Settlement Agreement

I. INTRODUCTION

1. By Notice of Settlement Hearing, the Mutual Fund Dealers Association of Canada (“MFDA”) will announce that it proposes to hold a hearing to consider whether, pursuant to section 24.4 of By-law No. 1, a hearing panel of the Central Regional Council (“Hearing Panel”) of the MFDA should accept the settlement agreement (“Settlement Agreement”) entered into between Staff of the MFDA (“Staff”) and the Respondent, George Lincoln Piper (“Respondent”).

II. JOINT SETTLEMENT RECOMMENDATION

2. Staff conducted an investigation of the Respondent’s activities. The investigation disclosed that the Respondent had engaged in activity for which the Respondent could be penalized on the exercise of the discretion of the Hearing Panel pursuant to s. 24.1 of By-law No. 1.

3. Staff and the Respondent recommend settlement of the matters disclosed by the investigation in accordance with the terms and conditions set out below. The Respondent agrees to the settlement on the basis of the facts set out in Part IV herein and consents to the making of an Order in the form attached as Schedule “A”.

4. Staff and the Respondent agree that the terms of this Settlement Agreement, including the attached Schedule “A”, will be released to the public only if and when the Settlement Agreement is accepted by the Hearing Panel.

III. ACKNOWLEDGEMENT

5. Staff and the Respondent agree with the facts set out in Part IV herein for the purposes of this Settlement Agreement only and further agree that this agreement of facts is without prejudice to the Respondent or Staff in any other proceeding of any kind including, but without limiting the generality of the foregoing, any proceedings brought by the MFDA (subject to Part IX) or any civil or other proceedings which may be brought by any other person or agency, whether or not this Settlement Agreement is accepted by the Hearing Panel.

IV. AGREED FACTS

Registration History

6. The Respondent was registered in the securities industry commencing in 1997.

7. From July 2000 to May 2016, the Respondent was registered in Ontario and Quebec as a mutual fund salesperson (now known as a dealing representative) with Quadrus Investment Services Ltd. (“Quadrus”), a Member of the MFDA.

8. On May 20, 2016, the Respondent resigned from Quadrus.

9. Since June 2017, the Respondent has been registered in Ontario and Quebec as a dealing representative with Excel Private Wealth Inc., a Member of the MFDA.

10. At all material times, the Respondent conducted business in the Ottawa, Ontario area.

Personal Financial Dealings with Clients

11. Since April 2008, Quadrus’ policies and procedures have prohibited its Approved Persons from borrowing from clients.

Client EV

12. On November 27, 2006, the Respondent borrowed $25,000 from EV (the “EV Loan”). At that time, EV was not a mutual fund client of the Respondent.  At all material times, the Respondent and EV were friends.

13. The EV Loan was recorded in a promissory note, which stated that on November 27, 2009, the Respondent would pay EV the amount of $25,000 plus interest at the rate of 10% per annum.

14. When the EV Loan became due on November 27, 2009, the Respondent advised EV that he was unable to repay her at that time. EV did not raise any concerns about the Respondent’s inability to repay the EV Loan.

15. In December 2009, EV became a client of Quadrus and the Respondent became the mutual fund salesperson responsible for servicing her account. The Respondent did not disclose the EV Loan to Quadrus at that time.  As described below in paragraph 38, the Respondent did not disclose his personal financial dealings with EV to Quadrus until November 2015.

16. In about May 2010, (now) client EV requested that the Respondent repay the EV Loan.

17. On July 21, 2010, the Respondent paid $20,000 to client EV in order to partially repay the EV Loan. The payment included interest charges in respect of the EV Loan in the amount of $10,494.44.

18. In November 2011, client EV agreed to reduce the interest payable on the EV Loan from 10% per annum to 6% per annum.

19. Between February 2014 and April 2016, the Respondent made six additional payments to client EV in the total amount of $22,318.28 in order to fully repay the EV Loan, including all interest charges. The Respondent made three of the payments in order to satisfy the terms of a consumer proposal, which the Respondent and his spouse had filed in November 2011 (the “Consumer Proposal”)^[1].  The Respondent made the other three payments directly to client EV.

20. On April 29, 2016, the Respondent fully repaid the EV Loan, including all interest charges.

Client TM

21. In December 2006, the Respondent became the mutual fund salesperson at Quadrus responsible for servicing the account of client TM. At all material times, the Respondent and client TM were friends.

22. On or about March 26, 2008, the Respondent and his spouse borrowed $110,000 from client TM (the “TM Loan”). The Respondent did not disclose the TM Loan to Quadrus at that time.  As described below in paragraph 38, the Respondent did not disclose his personal financial dealings with client TM to Quadrus until November 2015.

23. The TM Loan was recorded in a promissory note, which stated that on March 26, 2012, the Respondent’s spouse would pay client TM the amount of $110,000, and that each month, the Respondent’s spouse would pay interest to client TM at the rate of 8% per annum on the remaining balance of the TM Loan.

24. Between March 2008 and June 2010, the Respondent and his spouse made monthly payments to client TM in the amount of $733.34, which represented the interest that was due each month on the TM Loan.

25. On July 5, 2010, the Respondent and his spouse borrowed an additional $40,000 from client TM, which increased the total amount of their loan from client TM to $150,000 (the “Amended TM Loan”).

26. The Amended TM Loan was recorded in a promissory note, which replaced the promissory note described above in paragraph 23. The new promissory note stated that on June 30, 2013, the Respondent’s spouse would pay client TM the amount of $150,000, and that each month, the Respondent’s spouse would pay interest to client TM at the rate of 8% per annum on the remaining balance of the Amended TM Loan^[2].

27. Between July 2010 and March 2012, the Respondent made monthly payments to client TM in the amount of $1,000, which represented the interest that was due each month on the Amended TM Loan.

28. In March 2012, client TM agreed to reduce the monthly interest payable on the Amended TM Loan from 8% per annum to 6% per annum.

29. Between April 2012 and April 2016, the Respondent continued to make monthly payments to client TM in the amount of $1,000. As a result of the reduction of the interest rate payable on the Amended TM Loan described above, these monthly payments represented both the interest that was due each month on the Amended TM Loan and a partial repayment of the principal amount of the Amended TM Loan.  During this period, the Respondent also made three additional payments to client TM in respect of the Amended TM Loan in the total amount of $35,061.64.  The Respondent made the additional payments in order to satisfy the terms of the Consumer Proposal described above in paragraph 19.

30. On May 20, 2016, the Respondent resigned from Quadrus and as a result he ceased to service client TM’s account.

31. Following the Respondent’s resignation from Quadrus, the Respondent continued to make payments to client TM in respect of the Amended TM Loan.

32. On June 26, 2017, the Respondent fully repaid the Amended TM Loan, including all interest charges.

Failure to Report Consumer Proposal

33. As described above in paragraph 19, the Respondent and his spouse filed a Consumer Proposal in November 2011. In January 2012, the Consumer Proposal was accepted by the creditors of the Respondent and his spouse (the “Creditors”).

34. The Consumer Proposal constituted an arrangement with creditors, which the Respondent was required to report to Quadrus within 2 business days of the Consumer Proposal being accepted by the Creditors, in accordance with the requirements of MFDA Policy No. 6, subsection 4.1(g).

35. The Respondent failed to report the Consumer Proposal to Quadrus within 2 business days of its acceptance by the Creditors. As described below, the Respondent did not report the Consumer Proposal to Quadrus until November 2015.

36. In June 2015, the Respondent and his spouse completed their obligations under the Consumer Proposal and the Consumer Proposal was discharged.

37. On November 5, 2015, the Respondent’s branch manager conducted a review of the Respondent’s branch office. During the review, the Respondent advised his branch manager that he had filed the Consumer Proposal in 2011 and that he had completed his obligations under the Consumer Proposal.  This was the first time that the Respondent reported the Consumer Proposal to Quadrus.

38. On November 10, 2015, the Respondent advised his branch manager that two of the Creditors named in the Consumer Proposal (clients EV and TM) were the Respondent’s clients at Quadrus. This was the first time that Quadrus became aware of any personal financial dealings between the Respondent and his clients.

Action Taken by the Member

39. In November 2015, Quadrus sent letters to all clients serviced by the Respondent to determine whether he had engaged in personal financial dealings with any clients besides EV and TM. None of the clients reported any concerns.

40. On November 13, 2015, Quadrus issued a disciplinary letter to the Respondent regarding his failure to report the Consumer Proposal in a timely manner.

Additional Factors

41. There have been no client complaints as a result of the misconduct described in this Settlement Agreement.

42. The Respondent has not previously been the subject of MFDA disciplinary proceedings.

43. The Respondent borrowed monies from clients EV and TM as a result of rising personal debts. The debts were caused, in part, by the fact that the Respondent had to support three of his sister’s children, after his sister was killed in a car accident in 1996.

44. By entering into this Settlement Agreement, the Respondent has saved the MFDA the time, resources, and expenses associated with conducting a full hearing of the allegations.

V. CONTRAVENTIONS

45. The Respondent admits that:
    1. between March 2008 and May 2016, the Respondent borrowed $150,000 from one client and was indebted to another client in the amount of $25,000, thereby engaging in personal financial dealings with the clients which gave rise to a conflict or potential conflict of interest that the Respondent failed to address by the exercise of responsible business judgment influenced only by the best interests of the clients, contrary to MFDA Rules 2.1.1 and 2.1.4; and
    2. between January 2012 and November 2015, the Respondent failed to report to the Member the fact that he had made an arrangement with his creditors, contrary to MFDA Policy No. 6, subsection 4.1(g).

VI. TERMS OF SETTLEMENT

46. The Respondent agrees to the following terms of settlement:
    1. the Respondent shall pay a fine in the amount of $20,000 pursuant to s. 24.1.1(b) of MFDA By-law No. 1;
    2. the Respondent shall pay costs in the amount of $5,000 pursuant to s. 24.2 of MFDA By-law No 1;
    3. the Respondent shall in the future comply with MFDA Rules 2.1.1 and 2.1.4 and MFDA Policy No. 6; and
    4. the Respondent will attend in person on the date set for the Settlement Hearing.

VII. STAFF COMMITMENT

47. If this Settlement Agreement is accepted by the Hearing Panel, Staff will not initiate any proceeding under the By-laws of the MFDA against the Respondent in respect of the contraventions described in Part V of this Settlement Agreement, subject to the provisions of Part IX below. Nothing in this Settlement Agreement precludes Staff from investigating or initiating proceedings in respect of any contraventions that are not set out in Part V of this Settlement Agreement or in respect of conduct that occurred outside the specified date ranges of the contraventions set out in Part V, whether known or unknown at the time of settlement. Furthermore, nothing in this Settlement Agreement shall relieve the Respondent from fulfilling any continuing regulatory obligations.

VIII. PROCEDURE FOR APPROVAL OF SETTLEMENT

48. Acceptance of this Settlement Agreement shall be sought at a hearing of the Central Regional Council of the MFDA on a date agreed to by counsel for Staff and the Respondent. MFDA Settlement Hearings are typically held in the absence of the public pursuant to section 20.5 of MFDA By-law No. 1 and Rule 15.2(2) of the MFDA Rules of Procedure. If the Hearing Panel accepts the Settlement Agreement, then the proceeding will become open to the public and a copy of the decision of the Hearing Panel and the Settlement Agreement will be made available at www.mfda.ca.

49. Staff and the Respondent may refer to any part, or all, of the Settlement Agreement at the Settlement Hearing. Staff and the Respondent also agree that if this Settlement Agreement is accepted by the Hearing Panel, it will constitute the entirety of the evidence to be submitted respecting the Respondent in this matter, and the Respondent agrees to waive his rights to a full hearing, a review hearing before the Board of Directors of the MFDA or any securities commission with jurisdiction in the matter under its enabling legislation, or a judicial review or appeal of the matter before any court of competent jurisdiction.

50. Staff and the Respondent agree that if this Settlement Agreement is accepted by the Hearing Panel, then the Respondent shall be deemed to have been penalized by the Hearing Panel pursuant to s. 24.1.1 of By-law No. 1 for the purpose of giving notice to the public thereof in accordance with s. 24.5 of By-law No. 1.

51. Staff and the Respondent agree that if this Settlement Agreement is accepted by the Hearing Panel, neither Staff nor the Respondent will make any public statement inconsistent with this Settlement Agreement. Nothing in this section is intended to restrict the Respondent from making full answer and defence to any civil or other proceedings against him.

IX. FAILURE TO HONOUR SETTLEMENT AGREEMENT

52. If this Settlement Agreement is accepted by the Hearing Panel and, at any subsequent time, the Respondent fails to honour any of the Terms of Settlement set out herein, Staff reserves the right to bring proceedings under section 24.3 of the By-laws of the MFDA against the Respondent based on, but not limited to, the facts set out in Part IV of the Settlement Agreement, as well as the breach of the Settlement Agreement. If such additional enforcement action is taken, the Respondent agrees that the proceeding(s) may be heard and determined by a hearing panel comprised of all or some of the same members of the hearing panel that accepted the Settlement Agreement, if available.

X. NON-ACCEPTANCE OF SETTLEMENT AGREEMENT

53. If, for any reason whatsoever, this Settlement Agreement is not accepted by the Hearing Panel or an Order in the form attached as Schedule “A” is not made by the Hearing Panel, each of Staff and the Respondent will be entitled to any available proceedings, remedies and challenges, including proceeding to a disciplinary hearing pursuant to sections 20 and 24 of By-law No. 1, unaffected by this Settlement Agreement or the settlement negotiations.

54. Whether or not this Settlement Agreement is accepted by the Hearing Panel, the Respondent agrees that he will not, in any proceeding, refer to or rely upon this Settlement Agreement or the negotiation or process of approval of this Settlement Agreement as the basis for any allegation against the MFDA of lack of jurisdiction, bias, appearance of bias, unfairness, or any other remedy or challenge that may otherwise be available.

XI. DISCLOSURE OF AGREEMENT

55. The terms of this Settlement Agreement will be treated as confidential by the parties hereto until accepted by the Hearing Panel, and forever if, for any reason whatsoever, this Settlement Agreement is not accepted by the Hearing Panel, except with the written consent of both the Respondent and Staff or as may be required by law.

56. Any obligations of confidentiality shall terminate upon acceptance of this Settlement Agreement by the Hearing Panel.

XII. EXECUTION OF SETTLEMENT AGREEMENT

57. This Settlement Agreement may be signed in one or more counterparts which together shall constitute a binding agreement.

58. A facsimile copy of any signature shall be effective as an original signature.

1. [1] A consumer proposal is a formal procedure governed by the Bankruptcy and Insolvency Act whereby debtors, working with a Licensed Insolvency Trustee, put together an offer to pay their creditors a percentage of what is owed to them over a specific period of time, extend the time to pay off the debt or a combination of both.  This option is available to individuals whose total debt does not exceed $250,000, not including debts secured by their principal residence.
2. [2] Although the promissory notes described in paragraphs 23 and 26 did not refer to the Respondent, the Respondent was also a borrower under both the TM Loan and the Amended TM Loan.