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 the Respondent, Olympian Financial Inc. (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 XII) 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

The Respondent’s Registration History and Branch Structure

6. The Respondent is registered in Ontario, British Columbia, New Brunswick and Nova Scotia as a mutual fund dealer. The Respondent has been a Member of the MFDA since November 15, 2002.

7. Since becoming a Member of the MFDA, the Respondent has operated only one branch office, which is also its head office and is located in Toronto, Ontario. The Respondent’s head office has an onsite branch manager to supervise the Respondent’s Approved Persons who operate out of this location.

8. At all material times, the Respondent also operated sub-branches registered in Ontario which are affiliated with the Respondent’s head office^[1]. A branch manager operating from the Respondent’s head office was responsible for supervision of Approved Persons at sub-branches.

Failure to Review the Respondent’s Sub-Branches

9. On July 24, 2006, MFDA Policy No. 5 came into effect, which requires each MFDA Member to establish a branch[2] review program to effectively assess and monitor compliance with regulatory requirements. Branch reviews are required to be conducted by qualified individuals who are independent from the branch and the branch manager. An MFDA Member is generally expected to perform an on-site review of its branches and sub-branches no less than once every three years, unless the Member can demonstrate the branches that have not been subject to an on-site review are low risk and have been subject to alternative compliance review procedures performed by head office, such as an off-site desk review. Under no circumstances, should a Member never perform an on-site review of a branch.

10. Between about January 2006 and June 2017, the Respondent did not conduct on-site compliance reviews of every sub-branch location at least once every three years. In addition, the Respondent did not maintain evidence demonstrating that its sub-branch locations were low risk or had been subject to alternative compliance review procedures.

11. The Respondent’s failure to conduct on-site compliance reviews of every sub-branch location was identified by MFDA Staff as a compliance deficiency during each of the Respondent’s 6 scheduled and targeted sales compliance examinations conducted between January 2006 and August 2017.[3] In particular, MFDA Staff concluded that:
    1. From 2006 to 2012, the Respondent had not performed an audit or review of all of its sub-branches and had not maintained evidence of the methodology it had used to assess the risk of each sub-branch location according to an objective set of criteria;
    2. In October 2013, though the Respondent had established a branch review program, the Respondent had not maintained evidence of its sub-branch risk rating determinations and conclusions, had not maintained evidence of client file reviews or of advisors’ sales communications, advertising and client communications, and had not maintained evidence of interviews of advisors from each sub-branch; and
    3. In August 2016, with regards to its 13 registered sub-branches, the Respondent had:
       1. never completed reviews of 4 sub-branches which had become registered with the Member in 2014; and
       2. not completed reviews of 8 of the remaining 9 sub-branches within a 3 year cycle in accordance with MFDA Policy No. 5.

V. CURRENT PRACTICES

12. As of October 2017, the Respondent is in compliance with MFDA Policy No. 5 in that is has:
    1. properly assessed and provided a risk rating for each of its sub-branches; and
    2. discover, monitor and address non-compliance by its sub-branches with the Respondent’s policies and procedures and MFDA By-laws, Rules and Policies;

13. As a result, the Respondent is now able to:
    1. properly assess supervisory procedures and practices in place at sub-branches, as well as the quality of execution of those procedures; and
    2. ensure that branch supervisors and a selection of other Approved Persons were interviewed or that the information provided was substantively tested to verify its accuracy.

VI. MITIGATING FACTORS

14. The Respondent at all times cooperated with the MFDA’s investigation of the issues that form the subject matter of this Settlement Agreement.

15. There is no evidence that clients suffered losses or other harm as a result of the Respondent’s failure to complete on-site reviews of its sub-branches pursuant to MFDA Policy No. 5 and MFDA Rule 2.5.1.

16. The Respondent hereby undertakes to comply with its branch review obligations in the future.

VII. CONTRAVENTIONS

17. The Respondent admits that, between about March 2009[4] and October 2017, it did not conduct an on-site compliance review of every sub-branch location at least once every three years, contrary to MFDA Policy No. 5 and MFDA Rule 2.5.1.

VIII. TERMS OF SETTLEMENT

18. The Respondent agrees to the following terms of settlement:
    1. the Respondent shall pay a fine of $25,000 pursuant to s. 24.1.2(b) of MFDA By law No. 1;
    2. the Respondent shall pay costs of $5,000 pursuant to s. 24.2 of MFDA By law No. 1;
    3. the Respondent shall in the future comply with MFDA Rule 2.5.1 and MFDA Policy No. 5; and
    4. a senior officer of the Member will attend in person, on the date set for the Settlement Hearing.

IX. 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 VIII of this Settlement Agreement, subject to the provisions of Part XII below. Nothing in this Settlement Agreement precludes Staff from investigating or initiating proceedings in respect of any contraventions that are not set out in Parts IV and VIII of 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 VIII, 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.

X. 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.

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 its 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 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.

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 it.

XI. 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.

XII. 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 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 it 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.

XIII. 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.

XIV. 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] As of the date of this Settlement Agreement, the Respondent operates 13 sub-branch locations registered in Ontario.
[2] Policy No. 5 provides that references to “branches” include sub-branches.
[3] Compliance examinations of the Respondent were completed by MFDA Staff in January 2006, March 2009, November 2010, November 2012, October 2013 and August 2016.
[4] The date of MFDA Staff’s second targeted sales compliance examinations.  See paragraph 11 above.