Settlement Agreement

I. INTRODUCTION

1. Staff of the Mutual Fund Dealers Association of Canada (“Staff”) and the Respondent, Jacqueline Gail Gill (the “Respondent”), consent and agree to settlement of this matter by way of this agreement (the “Settlement Agreement”).

2. Staff conducted an investigation of the Respondent’s activities which disclosed 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.

II. JOINT SETTLEMENT RECOMMENDATION

3. Staff and the Respondent jointly recommend that the Hearing Panel accept the Settlement Agreement.

4. The Respondent admits to the following violations of the By-laws, Rules or Policies of the MFDA:
   1. between August 2011 and March 2012, the Respondent opened an account for a client, recorded the client’s Know-Your-Client information, and on three occasions processed a total of two transfers and three trades in the client’s account without having met or communicated with the client, thereby failing to use due diligence to learn the essential facts relative to the client and to each order or account accepted, contrary to MFDA Rules 2.2.1 and 2.1.1; and
   2. on or about November 23, 2011, the Respondent completed a trade form which incorrectly indicated that she spoke with a client and obtained the client’s authorization to process two trades in the client’s account, contrary to MFDA Rule 2.1.1.

5. Staff and the Respondent agree and consent to the following terms of settlement:
   1. the Respondent shall pay a fine in the amount of $15,000 pursuant to s. 24.1.1(b) of MFDA By-law No. 1;
   2. the Respondent shall pay costs in the amount of $2,500 pursuant to s. 24.2 of MFDA By-law No. 1;
   3. the Respondent shall in the future comply with MFDA Rules 2.2.1 and 2.1.1; and
   4. the Respondent will attend in person, on the date set for the Settlement Hearing.

6. Staff and the Respondent agree to the settlement on the basis of the facts set out in Part III herein and consent to the making of an Order in the form attached as Schedule “A”.

III. AGREED FACTS

Registration History

7. From October 1996 to February 2013, the Respondent was registered in Ontario as a mutual fund salesperson (now known as a dealing representative) with Scotia Securities Inc. (“SSI”), a Member of the MFDA.

8. Since August 2013, the Respondent has been registered in Ontario as a dealing representative with a Member of the Investment Industry Regulatory Organization of Canada.

9. At all material times, the Respondent conducted business at a bank branch in Waterloo, Ontario.

Misconduct

10. At all material times, BD was an Approved Person registered with SSI, who conducted business at the same bank branch as the Respondent.

11. At all material times, BD and her father, client BH, held a joint bank account (the “Joint Account”) at the bank branch. Client BH also held a Registered Retirement Income Fund (“RRIF”) account at another mutual fund dealer (the “Existing RRIF Account”).

12. In August 2011, BD requested that the Respondent open a new RRIF account at SSI for client BH and transfer the balance of the Existing RRIF Account to the new RRIF account at SSI. The Respondent states that BD told her that she held a power of attorney from client BH and that she looked after his financial affairs.  The Respondent did not receive or review any power of attorney or similar authorization that authorized the Respondent to act on the request of BD on behalf of client BH, and Staff’s investigation did not identify any such power of attorney or similar authorization.

13. In order to process the requests from BD described above, the Respondent, together with BD, and without having any discussions with client BH, completed the following account forms (the “Account Forms”) in respect of client BH: (a) an Account Application Form; (b) a Transfer Authorization Form; and (c) an “SIS Overview” Form containing client BH’s Know-Your-Client information.

14. The Respondent provided the Account Forms to BD to obtain client BH’s signature.

15. On or about August 3, 2011, BD provided the Account Forms, which she said had been signed by client BH, to the Respondent.

16. The Respondent subsequently submitted the Account Forms to SSI for processing, and as a result:
    • a new RRIF account at SSI was opened for client BH (the “New RRIF Account”); and
    • two mutual fund transfers were processed from the Existing RRIF Account to the New RRIF Account in the total amount of $30,932.16.

17. Based on the request of BD, between November 2011 and March 2012, the Respondent, without having met or communicated with client BH, processed two redemption requests for three redemptions (the “Redemptions”) in client BH’s New RRIF Account, the proceeds of which were to be deposited into the Joint Account belonging to client BH and BD. The Redemptions are summarized in the table below:

18. In order to process the first redemption request (Redemptions #1 and #2 described above), the Respondent completed and submitted to SSI for processing an Investment Directions Form, which incorrectly indicated that on November 23, 2011 at 4:15 p.m., she had received telephone instructions from client BH to process the redemptions.

19. In order to process Redemption #3 described above, the Respondent provided an Investment Directions Form to BD to obtain client BH’s signature. BD then provided the Investment Directions Form, which she said had been signed by client BH, to the Respondent.  The Respondent then submitted the Investment Directions Form to SSI for processing.

Action Taken by the Member

20. In December 2015, SSI became aware of this matter after client BH advised SSI that he had not authorized the Redemptions described above, and was unaware of the Joint Account belonging to him and BD. SSI subsequently obtained information indicating that after the proceeds from the Redemptions were deposited to the Joint Account, BD processed withdrawals from the Joint Account without the knowledge of client BH.[1]

21. In about July 2016, SSI reversed the Redemptions in client BH’s New RRIF Account.

Additional Factors

22. There is no evidence that the Respondent received any financial benefit from engaging in the misconduct described in this Settlement Agreement.

23. The Respondent states that she relied on the statements and actions of BD whom she trusted as a fellow employee.

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

25. Since the events described above, the Respondent has successfully completed a number of securities industry courses including the Canadian Securities Course and the Conduct and Practices Handbook Course, which address the requirements with respect to account opening and client trading instructions.

26. 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.

IV. ADDITIONAL TERMS OF SETTLEMENT

27. This settlement is agreed upon in accordance with section 24.4 of MFDA By-law No. 1 and Rules 14 and 15 of the MFDA Rules of Procedure.

28. The Settlement Agreement is subject to acceptance by the Hearing Panel which shall be sought at a hearing (the “Settlement Hearing”). At, or following the conclusion of, the Settlement Hearing, the Hearing Panel may either accept or reject the Settlement Agreement. 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 mfda.ca.

29. The Settlement Agreement shall become effective and binding upon the Respondent and Staff as of the date of its acceptance by the Hearing Panel. Unless otherwise stated, any monetary penalties and costs imposed upon the Respondent are payable immediately, and any suspensions, revocations, prohibitions, conditions or other terms of the Settlement Agreement shall commence, upon the effective date of the Settlement Agreement.

30. Staff and the Respondent agree that if this Settlement Agreement is accepted by the Hearing Panel:
    1. the Settlement Agreement will constitute the entirety of the evidence to be submitted respecting the Respondent in this matter;
    2. the Respondent waives any 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;
    3. Staff will not initiate any proceeding under the By-laws of the MFDA against the Respondent in respect of the facts and contraventions described in this Settlement Agreement. Nothing in this Settlement Agreement precludes Staff from investigating or initiating proceedings in respect of any facts and contraventions that are not set out in this Settlement Agreement.  Furthermore, nothing in this Settlement Agreement shall relieve the Respondent from fulfilling any continuing regulatory obligations;
    4. the Respondent shall be deemed to have been penalized by the Hearing Panel pursuant to s. 24.1.2 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; and
    5. 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 the Respondent.

31. If, for any reason, this Settlement Agreement is not accepted 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 the Settlement Agreement or the settlement negotiations.

32. Staff and the Respondent agree that the terms of the 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.

33. The Settlement Agreement may be signed in one or more counterparts which together shall constitute a binding agreement. A facsimile copy of any signature shall be effective as an original signature.

[1] SSI terminated the registration of BD in June 2014.