Settlement Agreement

Settlement Agreement
File No. 200943

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: Connor Financial Corporation and Joel Gerrett (Gerry) Connor

SETTLEMENT AGREEMENT

(I) INTRODUCTION
1.
By a Notice of Hearing dated December 23, 2009, the Mutual Fund Dealers Association
of Canada (the "MFDA") commenced a disciplinary proceeding against Connor Financial
Corporation ("CFC") and Joel Gerrett (Gerry) Connor (collectively the "Respondents") pursuant
to sections 20 and 24 of By-law No. 1. Staff of the MFDA ("Staff") and counsel for the
Respondents propose to make a request to a Hearing Panel of the Pacific Regional Council of the
MFDA (the "Hearing Panel") to consider whether, pursuant to Section 24.4 of By-law No. 1, the
Hearing Panel should accept the settlement agreement (the "Settlement Agreement") entered into
between Staff of the MFDA ("Staff") and the Respondents.
(II) JOINT
SETTLEMENT RECOMMENDATION
2.
Staff and the Respondents recommend settlement of all allegations in the Notice of
Hearing in accordance with the terms and conditions set out below. The Respondents agree to
the settlement on the basis of the facts set out in Parts IV and V herein and consent to the making
of an Order in the form attached as Schedule "A".
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(III) ACKNOWLEDGEMENT
3.
Staff and the Respondents 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 Respondents or Staff in any other proceeding of any kind including, but without
limiting the generality of the foregoing, any proceedings brought by the MFDA 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
4.
CFC is registered in British Columbia as a mutual fund dealer and is also subject to the
same conditions as are imposed on dealers in British Columbia that sell securities pursuant to
exemptions in local securities legislation. As set out in greater detail below, CFC became a
Member of the MFDA June 28, 2007. CFC maintains its principal office at 1405 Fernwood
Road, Victoria, B.C.
5.
From January 1984 to June 28, 2007, CFC was registered in British Columbia as a
mutual fund dealer and was supervised by the British Columbia Securities Commission (the
“BCSC”).
6.
Mr. Connor is registered in British Columbia as the President, a director, the compliance
officer and a mutual fund salesperson of CFC. Mr. Connor is the founder, sole shareholder and
sole director of CFC. Mr. Connor has been the sole registered employee of CFC since
approximately 1990 and the sole Approved Person of CFC since it became a Member of the
MFDA.
Membership History
7.
In 2001, the BCSC enacted rules requiring registered mutual fund dealers to become
Members of the MFDA. CFC applied for membership in the MFDA in 2001. However, the
processing of the application was suspended for an extended period pending resolution of certain
outstanding issues between CFC and the BCSC, and materials required to accompany the
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application were not finalized by CFC for several years. Eventually, the membership of CFC in
the MFDA was approved, subject to the Terms & Conditions, by a decision by the Executive
Committee of the board of directors of the MFDA dated June 28, 2007.
8.
The Terms & Conditions applicable to CFC’s membership are quoted below, using the
same numbering as used by the Executive Committee in its decision:
(1)
CFC shall be granted membership in the MFDA as a Level 2 dealer.
(2)
CFC shall complete the transition of its operations, books, records and accounts to
a Level 2 dealer by no later than December 31, 2007.
(3)
Until such time as CFC completes its transition to a Level 2 dealer, CFC shall
satisfy all requirements and obligations of Level 4 dealer, including the requisite
FIB, minimum capital requirements and monthly reconciliation of client positions.
(4)
CFC will ensure that it is in compliance with the MFDA’s required financial
reports requirements and has sufficient risk adjusted capital by no later than
August 31, 2007, being the date by which it is required to file its July 2007 FQR.
(5)
CFC will comply with its obligation to provide account statements to clients in
accordance with MFDA Rule 5.3 by no later than December 31, 2007.
(6)
CFC will rectify any identified deficiencies in its Policies and Procedures Manual
(“PPM”) by no later than December 31, 2007.
(7)
Joel Gerrett Connor shall, on behalf of CFC, certify in writing to MFDA Staff on
an annual basis, by no later than 30 days following CFC’s fiscal year end, that he
has reviewed the operations and the books and records of CFC and is satisfied that
CFC and its Approved Persons, including Connor, are in compliance with all
orders, decisions or terms and conditions and registration, and shall identify and
explain any instances of non-compliance.
(8)
CFC shall submit to Staff on an annual basis, by no later than 30 days following
CFC’s fiscal year end, a copy of the report on the status of compliance of CFC
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that the Compliance Officer is required to submit to the board of directors of CFC
in accordance with MFDA Rules 2.5.2 (b)
(9)
CFC shall, at its own expense, retain Consultant A as an independent consultant to
conduct a review of CFC’s operations and books and records for compliance with
all MFDA and any other applicable regulatory requirements including any orders,
decisions or terms and conditions of registration; and to assist CFC in
implementing changes to address identified deficiencies; and to test the
implementation and report to Staff by no later then December 31, 2007 thereon.
Without limiting the generality of the foregoing, Consultant A shall be granted
access to all of CFC’s books, records and accounts and Consultant A’s review
shall include on-site visits as required to perform his review and shall include the
subject matter addressed by the items in this Order.
(10) CFC is prohibited from holding or handling client funds through a trust account or
otherwise and without limiting the generality of foregoing, CFC is prohibited
from:
(a)
Holding funds on behalf of clients;
(b)
Receiving funds form clients for payment or settlement of trades in
securities on behalf of the client;
(c)
Receiving from clients cheques made out to CFC for payment of or
settlement of trades in securities on behalf of the client;
(d)
Receiving from other person funds payable to the client on account
of the sale of or settlement of trades in securities on behalf of the
client; and
(e)
Receiving from other persons cheques made out to CFC on account
of the sale of or settlement of trades in securities on behalf of the
client.
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(11) In connection with CFCS/CFSI loan business:
(a)
CFC is prohibited from making any new loans to existing clients
directly or indirectly, including loans made to CFSI or any other
person or entity affiliated with or related to CFC.
(b)
CFC is prohibited from accepting new clients any persons or
entities which have borrowed money from CFC, CFSI or any other
person or entity affiliated with or related to CFC.
(c)
CFC shall report to each client with any outstanding loan
obligations to CFSI at least annually on the status of any loans to
that client, including outstanding balance, repayments and interest.
(d)
CFC shall provide Staff with the loan documentation and
particulars of all loans by CFSI to CFC clients existing as of the
date of CFC’s membership sufficient to enable Staff to identify:
(A)
CFSI’s security for each loan, if any; and
(B)
The implications of the loans on transfer or liquidation of
client accounts.
(e)
Where loan documentation in item (d) above does not exist or
cannot be produced, CFC shall promptly obtain such loan
documentation from the clients concerned by no later than
December 31, 2007.
(f)
Upon request by the MFDA, CFC shall promptly provide the
MFDA with the names of all non-clients of CFC to whom CFSI
has loaned money and the particulars of said loans.
(g)
Upon request by the MFDA, CFC shall, for as long as CFSI has
loans outstanding to CFC clients and others, provide the MFDA
with copies of its annual financial statements and reasonable access
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to the books, records and accounts of CFSI for the purpose of
assessing the financial condition of CFSI, the status of any loans to
CFC clients and others and the potential impact of those loans on
the capital position of CFC.
9.
In addition to imposing the Terms & Conditions referenced above, the Executive
Committee included various comments in its decision regarding what was expected of CFC.
Those expectations are listed in full in the decision.
10.
The Terms & Conditions were agreed to by CFC prior to being made terms and
conditions of CFC’s membership by the Executive Committee and therefore constituted an
agreement between CFC and the MFDA for the purposes of s. 24.1.2(i) of MFDA By-law No. 1.
11.
As set out in greater detail below, after being granted membership in the MFDA, CFC
failed to comply with eight of the eleven Terms & Conditions in whole or in part. Specifically,
as described below, CFC failed to comply or to fully comply with the Terms and Conditions
numbered 2, 3, 5, 6, 7, 8, 9 and 11.
Compliance Examination of CFC
12.
In or about September 2008, Staff commenced a compliance examination of CFC for the
period June 28, 2007 to June 30, 2008 (the “2008 Examination”) for the purpose of assessing
CFC’s compliance with the By-laws, Rules and Policies of the MFDA. The results of the 2008
Examination were summarized in a report, dated January 13, 2009, provided to CFC (the “2008
Compliance Report”). As set out in greater detail below, the 2008 Compliance Report identified
deficiencies in CFC’s operations which form the subject matter of certain of the allegations in
this Notice of Hearing.
CFC's Resignation
13.
After receiving the Notice of Hearing in this proceeding CFC gave notice by letter dated
February 8, 2010 to the MFDA of its intention to resign as a member of the MFDA.
14.
If CFC had not submitted its resignation voluntarily, the relief sought by the MFDA in
this proceeding would have been significantly different.
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Allegation #1(A) – Transition to Level 2 dealer
15.
CFC failed to fully comply with Term & Condition number 2.
16.
At the time CFC became a Member of the MFDA, CFC operated in the same manner as
Level 4 dealer in that it held client securities in nominee name. Specifically, the holdings of
CFC clients in various mutual fund investments were registered with those mutual fund
companies in the name of CFC on behalf of the clients.
17.
Term & Condition number 2 required CFC to complete the transition of its operations,
books, records and accounts to a Level 2 dealer by no later than December 31, 2007. A Level 2
dealer is not permitted to hold client cash, securities or other property in nominee name. In order
to meet Term & Condition number 2, CFC was therefore required to, among other things,
convert all of its nominee name accounts into accounts held in the names of its individual clients
(or “client name” accounts).
18.
CFC did not take steps to implement the conversion of accounts into client names until
December of 2007. Late that month CFC instructed the relevant mutual fund companies to
convert accounts into client names. Most accounts were converted to client names by December
31, 2007 but some were not. In some cases the relevant mutual fund companies did not complete
the conversion until January of 2008. In some other cases the relevant mutual fund companies
either did not receive or did not immediately act upon instructions to convert accounts to client
names.
19.
Furthermore, CFC admits that it continues to maintain one account as a nominee for one
client. Through dealings before CFC became an MFDA member, a company affiliated with CFC
("CFSI") lent money to this client, and CFC asserts the client agreed that CFSI would maintain a
security interest in the account assets. The client now disputes the obligation to repay the loan.
The fund company declined to amend the account designation except by joint direction of the
client and CFC. CFC did not convert the account into the client's name until February of 2011.
Allegation #1(B) – Maintenance of Level 4 dealer requirements
20.
CFC failed to fully comply with Term & Condition number 3.
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21.
Term & Condition number 3 required CFC to satisfy all requirements and obligations of a
Level 4 dealer until CFC completed its transition to a Level 2 dealer. This required CFC to
maintain FIB (financial institution bond) coverage at a single loss limit of liability of $500,000 in
accordance with MFDA Rule 4.4.1(a). Despite repeated warnings by Staff that CFC was
required to maintain the higher level of FIB coverage and despite the fact that CFC was not a
Level 2 dealer and would not become a Level 2 dealer until CFC transferred all of its nominee
name accounts into client names, CFC reduced its single loss limit of liability to $200,000, the
amount required of a Level 2 dealer pursuant to MFDA Rule 4.4.1(a).
22.
The client holding the remaining nominee account as described in paragraph 19 above,
has a current value of approximately $7400. Since January, 2008, CFC has set aside additional
capital (above minimum free capital requirement) equivalent to the value of the disputed
account, to protect against any contingent liability in relation to the account.
Allegation #1(C) – Account Statements
23.
CFC failed to fully comply with Term & Condition number 5.
24.
Term and Condition number 5 required CFC to provide written account statements to
clients in accordance with the requirements of MFDA Rule 5.3 by no later than December 31,
2007. CFC failed to send out client statements by December 31, 2007. The statements which
were sent by CFC in July of 2008 did not comply with the requirements of MFDA Rule 5.3 in
that the statements did not include sufficient transactional information, the date the statement
was issued, the period covered by the statement or the legal address and telephone number of
CFC.
25.
CFC delivered written account statements to clients in July of 2009. CFC admits that it
did not take adequate steps to ensure that compliant client account statements were delivered
within the time required by Term and Condition number 5, but some of the delay was caused by
technical difficulties and by misunderstandings between CFC and its software consultant. Had
CFC began work earlier to develop the capabilities to generate the statements and had CFC given
the project more priority, any delays would have been avoided.

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Allegation #1(D) – Policies and procedures manual
26.
CFC failed to fully comply with Term & Condition number 6.
27.
Term and Condition number 6 required CFC to rectify any identified deficiencies in its
policies and procedures manual by no later than December 31, 2007. Despite having been
informed of deficiencies from and before May 2007, CFC failed to correct any deficiencies by
December 31, 2007. The revised policies and procedures manual prepared by CFC after that
date still failed to resolve all deficiencies which had been identified by Staff. Despite extensive
follow up communications from the MFDA about this issue, CFC admits that it did not take
adequate steps to ensure that the deficiencies in its policies and procedures manual were
remedied as required by Term and Condition number 6.
Allegation #1(E) – Certification by Mr. Connor
28.
CFC failed to comply with Term & Condition number 7.
29.
Term and Condition number 7 required Mr. Connor to certify various things on behalf of
CFC, in writing, by July 31, 2008 and again by July 31, 2009, including that Mr. Connor had
reviewed the operations and books and records of CFC and was satisfied as to certain things,
including compliance with regulatory requirements. CFC did not comply with that Term &
Condition prior to the deadline. An inadequate, partial response was delivered several weeks
late.
Allegation #1(F) – Annual compliance report
30.
CFC breached Term & Condition number 8.
31.
Term and Condition number 8 required CFC to submit by July 31, 2008 and again by
July 31, 2009, a report on the status of compliance at CFC that a compliance officer would be
required to submit in accordance with MFDA Rule 2.5.2(b). CFC did not comply with that Term
& Condition prior to the deadline. An inadequate, partial response was provided several weeks
late.

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Allegation #1(G) – Independent consultant
32.
CFC failed to comply with Term & Condition number 9.
33.
Term and Condition number 9 required CFC to retain Consultant A as an independent
consultant to conduct a review of CFC’s operations and to provide various other services, all to
be completed by December 31, 2007. CFC made initial contact with Consultant A and had
preliminary discussions with him. However, CFC did not retain Consultant A at that time. Both
Consultant A and Staff warned CFC that the relevant processes would take a considerable
amount of time. Staff warned CFC that compliance with the Term & Condition was mandatory.
Despite this, CFC waited until November of 2007 to ask Consultant A to commence work. At
that point Consultant A was no longer willing to accept the engagement. At that time CFC
searched for an alternative consultant. CFC later engaged Consultant B to be its independent
consultant and this was initially approved by the Staff. Extensive correspondence followed
between the Respondents and Staff, but despite those discussions Consultant B was unable to
develop a plan to complete Term and Condition number 9 to the satisfaction of the MFDA.
Consultant B never developed a plan to fully address the deficiencies which had been identified
and Consultant B never completed the processes which Consultant A was originally to complete.
Allegation #1(H) – Loan documentation
34.
CFC breached Term & Condition number 11.
35.
Prior to becoming a Member, CFC had offered lending services to clients. That practice
had ended and the loan accounts transferred from CFC to an affiliate of CFC before CFC became
a member. Term and Condition number 11 related to the loan business of CFC and its affiliated
lending company (the “Affiliate”). Among other things, Term & Condition number 11 obligated
CFC to:
(a) report at least annually to each client with any outstanding loan obligations on the
status of any loans to that client, including any outstanding balance, payments and
interest (subparagraph (c));
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(b) provide Staff with various loan documentation and particulars, if necessary by
collecting them from CFC’s affiliate (subparagraph (d) and (e));
(c) collect certain documentation and particulars from clients by December 31, 2001
(subparagraph (e));
(d) upon the request of the MFDA, to promptly provide the names of all non-clients of
CFC to whom money had been loaned and the particulars of such loans
(subparagraph (f)); and
36.
CFC has failed to comply with those portions of Term & Condition number 11 which are
identified above. Specifically:
(a)
the required status reports were not sent to clients annually, as required;
(b)
Staff asked for the relevant loan documentation and particulars. CFC permitted
Staff to look at the documents while on site at the office of CFC, but due to what
the Respondents now accept was an ill-considered concern about client
confidentiality CFC refused to provide copies in a timely way, preventing staff
from completing their review in a timely manner. Over a year later, after taking
legal advice CFC provided the requested copies;
(c)
despite requests from Staff, CFC did not collect missing loan documentation and
particulars from a client (Mr. Connor's niece) in a timely way;
(d)
despite requests from Staff, CFC initially refused to provide the names of non-
clients of CFC to whom funds had been loaned from the Affiliate due to what the
Respondents now accept was an ill-considered concern about client
confidentiality. Over a year later, after taking legal advice CFC provided the
information.
37.
By engaging in the conduct described in Allegations 1(A) to (H) above, CFC failed to
comply with its agreement with the MFDA to conduct itself in accordance with the Terms and
Conditions and engaged in conduct that was contrary to the public interest. CFC’s conduct
therefore engages the jurisdiction of the Hearing Panel to impose penalties on CFC in accordance
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ss. 24.1.2(i) and (k) of MFDA By-Law No. 1. In addition, as identified below, some of the
conduct of CFC and Mr. Connor also constituted independent violations of the By-Laws, Rules
and Policies of the MFDA.
Allegation #2 – Insufficient Cooperation in Compliance Examination
38.
CFC failed to respond fully within a reasonable time to requests from Staff to provide
information in relation to the 2008 Examination.
39.
Section 22 of MFDA Rule 1 authorizes MFDA staff to conduct a compliance
examination of a member. Sections 22.1 and 22.2 of MFDA By-Law No. 1 obligate a Member
to cooperate with such examinations so as to permit Staff to, among other things, determine if the
Member accepts or rejects Staff’s findings with respect to deficiencies in the Member’s
operations, to identify which deficiencies have been remedied by the Member and, for
deficiencies which have not been remedied, to assess the adequacy of Member’s proposal for
resolving the outstanding deficiencies.
40.
In the course of conducting the 2008 Examination, including the process of Staff
attempting to deal with CFC to resolve the deficiencies identified in CFC’s operations following
the delivery of 2008 Compliance Report, Staff requested that CFC provide responses to inquiries
and issues set out in letters dated January 13, 2009, February 6, 2009, April 22, 2009 and August
20, 2009 (as well as in related reminder letters). With minor exceptions, CFC failed to provide
any substantive responses.
41.
As a consequence of CFC’s failure to provide requested information to Staff during the
course of the 2008 Examination, Staff was unable to assess CFC’s compliance with MFDA
requirements in all cases.
Allegation #3 – Trade blotters
42.
MFDA Rule 5.1 (a) requires each Member to maintain a trade blotter which contains an
itemized daily record of all purchases and sales of securities, including the name of security and
the unit and aggregate purchase or sale of the security.
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43.
The 2008 Examination identified that CFC failed to maintain required trade blotters.
CFC did not develop the software needed to produce trade blotters until the summer of 2009.
Allegation #5(A) – Pre-signed forms
44.
The 2008 Examination identified that CFC, and Connor as its sole Approved Person,
improperly obtained and maintained blank client instruction forms signed by clients (“pre-signed
forms”) in nine client files. CFC states that it obtained these forms from multiple clients to
facilitate the execution of client instructions. CFC states that before becoming a member of the
MFDA it ended that practice. CFC states that it no longer relied on pre-signed forms, and it
removed most forms from client files. CFC missed some pre-signed forms.
45.
CFC admits that maintaining the pre-signed forms is conduct unbecoming a Member and
an Approved Person and contrary to MFDA Rule 2.1.1.
Allegation #5(B) – Improper trading authorizations
46.
The 2008 Examination identified that CFC obtained and utilized improper trading
authorization forms from clients.
47.
MFDA Rule 2.3.2 allows a Member or an Approved Person to accept a limited trading
authorization (“LTA”) form from a client for the express purpose of facilitating trade execution
only. The LTA form must be in the form prescribed by the MFDA. CFC had clients sign two
limited trading authorization forms, one in the form prescribed by the MFDA and another in a
manner which grants powers beyond that authorized by the MFDA. The unauthorized form
grants Mr. Connor discretionary trading authority, including the authority to redeem mutual
funds in a client’s account in order to satisfy fees owing by the client to CFC, and purports to
grant authority which continues even if Mr. Connor ceases to be an Approved Person, contrary to
MFDA Rules 2.3.2 and 2.1.1.
48.
CFC states that it never relied on the authority of the authorization forms in question.
When this issue was identified in the 2008 Examination, CFC agreed not to use the forms and it
removed them from client files. Nevertheless, CFC admits that obtaining the unauthorized forms
was conduct unbecoming of a Member and contrary to MFDA Rule 2.1.1.
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Allegation #6 – Out of province clients
49.
CFC and Mr. Connor are registered to conduct securities related business only in British
Columbia.
50.
MFDA Rules 1.1.4 and 1.1.5 require a Member and its Approved Persons to be registered
or licensed in the manner necessary under the applicable legislation in any province or territory
where they propose to act.
51.
The 2008 Examination identified that CFC had 27 clients resident in jurisdictions other
than British Columbia and that CFC had permitted trading activity in certain of those accounts,
including six accounts where CFC had processed purchases and switches of mutual fund
holdings for the clients.
52.
CFC has not been responsive to compliance examination requests on this subject.
Allegation #7 – Mr. Connor
53.
The board of directors of a Member and its senior officers are responsible for ensuring
that the Member maintains a compliance program that identifies and addresses material risks of
noncompliance.
54.
At all times since becoming a Member on June 28, 2007, Mr. Connor, as the sole
director, President and compliance officer of CFC, engaged in business conduct or practice that
was unbecoming or detrimental to the public interest by failing to ensure that CFC maintained a
compliance program that identified and addressed material risks of non-compliance. These
failures resulted in or contributed to the breaches of CFC which are admitted in this Settlement
Agreement.
(V) CONTRAVENTIONS

55.
The Respondents admit:
(a)
CFC failed to convert some client accounts into client names by December
31, 2007 and the conversion of one client account into client name did not
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occur until early February, 2011. CFC thereby breached Term and
Condition number 2.
(b)
The failure to convert the final remaining account in CFC's name into the
client's name prevented CFC's transition into a Level 2 dealer. CFC
thereby breached Term and Condition number 3;
(c)
CFC's failure to send out written client statements until July of 2009 was a
breach of Term and Condition number 5;
(d)
CFC's failure to correct any deficiencies in its Policies and Procedures
Manual by December 31, 2007 and its continued delays in correcting
certain deficiencies in that Practices and Procedures Manual was a breach
of Term and Condition number 6;
(e)
CFC's failure to provide various certifications in writing by July 31, 2008
and again by July 31, 2009 was a breach by CFC of Term and Condition
number 7;
(f)
CFC's failure to submit a compliance status report by July 31, 2008 and
again by July 31, 2009 was a breach by CFC of Term and Condition
number 8;
(g)
CFC's failure to retain an independent consultant to complete various
reviews by December 31, 2007 was a breach of Term and Condition
number 9;
(h)
CFC's failure to provide required status reports to clients regarding loans
and the delays by CFC in providing certain information to Staff regarding
loans was a breach by CFC of Term and Condition number 11;
(i)
CFC's failure to respond fully within a reasonable time to requests from
Staff to provide information in relation to the 2008 Examination was a
breach by CFC of Sections 21.1 and 22.2 of MFDA By-Law No. 1;
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(j)
CFC's failure to obtain or develop the software required to maintain
itemized daily records of all purchases and sales of securities was a breach
of MFDA Rule 5.1 (a);
(k)
By maintaining pre-signed forms in nine client files CFC, and Connor as
its sole Approved Person, conducted themselves in a manner unbecoming
of a Member and Approved Person contrary to MFDA Rule 2.1.1;
(l)
CFC's collection of limited trading authorizations containing powers
beyond that authorized by the MFDA was conduct unbecoming of a
Member and contrary to MFDA Rule 2.1.1;
(m)
CFC and Connor's acceptance of 27 clients resident outside of British
Columbia, and their acceptance of trades in at least six of those accounts
constituted a breach by CFC and by Connor as Approved Person of
MFDA Rules 1.1.4 and 1.1.5; and
(n)
While the sole director, officer and Approved Person of CFC Connor
maintained a compliance program which failed to identify and address
material risks of non-compliance. Mr. Connor thereby engaged in
business conduct or practices that were unbecoming or detrimental to the
public interest in breach of MFDA Rule 2.1.1.
(VI)
TERMS OF SETTLEMENT
56.
The Respondents agree to the following terms of settlement:
(a)
Effective at 11:59 p.m. on March 1, 2011 CFC's membership in the
MFDA shall be subject to the term and condition that CFC is prohibited
from accepting any new clients or opening any new accounts for existing
clients;
(b)
Effective at 11:59 p.m. on March 11, 2011 CFC's membership in the
MFDA is suspended and shall remain suspended until such time as CFC's
resignation is approved by the MFDA or its rights and privileges of
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membership are otherwise terminated by the MFDA or a Hearing Panel
pursuant to Section 24.1.2 (c) of MFDA By-law No. 1;
(c)
The MFDA may proceed to implement the previously tendered resignation
of CFC and both Connor and CFC agree to provide their full cooperation
in the orderly resignation of CFC as a Member;
(d)
Connor shall pay a fine in the amount of $50,000.00 pursuant to Section
24.1.1 (b) of MFDA By-law No. 1;
(e)
Connor is permanently prohibited from acting in the capacity of a branch
manager, compliance officer or UDP;
(f)
In the event that Connor seeks to become registered as a partner, director
or officer of a Member of the MFDA, Connor shall successfully complete
the Partners, Directors and Senior Officers course (or other course
acceptable to the MFDA) prior to becoming so registered; and
(g)
The Respondents shall together pay costs in the amount of $25,000.00,
attributable to conducting the investigation and settlement of this matter
pursuant to Section 24.2 of MFDA By-law No.1.
(VII) PROCEDURE FOR APPROVAL OF SETTLEMENT
57.
Acceptance of this Settlement Agreement shall be sought at a hearing of the Pacific
Regional Council of the MFDA on a date agreed to by counsel for Staff and the Respondents.
58.
Staff and the Respondents may refer to any part, or all, of the Settlement Agreement at
the settlement hearing. Staff and the Respondents 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 Respondents in this matter, and the Respondents agrees to waive its 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 o competent jurisdiction.
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59.
Staff and the Respondents agree that if this Settlement Agreement is accepted by the
Hearing Panel, then the Respondents shall be deemed to have been penalized by the Regional
Council 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.
60.
Staff and the Respondents agree that if this Settlement Agreement is accepted by the
Hearing Panel, neither Staff nor the Respondents will make any public statement inconsistent
with this Settlement Agreement. Nothing in this section is intended to restrict the Respondents
from making full answer and defence to any civil or other proceedings against it.
61.
If this Settlement Agreement is accepted by the Hearing Panel and, at any subsequent
time, the Respondents fails to honour ay of the terms of settlement set out herein, Staff reserves
the right to bring proceedings under the By-laws of the MFDA against the Respondents based
on, but not limited to, the facts set out in Parts IV and V of the Settlement Agreement, as well as
the breach of the Settlement Agreement.
62.
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 Respondents 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.
63.
Whether or not this Settlement Agreement is accepted by the Hearing Panel, the
Respondents agrees that it will not, in any proceeding, refer to or rely upon this Settlement
Agreement or the negotiations 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 my otherwise be available.
(VIII) DISCLOSURE OF AGREEMENT
64.
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 Respondents and Staff or as may be required by law.
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65.
Any obligations of confidentiality of the terms of this Settlement Agreement shall
terminate upon acceptance of this Settlement Agreement by the Hearing Panel.
(IX)
EXECUTION OF SETTLEMENT AGREEMENT
66.
This Settlement Agreement may be signed in one or more counterparts which together
shall constitute a binding agreement.
Dated: February 8, 2011.
“G. Connor”

“Gerry
Connor”

Witness
Signature
Connor
Financial
Corporation
Respondent
Per:

Gerry
Connor

“Gerry
Connor”

Gerry
Connor,
Respondent

“Mark Gordon”

Staff of the MFDA
Per:
Mark
T.
Gordon

Executive
Vice-President

Doc 244734
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