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Reasons For Decision

Re:

Reasons For Decision

Reasons for Decision
File No. 201638


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: Tony Nathan Estabrooks

Heard: July 18, 2016 in Edmonton, Alberta
Reasons for Decision: August 31, 2016


REASONS FOR DECISION

Hearing Panel of the Prairie Regional Council:

Shelley L. Miller, Q.C.
Chair

Nada Israeli
Industry Representative

Howard Mix
Industry Representative

Appearances:

David Babin
)
Counsel for the Mutual Fund Dealers

)
Association of Canada
)

Matthew Epp
)
Counsel for the Respondent
)

)

)

Page 1 of 16


INTRODUCTION

1.
On April 4, 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 of the MFDA in respect
of Tony Nathan Estabrooks (the “Respondent”).

2.
The Respondent and the MFDA Staff propose to enter into a Settlement Agreement dated
June 22, 2016 pursuant to which the Respondent would be disciplined under ss. 20 and 24.1.1 of
By-law No. 1 of the MFDA.

3.
The proposed Settlement Agreement provides that the Respondent shall:

(a) pay a fine of $7,500 pursuant to section 24.1.1.(b) of By-law No. 1,
(b) pay costs of $2,500 pursuant to section 24.2 of By-law No. 1,
(c) in future comply with MFDA Rule 2.1.1, and
(d) attend in person on the date set for the Settlement Hearing.

4.
On July 18, 2016, after hearing representations by counsel and by the Respondent, this
Panel approved the Settlement Agreement, with written reasons to follow, and agreed to sign an
Order to that effect. The written reasons for such approval are set out below.

AGREED FACTS

Registration

5.
Between May 27, 2013 and April 28, 2015, the Respondent was registered in Alberta as a
dealing representative with Royal Mutual Funds Inc." (“Royal"), a Member of the MFDA. 


6.
The Respondent was previously registered as a dealing representative with BMO
Investments Inc. between January 20, 2011 and April 25, 2013.
Page 2 of 16


7.
At all material times, the Respondent conducted business in the Edmonton, Alberta area.

8.
The Respondent is not presently registered in the securities industry in any capacity

ALTERED ACCOUNT FORMS

9.
At all material times, Royal's policies and procedures prohibited its Approved Persons
from using altered or pre-signed account forms.

10.
On or about January 7, 2015 and April 8, 2015, the Respondent re-used existing order
tickets after receiving verbal instructions for two separate clients (KP and KT) by altering either
the contribution amount or the date on the order tickets that had previously been submitted to
Royal on another transaction. The Respondent then resubmitted the altered trade tickets to Royal
for processing, without having the clients initial the alterations.

11.
The transactions were processed in accordance with client instructions.

BLANK AND PARTIALLY COMPLETED PRE-SIGNED ACCOUNT FORMS

12.
Between October 2014 and April 2015, the Respondent obtained, possessed and used to
process transactions, 26 pre-signed account forms in respect of 13 clients.

13.
The 26 pre-signed forms were comprised of:

(a) 2 Registered Plan and Investment Account Switch Forms; 

(b) 17 Trade Tickets in respect of contributions made to a Registered Plan or Investment
Account; and 

(c) 7 Trade Tickets in respect of transfers of Registered Plan from outside financial
institutions to Royal. 


Page 3 of 16

MEMBER RESPONSE

14.
On May 14, 2015, Royal reviewed all transactions processed by the Respondent between
October 1, 2014 and April 27, 2015. The Member did not identify any additional pre-signed or
altered forms beyond those noted at paragraphs 10 to 13 above.

15.
No clients complained or advised Royal that they had not authorized the transactions in
their accounts.

ADDITIONAL FACTORS

16.
The Respondent has no prior disciplinary history with the MFDA.

17.
There is no evidence of client harm in this matter.

18.
There is no evidence that the Respondent received any financial benefit from engaging in
the misconduct other than the fees to which the Respondent would have been ordinarily entitled
had the transactions in the clients' accounts been carried out in the proper manner.

19.
The Respondent has cooperated fully with Staff during the course of the investigation,
and by agreeing to this settlement, has avoided the necessity of a full hearing on the merits.

20.
The Respondent has expressed remorse for his misconduct.

ACCEPTANCE OF THE SETTLEMENT AGREEMENT

21.
This Panel is mindful of the comments about the role of a Hearing Panel at a settlement
hearing stated in Sterling Mutuals Inc. (Re) [2008] File No. 200820, Hearing Panel of the Central
Regional Council, Decision and Reasons dated August 21, 2008 at p 37, (Sterling Mutuals)
citing the I.D.A. Ontario District Council in Milewski (Re) that:

“in a settlement hearing, the Panel will tend not to alter a penalty that it
Page 4 of 16

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.”

22.
This Panel is similarly mindful of the comments about the benefits of settlements aptly
noted by the British Columbia Court of Appeal in British Columbia (Securities Commission) v.
Seifert, [2007] B.C.J. No. 2186 (B.C.C.A.) in referencing passages from the Supreme Court of
Canada in R. v. 974649 Ontario Inc., 2001 SCC 81, [2001] 3 S.C.R. 575, particularly the
following at paragraph 49:

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 in dispute, and are therefore to be resolved by way
of a hearing.”


23.
This Panel is also mindful of the list of considerations set out in the Sterling Mutuals
decision as well as the MFDA Penalty Guidelines which hearing panels may take into account in
their determination of whether a proposed settlement agreement should be accepted. 


24.
This Panel has considered the following factors as relevant and aggravating:

a) Nature of the Misconduct – Pre-signed forms

The Respondent altered and used to process transactions, two client account Forms in
relation to two clients, and obtained and used 26 pre-signed partially completed or
photocopied versions of pre-signed partially completed forms in respect of 13 client
accounts. This Panel regards the conduct as an aggravating factor, notwithstanding that
Page 5 of 16

no client was harmed. As noted in Price (Re) MFDA File No. 200814, Hearing Panel of
the Central Regional Council, Decision and Reasons dated April 18, 2011, at paras. 118-
121), pre-signed forms present a legitimate risk that they may be used by an Approved
Person to engage in discretionary trading, they create a mechanism for an Approved
Person to engage in acts of fraud, theft or other forms of harmful conduct towards a
client, and subvert the ability of a Member to properly supervise trading activity.

b) Experience in the Securities Industry

The Respondent has worked in the securities industry as a mutual fund sales person (now
mutual fund dealing representatives) since 2011. With that level of experience, this Panel
considers that the Respondent knew, or should have known, before the time period in
question, that the practice under investigation was prohibited by the Rules of the MFDA
and accordingly constitutes a further aggravating factor.

25.
This Panel considers the following factors as mitigating:

a) Past Conduct

The Respondent has never previously been subject of an MFDA disciplinary proceeding.

b) Recognition of Seriousness of the Misconduct

The Respondent has cooperated with the investigation by MFDA Staff, has accepted
responsibility for his misconduct by entering into the Settlement Agreement, spared the
MFDA the time and expense of a full contested hearing and attended in person at the
hearing, all of which demonstrate his recognition of the seriousness of the misconduct.

c) Client Harm and Benefits to Respondent

Page 6 of 16

Staff found no evidence of unauthorized trades, client losses or client complaints, or that
the Respondent received a financial or other benefit through his conduct.

26.
This Panel has also considered the following additional factors as relevant:

a) Penalty Guidelines

The Hearing Panel considered the MFDA Penalty Guidelines for breach of the Standard
of Conduct Rule 2.1.1, while noting that they are neither mandatory nor binding. This
Panel also noted that the parties have jointly proposed that the Respondent be assessed a
fine of $7,500 which is in line with the recommended penalty set out in the MFDA
Penalty Guidelines.

b) Deterrence

A fine in line with that recommended by the Penalty Guidelines for breach of the
standard of conduct of Approved Persons and an order for costs is necessary to achieve
both specific and general deterrence, to deter the Respondents from repetition of such
conduct and to deter others in the capital market from engaging in similar activity. It
further demonstrates that the Respondent’s misconduct in all of the circumstances is
serious and has significant consequences.

c) Previous Decisions in Similar Cases

The recent decisions of Weller (Re) MFDA File No. 201544 Hearing Panel of the Central
Regional Council, Decision and Reasons dated February 19, 2016, Wellman (Re), MFDA
File No. 201529, Hearing Panel of the Central Regional Council, Decision and Reasons
dated December 21, 2015, Lynn (Re), MFDA File No. 201537, Hearing Panel of the
Central Regional Council, Decision and Reasons dated December 21, 2015, and McKale
(Re), MFDA File No. 201333, Hearing Panel of the Central Regional Council, Decision
and Reasons dated January 16, 2014, all involved imposed fines and costs awards in
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similar amounts to the fine and costs proposed in the Settlement Agreement under
consideration in this case.

27.
In conclusion, based on consideration of the above factors, this Panel is satisfied that the
Settlement Agreement is in the public interest, is reasonable and proportionate, and will foster
public confidence in the integrity of the Canadian capital markets and the industry and,
accordingly, approves its terms. The Settlement Agreement is attached as Schedule “A” to these
reasons for decision.

28.
This Panel thanks counsel for their helpful presentation and the Respondent for providing
further particulars of the surrounding circumstances to assist this Panel in its deliberations.


DATED this 31st day of August, 2016.

“Shelley L. Miller”
Shelley L. Miller, Q.C.

Chair

“Nada Israeli”
Nada Israeli

Industry Representative

“Howard Mix”
Howard Mix

Industry Representative

DM 497836 v1

Page 8 of 16

Schedule “1”
Settlement Agreement
File No. 201638


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: Tony Nathan Estabrooks



SETTLEMENT AGREEMENT

I.
INTRODUCTION

1.
Staff of the Mutual Fund Dealers Association of Canada (“Staff”) and the Respondent,
Tony Nathan Estabrooks (the “Respondent”), consent and agree to settlement of this matter by
way of this agreement (the “Settlement Agreement”).

2.
Staff conducted an investigation of the Respondent’s activities which disclosed 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.

II.
JOINT SETTLEMENT RECOMMENDATION

3.
Staff and the Respondent jointly recommend that the Hearing Panel accept the
Settlement Agreement.
Page 9 of 16


4.
The Respondent admits that:

a) between January 2015 and April 2015, altered and used to process transactions,
two client account forms in relation to two clients, by altering the dates on previously
used client account forms without having the clients initial the alterations, contrary to
MFDA Rule 2.1.1; and
b) between October 2014 and April 2015, he obtained, possessed and used to process
transactions, 26 pre-signed account forms in respect of 13 clients, contrary to MFDA
Rule 2.1.1.

5.
Staff and the Respondent agree and consent to the following terms of settlement:

a) the Respondent shall pay a fine in the amount of $7,500, pursuant to section 24.1.1(b)
of By-law No. 1;
b) the Respondent shall pay costs in the amount of $2,500, pursuant to section 24.2 of
By-law No. 1;
c) the Respondent shall in the future comply with MFDA Rule 2.1.1; and
d) the Respondent will attend in person, on the date set for the Settlement Hearing.

6.
Staff and the Respondent agree to the settlement on the basis of the facts set out in Part
III herein and consent to the making of an Order in the form attached as Schedule “A”.

III.
AGREED FACTS

Registration History

7.
Between May 27, 2013 and April 28, 2015, the Respondent was registered in Alberta as a
dealing representative with Royal Mutual Funds Inc. (“Royal”), a Member of the MFDA.

Page 10 of 16

8.
The Respondent was previously registered as a dealing representative with BMO
Investments Inc. between January 20, 2011 and April 25, 2013.

9.
At all material times, the Respondent conducted business in the Edmonton, Alberta area.

10.
The Respondent is not presently registered in the securities industry in any capacity.

Altered Account Forms

11.
At all material times, Royal’s policies and procedures prohibited its Approved Persons
from using altered or pre-signed account forms.

12.
On or about January 17, 2015 and April 8, 2015, the Respondent re-used existing order
tickets after receiving verbal instructions for two separate clients (KP and KT) by altering either
the contribution amount or the date on two order tickets that had previously been submitted to
Royal on another transaction. The Respondent then resubmitted the altered trade tickets to Royal
for processing, without having the clients initial the alterations.

13.
The transactions were processed in accordance with client instructions.

Blank and Partially Completed Pre-Signed Account Forms

14.
Between October 2014 and April 2015, the Respondent obtained, possessed and used to
process transactions, 26 pre-signed account forms in respect of 13 clients.

15.
The 26 pre-signed forms were comprised of:

i) 2 Registered Plan and Investment Account Switch Forms;
ii) 17 Trade Tickets in respect of contributions made to a Registered Plan or Investment
Account; and
iii) 7 Trade Tickets in respect of transfers of Registered Plan from outside financial
institutions to Royal.
Page 11 of 16

Member Response

16.
On May 14, 2015, Royal reviewed all transactions processed by the Respondent between
October 1, 2014 and April 27, 2015. The Member did not identify any additional pre-signed or
altered forms beyond those noted at paragraphs 12 to15 above.

17.
No clients complained or advised Royal that they had not authorized the transactions in
their accounts.

Additional Factors

18.
The Respondent has no prior disciplinary history with the MFDA.

19.
There is no evidence of client harm in this matter.

20.
There is no evidence that the Respondent received any financial benefit from engaging in
the misconduct beyond the commissions or fees to which the Respondent would have been
ordinarily entitled had the transactions in the clients’ accounts been carried out in the proper
manner.

21.
The Respondent has cooperated fully with Staff during the course of the investigation,
and by agreeing to this settlement, has avoided the necessity of a full hearing on the merits.

22.
The Respondent has expressed remorse for his misconduct.

IV.
ADDITIONAL TERMS OF SETTLEMENT

23.
This settlement is agreed upon in accordance with section 24.4 of MFDA By-law No. 1
and Rules 14 and 15 of the MFDA Rules of Procedure.
Page 12 of 16


24.
The Settlement Agreement is subject to acceptance by the Hearing Panel which shall be
sought at a hearing (the “Settlement Hearing”). At, or following the conclusion of, the Settlement
Hearing, the Hearing Panel may either accept or reject the Settlement Agreement.

25.
The Settlement Agreement shall become effective and binding upon the Respondent and
Staff as of the date of its acceptance by the Hearing Panel. Unless otherwise stated, any monetary
penalties and costs imposed upon the Respondent are payable immediately, and any suspensions,
revocations, prohibitions, conditions or other terms of the Settlement Agreement shall
commence, upon the effective date of the Settlement Agreement.

26.
Staff and the Respondent agree that if this Settlement Agreement is accepted by the
Hearing Panel:

i) the Settlement Agreement will constitute the entirety of the evidence to be submitted
respecting the Respondent in this matter;
ii) the Respondent waives any 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;
iii) Staff will not initiate any proceeding under the By-laws of the MFDA against the
Respondent in respect of the facts and the contraventions described in this Settlement
Agreement. Nothing in this Settlement Agreement precludes Staff from investigating
or initiating proceedings in respect of any facts and contraventions that are not set out
in this Settlement Agreement. Furthermore, nothing in this Settlement Agreement
shall relieve the Respondent from fulfilling any continuing regulatory obligations;
iv) 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; and
v) 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
Page 13 of 16

from making full answer and defence to any civil or other proceedings against the
Respondent.

27.
If, for any reason, this Settlement Agreement is not accepted by the Hearing Panel, each
of Staff and the Respondent will be entitled to any available proceedings, remedies and
challenges, including proceeding to a disciplinary hearing pursuant to sections 20 and 24 of By-
law No. 1, unaffected by the Settlement Agreement or the settlement negotiations.

28.
Staff and the Respondent agree that the terms of the 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.

29.
The Settlement Agreement may be signed in one or more counterparts which together
shall constitute a binding agreement. A facsimile copy of any signature shall be effective as an
original signature.

DATED this 18th day of July, 2016.

“Tony Nathan Estabrooks”

Tony Nathan Estabrooks

“DB”

DB
Witness – Signature

Witness – Print Name

“Shaun Devlin”

Staff of the MFDA

Per: Shaun Devlin
Senior Vice-President,
Member Regulation – Enforcement
Page 14 of 16

Schedule “A”
Order
File No. 201638

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: Tony Nathan Estabrooks



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
Tony Nathan Estabrooks (the “Respondent”);

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

a) between January 2015 and April 2015, altered and used to process transactions,
two client account forms in relation to two clients, by altering the dates on previously
used client account forms without having the clients initial the alterations, contrary to
MFDA Rule 2.1.1; and
Page 15 of 16

b) between October 2014 and April 2015, the Respondent obtained, possessed and used
to process transactions, 26 pre-signed account forms in respect of 13 clients, contrary
to MFDA Rule 2.1.1

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 $7,500, pursuant to section 24.1.1(b) of
By-law No. 1.

2.
the Respondent shall pay costs in the amount of $2,500, pursuant to section 24.2 of By-
law No. 1;

3.
the Respondent shall in the future comply with MFDA Rule 2.1.1; and

4.
if at any time a non-party to this proceeding requests production of, or access to, any
materials filed in, or the record of, this proceeding, including all exhibits and transcripts, then the
MFDA Corporate Secretary shall not provide copies of, or access to, the requested documents to
the non-party without first redacting from them any and all intimate financial or personal
information, pursuant to Rules 1.8(2) and (5) of the MFDA Rules of Procedure.

DATED this [day] day of [month], 20[ ].

Per: __________________________

[Name of Public Representative], Chair

Per: _________________________

[Name of Industry Representative]

Per: _________________________

[Name of Industry Representative]
Page 16 of 16