Reasons For Decision

Background

1. This is a Settlement Hearing under Section 24.4 of By-Law No. 1 of the Mutual Fund Dealers Association of Canada (the “MFDA”). The hearing was held on January 21, 2019. The Respondent appeared in person. The full Settlement Agreement dated December 4, 2018 entered into between the Respondent Cristina Cruz (“Cruz”) and MFDA signed by its Staff is attached as Appendix “A” to these reasons and its relevant provisions will not be repeated in detail here.
2. The Respondent was registered as a mutual fund dealing representative since February 2009.
3. This Hearing Panel accepted the proposed Settlement Agreement at the conclusion of the January 21, 2019 hearing, with reasons to follow, which are set out below.

Contraventions

4. The Respondent has admitted that:
   1. between November 2011 and March 2016, she obtained, possessed, and used to process transactions, 12 pre-signed account forms in respect of 11 clients, contrary to MFDA Rule 2.1.1;
   2. between June 2013 and March 2017, she altered and used to process transactions, 9 account forms in respect of 8 clients, by altering the account forms without having the clients initial the alterations, contrary to MFDA Rule 2.1.1; and
   3. in July 2015, she photocopied the signature page from an account form that had been signed by the client and re-used the signature page to complete an additional form, contrary to MFDA Rule 2.1.1.

Terms of Settlement

5. In paragraph 5 of the Settlement Agreement, the Respondent agreed to the following penalties and terms of settlement:
   1. The Respondent shall pay a fine in the amount of $12,500.00 in certified funds upon acceptance of the Settlement Agreement, pursuant to section 24.1.1(b) of By-law No. 1;
   2. The Respondent shall pay costs in the amount of $2,500.00 in certified funds upon acceptance of the Settlement Agreement, 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. The Respondent will attend the Settlement Hearing in person.

Acceptance of the Settlement Agreement

6. In determining if it was appropriate to accept the terms of the Settlement Agreement, this Hearing Panel took into consideration the following factors:

Agreed Facts

Registration History

7. Since February 2009, the Respondent has been registered in Alberta as a mutual fund salesperson (now known as a dealing representative) with Sun Life Financial Investment Services (Canada) Inc. (“Sun Life”), a Member of the MFDA.
8. At all material times, the Respondent carried on business in the Edmonton, Alberta area.

Pre-signed Account Forms

9. At all material times, Sun Life’s policies and procedures prohibited its Approved Persons, including the Respondent, from holding, obtaining, or using pre-signed account forms.
10. Between November 2011 and March 2016, the Respondent obtained, possessed, and used to process transactions, 12 pre-signed account forms in respect of 11 clients.
11. The pre-signed account forms consisted of Pre-authorized chequing, Account Application, Know-Your-Client, Order ticket and Registered Education Savings Plans forms.

Altered Account Forms

12. At all material times, Sun Life’s policies and procedures prohibited its Approved Persons, including the Respondent, from holding, obtaining, or using falsified account forms.
13. Between June 2013 and March 2017, the Respondent altered and used to process transactions, 9 client forms in respect of 8 clients, by altering the account forms without having the clients initial the alterations.
14. The altered forms consisted of Pre-authorized chequing, Account Application, Know-Your-Client, Order ticket and Registered Education Savings Plans forms.

Re-using Signature Page Previously Signed by a Client

15. At all material times, Sun Life’s policies and procedures prohibited its Approved Persons from photocopying a document to re-use a previous signature.
16. Between February 2015 and September 2016, the Respondent photocopied the signature page from an account form that had been signed by the client and re-used the signature page to complete an additional form.

SunLife’s Investigation

17. In June 2016, Sun Life identified 2 of the pre-signed and altered forms that are the subject of this Settlement Agreement during an onsite branch review. Sun Life subsequently commenced a review of all of the client files serviced by the Respondent and identified the remaining pre-signed and altered account forms.
18. On May 15, 2017, Sun Life placed the Respondent under close supervision.
19. On August 11, 2017, Sun Life issued a warning letter to the Respondent for possessing and using pre-signed account forms, and placed her under continued close supervision for a period of 12 months. The close supervision period ended on August 1, 2018.
20. On September 1, 2017, as part of its investigation, Sun Life sent audit letters to all of the clients whose accounts the Respondent serviced in order to determine whether they had any unauthorized transactions in their accounts. No clients reported any concerns to Sun Life.

Additional Factors

21. There is no evidence that the Respondent received any financial benefit from engaging in the misconduct described above beyond any commissions and fees that she would ordinarily be entitled to receive had the transactions been carried out in the proper manner.
22. There is no evidence of any client loss or that the transactions were unauthorized.
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 of the allegations.

Nature of the Misconduct: Altered Account Forms and Re-used Client Signature

25. The Respondent’s misconduct is serious. She altered 9 account forms in respect of 8 clients by altering information on the account forms without having the clients initial the alterations. Three of the 9 forms were altered post-bulletin.
26. The Respondent photocopied the signature page from an account form that had been signed by the client and re-used the signature page to complete an additional form.
27. The Respondent is an experienced dealing representative who ought to have known and respected the MFDA’s and the Member’s compliance requirements.
28. There were certain mitigating factors applicable to the instant case, including:
    1. There is no evidence of client harm.
    2. There is no evidence that the Respondent received any financial or other benefit through her conduct, and there was no client complaint.
    3. The Respondent has not previously been disciplined by the MFDA.
    4. By entering into this Settlement Agreement, the Respondent has saved the MFDA the time, resources, and expenses associated with conducting a full hearing of the allegations.
29. Enforcement Counsel cited in support of his submission the penalties imposed in a number of recent cases, including:
    1. Simard, MFDA File No. 2017123, Hearing Panel of the Prairie Regional Council, Decision and Reasons dated June 5, 2018
    2. Georgijev, MFDA File No. 201721, Hearing Panel of the Central Regional Council, Decision and Reasons dated June 29, 2017
    3. Gibson, MFDA File No. 201620, Hearing Panel of the Central Regional Council, Decision and Reasons dated May 2, 2016
30. This Hearing Panel noted that the fact patterns in each of those cited cases were similar to the facts in the instant case. The monetary penalties imposed were $11,000.00, $10,000.00 and $10,000.00, respectively. The costs award in each case was $2,500.00.
31. As noted, Enforcement Counsel sought a penalty which exceeds the range of monetary fines levied in previous decisions on similar facts for an Approved Person’s breach of the standard of conduct by reason that 4 of the forms were obtained after the MFDA issued MFDA Bulletin #0661-E on October 2, 2015.

Appropriateness of the Proposed Penalty

32. In the view of this Hearing Panel, the penalties in the above-cited decisions are comparable to the case at hand, and the fact that some of the wrongful conduct occurred post Bulletin is a reasonable justification for a monetary fine above the range of results on those cases.
33. Accordingly, this Hearing Panel concludes that the penalties, including the costs award proposed in the Settlement Agreement, are reasonable and proportionate and will deter the Respondent and other Approved Persons from engaging in similar misconduct.
34. Further, this Hearing Panel concludes that acceptance of this Settlement Agreement will advance the public interest and the objective of the MFDA to enhance investor protection and ensure high standards of conduct in the mutual fund industry.
35. The Hearing Panel accordingly approves its terms.
36. This Hearing Panel thanks Enforcement Counsel for his helpful presentation and the Respondent and her counsel for their cooperation during the hearing.