Settlement Agreement

I. INTRODUCTION

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

2. Staff conducted an investigation of the Respondent’s activities which disclosed activity for which the Respondent could be penalized on the exercise of the discretion of the Hearing Panel pursuant to s. 24.1 of By-law No. 1.

II. JOINT SETTLEMENT RECOMMENDATION

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

4. The Respondent admits to the following violations of the By-laws, Rules or Policies of the MFDA:
   1. between December 30, 2015 and January 4, 2016, the Respondent opened 2 accounts for a client, recorded the client’s Know-Your-Client information, and processed 2 transactions in the client’s accounts without having met or communicated with the client, thereby failing to use due diligence to learn the essential facts relative to a client and to each order or account accepted, contrary to MFDA Rules 2.2.1 and 2.1.1; and
   2. on December 30, 2015, the Respondent created a note on the Member’s back office system which indicated that he met with a client to open two accounts at the Member when he had not done so, contrary to MFDA Rule 2.1.1.

5. Staff and the Respondent agree and consent to the following terms of settlement:
   1. the Respondent shall be prohibited for four months from conducting securities related business in any capacity while in the employ of or associated with any Member of the MFDA, pursuant to s. 24.1.1.(e) of MFDA By-law No. 1;
   2. the Respondent shall pay costs in the amount of $2,500 pursuant to s. 24.2 of MFDA By-law No. 1;
   3. the payment by the Respondent of the Costs shall be made to and received by MFDA Staff in certified funds as follows:
      1. $500 upon acceptance of the Settlement Agreement by the Hearing Panel;
      2. $500 on or before the last business day of the 2^nd month following the date of the acceptance of the Settlement Agreement by the Hearing Panel;
      3. $500 on or before the last business day of the 3^rd month following the date of the acceptance of the Settlement Agreement by the Hearing Panel;
      4. $500 on or before the last business day of the 4^th month following the date of the acceptance of the Settlement Agreement by the Hearing Panel; and
      5. $500 on or before the last business day of the 5^th month following the date of the acceptance of the Settlement Agreement by the Hearing Panel;
   4. the Respondent shall in the future comply with MFDA Rules 2.2.1 and 2.1.1; and
   5. the Respondent will attend in person, on the date set for the Settlement Hearing.

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

III. AGREED FACTS

Registration History

7. From September 2014 to February 2016, the Respondent was registered in Alberta as a mutual fund salesperson (now known as a dealing representative) with CIBC Securities Inc. (“CIBC”), a Member of the MFDA.

8. In February 2016, the Respondent’s registration with CIBC was terminated.

9. From November 2007 until August 2014, the Respondent was registered in Ontario and Alberta at various times as a mutual fund salesperson with Royal Mutual Funds Inc., a Member of the MFDA.

10. At all material times, the Respondent conducted business in the Fort McMurray, Alberta area.

11. The Respondent is not currently registered in the securities industry in any capacity.

Completion of KYC Information and Processing of Trades Without Meeting With Client

12. At all material times, CIBC’s policies and procedures required its Approved Persons, including the Respondent, to use due diligence to learn the essential facts relative to each client and to each order or account accepted.

13. In December 2015, the Respondent met with client MU on several occasions. Client MU was a CIBC Bank employee that worked at the same office location as the Respondent. As a result of those meetings, the Respondent opened individual Registered Retirement Savings Accounts (“RRSP”) and Tax Free Savings Accounts (“TFSA”) for client MU, her husband, client VU, and their daughter, client CU.

14. The Respondent states that, on one occasion during a scheduled meeting attended with only client MU and client VU, he discussed and recommended investments for the RRSP and TFSA accounts for all family members, including client CU.

15. On or about December 30, 2015, the Respondent prepared the following documentation in order to open the RRSP and TFSA for client CU:
    1. two New Account Application Forms (“NAAFs”) to open the RRSP and TFSA for client CU; and
    2. two Investor Profile Forms, which contained investment recommendations, and which required client CU to initial the forms.

16. The Respondent completed the Know-Your-Client information on the NAAFs and Investor Profile Forms to open the accounts for client CU based on information the Respondent had on file with respect to client CU’s holdings at CIBC Bank, without having any discussions with client CU.

17. The Respondent provided the NAAFs and Investor Profile Forms to client MU to obtain client CU’s signatures and initials, respectively.

18. On or about December 30, 2015, client MU returned the two NAAFs and Investor Profile Forms containing client CU’s signatures and initials to the Respondent. The Respondent subsequently submitted the forms to CIBC for processing.

19. Between December 30, 2015 and January 4, 2016, after opening client CU’s RRSP and TFSA, the Respondent prepared transfer forms (the “Transfer Forms”) to transfer monies to the RRSP and TFSA and purchase mutual funds based on the recommendations from the Investor Profile Forms. The Respondent provided the Transfer Forms to client MU to obtain client CU’s signatures, which were subsequently signed and returned to the Respondent. The Respondent obtained the signed Transfer Forms from client MU.

20. On January 4, 2016, the Respondent submitted the Transfer Forms to CIBC for processing, without having met or discussed the transactions with client CU.

21. The Respondent processed transactions totaling $18,109.41 for client CU in order to purchase mutual funds on behalf of client CU, as follows:

Client Notes

22. On or about December 30, 2015, the Respondent prepared client notes on CIBC’s back office system regarding the opening of the RRSP and TFSA for client CU, as described above at paragraph 15.

23. The Respondent’s client notes for client CU indicated that:
    1. the Respondent met with client CU on December 30, 2015 to open the RRSP and TFSA;
    2. he reviewed and confirmed the KYC information with client CU; and
    3. he explained the risk, volatility and performance history of the mutual funds generated electronically from the KYC information entered in the electronic Investment Profile;

    when he in fact had not done so.

CIBC’s Investigation

24. On or about January 25, 2016, client MU complained about the handling by the Respondent of her accounts, client VU’s accounts, and client CU’s accounts. CIBC subsequently commenced an investigation which identified the misconduct that is the subject of this Settlement Agreement.

25. In February 2016, CIBC reversed transactions that occurred in the accounts of clients MU and VU, as well as the transactions that occurred in client CU’s TFSA and RRSP as described above.

26. On February 8, 2016, CIBC terminated the Respondent’s mutual fund registration.

Additional Factors

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

28. The Respondent states that he is impecunious and unable to pay any amount towards a fine. The Respondent acknowledges that absent his inability to pay, it would have been appropriate for him to be subject to a penalty that included a fine due to the conduct that is the subject of this Settlement Agreement.

29. The Respondent states that he is actively attempting to become reregistered in the mutual fund industry.

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

31. By entering into this Settlement Agreement, the Respondent has saved the MFDA the time, resources, and expenses associated with conducting a full hearing of the allegations.

IV. ADDITIONAL TERMS OF SETTLEMENT

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

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

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

35. Staff and the Respondent agree that if this Settlement Agreement is accepted by the Hearing Panel:
    1. the Settlement Agreement will constitute the entirety of the evidence to be submitted respecting the Respondent in this matter;
    2. the Respondent waives any rights to a full hearing, a review hearing before the Board of Directors of the MFDA or any securities commission with jurisdiction in the matter under its enabling legislation, or a judicial review or appeal of the matter before any court of competent jurisdiction;
    3. Staff will not initiate any proceeding under the By-laws of the MFDA against the Respondent in respect of the facts and contraventions described in this Settlement Agreement. Nothing in this Settlement Agreement precludes Staff from investigating or initiating proceedings in respect of any facts and contraventions that are not set out in this Settlement Agreement.  Furthermore, nothing in this Settlement Agreement shall relieve the Respondent from fulfilling any continuing regulatory obligations;
    4. the Respondent shall be deemed to have been penalized by the Hearing Panel pursuant to s. 24.1.2 of By-law No. 1 for the purpose of giving notice to the public thereof in accordance with s. 24.5 of By-law No. 1; and
    5. neither Staff nor the Respondent will make any public statement inconsistent with this Settlement Agreement. Nothing in this section is intended to restrict the Respondent from making full answer and defence to any civil or other proceedings against the Respondent.

36. If, for any reason, this Settlement Agreement is not accepted by the Hearing Panel, each of Staff and the Respondent will be entitled to any available proceedings, remedies and challenges, including proceeding to a disciplinary hearing pursuant to sections 20 and 24 of By-law No. 1, unaffected by the Settlement Agreement or the settlement negotiations.

37. Staff and the Respondent agree that the terms of the Settlement Agreement, including the attached Schedule “A”, will be released to the public only if and when the Settlement Agreement is accepted by the Hearing Panel.

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