Settlement Agreement

I. INTRODUCTION

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

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 May, 1994, the Respondent has been registered in Ontario as a mutual fund salesperson (now known as a dealing representative) with Investors Group Financial Services Inc. (“Investors Group”), a Member of the MFDA.

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

Contravention

8. At all material times, clients RB and CO (the “Clients”) were clients of Investors Group and the Respondent was the mutual fund salesperson assigned to service their accounts.

9. On November 13, 2013, the Clients met with the Respondent. The Clients were looking to reduce the costs being incurred within their investment portfolios at Investors Group.  To accomplish their goals in this regard, the Clients wanted to redeem $150,000 of mutual funds without incurring deferred sales charges (“DSC”)[1].

10. The Respondent states that he advised the Clients that they could redeem all the current fee free units found in accounts # —–352 and # —–633, and that he can use the proceeds of those sales to purchase units of a conservative fund.

11. Immediately following the November 13, 2013 meeting, the Respondent processed 8 trades within accounts # —–352 and # —–633 totaling $43,225.55, which consisted of switches of matured fund units (i.e., units where the DSC schedule had expired) held by the Clients to units of a new fund, as described below:

November 13, 2013 Switches
Account #	Account Type	Dollar Amount	Fund Redeemed	Fund Purchased
—–352	Joint Non-reg	$4,499.63	International Small Cap	Cornerstone III Portfolio A
—–352	Joint Non-reg	$8,042.94	Dividend Fund	Cornerstone III Portfolio A
—–352	Joint Non-reg	$1,173.81	Canadian Small Cap	Cornerstone III Portfolio A
—–352	Joint Non-reg	$2,492.10	Canadian High Yield Income Fund	Cornerstone III Portfolio A
—–352	Joint Non-reg	$1,247.18	US Dividend Growth	Cornerstone III Portfolio A
—–352	Joint Non-reg	$9,580.35	IG Putnam US High Yield Income Fund	Cornerstone III Portfolio A
—–633	Client CO’s Non-reg	$5,297.16	Investors Dividend Fund	Cornerstone III Portfolio A
—–633	Client CO’s Non-reg	$10,892.38	Investors Canadian Equity	Cornerstone III Portfolio A
Total		$43,225.55

12. The Respondent processed the trades using a Limited Trade Authorization provided by the Clients.

13. Prior to processing the trades described above in paragraph 11, the Respondent did not obtain instructions from the Clients with respect to which funds would be purchased.

14. On November 22, 2013, the Clients met with the Respondent. At that time the Respondent advised the Clients that he had processed the trades described above in paragraph 11.

Additional Factors

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

16. 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 allegation.

V. CONTRAVENTIONS

17. The Respondent admits that on November 13, 2013, the Respondent performed 8 trades in the accounts of the Clients without having obtained instructions from the Clients on which funds would be purchased, contrary to MFDA Rule 2.3.1(b).

VI. TERMS OF SETTLEMENT

18. The Respondent agrees to the following terms of settlement:
    1. the Respondent shall be imposed with a reprimand, pursuant to section 24.1.1(a) of MFDA By-law No. 1;
    2. the Respondent shall pay costs in the amount of $2,500, pursuant to section 24.2 of MFDA By-law No. 1;
    3. the Respondent shall in the future comply with all MFDA By-laws, Rules and Policies, and all applicable securities legislation and regulations made thereunder, including MFDA Rule 2.3.1(b); and
    4. the Respondent will attend in person, on the date set for the Settlement Hearing.

VII. STAFF COMMITMENT

19. 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

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

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

22. 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.

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

IX. Failure to honour Settlement Agreement

24. 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

25. 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.

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

XI. DISCLOSURE OF AGREEMENT

27. 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.

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

XII. EXECUTION OF SETTLEMENT AGREEMENT

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

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

[1] A deferred sales charge is a back-end fee that is charged to a mutual fund investor if he/she redeems his/her investment prior to the expiry of the deferred sales charge schedule (generally, ranging from 5 to 7 years in length). The deferred sales charge declines over the course of the deferred sales charge schedule.