Hearing Panel of the Pacific Regional Council:
- Ian H. Pitfield, Chair
- Barbara E. Fraser, Industry Representative
Sakeb Nazim, Counsel for the Mutual Fund Dealers Association of Canada
David Di Paolo, Counsel for the Respondent
Dale Keith Lamb, Respondent, in person
- On June 5, 2018, after hearing representations from counsel, the Hearing Panel approved a Settlement Agreement dated April 30, 2018 (“Settlement Agreement”) between the Mutual Fund Dealers Association of Canada (“MFDA”) and Dale Keith Lamb (“Respondent”).
- The Order provides that the Respondent shall pay a fine of $13,500 and costs of $2,500. The aggregate of $16,000 is to be paid forthwith.
- The Respondent has been registered in British Columbia as a mutual funds salesperson (now known as a dealing representative) since 1996. He is also registered as a dealing representative in Alberta and Ontario. He carries on business in Kelowna, British Columbia, with Sun Life Financial Investment Services (Canada) Inc., a Member of the MFDA.
- Between December 2010 and January 2016, the Respondent obtained, possessed, or used to process transactions, 18 pre-signed account forms in respect of 12 clients, contrary to MFDA Rule 2.1.1, and Sun Life’s policies and procedures. The pre-signed forms consisted of electronic fund transfer, pre-authorized chequing, and order ticket forms.
- On February 29, 2016, Sun Life placed the Respondent under close supervision for an indefinite period.
- On April 12, 2018, the MFDA issued a Notice of Settlement Hearing regarding this matter in which additional misconduct involving the falsification of client account forms was alleged. The MFDA has advised that the Notice of Settlement Hearing mistakenly alleged that misconduct which was not attributable to the Respondent.
- Of note in this case is the fact that in June 2009, Sun Life issued a warning letter to the Respondent after it identified 15 pre-signed account forms in client files serviced by the Respondent. The Respondent signed an acknowledgment to Sun Life dated September 1, 2009, stating that the Respondent understood he should not have clients execute forms that had not been completed in full. After signing the acknowledgment, the Respondent again contravened the rules and policies and procedures from 2010 to 2016.
- There is no evidence that any client suffered harm through use of the forms, or that the Respondent benefitted beyond the receipt of commissions in the ordinary course.
- This is another instance in which a dealing representative engages in the use of pre-signed forms notwithstanding regular communications to industry members and dealing representatives from the MFDA reminding and cautioning that their use is prohibited. The use of pre-signed forms constitutes a violation of MFDA Rule 2.1.1 prescribing 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 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.
- The use of such forms is prohibited because they present a legitimate risk that they may be used to engage in discretionary trading; they provide a mechanism by which one may engage in acts of fraud, theft or other forms of conduct harmful to the client; and they subvert the ability of a Member to properly supervise trading activity: Re Price, MFDA File No. 200814, Central Regional Council, Reasons dated April 18, 2011, at paras. 118-121.
- The prohibition applies whether or not the client was aware of or authorized the use of the pre-signed forms, and whether or not the forms were actually used by the Approved Person for discretionary trading or other improper purposes.
- Hearing panels have continually held that obtaining or using pre-signed account forms is a contravention of the standard of conduct demanded under MFDA Rule 2.1.1.
- The accepted principle is that a hearing panel will not reject a settlement agreement unless the proposed penalty falls outside the reasonable range of appropriateness. As stated by counsel, settlements advance the MFDA’s regulatory objective of protecting the public 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: see British Columbia Securities Commission v. Seifert, 2007 BCCA 484, at paras. 31 and 49.
- The principal consideration in this case is deterrence. In that regard, the fine is an amount consistent with other recently accepted and approved penalties in similar circumstances: see Re Courneya, MFDA File No. 201648, May 23, 2017 (fine of $17,500); Re Rice, MFDA File No. 201731, October 20, 2017 (fine $11,500); and Re Shah, MFDA File No. 201530, December 21, 2015 (fine $10,000). Each of the foregoing is a decision of the Central Regional Council.
- The Panel considers the penalty imposed by the Settlement Agreement to fall within the reasonable range of appropriateness having regard for the authorities cited by counsel and the factors articulated in Re Breckenridge, MFDA File No. 200718, Central Regional Council, Reasons dated November 14, 2007. A penalty in excess of $5,000 is warranted having regard for MFDA Bulletin No. 0661-E dated October 2, 2015 advising that increased penalties would be sought in cases involving the use of pre-signed forms, and the aggravating factor of continued non-compliance after the signing of an acknowledgment in 2009.
- For the foregoing reasons, the Settlement Agreement is approved.
Ian H. PitfieldIan H. PitfieldChair
Barbara E. FraserBarbara E. FraserIndustry Representative