, and the regulatory process itself.

50.
In addition, the Settlement Agreement should satisfy the need for specific and general
deterrence.

DECISION

12 [2012] IIROC at p.4.
13 Rule 15.2 (3).
14 Rule 15.2 (3).
15 IQON Financial Inc. (Re), 2007 LNCMFDA 29, Reasons for Decision of the MFDA Pacific Regional Council
dated May 24, 2007 at paragraph 11.
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51.
The Settlement Agreement is reasonable having regard to the above considerations
regarding the Respondent’s misconduct, the seriousness of the contraventions, the MFDA
Penalty Guidelines, other decisions, the mitigating factors and circumstances, and the factors
concerning acceptance of a Settlement Agreement.


DATED this 21st day of December, 2012.

“Stanley Kurisko”
The Hon. Stanley R. Kurisko, Q.C.,

Chair

“Glenda Towle”
Glenda Towle,

Industry Representative

“Guenther Kleberg”
Guenther Kleberg,
Industry Representative

Doc 323381
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