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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: William McTavish

Heard: September 8, 2022 by electronic hearing in Toronto, Ontario
Reasons For Decision: October 12, 2022

Reasons For Decision

Hearing Panel of the Central Regional Council:

  • Paul M. Moore, Q.C., Chair
  • Colleen Waring, Industry Representative
  • Linda J. Anderson, Industry Representative

Appearances:

Molly McCarthy, Enforcement Counsel for the Mutual Fund Dealers Association of Canada

William McTavish, Respondent

I. SETTLEMENT AGREEMENT

  1. We accepted the settlement agreement dated July 22, 2022 (“Settlement Agreement”) between the staff of the MFDA (“Staff”) and William McTavish (“Respondent”) at an electronic settlement hearing held in accordance with MFDA rules for an electronic hearing.
  2. A copy of the Settlement Agreement is attached to these Reasons as Schedule “1”. The agreed facts are set out in Part III of the Settlement Agreement.

II. CONTRAVENTIONS

  1. The Respondent admits that
    1. between September 26, 2017 and March 2, 2021, the Respondent obtained, possessed, and used to process transactions, 8 pre-signed account forms in respect of 8 clients, contrary to MFDA Rule 2.1.1; and
    2. between August 17, 2017 and November 5, 2020, the Respondent altered and used to process transactions, 21 account forms in respect of 16 clients, by altering information on the account forms without having the client initial the alterations, contrary to MFDA Rule 2.1.1.

III. PROPOSED SANCTIONS

  1. The Settlement Agreement provides that:
    1. the Respondent shall pay a fine of $22,000;
    2. the Respondent shall pay costs of $2,500; and
    3. the Respondent shall in the future comply with MFDA Rule 2.1.1.

IV. CONSIDERATIONS

  1. We determined that we had to be satisfied regarding three considerations before we could accept the Settlement Agreement. First, the agreed penalties had to be within an acceptable range taking into account similar cases. Secondly, the agreed penalties had to be fair and reasonable (i.e. proportional to the seriousness of the contraventions taking into consideration relevant circumstances) and should appear to be so to members of the public and industry. Thirdly, the agreed penalties should serve as a deterrent to the Respondent and to the industry. To be satisfied on these three considerations required an understanding of the particular facts of the case, the circumstances of the Respondent, and the impact on the Respondent of the agreed penalties.

V. MISCONDUCT

  1. The Respondent’s conduct was in violation of the standard of conduct required by MFDA Rule 2.1.1. This rule requires that Members and Approved Persons deal fairly, honestly, and in good faith with clients; observe high standards of ethics and conduct in the transaction of business; and refrain from engaging in any business conduct or practice which is unbecoming or detrimental to the public interest. A multitude of MFDA disciplinary cases have found conduct similar to that of the Respondent in our case to be a contravention of MFDA Rule 2.1.1.

VI. OTHER CONSIDERATIONS

  1. There was no evidence that the Respondent received any financial benefit from the conduct set out above beyond the commissions or fees he would ordinarily be entitled to receive had the transactions been carried out in the proper manner.
  2. There was no evidence of client complaints, client loss or lack of client authorization for the underlying transactions.
  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 contested hearing on the allegations.

VII. RESPONDENT’S CONCERNS

  1. When asked by the panel if the Respondent had anything he wished to say, he replied to the following effect:
    1. He felt that the agreed penalties were unreasonable. By his calculation, they amounted to about $1000 for each incident that constituted a violation.
    2. People today do paperlessly over the internet what he did with paper transactions, although not in strict accordance with the rules where paper is required.
    3. None of his clients were harmed or deceived.
    4. His clients over the years have always thought highly of him and have never complained about him.
    5. He has been out of the business for some time now and had no intention of going back.
    6. He implied that such a large fine was not necessary as a deterrent for him.
    7. However, he agreed to everything in the Settlement Agreement because he just wanted to get a troubling and distressing regulatory matter behind him.
    8. He wanted the panel to accept the Settlement Agreement.
  2. We responded to the Respondent’s comments as follows:
    1. We understood the Respondent’s view that in his case the penalties seemed harsh.
    2. People often feel like him when they are caught for a speeding incident in a low-speed zone where going slow was not really necessary because of circumstances. Sometimes, when this happens, the driver is let off with just a warning and is not prosecuted.
    3. But when charges of misconduct are pursued by Staff and a settlement is reached, the settlement agreement is brought before a panel of the MFDA for acceptance, not approval.
    4. The panel can, under our rules, only accept the settlement or reject it.
    5. The panel cannot change the settlement agreement. In particular, the panel cannot change the agreed penalties to what the panel might have imposed as, in its opinion, more apt in the circumstances, had the matter come before the panel, not as a settlement, but as a contested matter.
    6. It is not up to the panel to even consider whether the agreed penalties are apt.
    7. In a settlement hearing, a panel cannot know, and need not know, all the reasons and motivating factors of each party for agreeing to the settlement.
    8. The panel needs, however, to be made aware of all relevant facts to reach the conclusions set out in Part VIII below, failing which the panel would not accept the settlement agreement.
    9. In deciding whether the agreed penalties will provide an appropriate deterrence in the case before us, we looked at the impact on others in the industry (and not just on the Respondent) who might otherwise be inclined to similar misconduct in the future.

VIII. CONCLUSIONS

  1. The agreed penalties are within the recommendations of the MFDA Sanction Guidelines and the reasonable range of appropriateness with regard to MFDA decisions submitted to us by Staff, made by MFDA Hearing Panels in similar circumstances. They are fair and reasonable and will serve as a specific and general deterrent.
  2. The costs award is reasonable.
  • Paul M. Moore, Q.C.
    Paul M. Moore, Q.C.
    Chair
  • Colleen Waring
    Colleen Waring
    Industry Representative
  • Linda J. Anderson
    Linda J. Anderson
    Industry Representative

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