Settlement Agreement

I. INTRODUCTION

1. By News Release, 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 MFDA 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 the Respondent, Mary Dee Happy Iturralde.

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 section 24.1 of MFDA 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. Since December 2, 2011, the Respondent has been registered in Ontario as a mutual fund salesperson (now known as a dealing representative) with PFSL Investments Canada Ltd. (“PFSL”), a Member of the MFDA.

7. At all material times, the Respondent conducted business in Toronto, Ontario. 

Background

8. At all material times, MB operated a business which purported to sell discount travel tickets to consumers (the “Travel Business”). Among other activities, MB solicited investors in the Travel Business to provide funding to purchase travel tickets for re-sale.

9. MB has never been registered in the securities industry in any capacity and was never a PFSL client.

10. On or about February 15, 2015, MB was convicted of Defrauding the Public, contrary to section 380(1)(a) of the Criminal Code, R.S.C., 1985, c. C-46, in respect of approximately 70 individuals who paid $301,736 to MB for travel services which were not provided to them. MB was sentenced to a period of incarceration of approximately 21 months and ordered to make full restitution.

11. On or about May 25, 2015, MB was convicted of operating a travel retailer without registration, contrary to section 4(1) of the Ontario Travel Industry Act, 2002, S.O. 2002, c. 30, Sched. D – Ontario. MB was sentenced to a period of incarceration of 12 months and ordered to make restitution in the amount of $81,578.21 in favour of 24 consumers who paid MB for travel services which were not provided to them.

12. As described in greater detail below, the Respondent authorized MB to use the Respondent’s personal bank accounts and credit cards, which MB used for various purposes, including in relation to the operation of the Travel Business. The Respondent states that she was not involved in MB’s fraudulent activities, and she did not, at any point during the material time, have knowledge of MB’s fraudulent activities. 

Allegation #1 – Personal Financial Dealings with a Client

13. At all material times, client BL was a client of PFSL and the Respondent was the mutual fund salesperson assigned to service her accounts.

14. At all material times, PFSL maintained policies and procedures which stated:

…PFSL representatives are prohibited from becoming involved with new or existing clients in any kind of private investment schemes.  Such schemes raise significant and direct conflicts of interest where the exercise of responsible judgment requires prohibition of the arrangements.

15. Sometime between March and May 2013, client BL met MB at a lunch where the Respondent was present.

16. Subsequent to this meeting, client BL was informed by MB of an opportunity to invest in the Travel Business and earn a guaranteed rate of return of 10% per month.

17. On or about May 30, 2013, client BL obtained a bank draft in the amount of $20,000 payable to the Respondent (the “Bank Draft”). The Respondent states that the Bank Draft was to reimburse the Respondent for monies that the Respondent, at client BL’s request, had paid to MB to invest in the Travel Business on behalf of client BL.

18. Client BL subsequently received an agreement signed by MB dated May 31, 2013 stating, “[t]his letter serves as an agreement between [client BL] and [MB] for the use of their money as an investment to purchase wholesale passenger air tickets with 10% payable every month.”

19. At the time that the Respondent received and deposited the Bank Draft , the Respondent was allowing MB to use the Respondent’s credit cards and bank accounts for various purposes, including in relation to the operation of the Travel Business.

20. Client BL advises that she received monthly interest payments in respect of the investment in the Travel Business until January 2014.

21. Client BL advises that she was not repaid the principal of her investment in the Travel Business.

22. The Travel Business was not an investment which was known to or approved by PFSL, and PFSL was not aware that the Respondent had any involvement with MB or in relation to the operation of the Travel Business.

23. By virtue of the foregoing, the Respondent accepted the Bank Draft from client BL, and deposited the monies into the Respondent’s bank account, thereby engaging in conduct giving rise to a conflict or potential conflict of interest which the Respondent failed to address by the exercise of responsible business judgment influenced only by the best interests of the client.

Allegation #2 – The Respondent Authorized the Use of Bank Accounts and Credit Cards by MB 

24. As described in greater detail below, between December 2011 and April 2014, the Respondent authorized MB to use the Respondent’s personal bank accounts and credit cards for various purposes, including in relation to the operation of the Travel Business.

25. In or about August 2011, the Respondent opened a bank account in the Respondent’s name for the exclusive use of MB (the “MB Account”). The Respondent opened the MB Account to assist MB, who told the Respondent that she could not open a bank account of her own because she was not a Canadian resident.

26. At all material times, the Respondent held a joint bank account with the Respondent’s spouse (the “Respondent Account”).

27. The Respondent authorized and/or permitted MB to use the MB Account and the Respondent Account in relation to the operation of the Travel Business.

28. Between January 5, 2012 and March 31, 2014, the MB Account and the Respondent Account were used to process at least 42 transactions, totaling approximately $72,203, in relation to the Travel Business.

29. Between January 4, 2012 and March 14, 2014, the Respondent authorized and/or permitted MB to process 95 charges, totaling $110,233.93, on the Respondent’s credit cards in respect of travel tickets purchases and travel expenses for the Travel Business, as described below:

 

Credit Card	Dates	# of Transactions	Description	Amount
PC MasterCard	January 4, 2012-April 2, 2012	2	Travel ticket purchases	$3,446.96
TD Visa	January 23, 2012-March 14, 2014	44	Travel ticket purchases and travel expenses	$45,876.18
BMO MasterCard	December 1, 2012-February 14, 2014	49	Travel ticket purchases and travel expenses	$60,910.79
Total		95		$110,233.93

30. Between March 7, 2012 and Jan. 16, 2014, a total of $78,404.91 was withdrawn from the MB Account to make payments to the Respondent’s credit cards.

31. As stated above, MB conducted fraudulent activities through the Travel Business. The Respondent unknowingly facilitated these fraudulent activities by authorizing and/or permitting MB to use the Respondent’s personal bank accounts and credit cards to operate the Travel Business.

32. At all material times, the Respondent ought to have known that permitting MB to use the Respondent’s personal bank accounts and credit cards concealed MB’s involvement in the Travel Business and the receipt of monies from consumers and investors in respect of the business.

33. By virtue of the foregoing, the Respondent engaged in conduct or practice which is unbecoming or detrimental to the public interest. 

Additional Factors 

34. The Respondent self-reported her relationship with MB to her dealer.

35. Prior to when the Respondent learned of MB’s fraudulent conduct, the Respondent considered MB to be a trusted personal friend.

36. There is no evidence that the Respondent received any financial benefit from engaging in the misconduct set out above and, in fact, the Respondent was never repaid monies by MB.

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

38. The sanctions imposed are significant to the Respondent, who is only 35 years of age and has two young children.

39. 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

40. The Respondent admits that in or about May 2013, the Respondent accepted a $20,000 bank draft from a client payable to the Respondent personally, and deposited the monies into the Respondent’s bank account, in order to facilitate the client’s investment in a discount travel ticket business, thereby engaging in conduct giving rise to a conflict or potential conflict of interest which the Respondent failed to address by the exercise of responsible business judgment influenced only by the best interests of the client, contrary to MFDA Rules 2.1.4, 2.4.2, 2.5.1, 1.1.2, and 2.1.1.

41. The Respondent admits that between December 2011 and April 2014, the Respondent authorized and/or permitted an individual to use the Respondent’s personal bank accounts and credit cards to operate a discount travel ticket business which was subsequently determined to be fraudulent, thereby engaging in conduct or practice which is unbecoming or detrimental to the public interest, contrary to MFDA Rule 2.1.1.

VI. TERMS OF SETTLEMENT 

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

1. the Respondent’s authority to conduct securities related business in any capacity while in the employ of or associated with any MFDA Member shall be suspended for 18 weeks, commencing on the date this Settlement Agreement is accepted by the Hearing Panel pursuant to section 24.1.1(c) of MFDA By-law No. 1;
2. the Respondent shall pay a fine in the amount of $10,000, payable in 10 monthly instalments of $1,000 each, commencing one month from the date this Settlement Agreement is accepted by the Hearing Panel, pursuant to section 24.1.1(b) of MFDA By-law No. 1;
3. the Respondent shall pay costs in the amount of $5,000, on or before the date set for the Settlement Hearing, pursuant to section 24.2 of MFDA By-law No. 1;
4. the Respondent shall in the future comply with MFDA Rules 2.1.1, 2.1.4, 2.4.2, 2.5.1 and 1.1.2; and
5. the Respondent will attend in person on the date set for the Settlement Hearing. 

VII. STAFF COMMITMENT

43. 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

44. 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.

45. 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 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.

46. 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 section 24.1.1 of MFDA By-law No. 1 for the purpose of giving notice to the public thereof in accordance with section 24.5 of MFDA By-law No. 1.

47. 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 her.

IX. FAILURE TO HONOUR SETTLEMENT AGREEMENT

48. 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

49. 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 MFDA By-law No. 1, unaffected by this Settlement Agreement or the settlement negotiations.

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

51. 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.

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

XII. EXECUTION OF SETTLEMENT AGREEMENT

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

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