- Staff of the Mutual Fund Dealers Association of Canada (“Staff”) and the Respondent, Pamela (Pan) Chen (the “Respondent”), consent and agree to settlement of this matter by way of this agreement (the “Settlement Agreement”).
- 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
- Staff and the Respondent jointly recommend that the Hearing Panel accept the Settlement Agreement.
- The Respondent admits to the following violations of the By-laws, Rules or Policies of the MFDA:
- between December 2008 and October 2016, the Respondent altered 16 account forms in respect of 14 clients by altering information on the account forms without having the clients initial the alterations, contrary to MFDA Rule 2.1.1; and
- between May 2010 and November 2015, the Respondent obtained, possessed, and used to process transactions, 4 pre-signed account forms in respect of 3 clients, contrary to MFDA Rule 2.1.1.
- Staff and the Respondent agree and consent to the following terms of settlement:
- the Respondent shall pay a fine in the amount of $15,000 in certified funds upon acceptance of the settlement Agreement, pursuant to s. 24.1.1.(b) of MFDA By-law No. 1;
- the Respondent shall pay costs in the amount of $2,500 in certified funds upon acceptance of the settlement Agreement, pursuant to s. 24.2 of MFDA By-law No. 1;
- the Respondent shall in the future comply with MFDA Rule 2.1.1; and
- the Respondent will attend in person, on the date set for the Settlement Hearing.
III. AGREED FACTS
- Since August 2008, the Respondent has been registered as a mutual fund salesperson (now known as a dealing representative) in British Columbia with Investia Financial Services Inc. (“Investia”), a Member of the MFDA.
- From November 2001 to February 2008, the Respondent was registered as a mutual fund salesperson in British Columbia with Sun Life Financial Investment Services (Canada) Inc., a Member of the MFDA.
- At all material times, the Respondent conducted business in the Surrey, British Columbia area.
Altered Account Forms
- At all material times, Investia’s policies and procedures required its Approved Persons, including the Respondent, to obtain client initials on any material changes to a client’s trade documents, and to not use liquid correction fluid or white out on account forms.
- Between December 2008 and October 2016, the Respondent altered 16 account forms in respect of 14 clients by:
- in 13 instances, altering information on the account forms without having the clients initial the alterations; and
- in 3 instances, using liquid correction fluid to alter information on the account forms, without having the clients initial the alterations.
- The altered account forms consisted of:
- 1 Know Your Client (“KYC”) update form;
- 2 new account application forms;
- 1 fund company application form;
- 11 order instruction forms; and
- 1 systematic instruction form.
- The Respondent states that the alterations were made to the account forms in the presence of the clients and prior to the clients signing the forms. The Respondent acknowledges that she was required to obtain client initials with respect to the alterations.
- The Respondent submitted the altered forms to Investia to process transactions in the clients’ accounts.
Pre-Signed Account Forms
- At all material times, Investia’s policies and procedures prohibited its Approved Persons from obtaining, holding, or using pre-signed account forms.
- Between May 2010 and November 2015, the Respondent obtained, possessed, and used to process transactions, 4 pre-signed account forms in respect of 3 clients.
- The pre-signed account forms consisted of:
- 1 leverage account review form; and
- 3 order instruction forms.
Prior MFDA Disciplinary History
- On March 11, 2011, a Hearing Panel of the MFDA Pacific Regional Council approved a settlement between Staff and the Respondent in MFDA File No. 201006, where the Respondent admitted that:
- between 2006 and 2008, she made discretionary trades in client accounts, contrary to MFDA Rules 2.1.1 and 2.3.2, and the terms of her registration as a mutual fund salesperson; and
- in July 2007, she attempted to enter into a settlement agreement with a client, without the consent of the Member, contrary to MFDA Policy No. 3 and MFDA Rule 2.1.1.
- The Hearing Panel approved the settlement, which included a fine of $18,000, costs of $5,000, the completion of an industry course, and a requirement to comply with all MFDA By-laws, Rules, and Policies, and applicable securities legislation in the future.
- In April 2017, Investia identified the altered and pre-signed account forms that are the subject of this Settlement Agreement during an audit. Investia subsequently commenced an investigation.
- On or about May 8, 2017, Investia placed the Respondent on close supervision.
- In May 2017, as part of its investigation, Investia sent letters to all of the clients serviced by the Respondent, which included copies of the clients’ account transaction histories for the last three years, in order to determine if the Respondent had engaged in unauthorized trading activity. Investia also sent separate audit letters to the clients where altered or pre-signed account forms were identified, which included summaries of their KYC information, in order to ensure the KYC information was recorded according to their instructions. No clients reported any concerns. The Respondent paid a $500 administration charge and $441 mailing charge to Investia with respect to the audit letters.
- On or about October 30, 2017, Investia issued a warning letter to the Respondent for possessing and using pre-signed and altered account forms, and removed the Respondent from close supervision.
- On or about December 20, 2017, the Respondent was placed under continued close supervision pending the completion of the MFDA proceedings in this matter. The Respondent was also required to complete the IFSE Ethics and Professional Conduct Course, which the Respondent completed on or about March 25, 2018.
- There is no evidence that the Respondent received any financial benefit from engaging in the misconduct described above beyond any commissions and fees that she would ordinarily be entitled to receive had the transactions been carried out in the proper manner.
- There is no evidence of any client loss, or that the transactions were unauthorized or that the Respondent engaged in discretionary trading.
- The Respondent has cooperated with the MFDA’s investigation into her conduct.
- 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
- 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.
- 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.
- 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.
- Staff and the Respondent agree that if this Settlement Agreement is accepted by the Hearing Panel:
- the Settlement Agreement will constitute the entirety of the evidence to be submitted respecting the Respondent in this matter;
- 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;
- 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;
- 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
- 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.
- 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.
- 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.
- 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.
RPLWitness - Signature
RPLWitness - Print Name
“Pamela (Pan) Chen”
Pamela (Pan) Chen
Staff of the MFDA
Per: Shaun Devlin
Member Regulation – Enforcement
File No. 201910
IN THE MATTER OF A SETTLEMENT HEARING
PURSUANT TO SECTION 24.4 OF BY-LAW NO. 1 OF
THE MUTUAL FUND DEALERS ASSOCIATION OF CANADA
Re: Pamela (Pan) Chen
WHEREAS on [date], the Mutual Fund Dealers Association of Canada (the “MFDA”) issued a Notice of Settlement Hearing pursuant to section 24.4 of By-law No. 1 in respect of Pamela (Pan) Chen (the “Respondent”);
AND WHEREAS the Respondent entered into a settlement agreement with Staff of the MFDA, dated [date] (the “Settlement Agreement”), in which the Respondent agreed to a proposed settlement of matters for which the Respondent could be disciplined pursuant to ss. 20 and 24.1 of By-law No. 1;
AND WHEREAS the Hearing Panel is of the opinion that the Respondent:
- between December 2008 and October 2016, altered 16 account forms in respect of 14 clients by altering information on the account forms without having the clients initial the alterations, contrary to MFDA Rule 2.1.1; and
- between May 2010 and November 2015, obtained, possessed, and used to process transactions, 4 pre-signed account forms in respect of 3 clients, contrary to MFDA Rule 2.1.1.
IT IS HEREBY ORDERED THAT the Settlement Agreement is accepted, as a consequence of which:
- The Respondent shall pay a fine in the amount of $15,000 in certified funds pursuant to s. 24.1.1.(b) of MFDA By-law No. 1;
- The Respondent shall pay costs in the amount of $2,500 in certified funds pursuant to s. 24.2 of MFDA By-law No. 1;
- The Respondent shall in the future comply with MFDA Rule 2.1.1; and
DATED this [day] day of [month], 20[ ].
[Name of Public Representative], Chair
[Name of Industry Representative]
[Name of Industry Representative]