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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: Magdalene Mun-Yin Wong

Heard: July 7, 2021 by electronic hearing in Toronto, Ontario
Reasons For Decision: October 18, 2021

Reasons For Decision

Hearing Panel of the Central Regional Council:

  • The Honourable Robert P. Armstrong, Q.C., Chair
  • Linda Anderson, Industry Representative

Appearances:

Audrey Smith, Enforcement Counsel for the Mutual Fund Dealers Association of Canada
Magdalene Mun-Yin Wong, Respondent

I. INTRODUCTION

  1. Magdalene Mun-Yin Wong, (the “Respondent”), admitted to the following violations:
    1. Between October 19, 2015 and May 10, 2018, the Respondent cut and pasted 2 client signatures onto 2 new account forms, and submitted the account forms to the Member for processing, contrary to MFDA Rule 2.1.1;
    2. Between February 23, 2018 and January 20, 2020, the Respondent altered and used to process transactions 9 account forms in respect of 7 clients by altering information on the account forms without having the client initial the alterations, contrary to MFDA Rule 2.1.1; and
    3. Between August 16, 2018 and December 27, 2018, the Respondent obtained, possessed, and in some instances used to process transactions, 10 pre-signed account forms in respect of 6 clients, contrary to MFDA Rule 2.1.1.
  2. On July 7, 2021, a hearing was held before this Panel of the MFDA via videoconference to review the proposed settlement including the agreed facts which provided in paragraphs 7–21 the following:

Registration History

  1. Commencing in November 2001, the Respondent was registered in the securities industry.
  2. Since August 2017, the Respondent has been registered as a Dealing Representative in Ontario with Investia Financial Services Inc. (the “Member”), a Member of the MFDA.
  3. At all material times, the Respondent conducted business in the Richmond Hill, Ontario area.

Cut and Pasted Client Signatures

  1. Between October 19, 2015 and May 10, 2018, the Respondent cut and pasted 2 client signatures onto 2 new account forms, and submitted the account forms to the Member for processing.
  2. The account forms consisted of 1 Order Entry Form and 1 Transfer Authorization Form.

Altered Account Forms

  1. At all material times, the Member’s policies and procedures prohibited Approved Persons from altering client account forms without obtaining client signatures or initials evidencing that the alteration was approved by the client.
  2. Between February 23, 2018 and January 20, 2020, the Respondent altered and used to process transactions 9 Order Entry forms in respect of 7 clients by altering information on the account forms without having the client initial the alterations.
  3. The Respondent altered the fund’s load type, account number, and fund number on the account forms.

Pre-signed Account Forms

  1. At all material times, the Member’s policies and procedures prohibited Approved Persons from obtaining or using pre-signed account forms.
  2. Between August 16, 2018 and December 27, 2018, the Respondent obtained, possessed, and in some instances used to process transactions, 10 pre-signed account forms in respect of 6 clients.
  3. The account forms consisted of:
    1. 6 Transfer Authorization Forms;
    2. 1 Order Instruction Form;
    3. 1 Investment Account Application Form; and
    4. 2 Know Your Client Update Forms.

The Member’s Investigation

  1. On February 13, 2020, the Member completed a full review of the client files maintained by the Respondent and identified all of the forms that are the subject of this Settlement Agreement.
  2. On October 16, 2020, the Member issued a letter to clients whose accounts the Respondent serviced, which included a transaction history of each client. The letter asked clients to review their transaction histories to ensure that the transaction activity in their accounts was executed properly and to contact the Member if any inconsistencies existed. The letter also asked clients to contact the member if their personal or financial circumstances have changed to ensure their portfolios remain in-line with their investment objectives and risk tolerances. No clients raised any concerns in response to the Member’s letters.
  3. On March 16, 2020, the Member placed the Respondent on strict supervision and required the Respondent to pay a total of $1,376 in respect of an administration fee and a fee for each transaction audit letter sent to clients. The Member also required the Respondent to sign a Declaration acknowledging the terms of the strict supervision.
  4. On September 22, 2020, the Member issued the Respondent a Warning Letter in respect of the forms that are the subject of this Settlement Agreement and required the Respondent to sign a Letter of Undertaking agreeing to adhere to the Member’s guidelines and policies.

II. ADDITIONAL FACTORS

  1. Under the Member’s Investigation, the Member conducted a full investigation of this matter. In addition to the breaches of Rule 2.1.1 the investigation concluded:
    1. “There is no evidence that the Respondent received any financial benefit from the conduct set out above beyond the commissions or fees she would ordinarily be entitled to receive had the transactions been carried out in the proper manner.
    2. There is no evidence of client loss, client complaints, or lack of authorization.
    3. The Respondent has not previously been the subject of MFDA disciplinary proceedings.
    4. 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.”

III. SUBMISSIONS OF STAFF OF THE MFDA

  1. The following submissions were made by Ms. Audrey Smith on behalf of the MFDA:

i. Pre-Signed Forms Are Not Permissible

  1. Counsel submitted that the use of pre-signed forms is a contravention of MFDA Rule 2.1.1 and cited two cases in respect of that submission:
    1. Lock (RE), [2020] Hearing Panel of the Central Regional Counsel, MFDA File No. 202011, Hearing Panel Decision dated May 11, 2020 at para 9, Staff’s Book of Authorities, Tab 2, (“Lok”).
    2. Warr (RE), [2020] Hearing Panel of the Atlantic Regional Counsel, MFDA File No. 202037, Hearing Panel Decision dated September 25, 2020 at para 13, Staff’s Book of Authorities, Tab 3 (“Warr”).
  2. Counsel also submitted that the MFDA has previously warned against the use of pre-signed forms. She pointed out that the use of pre-signed forms: “Adversely affects the integrity and reliability of the account documents, leads to the destruction of the audit trail, has a negative impact on member complaint handling, and has the potential of misuse in the form of unauthorized trading, fraud and misappropriation.”
  3. In this case the Respondent admitted that she obtained and possessed 10 pre-signed account forms in respect of 6 clients, which is contrary to MFDA Rule 2.1.1.

i. Altered Forms Are Not Permissible

  1. Counsel submits: “When an Approved Person alters information on an account form without having a client initial the form to show the client is aware of the change and has authorized it, the Approved Person engages in conduct that is contrary to MFDA Rule 2.1.1.” See Lock (RE), Supra at para 9, Staff’s Book of Authorities, Tab 2 and Warr (RE), Supra at para 13, Staff’s Book of Authorities, Tab 3.
  2. As with pre-signed forms, the MFDA previously warned against Approved Persons altering account forms without having the client initial the form to show they are aware of the change. See MFDA Notice #MSN-0066 dated October 31, 2007 (Updated March 4, 2013 and January 26, 2017), Staff’s Book of Authorities, Tab 4 and MFDA Bulletin 0661-E dated October 2, 2015, Staff’s Book of Authorities, Tab 5.
  3. The Respondent in this case admitted that she had altered and used to process transactions 9 account forms in respect of 7 clients by altering information on the account forms without having the clients initial the alterations, contrary to MFDA Rule 2.1.1.

iii. Cutting and Pasting Client’s Signature Are Not Permissible

  1. Counsel submits that when an Approved Person cuts and pastes a client signature from a previously signed account form and applies the signature page to a new account form the Approved Person has engaged in conduct which is contrary to MFDA Rule 2.1.1. The MFDA also has previously warned Approved Persons against reusing or cutting and pasting client signatures on account forms. See MFDA Notice #MSN-0066 dated October 31, 2007 (Updated March 4, 2013), see MFDA Bulletin 0661-E dated October 2, 2015.
  2. Previous cases have held that reusing and cutting and pasting clients’ signatures contravenes MFDA Rule 2.1.1. See Foster (RE), [2020] Hearing Panel of the Atlantic Regional Council MFDA File No. 201975, Panel Decision dated April 22, 2020 at paras. 16-18, Staff’s Book of Authorities, Tab 7, and Harry (RE), [2021] Hearing Panel of the Central Regional Council MFDA File No. 202035, Panel Decision dated January 11, 2021 at paras. 45-47, Staff’s Book of Authorities, Tab 8.
  3. The Respondent admitted that she cut and pasted and reused client signatures on 2 completed forms to complete 2 new account forms and submitted to the Member for processing, contrary to MFDA Rule 2.1.1.

iv. Proposed Penalty

  1. A joint submission was made in terms of penalty as follows:
    1. The payment of a fine in the amount $17,000.00 in certified funds upon acceptance of the Settlement Agreement;
    2. The payment of costs in the amount $2,500.00 in certified funds upon acceptance of the Settlement Agreement.

IV. ANALYSIS AND CONCLUSION

  1. Wong was unrepresented. However she spoke on her own behalf. She agreed that she had made a mistake in respect of the matters in issue. She said that everything was done to assist her clients. She advised that she has been in the investment industry for 20 years. In this case none of her clients suffered a loss. They all made money. There was no evidence before us that there are any prior breaches of the MFDA Rules and we assume that she is a first-time offender.
  2. This Panel has reviewed the Settlement Agreement, the submissions of counsel of the MFDA and the comments made by Ms. Wong. We are satisfied that the proposed penalty is within a reasonable range of appropriateness having regard to the conduct of Ms. Wong in this case. Ms. Wong has fully cooperated with the MFDA.
  3. An Order will be issued declaring that Ms. Wong breached MFDA Rule 2.1.1 as set out in the Settlement Agreement and that a penalty shall be imposed in the terms provided in the Settlement Agreement.
  • The Honourable Robert P. Armstrong, Q.C.
    The Honourable Robert P. Armstrong, Q.C.
    Chair
  • Linda Anderson
    Linda Anderson
    Industry Representative

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