Reasons For Decision

I. INTRODUCTION

1. The present matter was originally set for a hearing on the merits on August 23, 2021. However on August 20, 2021, Natasha Maureen Goodison (the “Respondent”) and the Mutual Fund Dealers Association of Canada (the “MFDA”) entered into a settlement agreement (the “Settlement Agreement”) and the present hearing was accordingly conducted as a Settlement Hearing pursuant to section 24.4.3 of By-Law No. 1 of the MFDA. The Settlement Agreement is attached hereto as Schedule “1”.
2. On the morning of August 23 2021, the Hearing Panel Chair was advised that one of the Hearing Panel members was unable to serve and the Chair ordered that the hearing be conducted before 2 Hearing Panel members in accordance with MFDA By-Law No. 1, section 19.9(b).

II. FACTS

3. The Respondent was a branch manager and an Approved Person of BMO Investments Inc. (the “Member”) and also an employee of the Bank of Montreal (the “Bank”) In January 2009, the client BM obtained 4 cheques from the Bank in the amount of $7,000 and instructed the Bank to hold the cheques until her death and then distribute them to the 4 payees. The Bank placed the cheques in the vault for safekeeping. BM became a client of the Member in June 2015. In early 2016 the Respondent without the knowledge of BM or the Bank took the cheques from the vault and on April 5 and 6, 2016 deposited them in her own account and subsequently used the proceeds for her own use.
4. BM died in January 2018 and in February the executor of BM’s estate requested the cheques from the Bank. When the cheques could not be located the Bank make inquiries of the employees of the branch and the Respondent admitted taking the cheques and depositing them into her own account.
5. Under the terms of the Settlement Agreement the Respondent has agreed to pay a fine in the amount of $7,500, costs in the amount of $5,000 and to a permanent prohibition on her authority to conduct securities related business in any capacity while in the employ of or affiliated with a Member of the MFDA, pursuant to section 24.1.1(e) of MFDA By-Law No. 1.

Conduct of the Respondent

6. The Respondent contravened MFDA Rule 2.1.1 by misappropriating $7,000 from the client BM.
7. MFDA Rule 2.1.1 codifies a standard of conduct applicable to all MFDA members and Approved Persons. It requires inter alia that each Member and Approved Person must “deal fairly and in good faith with its clients…”
8. Hearing Panels have consistently held that theft of a client’s money is clearly a breach of Rule 2.1.1.
   1. Douglas (Re), Hearing Panel of the Central Regional Council, MFDA File No. 201824 Decision dated October 9, 2018 at paras. 24-25
   2. Hothi (Re), Hearing Panel of the Prairie Regional Council, MFDA File No. 202012, Decision dated September 29, 2020 at para. 23.
   3. Lam (Re), Hearing Panel of the Prairie Regional Council, MFDA File No. 201865 Decision dated January 25, 2019 at para. 15.
9. Specifically in Douglas, supra, the Hearing Panel stated that:
   1. “There is no question that the Respondent misappropriated funds from her father, Client BH, and that the misappropriation of funds is inconsistent with the standard of conduct set out in Rule 2.1.1. Misappropriation is a serious breach of trust, causes harm to the clients affected, and undermines the reputation and integrity of the securities interest [sic]”.

Proposed Penalty

10. As stated above the following penalties are prescribed under the Settlement Agreement:
    1. A permanent prohibition to conduct securities related business in any capacity while in the employ of or affiliated with a Member of the MFDA, pursuant to section 24.1.1(e) of MFDA By-Law No. 1;
    2. A fine of $7,500 in certified funds upon acceptance of the Settlement Agreement, payable in 6 consecutive monthly installments of $1,250 on the last business day of each month commencing in September 2021, pursuant to section 24.1.1(b) of MFDA By-Law No. 1;
    3. Costs of $5,000 in certified funds upon acceptance of the Settlement Agreement pursuant to section 24.2 of MFDA By-Law No. 1.

General Considerations Concerning Acceptance of Settlement Agreements

11. Section 24.4.3 of MFDA By-Law No. 1 stipulates that a Hearing Panel must either accept or reject a Settlement Agreement.
12. There are a number of general factors which may be considered by a Hearing Panel in determining whether to accept or reject a Settlement Agreement including:
    1. Whether acceptance would be in the public interest and whether the penalty imposed will protect investors;
    2. Whether the Settlement Agreement is reasonable and proportionate, having regard to the conduct of the Respondent;
    3. Whether the Settlement Agreement will foster confidence in the integrity of Canadian capital markets and in the integrity of the MFDA; and
    4. Whether the Settlement Agreement will foster confidence in the regulatory process itself.
    1. Jacobsen (Re) supra, at para. 70

Specific Considerations Concerning Appropriateness of the Penalty

13. Included in the specific considerations a Hearing Panel should consider in determining whether to accept or reject a Settlement Agreement are:
    1. The seriousness of the allegations proved;
    2. The Respondent’s past conduct;
    3. The Respondents experience and level of activity in the capital markets;
    4. The harm suffered by the investors and the benefits received by the Respondent;
    5. The need to alert others to the consequences of inappropriate activities to those who are permitted to participate in the capital markets; and
    6. Previous decisions made in similar circumstances.
    1. Headley (Re), 2006 LNCMFDA3, at para. 85

Seriousness of the Allegations Proved

14. As stated in (Re) Lee, supra, misappropriation or theft is among the most serious types of misconduct encountered by securities regulators.
15. By taking client money the Respondent acted in a manner that detrimentally affects the reputation of the Member and public confidence in the financial services industry. The penalties sought to be imposed in the present case are warranted to emphasize the seriousness of the misconduct and prevent similar misconduct from occurring in the future.

Respondent’s Experience and Level of Activity in the Capital Markets

16. The Respondent was registered in the mutual fund industry from August 4, 2009 to December 31, 2017.
17. A further aggravating factor here is that she was a branch manager of the Member and was expected to set an example and thus should be held to a higher standard.
    1. Bast (Re), MFDA File No. 201956, Central Region, October 22, 2019, at para. 22
    2. Dziadecki (Re), CanLII 15836 (CA MFDAC), at para. 29

Deterrence

18. The permanent prohibition of the Respondent from engaging in securities related business on behalf of any Member of the MFDA, and the imposition of the penalties prescribed under the Settlement Agreement will deter others from engaging in similar misconduct and foster confidence among investors and other stakeholders in the mutual fund industry as a whole.

Client Harm and Benefits Received by the Respondent

19. After the Respondent was questioned about the missing cheques she admitted taking the money and reimbursed the Bank in whole. The Bank then reimbursed the client.
20. While the Respondent cashed the client’s cheques for her personal benefit she applied her own money to make repayment to the Bank in whole.

Past Conduct

21. Although the Respondent has had no previous disciplinary issues with the MFDA, the seriousness of the misconduct in stealing money from a client warrants giving little to no weight to this as a mitigating factor. We do note however that the Respondent has cooperated on the investigation into this matter following discovery of the theft.

Other Considerations

22. It has been brought to our attention that the Respondent pleaded guilty and was convicted of “Theft Over $5,000” in the Provincial Court of British Columbia. She received a 6 month conditional sentence. We have not considered this to be a mitigating or an aggravating factor in our deliberations.
23. As appears from paragraphs 23-25 of the Settlement Agreement, the Respondent is experiencing financial difficulties. She was receiving support payments from her ex-husband which have been discontinued as a result of his death in May 2021. Her income as reported on tax returns was approximately $24,000 in 2019 and $19,800 in 2020. However, the Hearing Panel agrees with Counsel for the MFDA that when an Approved Person steals money from a client for their personal benefit a Hearing Panel ought not to overemphasize the inability to pay penalties as a mitigating factor. The MFDA Sanction Guidelines suggest that “[ability to pay] is only one of the factors…including general and specific deterrence and the need to ensure public confidence in the MFDA’s disciplinary process.”
24. In the present case, the seriousness of the misconduct, together with the need to ensure public confidence in the MFDA disciplinary process and the regulatory process as a whole significantly outweigh the personal financial circumstances of the Respondent.

Previous Decisions in Similar Cases

25. Counsel have referred us to three cases involving Approved Settlements and four others involving Decisions after a full hearing on the merits.
    1. Approved Settlement Decisions
       1. (Re) Solis, Hearing Panel of the Central Regional Council, MFDA File No. 201677, Decision dated June 23, 2017
       2. (Re) MacKinnon, Hearing of the Atlantic Regional Council, MFDA File No. 201617, Decision dated December 22, 2016
       3. (Re) Jacobsen, supra
    2. Decisions Arising after Hearings on the Merits
       1. (Re) Breukelman, Hearing Panel of the Central Regional Council, MFDA File No. 201729, Decision dated June 8, 2018
       2. (Re) Bhathal, Hearing Panel of the Pacific Regional Council, MFDA File No. 201637, Decision dated November 21, 2016
       3. (Re) Ogalino, Hearing Panel of the Central Regional Council, MFDA File No. 201248, Decision dated January 31, 2014
       4. (Re) Vilfort, Hearing Panel of the Central Regional Council, MFDA File No. 201021, Decision dated December 15, 2010
26. All of the decisions above concerned thefts of greater than $7,500. Not surprisingly all imposed fines of greater than $7,500 although in the Approved Settlement cases the fines were for less than the amount of the theft. It is also to be noted that the Respondents in those cases did not appear as cooperative with the MFDA as is the case here.
27. Despite the distinguishing factors noted with the cases, all imposed a permanent prohibition and all save one, set costs at amounts in excess of $5,000. In the end the Hearing Panel has concluded that the sanctions imposed by the Settlement Agreement are within the reasonable range of appropriateness with regard to the other decisions cited by Counsel and we approve the Settlement Agreement.