Hearing Panel of the Central Regional Council:
- Martin L. Friedland, C.C, K.C., Chair
- Brigitte J. Geisler, Industry Representative
- Guenther W. K. Kleberg, Industry Representative
Samantha Wu, Enforcement Counsel for the Mutual Fund Dealers Association of Canada
Timothy James Laskey, Respondent
- This is a Settlement Hearing under Section 24.4 of By-law No. 1 of the Mutual Fund Dealers Association of Canada (the “MFDA”). The hearing was held on October 13, 2022. The full settlement agreement dated September 6, 2022 (“Settlement Agreement”), entered into between Staff of the MFDA (“Staff”) and Timothy James Laskey (the “Respondent”) is available on the MFDA website. The Respondent appeared at the Hearing without counsel.
- The Panel accepted the proposed Settlement Agreement at the conclusion of the hearing, with reasons to follow. These are our reasons for our decision to accept the Settlement Agreement.
- From about November 23, 1998, the Respondent was registered in the securities industry in Ontario as a dealing representative with Quadrus Investment Services Ltd. (the “Member”), a Member of the MFDA.
- From about August 19, 2009, to December 3, 2018, the Member designated the Respondent as a branch manager.
- The Respondent has also been registered with the Member since approximately August 17, 2018, in British Columbia, and since approximately January 4, 2022, in Alberta.
- At all material times, the Respondent conducted business in the London, Ontario area.
- A Notice of Settlement Hearing was issued by the MFDA on September 6, 2022, alleging that:
- between February 14, 2017 and December 22, 2020, the Respondent photocopied and re-used 5 account forms that had previously been signed by clients to process new transactions in respect of 4 clients, contrary to MFDA Rule 2.1.1;
- between March 12, 2015 and January 20, 2021, the Respondent altered and used to process transactions, 15 account forms in respect of 12 clients by altering information on the forms without having the clients initial the alterations, contrary to MFDA Rule 2.1.1; and
- between April 19, 2016 and February 11, 2020, the Respondent obtained, possessed, and in some instances used to process transactions, 36 pre-signed account forms in respect of 10 clients, contrary to MFDA Rule 2.1.1.
- MFDA Rule 2.1.1 subsections (a) to (c), provide:
- “Each Member and each Approved Person of a Member shall: (a) deal fairly, honestly and in good faith with its clients; (b) observe high standards of ethics and conduct in the transaction of business; (c) not engage in any business conduct or practice which is unbecoming or detrimental to the public interest.”
The Settlement Agreement
- In Paragraph 4 of the Settlement Agreement, the Respondent admits the allegations in paragraph 7 above.
- In Paragraph 5 of the Settlement Agreement, Staff and the Respondent agree and consent to the following terms of settlement:
- the Respondent shall pay a fine in the amount $28,000 in certified funds upon acceptance of the Settlement Agreement, pursuant to s. 24.1.1(b) of MFDA By-law No. 1;
- the Respondent shall pay costs in the amount of $2,500 in certified funds upon acceptance of the Settlement Agreement, pursuant to s. 24.2 of MFDA By-law No. 1;
- the Respondent shall be prohibited from acting as a branch manager or in any supervisory capacity for a Member of the MFDA for a period of 18 months, commencing upon the date the Settlement Agreement is accepted by the Hearing Panel, pursuant to s. 24.1.1(f) of MFDA By-law No. 1;
- the Respondent shall successfully complete the branch manager’s course offered by either the Canadian Securities Institute or the Investment Funds Institute of Canada prior to acting as a branch manager in the future, pursuant to s. 24.1.1(f) of MFDA By-law No. 1;
- the Respondent shall in the future comply with MFDA Rule 2.1.1; and
- the Respondent will attend in person on the date set for the Settlement Hearing.
- The agreed facts are set out in paragraphs 7 to 26 of the Settlement Agreement and will not be repeated here in full.
- Reusing Client Signatures. Between February 14, 2017, and December 22, 2020, the Respondent photocopied and re-used 5 account forms that had previously been signed by clients to process new transactions in respect of 4 clients. In some instances, the Respondent photocopied account forms that had previously been signed by the clients and, using liquid correction fluid, altered information on the account forms and used the forms to process new transactions.
- Altered Account Forms. Between March 12, 2015, and January 20, 2021, the Respondent altered and used to process transactions, 15 account forms in respect of 12 clients by altering information on the forms without having the clients initial the alterations. The Respondent altered information on various sections of the account forms.
- Pre-Signed Account Forms. Between April 19, 2016, and February 11, 2020, the Respondent obtained, possessed, and in some instances used to process transactions, 36 pre-signed account forms in respect of 10 clients.
- On or about February 26, 2021, the Member conducted a review of the client files maintained by the Respondent and discovered some of the account forms described above. The Member subsequently commenced an investigation into the Respondent’s conduct and discovered the remaining account forms.
- As a result of the Respondent’s conduct, on or about March 19, 2021, the Member issued a disciplinary letter in respect of photocopying and altering signed account forms. On the same date, the Member also placed the Respondent under close supervision for a minimum period of six months and imposed a $400 monthly fee on the Respondent, totalling $2,400. The Member completed its close supervision on September 30. 2021, and did not identify any further concerns during the close supervision period.
- MFDA Hearing Panels have consistently held that photocopying and reusing a client signature (see, e.g., Re Singh  MFDA Hearing No. 2017110 and Re Armstrong  MFDA File No. 202161), altering information on an account form without having the client initial the form (see, e.g., Re Hillsdon  MFDA File No. 202124 and Re Geng (Marshal) Liu  MFDA File No. 202218), and using pre-signed forms (see, e.g., Re Price  MFDA File No. 200814 and Re Rolland  MFDA File No. 202174) is a contravention of the standard of conduct prescribed under MFDA Rule 2.1.1.
- Using these forms are proscribed because their use adversely affects the integrity and reliability of account documents, leads to the destruction of the audit trail, has a negative impact on Member complaint handling, and has the potential for misuse in the form of unauthorized trading, fraud, and misappropriation. See Re Wong  MFDA File No. 201943; Re Brenchley  MFDA File No. 2018102; and Re Price  MFDA File No. 200814.
- For a number of years, the MFDA has been warning Approved Persons against the use of pre-signed, altered, and re-used account forms. See MFDA Staff Notice, MSN-0066, dated October 31, 2007 (updated January 26, 2017); and MFDA Staff Notice MSN-035, dated December 10, 2004 (updated March 4, 2013); MFDA Bulletin #0661-E (October 2, 2015).
Acceptance of the Settlement Agreement
- As stated above, the Panel accepted the terms of the Settlement Agreement. A Panel can either accept or reject a Settlement Agreement. It cannot modify it.
- The conduct in the present case is serious. This is obviously not an isolated case. The conduct went on for many years with many clients. Most of the contraventions occurred after the 2015 MFDA Bulletin #0661 relating to pre-signed and altered forms.
- There are a number of mitigating factors. There is no evidence of any client loss, client complaints, or lack of client authorization resulting from the Respondent’s conduct.
- There is also no evidence that the Respondent received any 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.
- The Respondent has not previously been the subject of MFDA disciplinary Procedures.
- By entering into the Settlement Agreement, the Respondent has saved the MFDA the time, resources, and expenses associated with conducting a full hearing on the allegations.
- The penalty of $28,000 is not out-of-line with the Sanctions Guidelines as well as the cases cited to us by counsel: see Re Collier  MFDA File No. 2018126; Re Hillsdon  MFDA File No. 2024; Re Ajin  MFDA File No. 202178; Re Armstrong  MFDA File No. 202161; and Re Lebel  MFDA File No. 202055.
- Apart from the monetary penalty, the Respondent has reimbursed the Member $2,400 in connection with the costs of strict supervision and communication with the Respondent’s clients.
- In addition to a fine, the Respondent is prohibited from acting as a branch manager or in any supervisory capacity for a Member of the MFDA for a period of 18 months and has to successfully complete a branch manager’s course prior to acting as a branch manager in the future.
- The suspension and monetary penalty together provide a significant measure of specific and general deterrence.
- Settlements can be important and useful in achieving outcomes which further the goals of securities regulation. The British Columbia Court of Appeal stated with respect to a settlement by the B.C. Securities Commission (C. Securities Commission v. Seifert  B.C.J. No. 2186, para. 49 (B.C.C.A.)):
- “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.”
- Hearing Panels should respect settlements worked out by the parties. A Panel does not know what led to a settlement, what was given up by one party or the other in the course of the negotiations, and what interest each party has in agreeing to resolve the matter. The Panel cannot go beyond the Settlement Agreement. There are almost always facts that play a role in the settlement which are not set out in the Settlement Agreement or brought to the attention of the Panel.
- As a Panel stated (Re Keshet, File No. 201419 at paragraph 7), to take one of many such cases: “It is well established that hearing panels should not interfere lightly in negotiated settlements and should not reject a settlement agreement unless it views the proposed penalty clearly falling outside a reasonable range of appropriateness.” There are many similar statements by MFDA Panels, stemming from the leading decision of Re Milewski  I.D.A.C.D. No. 17, which stated:
- “A District Council considering a settlement agreement will tend not to alter a penalty that it considers to be within a reasonable range, taking into account the settlement process and the fact that the parties have agreed. It will not reject a settlement unless it views the penalty as clearly falling outside a reasonable range of appropriateness.”
- The penalty and the costs agreed to in this case fall within “a reasonable range of appropriateness.”
- For the above reasons the Panel accepted the Settlement Agreement.
Martin L. Friedland, C.C, K.C.Martin L. Friedland, C.C, K.C.Chair
Brigitte J. GeislerBrigitte J. GeislerIndustry Representative
Guenther W. K. KlebergGuenther W. K. KlebergIndustry Representative