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MFDA Reasons For Decision

IN THE MATTER OF A DISCIPLINARY HEARING PURSUANT TO SECTIONS 20 AND 24 OF BY-LAW NO. 1 OF THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA

Re: Todd Regan Morin

Heard: April 25, 2017 in Toronto, Ontario
Reasons For Decision: June 6, 2017

Reasons For Decision

Hearing Panel of the Central Regional Council:

  • Frederick H. Webber, Chair
  • Kenneth P. Mann, Industry Representative

Appearances:

Francis Roy, Counsel for the Mutual Fund Dealers Association of Canada|Todd Regan Morin, Respondent, In Person

A. AGREED STATEMENT OF FACTS

  1. This hearing took place pursuant to an Agreed Statement of Facts (“ASF”) entered into between the MFDA and Todd Regan Morin (“Respondent”) on April 21,2017, a copy of which is attached hereto as Schedule “A”.
  1. The essential facts agreed to are:
    1. in February 2014, the Respondent was approached by SL, an individual working at Investors Group Financial Services Inc. (“IG”), the Member with whom the Respondent also worked, to sign two completed client account forms (“NCAFs”) which had been signed by the clients, using the Respondent’s representative code. The Respondent agreed to help SL and also agreed to transfer the accounts to SL at a later date;
    2. At this time, SL was not a registered mutual fund salesperson, although the Respondent assumed that he was registered, since the Respondent knew SL from IG meetings. The Respondent signed the NCAFs on February 27th and 28th, 2014 without meeting the clients; SL became registered on March 6, 2014;
    3. SL asked the Respondent to open the NCAFs so that the clients could make RRSP contributions before the payment deadline and to help SL avoid a commercial disagreement SL was having with GD (another registered IG mutual fund salesperson) regarding clients;
    4. In signing the NCAFs, the Respondent attested that he had met the clients and verified the clients’ identities; and
    5. The NCAFs were submitted to IG which opened the accounts for the clients. The ASF contains no reference to any transactions in those accounts.
  1. While the parties agreed on the facts, they did not agree on the appropriate penalty which they asked the Panel to determine, based on the ASF.

B. MISCONDUCT

  1. In the ASF, the Respondent admitted that, by signing the NCAFs in the manner stated above, he engaged in conduct contrary to MFDA Rules 1.1.1, 2.2.1 and 2.1.1. Notwithstanding such admission, it was not clear to the Panel that the Respondent’s actions as stated in the ASF constituted a breach of all these Rules, in particular Rule 1.1.1 and Rule 2.2.1 (b), (c), (d), (e) and (f). This case is based on an ASF, not a settlement agreement where the Panel must accept or reject the agreed settlement. Therefore it was open to the Panel to reject the applicability of some of the Rules to the Respondent’s conduct and still proceed to determine the appropriate penalty as requested.
  1. The applicability of the stated Rules was discussed with MFDA counsel in order to determine whether that could affect the appropriate penalty. At the conclusion of these discussions, it was still not clear to the Panel that all parts of all of the Rules applied to the Respondent’s conduct. Ultimately it was not necessary to make specific findings regarding which parts of the Rules were applicable, since the Panel had no doubt that, at least Rules 2.1.1 and 2.2.1(a) were applicable to the Respondent’s admitted conduct and that the appropriate penalty would not be affected whether or not the other Rules applied in this particular case.

C. PENALTY

  1. Notwithstanding the Respondent’s admissions, as stated in the ASF, the parties were not in agreement with regards to the appropriate penalty to be imposed in this case.
  1. The purpose of this hearing was therefore for the Panel to determine what penalty, if any, to impose on the Respondent.
  1. The MFDA submitted that a fine in the amount of at least $7,500 pursuant to s. 24.1.1(b) of MFDA By-law No. 1 and costs of $5,000 pursuant to s, 24.2 of MFDA By-law No.1 are reasonable, proportionate to the admitted contravention, and are in keeping with the MFDA’s mandate to enhance investor protection and strengthen public confidence in the Canadian mutual fund industry.
  1. The Respondent sought a combined fine and costs in the total amount of no more than $4,000.
  1. As in previous cases, this Panel considered the following factors to determine the appropriate penalties to be imposed:
    1. The seriousness of the allegations proved against the Respondent;
    2. The Respondent’s past conduct, including prior sanctions;
    3. The Respondent’s experience and level of activity in the capital markets;
    4. Whether the Respondent recognizes the seriousness of the improper activity;
    5. The harm suffered by investors as a result of the Respondent’s activities;
    6. The benefits received by the Respondent as a result of the improper activity;
    7. The risk to investors and the capital markets in the jurisdiction, were the Respondent to continue to operate in capital markets in the jurisdiction;
    8. The damage caused to the integrity of the capital markets in the jurisdiction by the Respondent’s improper activities;
    9. 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;
    10. The need to alert others to the consequences of inappropriate activities to those who are permitted to participate in the capital markets; and
    11. Previous decisions made in similar circumstances.
  1. The Panel agrees with the MFDA submissions that the Respondent’s actions were serious misconduct, contravening at least two cornerstones of the MFDA’s investor protection mandate:
    1. First, all securities related business is required to be conducted by properly registered individuals who are Approved Persons of the Member and have fulfilled the proficiency requirements and satisfied securities regulators that they are otherwise fit to provide investment advice and facilitate trading in the securities industry. In this case, the Respondent’s conduct unwittingly enabled an individual not registered with his Member to hold himself out to investors as an Approved Person of that Member;
    2. Second, it is a fundamental obligation of every Member and Approved Person to learn the essential facts relative to each client. The MFDA submission also stated that:
      1. It is a fundamental obligation of Approved Persons to ensure that each order accepted or recommendation made for any account of a client is suitable and in keeping with the client’s investment objectives. By processing trades for clients he had not met, the Respondent was not in a position to know the clients, ensure that the investment recommendations made to them and orders accepted from them were suitable and to ensure that any risks associated with the investment recommendations made or strategies implemented for them were appropriately explained.

    The Panel agrees with the statement of the fundamental obligations, but, in this case, the ASF makes no reference to any transactions, and therefore the Panel only considered the Respondent’s conduct in signing the NCAFs, which it still determined to be serious misconduct.

  1. While the Respondent’s misconduct at issue is serious, in determining the appropriate penalty, the Panel also took into account the following mitigating factors:
    1. The Respondent has no previous disciplinary history;
    2. MFDA stated that it was satisfied that the Respondent did not intend to subject investors to potential harm;
    3. There is no evidence that any clients suffered financial harm as a result of the Respondent’s misconduct;
    4. The Respondent has cooperated with the MFDA throughout the course of its investigation and these proceedings;
    5. The Respondent ultimately admitted what he had done thereby accepting responsibility for his wrongdoing and in the end, provided accurate information about and corroboration of the scope and extent of his
  1. The Panel considered both specific and general deterrence to be very important factors in deciding on the appropriate penalty. It is necessary that any penalty be sufficiently significant that it will deter future misconduct by the Respondent and also deter others in the industry from engaging in similar misconduct. A message must be sent to the industry that similar misconduct will not be tolerated.
  1. The Panel reviewed the cases to which it was referred in the MFDA Book of Authorities. While none of the cases is directly applicable to this case, the facts of each case and the penalties imposed based on those facts were instructive to this Panel in determining the appropriate penalty in our case.
  1. The Panel also considered the MFDA Penalty Guidelines (“Guidelines”) to which it was referred. The Guidelines are not mandatory or binding on a Hearing Panel, but do provide a basis upon which discretion can be exercised consistently and fairly. The MFDA submission stated that, in cases involving the misconduct alleged in the present case, the Guidelines recommend consideration of the following penalties for Approved Persons:
    1. Securities Related Business: minimum fine of $10,000, write or rewrite an appropriate industry course exam, period of increased supervision, suspension or termination in egregious cases;
    2. Provincial Securities Requirements: minimum fine of $5,000, write or rewrite an appropriate industry course exam, suspension or termination in egregious cases;
    3. Suitability and Know Your Client: minimum fine of $10,000, write or rewrite an appropriate industry course exam, period of increased supervision, suspension or termination in egregious cases; and
    4. Standard of Conduct: minimum fine of $5,000, suspension or termination in egregious cases.
  1. The Panel also considered oral submissions by MFDA counsel regarding both penalty and costs, and oral submissions by the Respondent regarding penalty.

D. DECISION AND ORDER

  1. Having regard to the principles and factors stated above, the cases to which it was referred, the Guidelines and the written and oral submissions of both MFDA counsel and the Respondent, the Panel made the following decision:
    1. the Respondent shall pay a fine in the amount of $7,500 pursuant to section 24.1(b) of By-law No.1; and
    2. the Respondent shall pay costs of this proceeding and investigation in the amount of $2,500 pursuant to section 24.2 of By-law No. 1.
  1. Subsequent to hearing, the Hearing Panel was advised that the parties had agreed that the fine and penalty would be paid on or before May 19, 2017, and an order dated April 25, 2017 was signed by the Panel accordingly.
  • Frederick H. Webber
    Frederick H. Webber
    Chair
  • Kenneth P. Mann
    Kenneth P. Mann
    Industry Representative

553316v2


Schedule “A”

Agreed Statement of Facts
File No. 201666

IN THE MATTER OF A DISCIPLINARY HEARING
PURSUANT TO SECTIONS 20 AND 24 OF BY-LAW NO. 1
OF THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA

Re: Todd Regan Morin

AGREED STATEMENT OF FACTS

I. Introduction

  1. By Notice of Hearing dated September 2, 2016, the Mutual Fund Dealers Association of Canada (the “MFDA”) commenced a disciplinary proceeding against Todd Regan Morin (the “Respondent”) pursuant to ss. 20 and 24 of MFDA By-law No. 1.
  1. The Notice of Hearing set out the following allegation:
    1. Allegation #1:   Allegation #1: On February 27 and 28, 2014, the Respondent assisted an unregistered individual, SL, to open two client accounts at the Member by signing two New Client Account Applications as the advisor of record without having met the clients or otherwise performed the necessary due diligence to learn the essential facts relative to the clients, thereby engaging on conduct contrary to MFDA Rules 1.1.1, 2.2.1 and 2.1.1.

II. In public / In Camera

  1. The Respondent and Staff of the MFDA (“Staff”) agree that this matter should be heard in public pursuant to Rule 1.8 of the MFDA Rules of Procedure.

 

III. Admissions AND ISSUES TO BE DETERMINED

  1. The Respondent has reviewed this Agreed Statement of Facts and admits the facts set out in Part IV herein. The Respondent admits that the facts in Part IV constitute misconduct for which the Respondent may be penalized on the exercise of the discretion of a Hearing Panel pursuant to s. 24.1 of MFDA By-law No. 1.
  1. Staff and the Respondent jointly request that the Hearing Panel determine, on the basis of this Agreed Statement of Facts, the appropriate penalty to impose on the Respondent: the appropriate reprimand (if any), pursuant to s. 24.1.1 (a) of MFDA By-law No. 1, the amount of the appropriate fine (if any) to impose on the Respondent, pursuant to s. 24. 1.1(b) of MFDA By-law No. 1, the length of the appropriate suspension, revocation or prohibition (if any) to impose on the Respondent, pursuant to s. 24.1.1 (c) – (e) of MFDA By-law No. 1, the appropriate conditions to impose on the Respondent, pursuant to s. 24.1.1 (f) of MFDA By-law No. 1, and the appropriate amount of costs (if any) of the investigation and hearing to be awarded against the Respondent, pursuant to s. 24.2 of MFDA By-law No.1.
  1. Staff is seeking a fine in the amount of at least $7,500 pursuant to s. 24. 1.1(b) of MFDA By-law No. 1 and costs of $5,000 pursuant to s. 24.2 of MFDA By-law No. 1.
  1. The Respondent is seeking a combined fine and costs in the total amount of no more than $4,000.

IV. AGREED FACTS

  1. Staff and the Respondent agree that submissions made with respect to the appropriate penalty are based only on the agreed facts in Part IV and no other facts or documents. In the event the Hearing Panel advises one or both of Staff and the Respondent of any additional facts it considers necessary to determine the issues before it, Staff and the Respondent agree that such additional facts shall be provided to the Hearing Panel only with the consent of both Staff and the Respondent.  If the Respondent is not present at the hearing, Staff may disclose additional relevant facts, at the request of the Hearing Panel.
  1. Nothing in this Part IV is intended to restrict the Respondent from making full answer and defence to any civil or other proceedings against him.

Registration History

  1. The Respondent has been registered as a mutual fund salesperson (now known as dealing representative) with Investors Group Financial Services Inc. (“IG”), a Member of the MFDA, in Ontario since November 7, 2001 and in Quebec since November 23, 2005. He was also registered as a Regional Director and Branch Manager of IG from July 2008 to October 2014.
  1. At all material times, the Respondent conducted business in the Ottawa, Ontario area.

The Respondent Opened Two Client Accounts Without Meeting the Clients

  1. In or about February 2014, the Respondent was approached by an individual, SL, to sign two New Client Account Applications (“NCAFs”) and open two client accounts at IG using the Respondent’s representative code.[1]
  1. At the time he approached the Respondent, SL had applied to become registered as a mutual fund salesperson with IG.[2] SL did not become registered with IG until March 6, 2014.
  1. The Respondent states that he was unaware of the fact that SL was not registered as a mutual fund salesperson with IG given that SL had been attending at IG’s branch office since or about September 2013 while working with GD, another IG mutual fund salesperson.[3] The Respondent states that when SL approached him to open the two client accounts, SL informed him that SL and GD were having a commercial disagreement involving clients and that the Respondent facilitating the client openings would be of service to SL in his dispute with GD.
  1. The Respondent therefore agreed to assist SL to open accounts at IG for the two clients and to become the advisor of record in respect of the accounts. The Respondent further agreed that he would transfer the accounts to SL at a later date.
  1. On February 27 and 28, 2014, SL provided the Respondent with two completed NCAFs which had been signed by the two clients.[4] The Respondent signed the two NCAFs as the advisor of record using his IG representative code, without having met the clients, obtaining any instructions from the clients, or otherwise performing due diligence to learn the essential facts relative to the clients.
  1. In signing the NCAFs, the Respondent attested that he had met the clients and verified the clients’ identities.
  1. The Respondent submitted the NCAFs to IG, which opened accounts for the two clients.

Misconduct Admitted

  1. By engaging in the conduct described above, the Respondent admits that he opened two client accounts at the Member without having met the clients or otherwise performed the necessary due diligence to learn the essential facts relative to the clients, thereby engaging on conduct contrary to MFDA Rules 1.1.1, 2.2.1 and 2.1.1.

Execution of Agreed Statement of Facts

  1. This Agreed Statement of Facts may be signed in one or more counterparts which together shall constitute a binding agreement.
  1. A facsimile copy of any signature shall be effective as an original signature.

DATED this 21st day of April, 2017.

“Todd Regan Morin”

Todd Regan Morin

“Shaun Devlin”

Staff of the MFDA
Per: Shaun Devlin
Senior Vice-President, Member Regulation –
Enforcement

[1] SL is the subject of a related MFDA regulatory proceeding (File No. 201667).
[2] SL applied to become registered with IG in September 2013.
[3] GD is the subject of a related MFDA regulatory proceeding (File No. 201665).
[4] All information on the NCAFs, including the clients’ investment knowledge, investment objectives, time horizon and risk tolerance, was obtained and imputed by SL alone, without the Respondent’s knowledge or assistance.