Settlement Agreement

I. INTRODUCTION

1. Staff of the Mutual Fund Dealers Association of Canada (“Staff”) and the respondent, David Terrance Fredrickson (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 January 4, 2012 and September 17, 2015, the Respondent, or his assistants for whom he was responsible, obtained, possessed, and in some instances, used to process transactions, 40 pre-signed account forms in respect of 11 client accounts, 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 pay a fine in the amount of $10,000 pursuant to section 24.1.1.(b) 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 payment of the fine and costs shall be made to and received by MFDA Staff in as follows:
      1. $2,500 (costs) upon acceptance of the Settlement Agreement by the Hearing Panel;
      2. $10,000 (fine) in certified funds on or before the last business day of the 3^rd month following the date of the acceptance of this Settlement Agreement by Hearing Panel;
   4. the Respondent shall in the future comply with MFDA Rule 2.1.1; and
   5. the Respondent will attend, in person, on the date set for the settlement hearing (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. The Respondent has been registered in the mutual fund industry commencing in or around 1995.  The Respondent states that he has been licensed in the insurance industry since 1975.
8. Since August 2001, the Respondent has been registered in Manitoba as a mutual fund salesperson (now known as a dealing representative) with Quadrus Investment Services Ltd. (“Quadrus”), a Member of the MFDA.
9. At all material times, the Respondent conducted business in the Winnipeg, Manitoba area.

Pre-Signed Account Forms

10. At all material times, Quadrus’ policies and procedures prohibited its Approved Persons, including the Respondent, from obtaining, holding, or using pre-signed account forms.
11. Between January 4, 2012 and September 17, 2015, the Respondent, or his assistants, obtained, possessed, and in 37 instances, used to process transactions, 40 pre-signed account forms in respect of 11 client accounts.
12. The Respondent states that one of the assistants was an employee of Quadrus^[1], but accepts that he is ultimately responsible for the actions of the assistants.
13. The pre-signed account forms consisted of:
    1. 2 pre-authorized chequing forms;
    2. 15 redemption forms;
    3. 2 subsequent investment forms;
    4. 4 RESP educational assistance payment forms;
    5. 14 switch / conversion forms; and
    6. 3 systematic instruction forms.

Quadrus’ Investigation

14. On or about January 8, 2016, an assistant of the Respondent, AM, submitted an account form to Quadrus for processing.[2] Quadrus believed that the form was a pre-signed account form that had been submitted in contravention of MFDA Rule 2.1.1. The form submitted by AM was ultimately determined not to be a pre-signed account form and does not form part of this Settlement Agreement.
15. On the basis of the account form submitted by AM, Quadrus commenced an investigation and identified the pre-signed account forms that are the subject of this Settlement Agreement.
16. As part of its investigation, Quadrus sent letters to all the clients serviced by the Respondent to determine if any of the transactions in the clients’ accounts were unauthorized.
17. The clients contacted by Quadrus did not report any complaints or concerns regarding the actions of the Respondent.
18. The Respondent states, and has provided file notes to support, that all the transactions relating to the use of pre-signed account forms were authorized by the clients.
19. On or about January 28, 2016, Quadrus issued a warning letter to the Respondent for obtaining and using pre-signed account forms, and placed him on close supervision for a period of one (1) year. The Respondent remains under close supervision pending resolution of the MFDA proceedings into this matter. Quadrus also ordered the Respondent to review and successfully complete various online learning modules, which he completed on or about February 2016.

Additional Factors

20. There is no evidence that the Respondent received any financial benefit from engaging in the misconduct described above beyond any commissions and fees that he would ordinarily be entitled to receive had the transactions been carried out in the proper manner.
21. The Respondent states that the pre-signed account forms that form the subject of this Settlement Agreement were obtained for the convenience of the clients in question.
22. The Respondent has cooperated fully with the MFDA’s investigation into his conduct.
23. The Respondent has not previously been the subject of MFDA disciplinary proceedings or other disciplinary proceedings with respect to the securities industry. The Respondent states that he has never been subject to any disciplinary proceedings with respect to his insurance license since 1975.
24. The Respondent states that he has corrected his practices going forward, including with respect to the supervision of assistants, to ensure his practice is compliant with MFDA Rules.
25. 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

26. This Settlement Agreement 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.
27. The Settlement Agreement is subject to acceptance by the Hearing Panel which shall be sought at the Settlement Hearing. At, or following the conclusion of, the Settlement Hearing, the Hearing Panel may either accept or reject the Settlement Agreement. 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.
28. 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.
29. 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.
30. 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.
31. 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.
32. 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.

[1] The Respondent states that he reimbursed Quadrus for the time the assistant / Quadrus employee would spend working with the Respondent. 

[2] This assistant was not the assistant that was also an employee of Quadrus.