Settlement Agreement

Settlement Agreement
File No. 201022

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: Mary Lorelei Lambros



SETTLEMENT AGREEMENT

I.
INTRODUCTION

1.
By Notice of Settlement Hearing, the Mutual Fund Dealers Association of Canada (the
“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 (the “Hearing
Panel”) of the MFDA should accept the settlement agreement (the “Settlement Agreement”)
entered into between Staff of the MFDA (“Staff”) and Mary Lorelei Lambros (the
“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
X herein) 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 has been registered in Alberta, British Columbia and Ontario as a mutual
fund salesperson with Equity Associates Inc. (“Equity” or the “Member”) since March 7, 2003.

7.
Prior to that, the Respondent was registered as a mutual fund salesperson with FundEX
Investments Inc. from December 1996 to March 2003, and with Investment Centre Financial
Corp. from December 1993 to December 1996.

8.
Equity is a Member of the MFDA and, with the exception of Saskatchewan, is registered
in all Canadian provinces as a mutual fund dealer. It is also registered as an exempt market
dealer in Ontario and Newfoundland and Labrador.

Page 2 of 23

The Respondent’s Dealings with Client NM

9.
The Respondent and client NM were indirectly related. Specifically, the Respondent’s
aunt was client NM’s step-mother, however NM referred to the Respondent as her niece and the
Respondent referred to NM as her aunt. The Respondent states that she was very close to NM
and further states that her relationship with the client was such that NM relied heavily on the
Respondent to assist NM with all personal and financial needs.

10.
From December 1993 until the date of NM’s death, December 20, 2007, NM had an
account at the mutual fund dealer at which the Respondent was registered1 and the Respondent
was the mutual fund salesperson responsible for servicing NM’s account (the “NM Account”).

11.
Prior to June 2005, the NM account was always held in NM’s name alone.

12.
On or about June 28, 2005, following client NM’s request, the Respondent became a joint
owner with right of survivorship of the NM Account. NM made the Respondent a joint owner of
the NM Account in order for her estate to avoid paying probate fees in respect of the NM
Account upon her death.

13.
On July 8, 2005, the Respondent changed the mailing address on the NM Account to the
Respondent’s residential address.

14.
Beyond submitting the necessary forms to Equity to effect the change in ownership of the
NM Account as well as the change in mailing address on the NM Account, the Respondent did
not otherwise disclose or bring to the attention of Equity that she had become a joint owner of
the NM Account and that all account statements and other communications in respect of the NM
account would thereafter be mailed to the Respondent.

1 From December 1993 to December 1996: Investment Center Financial Corp.
From December 1996 to February 2003: FundEX Investments Inc.
From March 2003 until December 20, 2007: Equity Associates Inc.

Page 3 of 23

15.
By becoming a joint owner of the NM Account, the Respondent acquired trading
authority over the NM Account.

16.
Between October 19, 2006 and December 20, 2007, the date on which client NM died,
the Respondent, while a joint owner of the NM Account, executed trades in the NM Account on
at least four occasions, and on each such occasion the Respondent alone authorized the trades
and determined the securities traded.

17.
Equity’s policies and procedures, consistent with MFDA requirements, prohibited an
Approved Person from exercising trading authority over a client’s account.

18.
On October 4, 2005, the Respondent held a meeting with client NM and NM’s daughter,
KB. Among other things discussed, KB wished for the Respondent to talk to client NM in order
for NM’s will to be updated due to circumstances surrounding client NM’s son, DM. Notes
prepared by the Respondent following this meeting stated as follows:

[KB] wanted me to talk to her about calling [AB] in regards to getting the will
updated due to the fact of what’s going on with [DM] right now and they really
feel strongly that they don’t want [DM] to take half of her money and just piss it
away in a month or two. That seemed to be what the biggest concern was.
Initially she had asked me to be Trustee and then [KB] called me back and said
that she would prefer that that wasn’t the case, but I said it would make things a
little easier. As soon as Aunt [NM]’s done with these shingles, I will make a
point of getting her to the lawyers and getting things in order.

19.
On September 29, 2006, during a meeting with NM to review NM’s last will and
testament and discuss NM’s estate succession, the Respondent discussed with NM the
preparation of a new will and power of attorney (together, the last will and testament and power
of attorney are hereinafter referred to as the “Will”). Notes prepared by the Respondent
following this meeting stated as follows:

We had a conversation about her Will and her POA and they have got to be done
fresh, new and clean because I just don’t want the headache when she dies.
…Her big concern was giving it to [DM] [client’s son] and that she really wanted
it to be doled out to him at a very slow process so that money was kept in reserve.
That would be my responsibility to get that going and to keep things maintained

Page 4 of 23

in that manner. I’m going to have the Will changed to make sure that paperwork
is in order according to what she wants. I’m going to take her to [lawyer]
[JF]…for the Will.

20.
On October 30, 2006, NM signed a new Will wherein her daughter, KB, was appointed
as the executrix of her estate and the Respondent was appointed as an executrix in the event that
KB was unwilling or unable to perform her duties. The Respondent was present when NM
executed the new Will and was provided with a copy by NM for her client file.

21.
Under the terms of the Will, NM’s estate was to be divided equally between her two
children, daughter KB and son DM.2 Due to concerns that NM had about DM’s ability to
manage his financial affairs, the Will provided that DM’s share of the estate was to be held in
trust and that 10% of such trust was to be paid to him annually. The Respondent was appointed
as the trustee for this trust.

22.
The Respondent states that she was aware of KB’s appointment as executrix in the Will,
of her appointment as an executrix in the event that KB was unable or unwilling to perform her
duties, and was further aware that she was named trustee in respect of funds to be paid to DM.

23.
At all material times, section 3.2.2.7 of Equity’s Policies and Procedures Manual
(“PPM”)3, entitled “Executor or Co-Executor on Clients Estates, required an Approved Person
named as executor for a client’s estate to renounce such appointment or, where they did not
renounce it, to inform Equity of the appointment so that the client account could be re-assigned
to another Approved Person. As stated in Equity’s PPM, the purpose of such requirement was as
follows: “If an Approved Person is also the named executor of a living client’s estate, any
investment recommendations made by the Approved Person may be influenced by potential
personal gains and therefore creates a conflict of interest.”

24.
At no time after being appointed in the Will as an executrix of NM’s estate in the event
that KB was unwilling or unable to perform her duties did the Respondent renounce the
appointment or, alternatively, inform Equity of the appointment so that Equity could reassign the

2 Neither KB or DM were clients of Equity.
3 As was effective between 2005 to April 2009.

Page 5 of 23

NM Account to a different Approved Person. The Respondent states that she did not do so given
that Equity’s PPM addressed the situation of an appointment as executor or co-executor of a
client’s estates, but did not address the situation where an Approved Person was appointed as an
executor in the event that the named executor could not or was unwilling to perform his/her
duties.

25.
The Respondent also did not disclose or otherwise bring to Equity’s attention that she had
been appointed by NM as trustee of the trust established for DM.

26.
In May 2007, Equity conducted a routine field review of the Respondent (the “May 2007
Field Review”). As part of this review, Equity required the Respondent to answer questions
relating to her activities as an Approved Person, including whether or not she had “been named
as an executor/executrix for any mutual fund clients”. The Respondent states that, because she
had been appointed in the Will (dated October 30, 2006) as an executrix only in the event that
the named executrix could not or was unwilling to perform her duties, and not the executor of
NM’s estate, the Respondent answered that she had not been named as executor/executrix “to the
best of her knowledge” and continued to service the NM Account.

27.
On December 13, 2007 client NM was moved into a hospice facility due to her declining
health. The Respondent states that until the date of her death, on December 20, 2007, she visited
client NM on a daily basis.

28.
On December 19, 2007, the Respondent was told by staff of the hospice that NM was
expected to pass away before the coming weekend.

29.
Notwithstanding that the Will provided that KB was to act as the executrix of NM’s
estate upon NM’s death, the Respondent proceeded to start dealing with the NM Account
without informing KB, to the extent and in the manner described below:

1) On December 20, 2007, the day after the Respondent’s visit to the assisted living
facility, the Respondent redeemed all of the investments in the NM Account, the
proceeds of which totaled $347,161.87 (the “Redemption Proceeds”). Later that

Page 6 of 23

day, NM died and the Respondent became the sole owner of record of the NM
Account; and
2) On January 2, 2008, the Respondent withdrew the Redemption Proceeds from the
NM Account and deposited them in her personal bank account, held jointly with
her husband.

30.
The Respondent did not inform KB that she had redeemed all of the investments in the
NM Account and transferred the proceeds to her personal bank account until January 21, 2008.

31.
Beyond submitting the necessary forms to Equity to effect the withdrawal of the monies
from the NM Account, the Respondent did not disclose or otherwise bring to the attention of
Equity that she withdrew the Redemption Proceeds from the NM Account and transferred them
to her personal bank account.

32.
On February 3, 2008, NM’s son, DM, died in a car accident. Shortly thereafter, at some
point between February 3 and February 7, 2008, the Respondent paid herself $15,000 from the
Redemption Proceeds. The Respondent did not disclose to KB or to Equity that she had paid
herself this fee, nor did she seek their permission for same.

33.
At some point between April and August 2008, KB learned that the Respondent had paid
herself a $15,000 fee out of the Redemption Proceeds.

34.
On August 14, 2008, following correspondence between KB’s lawyer and the
Respondent’s lawyer, KB filed a complaint with both Equity and the MFDA with respect to the
Respondent’s handling of the NM Account and her payment to herself of the $15,000 fee.

35.
In response to MFDA Staff’s inquiries as to the nature of the fee, the Respondent initially
stated that it represented fees, in the nature of trustee fees, for services related to funeral
arrangements for both client NM and her son, DM. Subsequently, during an interview with
MFDA Staff on August 13, 2009, the Respondent stated that the $15,000 fee was not a trustee
fee but reimbursement of expenses incurred by the Respondent to care for both client NM prior
to her death, and for DM following NM’s death.

Page 7 of 23

36.
On or about February 7, 2008, the Respondent released DM’s portion of the Redemption
Proceeds to his heirs. That same date, NM’s lawyer, JF, acting pursuant to the Respondent’s
instructions and direction, presented to, and requested that, KB execute a Full and Final Release
discharging the Respondent as “Trustee” of the NM estate. KB refused to do so at that time and
requested a full accounting of the NM estate from the Respondent. Given KB’s refusal to
execute a Full and Final Release, the Respondent transferred KB’s share of the Redemption
Proceeds to an account held by her (the Respondent’s) solicitor in trust for KB. The Respondent
did not, however, provide KB with a full accounting, as requested, and insisted to KB that she
would only release her share of the Redemption Proceeds if KB agreed to execute a Full and
Final Release discharging the Respondent as “Trustee” of the NM estate.

37.
On or about April 16, 2010, KB received her share of the Redemption Proceeds without
having executed the Full and Final release that had been requested by the Respondent. KB
maintains a civil claim against the Respondent and Equity requesting, among other things, a full
accounting of the Redemption Proceeds and a return of the $15,000 fee the Respondent paid
herself.

The Respondent Engaged In Personal Financial Dealings With Clients And Operated
Undisclosed Outside Securities Businesses

38.
EW and TW were clients of Equity. The Respondent was the mutual fund salesperson
responsible for servicing clients EW and TW’s accounts.

39.
In or about January 2006, client EW met the Respondent to obtain advice on her and her
husband’s purchase of a property in the Bahamas. At or about that time, client EW also
informed the Respondent of an investment opportunity she, client TW and their son, TWJ, were
considering: the purchase and development of 28.484 acres of ocean front land in the Bahamas
(the “Crossing Rocks Property”) from a Bahamian corporation known as Crossing Rocks Beach
and Tennis Club Limited. In particular, EW informed the Respondent that she and her family
wished to use an existing plan of subdivision to develop the Crossing Rocks Property and then
sell lots quickly to recover their expenses. Client EW requested the Respondent’s advice on this

Page 8 of 23

investment idea and further asked the Respondent if she knew of individuals anyone who would
be interested in participating in the Crossing Rocks Property development.

40.
In February 2006, the Respondent’s husband, AL, travelled to the Bahamas with EW’s
husband, client TW, to inspect the Crossing Rocks Property. During that trip, TW also
introduced AL to the owner of a house available for purchase which was close to the property
that EW and TW had already purchased, and which was adjacent to the Crossing Rocks
Property. On their return, the Respondent informed clients EW and TW that she and her family
wished to invest in the Crossing Rocks Property development project. The Respondent and her
husband did not, however, purchase the house close to the property that EW and TW had
purchased.

41.
In June 2006, EW’s son, TWJ, as purchaser, entered into an agreement of purchase and
sale with Crossing Rocks Beach and Tennis Club Limited, as vendor, for the purchase of the
Crossing Rocks Property at a price of US$2,800,000, plus applicable taxes and legal fees (the
“Purchase Agreement”). The sum of US$280,000 was to be paid to the vendors for an initial
deposit as follows: US$160,000 by the Respondent and her family and US$120,000 by EW and
TW. The deposit funds were delivered to a Bahamian lawyer on or about November 28, 2006
and were deposited in separate trust accounts in the names of the Respondent and her husband,
on the one hand, and EW and TW, on the other hand.

42.
In furtherance of the Respondent’s and her family’s stated intention to participate in the
development of the Crossing Rocks Property, the Respondent and her family, along with EW,
TW and TWJ, retained a Bahamian lawyer for advice regarding the group’s purchase of the
Crossing Rocks Property.

43.
Pursuant to the lawyer’s recommendation that the property be purchased through a
Bahamian corporation, on October 30, 2006, Crossing Bay Limited (“Crossing Corp.”) was
incorporated by the Respondent, along with her family’s and EW’s family, pursuant to the
Bahamas Corporations Act, 1992. The following individuals became shareholders and directors
in Crossing Corp.:

Page 9 of 23

Shareholder Shares
Held
Interest
EW 825
16.5%
TW (EW’s husband)
825
16.5%
TWJ (EW’s son)
1,650
33%
The Respondent
825
16.5%
AL (the Respondent’s husband)
825
16.5%
AEL (the Respondent’s daughter)
50
1%

Therefore, the W family owned 66% and the Respondent’s family owned 34% of Crossing Corp.

44.
The rights to the Purchase Agreement were subsequently assigned by TWJ to Crossing
Corp. As such, upon completion of the Purchase Agreement’s terms, Crossing Corp. would
become owner of the Crossing Rocks Property.

45.
Commencing in June 2006, the Respondent began working with her husband, EW, TW,
and TWJ on the development plans for the Crossing Rocks Property. Among other steps taken,
they retained lawyers and accountants in both Canada and the Bahamas, and set up, or took steps
to establish, bank accounts and lines of credits to finance the project.

46.
In the spring of 2007, EW and TW advised the Respondent that the additional funds they
had hoped to contribute on their own behalf to the Crossing Rocks Property development project
would not be forthcoming. A decision was thus made by Crossing Corp. to raise additional
capital as investments in the Crossing Rocks Property project from other interested individuals.

47.
In or about May 2007, the Respondent retained PricewaterhouseCoopers (“PWC”) in
respect of how to structure the proposed purchase and development of the Crossing Rocks
Property.

48.
Since investments by non Bahamian residents in Crossing Corp. would be subject to
disadvantageous Bahamian tax treatment, including withholding taxes, the Respondent and her
husband incorporated Abaco Investments Inc. (“Abaco”) in Ontario on June 7, 2007, to facilitate
investments by Canadian investors in the Crossing Rocks Property development project. The

Page 10 of 23

Respondent and her husband were named the sole directors of Abaco and were the company’s
sole shareholders. The Respondent also became Abaco’s president.

49.
Abaco was to be used as a vehicle to raise funds from Canadian investors which would be
flowed through to Crossing Corp. as loans for tax purposes (the “Abaco Investment”).

50.
Following Abaco’s incorporation, the Respondent facilitated investments by a number of
Canadian individuals, including clients of Equity for which she was the mutual fund salesperson
responsible for servicing their accounts. Abaco represented to prospective investors that the
Abaco Investment would work as follows:

1) An investment of US $100,000 would be equivalent to one share of Abaco, worth 1% of
the company and equivalent to a 1% shareholding in Crossing Corp.;
2) Initial investments in Abaco would be subject to an initial administration fee of $1,000
(CAD), which all investors would make, including the Respondent;
3) The Abaco Investment would then be loaned to Crossing Corp. in the Bahamas, which
loan would earn the Abaco shareholders interest at 5% per annum (the “Loans”);
4) The Loans would have to be maintained in Crossing Corp. for a minimum of two years,
following which Crossing Corp. intended to fully repay them to Abaco;
5) Initial investors in Abaco would be entitled to an annual complimentary week stay in a
unit of the Crossing Rocks Property once the development project was completed; and
6) A collateral mortgage would be registered against the Crossing Rocks Property while
Loans to Crossing Bay were outstanding in order to secure the Loans (and thus
investments in Abaco / the Crossing Rocks Property development project).

51.
The Abaco Investment was not a security sold pursuant to a prospectus or an exemption
from the prospectus requirement, nor was it an investment known to or approved for sale by
Equity. Investors were not provided with an offering memorandum, a subscription agreement or
any other form of written disclosure in respect of the Abaco Investment.

Page 11 of 23

52.
The Respondent now states that the Abaco Investment was a security sold pursuant to
National Instrument 45-106, section 2.4(2)(e) (“NI 45-106”)4, however there is no evidence
establishing that it was sold on that basis, nor that it complied with the provisions of NI 45-106.

53.
The following individuals invested in Abaco (the “Abaco Investors”):

Investors Date
of
Amount Admin.
Client of Equity
Investment
Fee
serviced by the
Respondent
Respondent
July 10, 2007
$600,000
$5,000
N/A
DM and
July 13, 2007
$100,000
$1,000
Yes
KM
TN and DN
July 13, 2007
$300,000
$1,000
Yes
BP and BP
July 13, 2007
$100,000
$1,000
No
EB
July 31, 2007
$600,000
$1,000
Yes
DP
August 3, 2007
$50,000
$1,000
No
TG and
August 3, 2007
$100,000
$1,000
Yes
MG
WD and
August 13,
$100,000 $1,000
Yes
SD
2007
Total
$1,950,000
$12,000

Though there is no evidence of such, the Respondent states that these individuals were her close
friends and wealthy individuals.

54.
A portion of the funds invested in Abaco by each of clients DM, KM, EB, WD and SD
was obtained from redemptions made in their Equity accounts. In each case, the Respondent
processed the redemption:

4 The Private issuer exemption, as it is defined in NI 45-106. This exemption permits trades in a security of a
company that has fifty or fewer shareholders and is not a reporting issuer. Trades of a private issuer’s securities may
only be made to individuals listed in NI 45-106, s. 2.4(2) and only where the private issuer’s articles, shareholders’
agreement or other security holders’ agreement contains restrictions on the transfer of its securities.

Page 12 of 23

Investors Redemption
Redemption Surrender Fees
Date
Amount
Incurred
DM and KM
July 5, 2007
$100,000
$0
EB
June 29 to
$495,668.96 $3,862.88
July 4, 2007
WD and SD
August 3,
$90,000 $0
2007

55.
On September 20, 2007, the Respondent sent letters to the Abaco Investors on Abaco
letterhead acknowledging their investments and advising that share certificates would be issued
in their names. The letters also acknowledged receipt of an administration fee in the amount of
$1,000.00.

56.
While the Abaco Investors may have known that the Respondent and her husband were
investing in Abaco, the Respondent did not disclose to the Abaco Investors, either orally or in
writing, that her interests posed a potential or actual conflict of interest between her and the
Equity clients who invested in Abaco.

57.
At no time did the Respondent disclose to EW and TW, either orally or in writing, that
her interests posed a potential or actual conflict of interest between her and EW and TW in
relation to the investments in the Crossing Rocks Property and Crossing Corp. Further, the
Respondent did not disclose to Equity her involvement in Crossing Corp., Abaco, or the Abaco
Investments.

58.
In the fall of 2007, the Respondent realized that the costs of developing the Crossing
Rocks Property were significantly higher than initially thought. As a consequence, in December
2007, the Respondent advised EW, TW and TWJ of her intention to withdraw Crossing Corp.’s
offer to purchase the Crossing Rocks Property and provided TWJ with the necessary directions
to do so. At that time, the Respondent, via Abaco, returned the funds invested by the Abaco
Investors, including their $1,000 administration fee. The Respondent states that she assumed

Page 13 of 23

responsibility for payment of lawyers, accountants, valuators and other professionals engaged in
the planning of the Crossing Rocks Property development project for the sum of $78,000.

59.
Pursuant to section 2.3 of Equity’s Policies and Procedures Manual, Equity requires its
registered mutual fund salesperson to inform them of:

a) business activities that are not carried on for the account of Equity; and
b) shareholdings in any business, whether related to the conduct of a securities
business or not, that is not carried on for the account of Equity.

60.
As part of its May 2007 Field Review of the Respondent, Equity inquired as to whether
the Respondent was a “shareholder in any other business, securities-related or non-securities-
related.” The Respondent responded “No”.

61.
The Respondent never disclosed to Equity that she was a shareholder in Crossing Corp.
or Abaco, nor did she disclose the nature of her investments relating to the development of the
Crossing Rocks Property. In addition, the Respondent never disclosed to the Member that
Equity clients for which she was the representative salesperson had invested in Abaco or
Crossing Corp.

V.
CONTRAVENTIONS

62.
The Respondent admits that:

a) From June 28, 2005 to December 20, 2007, she was a joint owner with right of
survivorship of client NM’s account, thereby giving rise to an actual or potential
conflict of interest between the Respondent and client NM which the Respondent
failed to address by the exercise of responsible business judgment influenced only
by the best interests of client NM, contrary to MFDA Rules 2.1.45 and 2.1.1;

5 MFDA Rule 2.1.4 was amended on February 27, 2006. It is alleged that the Respondent’s conduct contravened
MFDA Rule 2.1.4 both pre- and post-amendment.

Page 14 of 23

b) From October 19, 2006 to December 20, 2007, while a joint owner of client NM’s
account, she carried out trades in client NM’s account on at least four occasions in
respect of which she alone authorized the trades and determined the securities
traded, contrary to MFDA Rule 2.3.1(a) and 2.1.1;
c) By failing to renounce her appointment in the will of client NM as an executrix of
NM’s estate in the event that KB was unwilling or unable to perform her duties,
her actions gave rise to an actual or potential conflict of interest between herself
and client NM (and later the estate of client NM) which she failed to address by
the exercise of responsible business judgment influenced only by the best interests
of client NM (and later the estate of client NM), contrary to MFDA Rules 2.1.4
and 2.1.1;
d) By accepting her appointment as trustee of the trust established for DM, the son
of client NM, she engaged in personal financial dealings with client NM, thereby
giving rise to an actual or potential conflict of interest between herself and client
NM (and later the estate of client NM) which she failed to address by the exercise
of responsible business judgment influenced only by the best interests of client
NM (and later the estate of client NM), contrary to MFDA Rules 2.1.4 and 2.1.1;
e) By transferring all of the monies in client NM’s account to her personal bank
account following the death of client NM she engaged in conduct unbecoming an
Approved Person, contrary to MFDA Rules 2.1.4 and 2.1.1;
f) Between February 2006 and December 2007, she engaged in personal financial
dealings;
a. with clients EW and TW by participating in the purchase of the Crossing
Rocks Property, incorporating Crossing Corp. with clients EW and TW,
and participating in the Crossing Rocks Property development project; and
b. with clients DM, KM, TN, DN, EB, TG, MG, WD and SD by facilitating
and obtaining their investments in Abaco, a corporation for which she was
a shareholder, director and officer;

thereby giving rise to an actual or potential conflict of interest with each client which
she failed to address by the exercise of responsible business judgment influenced only
by the best interests of the clients, contrary to MFDA Rules 2.1.4 and 2.1.1;

Page 15 of 23

g) Between February 2006 and December 2007, she engaged in outside business
activities which she failed to disclose to the Member or on the National
Registration Database (“NRD”), as required, by participating in the purchase and
development project of a Bahamian property, and in the process incorporating,
and being a shareholder, director and officer of, a Bahamian corporation known as
Crossing Corp. as well as an Ontario corporation known as Abaco, thereby acting
contrary to MFDA Rules 1.2.1(d), 2.1.1(c);
h) Between October 31, 2006 and December 2007, she engaged in securities related
business that was not carried out for the account and through the facilities of the
Member by selling investments in Abaco to clients and other individuals, contrary
to MFDA Rules 1.1.1(a) and 2.1.1; and
i) Between June 2006 and December 2007, she failed to disclose to the Member her
participation in a Bahamian property development project, including her
shareholdings and directorships in Crossing Corp. and Abaco, thereby acting
contrary to the Member’s policies and procedures and interfering with the ability
of the Member to supervise her conduct and comply with its obligations under
MFDA Rule 2.1.4, contrary to MFDA Rules 1.1.2, 1.1.5 and 2.5.1, and MFDA
Rule 2.1.1.

VI.
TERMS OF SETTLEMENT

63.
The Respondent agrees to the following terms of settlement:

a) the Respondent shall pay a fine in the amount of $40,000, pursuant to section
24.1(b) of By-law No. 1, upon the acceptance of this Settlement Agreement;
b) a suspension from acting as a mutual fund salesperson for a period of 3 months;
c) the Respondent shall pay the costs of this proceeding in the amount of $5,000,
pursuant to section 24.2 of By-law No. 1, upon the acceptance of this Settlement
Agreement; and
d) the Respondent shall in the future comply with all MFDA By-laws, Rules and
Policies, and all applicable securities legislation and regulations.

Page 16 of 23

VII.
STAFF COMMITMENT

64.
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 facts set out
in Part IV and 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
IV this Settlement Agreement or in respect of conduct that occurred outside the specified date
ranges of the facts and contraventions set out in Parts IV and 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

65.
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.

66.
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 its her 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.

67.
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. 24.1.2 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.

68.
Staff and the Respondent agree that if this Settlement Agreement is accepted by the

Page 17 of 23

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 it her.

IX.
FAILURE TO HONOUR SETTLEMENT AGREEMENT

69.
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

70.
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.

71.
Whether or not this Settlement Agreement is accepted by the Hearing Panel, the
Respondent agrees that it she 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

72.
The terms of this Settlement Agreement will be treated as confidential by the parties

Page 18 of 23

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.

73.
Any obligations of confidentiality shall terminate upon acceptance of this Settlement
Agreement by the Hearing Panel.

XII.
EXECUTION OF SETTLEMENT AGREEMENT

74.
This Settlement Agreement may be signed in one or more counterparts, which together,
shall constitute a binding agreement.

75.
A facsimile copy of any signature shall be effective as an original signature.

Dated: November 16, 2010.

“R. Ieraci”

“Mary Lambros”
Witness – Signature

Mary Lorelei Lambros

R. Ieraci
Witness – Print name

“Shaun
Devlin”

Staff of the MFDA
Per: Shaun Devlin
Vice-President Enforcement

Page 19 of 23

Schedule “A” Order
File No. 201022

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: Mary Lorelei Lambros



ORDER


WHEREAS on [DATE], the Mutual Fund Dealers Association of Canada (the “MFDA”)
issued a Notice of Settlement Hearing pursuant to section 24.4 of By-law No. 1 in respect of
Mary Lorelei Lambros (the “Respondent”);

AND WHEREAS the Respondent entered into a settlement agreement with Staff of the
MFDA, dated November 16, 2010 (the “Settlement Agreement”), in which the Respondent
agreed to a proposed settlement of matters for which the Respondent could be disciplined
pursuant to ss. 20 and 24.1 of By-law No. 1;

AND WHEREAS the Hearing Panel is of the opinion that:

1) From June 28, 2005 to December 20, 2007, the Respondent was a joint owner with right
of survivorship of client NM’s account, thereby giving rise to an actual or potential
conflict of interest between the Respondent and client NM which the Respondent failed

Page 20 of 23

to address by the exercise of responsible business judgment influenced only by the best
interests of client NM, contrary to MFDA Rules 2.1.46 and 2.1.1;

2) From October 19, 2006 to December 20, 2007, while a joint owner of client NM’s
account, the Respondent carried out trades in client NM’s account on at least four
occasions in respect of which she alone authorized the trades and determined the
securities traded, contrary to MFDA Rule 2.3.1(a) and 2.1.1;

3) By failing to renounce her appointment in the will of client NM as an executrix of NM’s
estate in the event that KB was unwilling or unable to perform her duties, the
Respondent’s actions gave rise to an actual or potential conflict of interest between
herself and client NM (and later the estate of client NM) which she failed to address by
the exercise of responsible business judgment influenced only by the best interests of
client NM (and later the estate of client NM), contrary to MFDA Rules 2.1.4 and 2.1.1;

4) By accepting her appointment as trustee of the trust established for DM, the son of client
NM, the Respondent engaged in personal financial dealings with client NM, thereby
giving rise to an actual or potential conflict of interest between herself and client NM
(and later the estate of client NM) which she failed to address by the exercise of
responsible business judgment influenced only by the best interests of client NM (and
later the estate of client NM), contrary to MFDA Rules 2.1.4 and 2.1.1;

5) By transferring all of the monies in client NM’s account to her personal bank account
following the death of client NM the Respondent engaged in conduct unbecoming an
Approved Person, contrary to MFDA Rules 2.1.4 and 2.1.1;

6) Between February 2006 and December 2007, the Respondent engaged in personal
financial dealings:

6 MFDA Rule 2.1.4 was amended on February 27, 2006. It is alleged that the Respondent’s conduct contravened
MFDA Rule 2.1.4 both pre- and post-amendment.

Page 21 of 23

a. with clients EW and TW by participating in the purchase of a Bahamian property
(the “Property”), incorporating a Bahamian company known as Crossing Bay
Limited (the “Crossing Corp.”) with clients EW and TW, and participating in a
development project of the Property (the “Bahamian Property Development
Project”); and
b. with clients DM, KM, TN, DN, EB, TG, MG, WD and SD by facilitating and
obtaining their investments in Abaco Investments Inc. (“Abaco”), a corporation
for which she was a shareholder, director and officer;

thereby giving rise to an actual or potential conflict of interest with each client which 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 2.1.4 and 2.1.1;

7) Between February 2006 and December 2007, the Respondent engaged in outside
business activities which she failed to disclose to the Member or on the National
Registration Database (“NRD”), as required, by participating in the purchase and
development project of the Property, and in the process incorporating, and being a
shareholder, director and officer of, a Bahamian corporation known as Crossing Corp. as
well as an Ontario corporation known as Abaco, thereby acting contrary to MFDA Rules
1.2.1(d), 2.1.1(c);

8) Between October 31, 2006 and December 2007, the Respondent engaged in securities
related business that was not carried out for the account and through the facilities of the
Member by selling investments in Abaco to clients and other individuals, contrary to
MFDA Rules 1.1.1(a) and 2.1.1; and

9) Between June 2006 and December 2007, the Respondent failed to disclose to the Member
her participation in the Bahamian Property Development Project, including her
shareholdings and directorships in Crossing Corp. and Abaco, thereby acting contrary to
the Member’s policies and procedures and interfering with the ability of the Member to
supervise her conduct and comply with its obligations under MFDA Rule 2.1.4, contrary
to MFDA Rules 1.1.2, 1.1.5 and 2.5.1, and MFDA Rule 2.1.1.

Page 22 of 23

IT IS HEREBY ORDERED THAT the Settlement Agreement is accepted, as a
consequence of which:

1. The Respondent shall pay a fine in the amount of $40,000, pursuant to section 24.1(b)
of By-law No. 1;

2. The Respondent is a suspended from acting as a mutual fund salesperson for a period
of 3 months;

3. The Respondent shall pay the costs of this proceeding in the amount of $5,000,
pursuant to section24.2 of By-law No. 1; and

4. The Respondent shall in the future comply with all MFDA By-laws, Rules and
Policies, and all applicable securities legislation and regulations.

DATED this [day] day of [month], 20[ ].

Per: __________________________

Terrance A. Sweeney, Chair

Per: _________________________
Guenther
Kleberg

Per: _________________________
Brian
Nowak

Doc 245896

Page 23 of 23