Hearing Panel of the Central Regional Council:
- Malliha Wilson, Chair
- Kenneth P. Mann, Industry Representative
David Babin, Enforcement Counsel for the Mutual Fund Dealers Association of Canada
Rohit Kumar, Counsel for the Respondent
Novelette Angela Graham-Hart, Respondent, in person
- The Hearing Panel accepted the Settlement Agreement dated August 10, 2018 (the “Settlement Agreement”) between the staff of the MFDA and Novelette Angela Graham-Hart (the “Respondent”). A copy of the Settlement Agreement is attached hereto as Schedule “1” and a copy of the Order is attached as Schedule “2”.
- The agreed facts are set out in paragraphs 6 – 19 of the Settlement Agreement.
- From July 27, 2006 to December 1, 2015, the Respondent was registered as a mutual fund salesperson (now known as a dealing representative) with National Bank Investments Inc. (“National Bank”), a member of the MFDA (the “Member”).
- The Respondent was employed by National Bank as a Retirement Investment Advisor (“RIA”). In her role as an RIA, the Respondent was primarily responsible for transferring client assets from other dealers to either National Bank or National Bank Direct Brokerage (“NBDB”), a dealer member of Investment Industry Regulatory Organization of Canada (“IIROC”).
- The Respondent admits that between February 18, 2014 and July 27, 2015, she engaged in securities related business that was not carried on for the account and through the facilities of the Member by trading mutual funds and equity securities in an on-line discount brokerage account of one individual, contrary to MFDA Rules 1.1.1 and 2.1.1.
- MFDA Rule 1.1.1(a) requires that all securities business must be carried on for the account of the Member and through the facilities of the Member. Here, the Respondent admitted that by accessing a client’s on-line discount brokerage account on 5 occasions and processing 5 trades in the client’s account, including the purchase and/or sale of equity securities, she engaged in registrable activity and securities related business contrary to MFDA Rule 1.1.1.
- By acting outside of MFDA Rule 1.1.1 the Respondent prevented the trading activity from being subjected to appropriate review and supervision.
- Where an Approved Person engages in securities related business that is not carried on for the account of the Member and through the facilities of the Member, such conduct is also contrary to MFDA Rule 2.1.1.
- The agreed penalties were:
- One-month prohibition to the Respondent from conducting securities related business while in the employ of or associated with any MFDA member;
- a fine of $5,000; and
- a costs award of $2,500.
- The following considerations guided the Hearing Panel’s acceptance of the Settlement Agreement. Firstly, the agreed penalty needed to be within an acceptable range considering similar cases. Secondly, the agreed penalty had to be fair and reasonable, i.e. proportional to the seriousness of the contravention and relevant circumstances. Thirdly, the agreed penalty should serve as a deterrent to the respondent and the industry.
Nature of the Misconduct
- The Respondent’s misconduct is serious. The actions of the Respondent denied the Member the ability to supervise the Respondent’s activities. Furthermore, the Respondent breached her fundamental obligations as a dealing representative. MFDA Rule 1.1.1 is fundamental to the regulatory mandate of the MFDA to enhance investor protection and strengthen public confidence in the mutual fund industry.
- Here, in particular, the Respondent’s misconduct was serious as some of the trades were equity securities which the Respondent was not registered to trade. The Respondent was licensed as a mutual fund sales person but provided advice and was trading in equity securities.
Other Considerations re Acceptability of Agreed Penalty
- There was no evidence of client losses or benefits accruing to the Respondent from her conduct.
- The Respondent has accepted responsibility for her misconduct.
- The Respondent has cooperated extensively with the MFDA’s investigation.
- The Respondent has no prior disciplinary record with the MFDA.
- The Respondent was registered for nine years, from July 2006 to December 1, 2015. She was terminated as a result of the events at issue.
- The agreed penalty helps the MFDA to send a message to the Respondent and others with respect to specific and general deterrence.
- The agreed penalty is within the reasonable range of appropriateness with respect to other decisions, as submitted to us by staff, made by MFDA hearing panels in similar circumstances.
- Having regard to all the aforementioned factors, the Panel concludes that the penalties proposed in the Settlement Agreement are reasonable, proportionate and will deter the Respondent and others from engaging in the impugned conduct. The Panel is of the view that the acceptance of this Settlement Agreement is in the public interest and will advance the objective of investor protection. The Settlement Agreement is therefore accepted.
Malliha WilsonMalliha WilsonChair
Kenneth P. MannKenneth P. MannIndustry Representative