Reasons For Decision

Appendix “A”

Settlement Agreement
File No. 201758

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: Sarah Solis Maria Suzarah Del Rosario

I. INTRODUCTION

1. Staff of the Mutual Fund Dealers Association of Canada (“Staff”) and the Respondent, Sarah Solis Suzarah Del Rosario (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.

4. The Respondent admits to the following violations of the By-laws, Rules or Policies of the MFDA:
   1. on or about April 24, 2015, the Respondent failed to ensure that a trade in a client account was suitable for the client having regard to the essential Know-Your-Client (“KYC”) factors, including the client’s age, time horizon and investment objectives, contrary to MFDA Rules 2.2.1 and 2.1.1; and
   2. on or about April 24, 2015, the Respondent processed a trade in a client account, using her discretion to select a version of a mutual fund subject to a deferred sales charge, contrary to MFDA Rules 2.3.1 and 2.1.1.

5. Staff and the Respondent agree and consent to the following terms of settlement:
   1. the Respondent shall pay a fine in the amount of $10,000 in certified funds upon acceptance of the Settlement Agreement pursuant to s. 24.1.1(b) of MFDA By-law No. 1;
   2. the Respondent shall be prohibited from acting in the capacity of branch manager for a period of 2 months pursuant to s. 24.1.1(c) of MFDA By-law No. 1;
   3. the Respondent shall pay costs in the amount of $2,500 in certified funds upon acceptance of the Settlement Agreement pursuant to s. 24.2 of MFDA By-law No. 1;
   4. the Respondent shall in the future comply with MFDA Rules 2.2.1, 2.3.1 and 2.1.1; and
   5. the Respondent will attend by teleconference, 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. Since 2002, the Respondent has been registered in Ontario as a mutual fund salesperson (now known as a Dealing Representative) with Sun Life Financial Services (Canada) Inc. (“Sun Life”)[1], a Member of the MFDA.

8. Between September 2009 and May 2015, Sun Life designated the Respondent as a branch manager.

9. At all material times, the Respondent conducted business in the Ottawa, Ontario area.

Unsuitable Trade and Discretionary Trading

10. At all material times, Sun Life’s policies and procedures permitted clients to sign a Limited Trade Authorization (“LTA”), a document that authorizes Approved Persons to accept verbal instructions from a client in certain circumstances.

11. At all material times, Sun Life’s policies and procedures prohibited its Approved Persons, including the Respondent, from engaging in discretionary trading.

12. On February 6, 2014, client JR opened a mutual fund account at the Member (the “Mutual Fund Account”) and completed a KYC form, on which form client JR indicated that the time horizon for her investment in the Mutual Fund Account was less than five years, and that her risk tolerance was low to medium. Client JR also signed a LTA at this time.

13. At the time Client JR opened the Mutual Fund Account, the Respondent explained to her the difference between deferred sales charges and front end load charges. Client JR informed the Respondent that she intended to use the monies invested in the Mutual Fund Account to pay taxes on a property within a period of less than five years.

14. In March 2014, in accordance with client JR’s instructions, the Respondent processed a purchase in a money market fund in the Mutual Fund Account, subject to a front end load charge.

15. On April 24, 2014, the Respondent states that client JR verbally instructed the Respondent to process a switch in the Mutual Fund Account to transfer the monies to another fund with a risk rating of low to medium called the Signature Diversified Yield Fund (the “Switch”).

16. Prior to accepting the order for the Switch, the Respondent states that client JR advised her that client JR did not need the invested monies immediately. The Respondent failed to ask any further questions to determine client JR’s time horizon for the invested monies.

17. Without obtaining instructions from client JR, the Respondent used her discretion to select a version of the Signature Diversified Yield Fund that was subject to a 7 year deferred sales charge (“DSC”), and processed the Switch.

18. At the time of the Switch, the Respondent failed to inform client JR that she would incur DSC fees if she redeemed monies from the investment within seven years.

19. On April 25, 2015, client JR redeemed her investment at a $10,822.89 gain, but incurred $6,052.29 in DSC fees.

Sun Life’s Investigation

20. In or around April 2015, client JR complained to Sun Life’s compliance department about the DSC fees arising from the Switch.

21. Sun Life completed a review of the client complaint and refunded client JR the DSC fees incurred from the Switch.

22. The Respondent also refunded to Sun Life the $3,631.37 commission that she received from the Switch.

Additional Factors

23. The Respondent has not previously been the subject of MFDA disciplinary proceedings.

24. By entering into this Settlement Agreement, the Respondent has saved the MFDA the time, resources, and expenses associated with conducting a full hearing on the allegations.

IV. ADDITIONAL TERMS OF SETTLEMENT

25. 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.

26. 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. MFDA Settlement Hearings are typically held in the absence of the public pursuant to section 20.5 of MFDA By-law No. 1 and Rule 15.2(2) of the MFDA Rules of Procedure. If the Hearing Panel accepts the Settlement Agreement, then the proceeding will become open to the public and a copy of the decision of the Hearing Panel and the Settlement Agreement will be made available at mfda.ca.

27. 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.

28. Staff and the Respondent agree that if this Settlement Agreement is accepted by the Hearing Panel:
    1. the Settlement Agreement will constitute the entirety of the evidence to be submitted respecting the Respondent in this matter;
    2. 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;
    3. Staff will not initiate any proceeding under the By-laws of the MFDA against the Respondent in respect of the contraventions described in this Settlement Agreement. Nothing in this Settlement Agreement precludes Staff from investigating or initiating proceedings in respect of any 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;
    4. 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
    5. 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 from making full answer and defence to any civil or other proceedings against the Respondent

29. 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.

30. 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.

31. 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.

[1] Between 2002 and 2005, the Respondent was registered with Clarica Investco. Inc. (“Clarica”); in 2005, Clarica merged with Sun Life.

Schedule “A”

Order
File No.

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: Sarah Solis Maria Suzarah Del Rosario

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 Sarah Solis Maria Suzarah Del Rosario (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:

1. on or about April 24, 2015, the Respondent failed to ensure that a trade in a client account was suitable for the client having regard to the essential Know-Your-Client (“KYC”) factors, including the client’s age, time horizon and investment objectives, contrary to MFDA Rules 2.2.1 and 2.1.1; and
2. on or about April 24, 2015, the Respondent processed a trade in a client account, using her discretion to select a version of a mutual fund subject to a deferred sales charge, contrary to MFDA Rules 2.3.1 and 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 $10,000 in certified funds upon acceptance of the Settlement Agreement pursuant to s. 24.1.1(b) of MFDA By-law No. 1;

2. The Respondent shall be prohibited from acting in the capacity of branch manager for a period of 2 months pursuant to s. 24.1.1(c) of MFDA By-law No. 1;

3. The Respondent shall pay costs in the amount of $2,500 in certified funds upon acceptance of the Settlement Agreement pursuant to s. 24.2 of MFDA By-law No. 1;

4. The Respondent shall in the future comply with MFDA Rules 2.2.1, 2.3.1 and 2.1.1; and

5. 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.

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