Reasons For Decision

I. INTRODUCTION

1. On September 16, 2022, the Hearing Panel was asked in a closed session to consider a settlement agreement (Settlement Agreement) made between the staff (Staff) of the Mutual Fund Dealer’s Association of Canada (MFDA) and Joyce Elaine Ross, the Respondent. It is attached as Schedule “1”.
2. The Settlement Agreement concerned the Respondent:
   1. using photocopied signature pages to complete account documents; and
   2. altering account documents without written client confirmation.

   The Hearing Panel accepted the Settlement Agreement for the following reasons.

II. AGREED FACTS AND LAW

Facts

3. The parties agree that:
   1. In June 2001, the Respondent became registered as a dealing representative with PFSL Investments Canada Ltd., a Member of the MFDA (the Member).
   2. On September 28, 2009, the Member designated the Respondent as a branch manager.
   3. At all material times, the Respondent conducted business in or around Burnaby, British Columbia.
   4. Between September 28, 2015 and May 25, 2020, the Respondent photocopied the signature pages of account forms previously executed by 5 clients. The Respondent used the copies to complete 16 additional account forms.
   5. Between July 30, 2015 and July 17, 2020, the Respondent altered 12 account forms in respect of 6 clients without having the clients initial the changes. The Respondent relied on these altered forms to process transactions.
   6. The account forms discussed above included documents that contained Know Your Client (KYC) information.
   7. At all material times, the Member’s policies and procedures prohibited Approved Persons from photocopying client signatures and, unless confirmed by the client’s initials, from altering information disclosed in a previously signed document.
   8. In September, 2020, the Member conducted a normal course internal review of its records. It discovered the photocopied signature pages and the altered account forms. The Member contacted all the affected clients. It determined that their KYC information was accurate and that no client had any concerns regarding the transactions conducted in their accounts.
   9. On March 5, 2021, the Respondent voluntarily resigned her branch manager position.
   10. On April 7, 2021, the Member issued a disciplinary letter to the Respondent regarding the foregoing conduct.
   11. In April and May, 2021, the Respondent voluntarily completed the Branch Managers’ Examination Course and the Ethics and Professional Conduct Course offered by the Investment Funds Institute of Canada.
   12. There is no evidence of any client losses or complaints, or that the Respondent’s actions lacked client authorization, or that she received any financial benefit from her actions apart from ordinary compensation.
   13. The Respondent has not been previously disciplined by the MFDA.

Law

4. MFDA Rule 2.1.1 obligates Approved Persons to observe high standards of ethics and conduct in the transaction of business, and to refrain from conduct that is unbecoming or detrimental to the public interest.
5. Longstanding MFDA guidance has made clear that:
   1. Using photocopied signature pages and altering information in a previously signed document without the client initialling approval are both forms of signature falsification.
   2. Resorting to these practices undercuts the integrity and reliability of client account documentation, by:
      1. hampering a Member’s ability to audit account activity and an Approved Person’s business conduct;
      2. misleading supervisory personnel;
      3. interfering with a Member’s ability to address potential client complaints; and
      4. enabling the masking of unauthorized trading, which in turn can potentially be exploited to misappropriate funds and perpetrate fraud.
   1. MFDA Notice #MSN-0066 – Signature Falsification, dated October 31, 2007 (updated March 4, 2013 and January 26, 2017).
   2. MFDA Bulletin #0661-E, dated October 2, 2015.
6. It is therefore never appropriate for an Approved Person to use a photocopied signature, or to change an account form without obtaining the client’s initialled approval. Irrespective of circumstance or purpose, taking either of these actions necessarily constitutes a contravention of Rule 2.1.1.
7. In the Settlement Agreement, the Respondent acknowledges that she breached MFDA Rule 2.1.1. This is unambiguously confirmed by her admissions of fact.

III. APPLICABLE STANDARD

8. Under MFDA By-Law 24.4, a settlement hearing panel’s jurisdiction is limited to either accepting or rejecting a settlement agreement. It has no authority to impose its own preferred outcome on the parties.
9. MFDA settlement hearing panels have repeatedly drawn the obvious corollary: a panel ought not to assess a settlement against the outcome the panel might itself have ordered exercising its own discretion. Instead, a panel’s task is to take the agreed upon facts at their face value and weigh the proposed sanctions against the objectives of protecting the investing public and the integrity of the mutual fund industry. An outcome that clearly falls “outside a reasonable range of appropriateness” may properly be rejected. Otherwise, it is incumbent on the hearing panel to accept it.
   1. Sterling Mutuals Inc. (Re), MFDA File No. 20080, September 3, 2008, at paragraph 37, citing the reasoning in Milewski (Re), [1999] I.D.A.C.D. No. 17 at p. 11, Ontario District Council Decision dated July 28, 1999.
10. The rationale for this deferential approach is both clear and well-established. The MFDA’s core regulatory purpose is protecting the investing public. It follows that settlements are to be encouraged and supported, because they facilitate timely regulatory responses to misconduct while simultaneously enabling the efficient allocation of limited enforcement resources. Moreover, as compromises negotiated by litigants, settlements by their very nature are pragmatic and nuanced resolutions of the facts and issues determined by the persons best situated to assess them.
11. This essential character of settlements, and their value in the securities context, was affirmed in C. Securities Commission v. Seifert. In that case, the British Columbia Securities Commission’s settlement process was challenged for want of jurisdiction. In dismissing that proposition, the British Columbia Court of Appeal cited the trial judge’s observation that:
    1. Settlements assist the Commission to ensure that its overriding objective, the protection of the public, is met. Settlements proscribe activities that are harmful to the public. In so doing, they are effective in accomplishing the purposes of the statute. They provide means of reaching a flexible remedy that is tailored to address the interests of both the Commission and the person under investigation. Enforcement is rarely a concern because the settlement is voluntary. A person who is the subject of an investigation retains the option of refusing to settle and proceeding to a hearing. Settlements are also efficient. Both parties can forego the time and expense of a hearing.
       1. B.C. Securities Commission v. Seifert 2007 BCCA 484 at paragraph 31.

IV. PROPOSED SANCTIONS

12. The Settlement Agreement contemplates that the Respondent:
    1. pay a financial penalty of $20,000;
    2. pay costs of $2,500; and
    3. be prohibited from acting as a branch manager or in any supervisory capacity for two months.
13. In support of this common position, Enforcement Counsel cited a number of recent settlement decisions involving closely similar misconduct:
    1. Heide (Re),  MFDA File No. 2018122, April 15, 2019.
    2. Liu (Re), MFDA File No. 202036, September 29, 2020.
    3. Koo (Re), MFDA File No. 202058, March 12, 2021.
    4. Knyf (Re), MFDA File No. 202125, October 18, 2021.
    5. Lindhout (Re),  MFDA File No. 202212, July 21, 2022
14. As defence counsel observed on the Respondent’s behalf, in each of these precedents the sanctions were calibrated to the scale of the misconduct.
15. In Lindhout, supra, where the parties agreed to a $30,000 fine and $5,000 in costs, the misconduct involved a total of 42 combined instances of using photocopied signature pages, altering account forms, and possessing pre-signed account forms. In the other precedents, where the misconduct consisted of between 14 and 28 instances of the same sorts of signature falsifications, the settlements provided for fines of between $12,000 and $15,000 and costs of $2,500.
16. In common with the present case, none of the settlement precedents involved respondents with prior disciplinary histories and in no case was there any evidence of unauthorized trading, client losses, or the respondent receiving undue financial benefit.

V. ASSESSING APPROPRIATENESS

17. The appropriateness of a settlement outcome depends on whether it can reasonably be said to satisfy the overarching principles that inform sanctioning generally.
18. Penalties in securities regulatory proceedings are required to be forward looking and preventative in orientation, not retrospective or punitive. Regardless of whether the context is a contested disciplinary hearing or a settlement, the appropriateness of proposed sanctions turns on whether their deterrent effect is both necessary to protect the investing public from future harm and proportional to the misconduct. As the Supreme Court of Canada stated in Cartaway Resources Corp., the importance of deterrence when “imposing a sanction… will vary according to the breach… and the circumstances of the person charged”.
    1. Pezim v. British Columbia (Superintendent of Brokers), [1994] 2 S.C.R. 557, at paras. 59 and 68.
    2. Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 at paras. 14, 85.
    3. Cartaway Resources Corp. (Re), [2004] 1 S.C.R. 672 at para. 61.
19. Following this approach requires a case specific assessment of the objective risk the misconduct presents to the investing public. In this regard, the key factors to be considered are summarized in the MFDA’s Sanction Guidelines, which also make clear that the relative importance to be placed on any single factor will always depend on the character and scope of the misconduct at issue. Where, as in this case, there is no evidence of client harm or improper gain, the most relevant factors are:
    1. The gravity of the misconduct.
    2. Whether the Respondent recognizes the significance of her misconduct.
    3. The continuing risk, if any, the Respondent may present to the investing public.
    4. Whether the proposed sanctions meet the need for both specific and general deterrence.

VI. DECISION

20. The misconduct commenced in July 2015. By this time, the Respondent had been an Approved Person and a branch manager for 14 and 6 years, respectively.
21. Both before and during the period of misconduct, the MFDA repeatedly issued guidance expressly warning Approved Persons that signature falsification in any form is strictly prohibited:
    1. In 2007, the MFDA issued Notice #MSN-0066. This was updated in 2013.
    2. In October 2015, the MFDA published Bulletin #0661-E for Members to distribute to their Approved Persons, reiterating and emphasizing the importance of the prohibition against signature falsification.
    3. In 2017, the MFDA again updated Notice #MSN-0066.
22. Despite her significant experience as an Approved Person, the Respondent disregarded this explicit guidance. This is an aggravating factor. It is amplified by the fact that the Respondent engaged in the misconduct while a branch manager, that is, at the very time one of her core responsibilities was to advise Approved Persons reporting to her on their compliance obligations.
23. Having said that, it is important to recognize that nothing in the available facts suggests the Respondent’s misconduct was motivated by dishonesty or to advance her pecuniary interests over those of her clients. On the contrary, that none of her clients were disadvantaged financially suggests the misconduct was undertaken for the sake of convenience. While not in any sense mitigating, this is relevant to assessing the sufficiency of the proposed sanctions for deterrence purposes. It is also relevant that upon receiving the Member’s disciplinary letter, the Respondent acted proactively by promptly and voluntarily retaking the Branch Managers’ Examination Course and the Ethics and Professional Conduct Course.
24. As with all settlements, that the Respondent elected to enter into the Settlement Agreement is, by itself, a factor that deserves to be given weight. Her unqualified admission of fault and agreement to the proposed sanctions not only saves the MFDA the resources that would otherwise be required to conduct a contested hearing, but objectively confirms that she recognizes the gravity of her lapse.
25. The sanctions contemplated by the Settlement Agreement represent a reasonable and proportionate response to the need for specific and general deterrence in this case. Since the proposed outcome cannot be said that to fall outside the reasonable range of appropriateness, the Hearing Panel accepted the Settlement Agreement.