Hearing Panel of the Pacific Regional Council:
- Susan E. Ross, Chair
- Darlene Barker, Industry Representative
- Darryl Gossen, Industry Representative
Zaid Sayeed, Enforcement Counsel for the Mutual Fund Dealers Association of Canada
Jerry Bo Song, Respondent
- At the conclusion of an electronic hearing, the Hearing Panel accepted a settlement agreement dated May 30, 2022 (the “Settlement Agreement”), between staff of the Mutual Fund Dealers Association of Canada (the “MFDA”) and registered dealing representative Jerry Bo Song (the “Respondent”). Under the Settlement Agreement, the Respondent agreed to:
- be suspended from acting as a branch manager or in any other supervisory capacity for a four-month period;
- successfully complete a branch manager’s course acceptable to staff of the MFDA before acting as a branch manager or in any other supervisory capacity in the future;
- pay a $9,000 fine; and
- pay costs of $5,000.
- The terms of settlement were reached in respect of the Respondent’s admission that between October 2017 and November 2019, acting in his capacity as a branch manager, he reviewed and approved the use of 24 altered and pre-signed forms, contrary to MFDA Rules 2.1.1 and 2.5.5(f).
- The Settlement Agreement is attached as Schedule “1” to these Reasons for Decision.
- The Respondent has been registered in the securities industry since 2009. In September 2017, he became registered as a dealing representative and was designated as a branch manager with Queen Financial Group Inc. (the “Member”) in Richmond, British Columbia.
- In 2019 and 2020, an MFDA compliance examination and investigation identified pre-signed and altered accounts forms prepared by two Approved Persons whom the Respondent was responsible for supervising as branch manager.
- The Respondent had queried the Approved Persons about missing information on 11 account forms and then signed and approved the incomplete forms. He did not verify information that the Approved Persons later added to the forms without having the client initial the additions. The Respondent had also approved 13 account forms on which information had been altered without having the client initial the alterations.
- There is no evidence that the Respondent received any financial benefits beyond fees and commissions he would ordinarily have been entitled to if the resulting transactions had been carried out in the proper manner. There were also no client losses, complaints, or lack of authorization for the transactions and the Respondent has no prior disciplinary record.
- The Respondent cooperated fully with the MFDA investigation. He admitted the contraventions and, in the settlement hearing, expressed responsibility and remorse for his misconduct.
- The Hearing Panel’s authority is to either accept or reject the Settlement Agreement. In doing so, we consider whether the proposed penalty falls within a reasonable range of appropriateness having regard to the Respondent’s misconduct and the MFDA’s primary regulatory objective of protecting the investing public.
- Key considerations for determining the reasonableness of a settlement are:
- the seriousness of the Respondent’s conduct;
- the Respondent’s past conduct, including prior sanctions;
- the Respondent’s experience and level of activity in the capital markets;
- whether the Respondent recognizes the seriousness of the improper activity;
- the harm suffered by investors as a result of the Respondent’s activities;
- the benefits received by the Respondent as a result of the improper activity;
- the risk to investors and the capital markets in the jurisdiction, were the Respondent to continue to operate in capital markets in the jurisdiction;
- the damage caused to the integrity of the capital markets in the jurisdiction by the Respondent’s improper activities;
- the need to deter not only those involved in the case being considered, but also any others who participate in the capital markets, from engaging in similar improper activity;
- the need to alert others to the consequences of inappropriate activities for those who are permitted to participate in the capital markets; and
- previous decisions made in similar circumstances.
- Headley (Re), 2006 LNCMFDA 3, at pages 16-17
- It is well-established that obtaining or using pre-signed account forms (forms that were incomplete when they were signed) or altering information on account forms without having the client initial the alterations are contraventions of the standards of conduct in MFDA Rule 2.1.1. These practices adversely affect the integrity and reliability of account documents, lead to destruction of the audit trail, negatively impact member complaint handling, and have the potential to enable unauthorized trading, fraud, and misappropriation.
- A branch manager who reviews and approves account forms that have been pre-signed, or altered without the client initialing the alterations, contravenes both Rule 2.1.1 and the branch manager’s responsibility under Rule 2.5.5(f) to supervise activities at their branch. We agree with Enforcement Counsel that this is serious misconduct.
- Contraventions involving pre-signed or altered account forms are a long-standing and persistent form of misconduct in the industry. The MFDA has issued warnings against the use of pre-signed and altered forms since 2007. Hearing Panels have expressed concern about whether the sanctions being imposed have been sufficient to combat this problem. They have also observed that the danger of low fines being tantamount to a licensing fee for registrants to engage in this misconduct as a matter of convenience is an acknowledged consideration in the MFDA Sanction Guidelines.
- MFDA Notice #MSN-0066 dated October 31, 2007 (updated March 4, 2013, and January 26, 2017) and MFDA Bulletin #0661-E dated October 2, 2015
- Gilchrist (Re),  Hearing Panel of the Pacific Regional Council, MFDA File No. 2016100, Hearing Panel Decision dated May 29, 2017, at para. 16
- Myers (Re),  Hearing Panel of the Central Regional Council, MFDA File No. 202145, Hearing Panel Decision dated January 10, 2022, at para. 29
- MFDA Sanction Guidelines dated November 5, 2018, at page 6
- Enforcement Counsel referred us to cases demonstrating a range of sanctions for contraventions by branch managers involving pre-signed or altered account forms. Two recent settlement decisions indicate that the proposed $9,000 fine and four-month branch manager suspension are in the mid-range for this type of misconduct. In Bast, where the misconduct was more egregious, there was a $12,500 fine accompanied by a three-month branch manager suspension. In Arnold, where the misconduct was comparable to this case, there was a $5,000 fine accompanied by a six-month branch manager suspension. Both Bast and Arnold also required the completion of a branch manager’s course.
- Bast (Re),  Hearing Panel of the Central Regional Council, MFDA File No. 201956, Hearing Panel Decision dated October 22, 2019
- Arnold (Re),  Hearing Panel of the Central Regional Council, MFDA File No. 202134, Hearing Panel Decision dated November 10, 2021
- Other relevant factors in weighing the reasonableness of the penalty are that the Respondent has accepted responsibility for his misconduct, has no prior disciplinary record, and has saved the MFDA the time, resources and expenses associated with a full disciplinary hearing. There is no evidence of client losses, complaints or lack of authorization, or extra fees or commissions to the Respondent from his misconduct. We accepted the Respondent’s expression of remorse and assurance that he has learned a lesson.
- The Hearing Panel concluded that the proposed sanctions are an appropriate reflection of the seriousness of this case and area of misconduct. Having regard to the relevant considerations including general and specific deterrence and protection of the integrity of the capital markets, we concluded that the settlement was within a reasonable range.
- The Settlement Agreement was therefore accepted.
Susan E. RossSusan E. RossChair
Darlene BarkerDarlene BarkerIndustry Representative
Darryl GossenDarryl GossenIndustry Representative