Skip to Main Content

Reasons For Decision

Re:

Reasons For Decision

Reasons for Decision
File No. 201605



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: Nathan Charles Garries

Heard: October 24, 2016, in Edmonton, Alberta
Reasons for Decision: November 14, 2016

REASONS FOR DECISION


Hearing Panel of the Prairie Regional Council:

The Hon. René P. Foisy
Chair
Kathleen Jost
Industry Representative
James Samanta
Industry Representative

Appearances:

Justin Dunphy
)
Counsel for the Mutual Fund Dealers

)
Association of Canada
)

Nathan Charles Garries
)
In Person
)

)

Page 1 of 25

1.
By Notice of Settlement Hearing dated August 8th, 2016, and duly served upon Nathan
Garries (the “Respondent”), a Settlement Hearing was heard in Edmonton, Alberta on October
24, 2016.

2.
Staff of the Mutual Fund Dealers Association of Canada (“MFDA Staff”), made the
following Submissions:

3.
MFDA Staff has entered into a settlement agreement dated July 31, 2016 (the “Settlement
Agreement”) with Nathan Charles Garries (the “Respondent”), in which the Respondent admits
that:

a)
between May 1, 2013 and October 31, 2013, he processed 306 authorized
discretionary trades as part of a dollar-cost averaging strategy in relation to 38
clients, contrary to MFDA Rules 2.3.1 and 2.1.1;
b)
between September 2, 2010 and June 3, 2014, he failed to record and maintain
evidence of client trade instructions with respect to 340 transactions that he
processed pursuant to Limited Trading Authorizations for 48 clients, contrary to
MFDA Rules 2.1.1 and 5.1(b);
c)
between November 12, 2008 and July 18, 2014, he obtained, possessed and, in
some instances, used to process transactions, 54 pre-signed account forms or
photocopies of pre-signed account forms in respect of 19 clients, contrary to
MFDA Rule 2.1.1; and
d)
between January 21, 2011 and May 23, 2014, he falsified and used to process
transactions, 14 client account forms in respect of 13 clients, by altering client
account forms without having the clients initial the alterations, contrary to MFDA
Rule 2.1.1.

4.
The Respondent agrees, as a term of the Settlement Agreement, to a 1 month prohibition
from conducting securities related business in any capacity while in the employ or associated
with any Member of the MFDA, to pay a fine in the amount of $25,000, and to pay costs in the
amount of $2,500.
Page 2 of 25


AGREED FACTS

5.
Since March 14, 2003, the Respondent has been registered in Alberta as a mutual fund
salesperson (now known as a dealing representative) with Quadrus Investment Services Ltd.
(“Quadrus”), a Member of the MFDA.

6.
At all material times, the Respondent has conducted business in the Edmonton, Alberta
area.

Authorized Discretionary Trading

7.
At all material times, Quadrus’ policies and procedures prohibited its Approved Persons
from engaging in discretionary trading.

8.
Between May and October of 2013, the Respondent processed 306 trades in respect of 38
clients where he determined the amount and timing of the trades, thereby engaging in
discretionary trading.

9.
The Respondent states that he processed the majority of the discretionary trades to
implement a dollar-cost averaging strategy. Dollar-cost averaging is a strategy whereby a client
will invest a consistent dollar amount at regular intervals in order to diversify the purchase price
for a unit of a given mutual fund. The result is that a client purchases more units when prices are
low and fewer units when prices are high.

10.
The Respondent states that he met with clients to secure client authorization for a single
switch to be completed in each client’s accounts. The Respondent then completed the switch as a
series of smaller transactions spread over a period of six months (the “sub-switches”).

11.
The Respondent states that he discussed the nature of the dollar-cost averaging trades
with each of the 38 clients during an initial discussion with each client. The Respondent did not
Page 3 of 25

obtain specific client instructions for each sub-switch he undertook after receiving initial client
instructions.

12.
The Respondent exercised his discretion to determine the amount and date when each
sub-switch was submitted to Quadrus for processing, without discussing these elements of the
transactions with the clients in each instance.

Failure to Record and Maintain Evidence of Client Instructions

13.
At all material times, Quadrus’ policies and procedures required its Approved Persons to
maintain a permanent record of all client instructions, and to make these instructions available to
Quadrus upon request. Quadrus’ policies and procedures further required Approved Persons to
clearly indicate the date and time that the client instructions were received.

14.
Between September 2, 2010 and June 3, 2014, the Respondent processed 340 trades in
the accounts of 48 clients, pursuant to Limited Trading Authorizations (“LTA”) that had been
executed by the clients. The Respondent states that he received verbal instructions from each
client in relation to the trades, but failed to make a written record to evidence the client
instructions.

Pre-Signed Account Forms

15.
At all material times, Quadrus’ policies and procedures prohibited its Approved Persons
from using pre-signed account forms.

16.
Between November 12, 2008 and July 18, 2014, the Respondent obtained, possessed and
used to process transactions, 43 pre-signed account forms or photocopies of pre-signed account
forms in respect of 19 clients. The pre-signed account forms consisted of:

i.
Four Know Your Client (“KYC”) Forms;
ii.
One KYC Update Form;
Page 4 of 25

iii.
One Pre-Authorized Contribution Form;
iv.
Two Redemption Forms;
v.
Two RESP Educational Assistance Payment Forms;
vi.
One Spousal RRSP Application Form;
vii.
26 Switch Forms;
viii.
One TFSA Application Form; and
ix.
Five Transfer Forms.

17.
Between November 12, 2008 and July 18, 2014, the Respondent also obtained and
possessed 11 pre-signed account forms in the files of seven of clients described in paragraph 16.
The pre-signed account forms consisted of:

i.
One Human Resources and Skills Development Canada Application Form;
ii.
Four KYC Forms;
iii.
Two RESP Educational Assistance Payment Forms;
iv.
One Switch Form; and
v.
Three Transfer Forms.

18.
The Respondent states that he used the account forms described above for client
convenience and, in some cases, to implement a dollar-cost averaging strategy to be carried out
in client accounts between May and October, 2013.

Falsified Account Forms

19.
Between January 21, 2011 and May 23, 2014, the Respondent altered and used to process
transactions, 14 pre-signed account forms in respect of 13 clients. The pre-signed account forms
consisted of:

i.
Two Investment Application Forms;
ii.
One Redemption Form;
iii.
Three RESP Educational Assistance Payment Forms;
Page 5 of 25

iv.
Three Transfer Authorization for Registered Investments (“TARI”) Forms; and
v.
Two TFSA Application Forms.

20.
In each case, the Respondent altered the forms to change information to reflect client
instructions, without obtaining the clients’ initials authorizing the change.

Member Response

21.
In July 2014, Quadrus reviewed all of the 196 client files maintained by the Respondent.
Quadrus did not detect any additional pre-signed account forms beyond those described in
paragraphs 14 to 18 above. Quadrus also did not find evidence that the Respondent failed to
record and maintain evidence of client trade instructions beyond the 48 clients described in
paragraph 12 above.

22.
As part of its investigation, Quadrus sent letters to all of the Respondent’s clients on
August 15, 2014, in order to determine whether the Respondent had engaged in any unauthorized
trading. No clients reported any concerns.

23.
On August 21, 2014, Quadrus issued a letter of reprimand to the Respondent, and
required that he complete internal Member courses on “Know Your Conduct” and “Know Your
Process”. The Respondent completed these modules by August 26, 2014.

Additional Factors

24.
In September 2009, Quadrus conducted an audit of the Respondent’s client files and
identified instances where he had maintained pre-signed account forms. At that time, Quadrus
informed the Respondent of the seriousness of maintaining pre-signed account forms.

25.
The Respondent has no prior disciplinary history with the MFDA.

26.
There is no evidence of client harm in this matter.
Page 6 of 25


27.
There is no evidence that the Respondent received any financial benefit from engaging in
the misconduct beyond the commissions or fees he would ordinarily be entitled to receive had
the transactions in the clients’ accounts been carried out in the proper manner.

28.
The Respondent has cooperated fully with Staff during the course of the investigation,
and by agreeing to the settlement, has avoided the necessity of a full hearing on the merits.

29.
The Respondent has expressed remorse for his misconduct.

MFDA Rule 2.1.1 – High Standard of Ethics

30.
MFDA Rule 2.1.1 prescribes the standard of conduct applicable to registrants in the
mutual fund industry. The Rule requires that each Member and Approved Person: deal fairly,
honestly, and in good with faith with clients, observe high standards of ethics and conduct in the
transaction of business, and refrain from engaging in any business conduct or practice which is
unbecoming or detrimental to the public interest.

MFDA Rule 2.1.1, MFDA Staff’s Book of Authorities, Tab 1

Pre-Signed Account Forms are Not Permissible

31.
In the present case, the Respondent admits that he obtained, possessed, and in some
instances, used to process transactions, 54 pre-signed account forms or photocopies of pre-signed
account forms in respect of 19 clients.

32.
“Pre-signed account forms” is a generic term which applies to a variety of situations
where an Approved Person seeks to rely on a client’s signature on a document when the
signature was not provided by the client at the time the document was completed. Most
commonly, an Approved Person obtains a client’s signature on a partially or completely blank
account form, completes the form, then uses the form to process transactions in the client’s
account.
Page 7 of 25


33.
The MFDA has warned Approved Persons against the use of pre-signed account forms
for a number of years.

MFDA Staff Notice #MSN-0035 dated December 20, 2004, MFDA Staff’s
Book of Authorities, Tab 3
MFDA Staff Notice #MSN-0066 dated October 31, 2007, (updated March 4,
2013), MFDA Staff’s Book of Authorities, Tab 4
MFDA Bulletin #0661-E dated October 2, 2015, MFDA Staff’s Book of
Authorities, Tab 5

34.
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 Central Regional Council, MFDA File
No. 201311, Panel Decision dated September 4, 2013, MFDA Staff’s Book of
Authorities, Tab 6
Price (Re), [2011] Hearing Panel of the Central Regional Council, MFDA File
No. 200814, Panel Decision (Misconduct) dated April 18, 2011, MFDA Staff’s
Book of Authorities, Tab 7

35.
The use of pre-signed account forms adversely affects the integrity and reliability of
account documents, leads to the destruction of the audit trail, has a negative impact on Member
complaint handling, and has the potential for misuse in the form of unauthorized trading, fraud
and misappropriation. As the Hearing Panel explained in Price (Re):

Pre-signed forms present a legitimate risk that they may be used by an Approved
Person to engage in discretionary trading….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…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 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 activity in his or her
account.

Price (Re), supra, MFDA Staff’s Book of Authorities, Tab 7, at paras 122-124

36.
The prohibition on the use of pre-signed account forms applies regardless of whether:
Page 8 of 25


(a)
the client was aware, or authorized the use, of the pre-signed account forms; and
(b)
the forms were used by the Approved Person for discretionary trading or other
improper purposes.

Byce (Re), supra, MFDA Staff’s Book of Authorities, Tab 6
Price (Re), supra, MFDA Staff’s Book of Authorities, Tab 7

Falsifying Forms is Not Permissible

37.
In the present case, the Respondent admits that he falsified and used to process
transactions, 14 client account forms in respect of 13 clients, by altering client account forms
without having the clients initial the alterations.

38.
Like pre-signed account forms, the prohibition against falsifying forms exists regardless
of the existence of client authorization or the motive behind the use of the form, and, like pre-
signed account forms, the MFDA has been warning Approved Persons against falsifying forms
for a number of years.

MFDA Staff Notice #MSN-0035 dated December 20, 2004. MFDA Staff’s
Book of Authorities, Tab 3
MFDA Notice #MSN-0066 dated October 31, 2007 (updated March 4, 2013),
MFDA Staff’s Book of Authorities, Tab 4
MFDA Bulletin #00661-E dated October 2, 2015, MFDA Staff’s Book of
Authorities, Tab 5

39.
Hearing Panels have held that falsifying forms is a contravention of the standard of
conduct as set out in MFDA Rule 2.1.1.

Byce (Re), supra, MFDA Staff’s Book of Authorities, Tab 6
Ewart (Re),
[2015] Hearing Panel of the Central Regional Council, MFDA File
No. 201528, Panel Decision dated September 11, 2015, MFDA Staff’s Book of
Authorities, Tab 8

Page 9 of 25

40.
Like pre-signed account forms, the creation, possession or use of a falsified form is
considered serious misconduct. The reasoning in Price (Re), above, for why pre-signed account
forms affect the integrity and reliability of account documents also applies to falsified forms.

41.
MFDA Staff considers this type of form to be a more serious violation of the
contravention of the standard of conduct under MFDA Rule 2.1.1. The falsification of a client
signature or initials is particularly serious.

42.
Unlike pre-signed account forms, where the client knows he or she is signing an
incomplete form to be used in some way, in the case of a form falsified by the Approved Person,
the possibility exists that the client is unaware of the Approved Person’s actions.

Discretionary Trading is Not Permissible

43.
Pursuant to MFDA Rule 2.3.1(a), Approved Persons are prohibited from engaging in
discretionary trading.

MFDA Rule 2.3.1, MFDA Book of Authorities, Tab 1

44.
An Approved Person is required to obtain express client instructions from a client with
respect to each of the elements of every trade (including purchases, redemptions and switches)
that are processed in a client account including:

(a)
the specification of which security is to be traded;
(b)
the amount of the trade (in either dollar value or the number of units to be traded);
(c)
the timing of the trade; and
(d)
the specific details of any costs for fees associated with executing the trade.

Smilestone (Re), [2013] Hearing Panel of the Atlantic Regional Council, MFDA
File No. 201129, Panel Decision dated August 8, 2013, MFDA Staff’s Book of
Authorities, Tab 9
O’Brien (Re), [2008] Hearing Panel of the Atlantic Regional Council, MFDA
File No. 200809, Panel Decision dated November 25, 2008, MFDA Staff’s
Book of Authorities, Tab 10, at para 21
Page 10 of 25


45.
If an Approved Person fails to obtain instructions from a client with respect to one or
more elements of the trade and exercises his or her own discretion with respect to any elements
of the trade in order to process the trade, the Approved Person has engaged in discretionary
trading.

46.
If a trade is processed without the knowledge or approval of the client (even if it can be
shown that the trade was processed with good intentions and even if the client benefits the client
financially or otherwise) the trade is unauthorized and the processing of such a trade constitutes a
contravention of the regulatory obligations of the Approved Person who processed it.

47.
Even if prior to the processing of the trade, the client has expressed a clear intention to
delegate authority to the Approved Person to exercise discretion with respect to one or more
elements of the trade, such a trade is still a discretionary trade and an Approved Person is not
permitted to accept authority to engage in discretionary trading.

48.
In the case of Rounthwaite (Re), the Hearing Panel stated that:

Discretionary trading is fundamentally wrong. Subject to certain exceptions,
which are not applicable here, Member Rule 2.3.1 absolutely prohibits it. We
agree with the reasons which [Enforcement Counsel] submitted for the
prohibition. It:

(i) undermines the client's right and ability to make informed decisions about
their financial affairs;
(ii) subverts the ability of a Member to properly supervise trading activity;
and
(iii) destroys the integrity of the audit trail.

Jurisprudence emanating from MFDA Hearing Panels is consistent that even
when an Approved Person fully apprises a client of the details of a transaction,
Page 11 of 25

after it has been made, a discretionary trade is still wrong. See Re O'Brien, [2008]
LNCMFDA 17 and Re Price, [2011] MFDA Case No. 200814.

Rounthwaite (Re), [2012] Hearing Panel of the Central Regional Council,
MFDA File No. 201123, Panel Decision dated July 30, 2012, MFDA Staff’s
Book of Authorities, Tab 11, at paras 7-8

49.
In the case of O’Brien (Re), an MFDA Hearing Panel also noted that discretionary
trading exceeds the scope of a mutual fund salesperson’s registration category.

O’Brien (Re), supra, MFDA Staff’s Book of Authorities, Tab 10, at para 19

50.
The Hearing Panel in O’Brien also described the significance of the existence of a limited
trading authorization (“LTA”) on file for the client and the obligations of an Approved Person
who processes trades using an LTA as follows:

An LTA is a document which authorizes an Approved Person to execute a trade in
a client's account without the necessity of the client providing his or her written
instructions. It does not in any way confer general discretionary trading authority.

. . .

The existence of an LTA for a client's account does not relieve an Approved
Person of the ordinary-course obligation to obtain specific, express instructions
from the client for each trade made pursuant to the LTA. In the absence of such
instructions, there will be no written authorization or signature of the client
against which to later verify the trade. That is why it is important to record and
maintain evidence of client trade instructions including, among other things, the
account to which the trade instructions apply, the time and date that the
instructions were received, the amount of the trade, the price at which it was
executed and, the specific details of any costs for fees associated with executing
the trade. Such instructions should also include a note as to how the client's
instructions were given to the approved person (e.g. by telephone, in person or by
facsimile). See Recording and Maintaining Evidence of Client Trade Instructions,
Member Regulation Notice MR-0035.

O’Brien, supra, MFDA Staff’s Book of Authorities, Tab 10, at paras 20 – 21

51.
In the present case, the Respondent admits that he processed 340 trades in the accounts of
48 clients as part of a dollar cost averaging strategy. The Respondent relied on Limited Trading
Page 12 of 25

Authorizations that had been executed by the clients, and while he states that he received verbal
instructions from each client in relation to the trades, he failed to make a written record to
evidence the client instructions.

Trades Processed Without Evidence of Client Authorization

52.
Pursuant to MFDA Rule 5.1(b), Approved Persons are also required to maintain records
of each order, and of any instruction given or received for the purchase or sale of securities,
whether executed or unexecuted.

MFDA Rule 5.1(b), MFDA Staff’s Book of Authorities, Tab 1

53.
The MFDA has previously advised Approved Persons of the requirement to maintain
evidence of client trade instructions.

MFDA Staff Notice #MSN-0035 dated December 10, 2004, MFDA Staff’s
Book of Authorities, Tab 3

54.
The failure by an Approved Person to document a client’s authorization of a trade may
give rise to ramifications that are similar to those that result from the use of pre-signed account
forms. Such ramifications include the destruction of the audit trail and the frustration of the
Member’s ability to respond to inquiries and complaints from clients concerning the propriety of
trading activity in their accounts.

MFDA Staff Notice #MSN-0035 dated December 10, 2004, MFDA Staff’s
Book of Authorities, Tab 3

55.
In the present case, the Respondent admits that he processed 340 trades in the accounts of
48 clients pursuant to Limited Trading Authorizations that had been executed by the clients. The
Respondent states that he received verbal instructions from each client in relation to the trades,
but failed to make a written record to evidence the client instructions.
Page 13 of 25


General Principles Regarding the Acceptance of Settlement Agreements

56.
For the reasons set out below, it is in the public interest for the Hearing Panel to accept
the Settlement Agreement having regard to the nature of the conduct admitted to by the
Respondent and the MFDA’s mandate to protect the public.

57.
Pursuant to s. 24.4.3 of MFDA By-law No. 1, a Hearing Panel has two options with
respect to a settlement agreement. It may either accept the settlement agreement or reject it.

MFDA By-law No. 1, s. 24.4.3, MFDA Staff’s Book of Authorities, Tab 2

58.
The role of a Hearing Panel at a settlement hearing is fundamentally different than its role
at a contested hearing. As was stated by the MFDA Hearing Panel in Sterling Mutuals Inc. (Re),
quoting the reasoning in the I.D.A matter of Milewski (Re):

We also note that while in a contested hearing the Panel attempts to determine the
correct penalty, in a settlement hearing the Panel “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. [Emphasis added.]

Sterling Mutuals Inc. (Re), [2008] Hearing Panel of the Central Regional
Council, MFDA File No. 200820, Panel Decision dated August 21, 2008,
MFDA Staff’s Book of Authorities, Tab 12, at page 9

59.
The principle that a Hearing Panel will not reject a settlement agreement unless the
proposed penalty clearly falls outside the reasonable range of appropriateness assists the MFDA
to fulfill its regulatory objective of protecting the public. Settlements advance this regulatory
objective by proscribing activities that are harmful to the public, while enabling the parties to
reach a flexible remedy tailored to address the interests of both the regulator and a respondent.

British Columbia Securities Commission v. Seifert, 2007 BCCA 484, MFDA Staff’s
Book of Authorities, Tab 13, at para 31

Page 14 of 25

General Considerations Concerning the Acceptance of a Settlement Agreement

60.
The primary goal of securities regulation is the protection of the investor.

Pezim v. British Columbia (Superintendent of Brokers), [1994] 2 SCR 557 (SCC) MFDA
Staff’s Book of Authorities, Tab 14, at paras 59, 68

61.
In the past, MFDA Hearing Panels have taken into account the following considerations
when determining whether a proposed settlement should be accepted:

(a)
whether acceptance of the settlement agreement would be in the public interest
and whether the penalty imposed will protect investors;
(b)
whether the settlement agreement is reasonable and proportionate, having regard
to the conduct of the Respondent as set out in the settlement agreement;
(c)
whether the settlement agreement addresses the issues of both specific and
general deterrence;
(d)
whether the proposed settlement will prevent the type of conduct described in the
settlement agreement from occurring again in the future;
(e)
whether the settlement agreement will foster confidence in the integrity of the
Canadian capital markets;
(f)
whether the settlement agreement will foster confidence in the integrity of the
MFDA; and
(g)
whether the settlement agreement will foster confidence in the regulatory process
itself.

Jacobson (Re), [2007] Hearing Panel of the Prairie Regional Council, MFDA File No.
200712, Panel Decision dated July 13, 2007, MFDA Staff’s Book of Authorities, Tab 15,
at page 9

62.
A Hearing Panel should not interfere lightly in a negotiated settlement as long as the
penalties agreed upon are within a reasonable range of appropriateness having regard to the
conduct of the Respondent.

Page 15 of 25

Jacobson (Re), supra, MFDA Staff’s Book of Authorities, Tab 15, at page 10

Specific Factors Concerning the Appropriateness of the Penalty

63.
Factors that Hearing Panels frequently consider when determining whether a penalty is
appropriate include the following:

(a)
the seriousness of the allegations proved against the Respondent;
(b)
the Respondent’s past conduct, including prior sanctions;
(c)
the Respondent’s experience and level of activity in the capital markets;
(d)
whether the Respondent recognizes the seriousness of the improper activity;
(e)
the harm suffered by investors as a result of the Respondent’s activities;
(f)
the benefits received by the Respondent as a result of the improper activity;
(g)
the risk to investors and the capital markets in the jurisdiction, were the
Respondent to continue to operate in capital markets in the jurisdiction;
(h)
the damage caused to the integrity of the capital markets in the jurisdiction by the
Respondent’s improper activities;
(i)
the need to deter not only those involved in the case being considered, but also
any others who participate in the capital markets, from engaging in similar
improper activity;
(j)
the need to alert others to the consequences of inappropriate activities to those
who are permitted to participate in the capital markets; and
(k)
previous decisions made in similar circumstances.

Headley (Re), [2005] Hearing Panel of the Ontario Regional Council, MFDA File No.
200509, Panel Decision dated February 21, 2006, MFDA Staff’s Book of Authorities,
Tab 16, at pages 25-26

64.
The MFDA Penalty Guidelines are an additional source of factors to be taken into
account with regards to penalty. The MFDA Penalty Guidelines are not mandatory but are
intended to assist Hearing Panels, MFDA Staff and Respondents in considering the appropriate
penalties in MFDA disciplinary proceedings.

Page 16 of 25

Excerpts from the MFDA Penalty Guidelines, MFDA Staff’s Book of Authorities, Tab 17

65.
In cases involving 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


Number of trades
Fine (AP): Minimum of $5,000


Whether client provided verbal authority to
Write or rewrite an appropriate
engage in discretionary trading
industry course (e.g. IFIC Officers',
Discretionary
• Underlying reason for engaging in trading
Partners' and Directors' Course or
Trading
or (e.g. For personal financial gain)
Canadian Investment Funds Course)
(Rule 2.3.1)

• The number of clients affected
Period of increased supervision
(Guidelines, p. 26)

• Period of time over which the trading took
Suspension

place
Permanent prohibition in egregious
• Suitability of trades
cases
• Extent of client losses
• Fine (AP): Minimum of $5,000
• Write or rewrite an appropriate • Nature of the circumstances and conduct
Standard of
industry course (e.g. IFIC Officers',
• Number of individuals affected
Conduct
Partners' and Directors' Course or
• Whether the conduct is likely to bring the
(Rule 2.1.1)
Canadian Investment Funds Course)
individual, the Member or the mutual fund
(Guidelines, p. 27)
• Suspension
industry into disrepute
• Permanent prohibition in egregious

cases

Fine (AP): Minimum of $5,000


The nature of the inaccurate or missing
Write or rewrite an appropriate
information
Books and
industry course (e.g. IFIC Officers',
• The materiality of the inaccurate or
Records
Partners' and Directors' Course or
missing information
(Rule 5.1)
Canadian Investment Funds Course)
• The extent of any client losses
(Guidelines, p. 7)
• Suspension

• Whether there was an intentional disregard
Permanent prohibition in egregious
for the requirements or if the failure was
cases
due to carelessness or inadvertence

Excerpts from the MFDA Penalty Guidelines, MFDA Staff’s Book of Authorities, Tab 17

Page 17 of 25

Considerations in the Present Case

66.
We accept that the MFDA Staff has taken the factors set out above into account in
reaching its Settlement Agreement with the Respondent. Set out below are a number of factors
particularly relevant to the Settlement Agreement.

(a) Nature of the Misconduct

67.
Engaging in discretionary trading is considered serious misconduct.

Griffith (Re), [2014] Hearing Panel of the Central Regional Council, MFDA File
No. 201329, Panel Decision dated August 19, 2014, Staff’s Book of Authorities,
Tab 18, at para 7

68.
As well, the use of pre-signed and falsified account forms is a serious breach of MFDA
Rule 2.1.1.
Byce (Re), supra, MFDA Staff’s Book of Authorities, Tab 6
Ewart (Re), supra, MFDA Staff’s Book of Authorities, Tab 8

69.
Finally, in Moalker (Re), the Hearing Panel commented on the seriousness of the
misconduct where an approved person engaged in unauthorized discretionary trading and failed
to maintain adequate records of clients instructions received.

Moalker (Re), [2015] Hearing Panel of the Central Regional Council, MFDA
File No. 201571, Panel Decision dated May 24, 2016, MFDA Staff’s Book of
Authorities, Tab 19

(b) Client Harm

70.
There is no evidence of client harm.

Settlement Agreement, para 28

(c) Benefits Received by the Respondent

Page 18 of 25

71.
There is no evidence that the Respondent received any financial benefit from engaging in
the misconduct at issue in this proceeding other than the commissions and fees he would
ordinarily be entitled to receive had the transactions been carried out in the proper manner.

Settlement Agreement, para 29

(d) Respondent’s Experience and Level of Activity in the Capital Markets

72.
The Respondent has been registered in the mutual fund industry since 2003. He ought to
have known and respected the compliance requirements of the Member and the MFDA.

Settlement Agreement, para 7

(e) Deterrence

73.
The proposed fine and costs are significant and help the MFDA send a message to the
Respondent and others in the capital markets about the seriousness of the misconduct at issue.

(f) Respondent’s Past Conduct

74.
The Respondent has not previously been subject to MFDA disciplinary proceedings.

Settlement Agreement, para 27

(g) Respondent’s Recognition of the Seriousness of His Misconduct

75.
By entering into this Settlement Agreement, the Respondent has accepted responsibility
for his misconduct and avoided the necessity of the MFDA incurring the time and expense of
conducting full disciplinary hearings.

Settlement Agreement, para 30

(h) Penalty Guidelines
Page 19 of 25


76.
The proposed penalty of a 1 month suspension in engaging in any securities related
business, a fine of $25,000, and costs of $2,500 is greater than the $5,000 suggested minimum
penalty for the violations as set out in the Penalty Guidelines above. This is due to the number of
MFDA Rule violations in total, in addition to the number of discretionary trades and the number
of pre-signed account forms and falsified forms, all of which merit a higher penalty than the
suggested minimums.

(i) Previous Decisions Made in Similar Circumstances

77.
The proposed resolution is within the reasonable range of appropriateness with regard to
other decisions made by MFDA Hearing Panels in similar circumstances:

Case:
Facts:
Penalties:
Smilestone (Re), supra,
The Respondent falsified an unknown number client
The Hearing Panel approved
Tab 9
signatures and initials in order to open and execute
the settlement agreement
trades in client accounts and falsely provided with the following terms:
signature guarantees on trade tickets with respect to
• A two year suspension
one client.
• Completion of an ethics
• The Respondent engaged in authorized and
course
unauthorized discretionary trading in respect of an
• Fine of $10,000
unknown number of clients.
• Costs of $5,000
• The Respondent failed to comply with the Member’s
conditions with respect to an outside business
activity.
• The Respondent provided false responses to the
Member’s compliance staff during a course review

Moalker (Re), [2015] •
The Respondent engaged in unauthorized The Hearing Panel approved
Hearing Panel of the
discretionary trading in the accounts of 17 clients.
the settlement agreement
Central Regional Council, •
The Respondent failed to maintain adequate records
with the following terms:
MFDA File No. 201571,
of client instructions in the accounts of 9 clients.
• A 6 month suspension
Panel Decision dated May
• Fine of $15,000, failure
24, 2016, MFDA Staff’s
of which to pay would
Book of Authorities, Tab
lead to a permanent
19
prohibition
• Costs of $5,000

Mohamed (Re), [2012] •
The Respondent obtained, maintained, and in some
The Hearing Panel approved
Hearing Panel of the
instances used to process transactions 43 pre-signed
the settlement agreement
Central Regional Council,
account forms in respect of 30 clients.
with the following terms:
Page 20 of 25

MFDA File No. 201229, •
The Respondent engaged in 22 instances of •
One month suspension
Panel Decision dated
authorized discretionary trading in respect of 7 •
Completion of the IFSE
December 21, 2012,
clients.
Mutual Fund Dealer
MFDA Staff’s Book of •
The Respondent provided misleading information to
Compliance Course
Authorities, Tab 20

the Ontario Securities Commission with respect to
• Fine of $20,000

his conduct.
• Costs of $5,000

Bowness (Re), [2013] •
The Respondent obtained and maintained 68 pre-
The Hearing Panel approved
Hearing Panel of the
signed account forms in respect of 26 clients.
the settlement agreement
Atlantic Regional
• The Respondent engaged in 8 instances of authorized with the following terms:
Council, MFDA File No.
discretionary trading with respect of one client.
• A one year suspension
201350, Panel Decision • The Respondent falsified 16 account forms with • Fine of $5,000
dated January 16, 2014,
respect to 6 clients.
• Costs of $2,500
MFDA Staff’s Book of

Authorities, Tab 21
Chen (Re),
[2010] •
The Respondent engaged in an unknown number of
The Hearing Panel approved
Hearing Panel of the
instances of authorized discretionary trading in the settlement agreement
Pacific Regional Council,
respect of 3 clients.
with the following terms:
MFDA File No. 201006, •
The Respondent entered into a settlement agreement
• Fine of $18,000
Panel Decision dated
with a client without the Member’s consent.
• Completion of an
April 18, 2011, MFDA
investment funds course
Staff’s Book of
• Costs of $5,000
Authorities, Tab 22

Man (Re), [2013] Hearing •
The Respondent falsified account transfer forms with
The Hearing Panel issued the
Panel of the Central
respect of 2 clients by altering the transfer following penalty:
Regional Council, MFDA
information
• A 3 month suspension
File No. 201314, Panel •
The Respondent obtained, maintained, and used one
• Fine of $5,000
Decision dated May 5,
pre-signed account form with respect to one client.
• Costs of $5,000
2014, MFDA Staff’s • The Respondent engaged in discretionary trading

Book of Authorities, Tab
with respect of 2 clients.
23

Costs

78.
An award of costs in the amount of $2,500 is appropriate in the circumstances.

Conclusion

79.
Having regard to all the foregoing circumstances, the proposed penalties are reasonable,
proportionate to the misconduct in question, and are in keeping with the MFDA’s mandate to
enhance investor protection and strengthen public confidence in the Canadian mutual fund
industry by ensuring high standards of conduct by Members and Approved Persons.

The Settlement Agreement is accepted.
Page 21 of 25


80.
The formal Order is attached as Schedule “A” hereto.


DATED this 14th day of November, 2016.

“René P. Foisy”
The Hon. René P. Foisy

Chair
“Kathleen Jost”
Kathleen Jost
Industry Representative
“James Samanta”
James Samanta
Industry Representative

Page 22 of 25

Schedule “A”
Order
File No. 201605

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: Nathan Charles Garries



ORDER
(ARISING FROM SETTLEMENT HEARING ON OCTOBER 24, 2016)



WHEREAS on October 24, 2016, 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 Nathan Garries (the “Respondent”);

AND WHEREAS the Respondent entered into a settlement agreement with Staff of the
MFDA, dated July 31, 2016 (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 the Hearing Panel is of the opinion that the Respondent:

a) between May 1, 2013 and October 31, 2013, processed 306 authorized discretionary
trades as part of a dollar-cost averaging strategy in relation to 38 clients, contrary to
MFDA Rules 2.3.1 and 2.1.1;
Page 23 of 25

b) between September 2, 2010 and June 3, 2014, failed to record and maintain evidence
of client trade instructions with respect to 340 transactions that he processed pursuant
to Limited Trading Authorizations for 48 clients, contrary to MFDA Rules 2.1.1, and
5.1(b);
c) between November 12, 2008 and July 18, 2014, obtained, possessed and, in some
instances, used to process transactions, 54 partially complete pre-signed account
forms or photocopies of partially complete pre-signed account forms in respect of 19
clients, contrary to MFDA Rule 2.1.1; and
d) between January 21, 2011 and May 23, 2014, falsified and used to process
transactions, 14 client account forms in respect of 13 clients, by altering client
account forms without having the clients initial the alterations, contrary to MFDA
Rule 2.1.1.

IT IS HEREBY ORDERED THAT the Settlement Agreement is accepted, as a
consequence of which:

1.
If at any time a non-party to this proceeding, with the exception of the bodies set out in
section 23 of MFDA By-law No. 1, requests production of or access to exhibits in this
proceeding that contain personal information as defined by the MFDA Privacy Policy, then the
MFDA Corporate Secretary shall not provide copies of or access to the requested exhibits to the
non-party without first redacting from them any and all personal information, pursuant to Rules
1.8(2) and (5) of the MFDA Rules of Procedure;

2.
The Respondent shall be prohibited from conducting securities related business in any
capacity while in the employ or associated with any Member of the MFDA for a period of one
month from the date of the settlement hearing, pursuant to section 24.1.1(e) of MFDA By-law
No. 1;

3.
the Respondent shall pay a fine in the amount of $25,000 pursuant to section 24.1.1(b) of
By-law No. 1;

Page 24 of 25

4.
the Respondent shall pay costs in the amount of $2,500 pursuant to section 24.2 of By-
law No. 1 upon acceptance of this Settlement Agreement; and

5.
the Respondent shall in the future comply with MFDA Rules 2.1.1 , 2.3.1 and 5.1.


DATED this 24th day of October, 2016.

“Rene P. Foisy”
The Hon. Rene P. Foisy

Chair

“Kathleen Jost”
Kathleen Jost

Industry Representative

“James Samanta”
James Samanta

Industry Representative

DM 509522 v1
Page 25 of 25