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, Michel Claude Bédard.

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 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 September 2007, the Respondent has been registered in Ontario as a mutual fund salesperson (now known as a dealing representative).^[1]
7. From April 19, 2013 to May 10, 2016, the Respondent was registered in Ontario as a dealing representative with Desjardins Financial Security Investments Inc. (“DFSI”), a Member of the MFDA.
8. Since June 7, 2016, the Respondent has been registered in Ontario as a dealing representative with De Thomas Wealth Management Corp. (“De Thomas”), a Member of the MFDA.
9. At all material times, the Respondent conducted business in the Hamilton, Ontario area.

The Respondent Sold Investments in Syndicated Mortgages

10. At all material times, DFSI’s policies and procedures required its Approved Persons to conduct all securities related business through DFSI.
11. In late 2015, the Respondent met with the managing partner of Core Advisory (“Core”), a mortgage broker and real estate financing and investment company, and was informed about an opportunity to offer clients investments in syndicated mortgages as an agent for Core.
12. The Respondent introduced client CA and client MA (client CA’s brother) to the opportunity to invest in syndicated mortgages and recommended they consider investing. The Respondent further invited the clients to a presentation about syndicated mortgages hosted by Core, and attended the presentation with them.
13. In or about March 2016, the Respondent entered into an agreement with Core to sell investment products including syndicated mortgages.
14. The Respondent did not inform or obtain approval from DFSI to offer syndicated mortgages through Core or any other entity to investors.
15. On or about March 8, 2016, the Respondent recommended and sold a $100,000 investment in a syndicated mortgage through Core to client CA. To facilitate the investment, the Respondent:
    1. explained details of the syndicated mortgage;
    2. recommended the investment in the syndicated mortgage;
    3. provided marketing materials; and
    4. provided the necessary documents for client CA’s signature to complete the investment.
16. Pursuant to the arrangement with Core, the Respondent received a 5% commission, totaling $5,000, in respect of client CA’s investment in the syndicated mortgage.
17. The Respondent’s recommendation and sale of the syndicated mortgage was not done for the account of DFSI or through the facilities of DFSI.
18. The Respondent did not disclose his activities pertaining to Core to DFSI, and DFSI did not approve these activities.
19. On or around October 31, 2016, client CA’s investment in the Core syndicated mortgages was frozen and distributions payable to client CA as an investor were discontinued. On December 21, 2017, the property underlying client CA’s syndicated mortgage investment was sold.  A portion of the proceeds of the sale was transferred to a trustee and distributed to investors, resulting in a nominal recovery for the syndicated mortgage investors.

Additional Factors

20. Client CA has not complained to the Member or the MFDA about the substantial loss of his investment in the syndicated mortgage.
21. The Respondent has not previously been the subject of MFDA disciplinary proceedings.
22. As a result of the Respondent’s financial situation, he is unable to pay any additional amounts towards a fine or costs. The Respondent acknowledges that absent his inability to pay, it would have been appropriate for him to be subject to a sanction that included a greater financial penalty due to the seriousness of the misconduct that is the subject of the Settlement Agreement.
23. At the time of the sale of the syndicated mortgage, the Respondent intended to transition his registration to De Thomas, where he reasonably believed he would be permitted to sell syndicated mortgages.
24. By entering into this Settlement Agreement, the Respondent has saved the MFDA the time, resources, and expenses associated with conducting a full hearing on the allegations.

V. CONTRAVENTIONS

25. The Respondent admits that between January 2016 and March 2016, he engaged in securities related business that was not carried on for the account of the Member or through the facilities of the Member by recommending and selling a $100,000 investment in a syndicated mortgage to one client, contrary to the Member’s policies and procedures and MFDA Rules 1.1.1, 2.1.1, 1.1.2, and 2.5.1.

VI. TERMS OF SETTLEMENT

26. The Respondent agrees to the following terms of settlement:
    1. the Respondent shall be suspended from conducting securities related business in any capacity while in the employ of or associated with any MFDA Member for a period of 1 year from the date the Settlement Agreement is accepted, pursuant to section 24.1.1(c) of MFDA By-law No. 1;
    2. the Respondent shall pay a fine in the amount of $10,000 in certified funds upon acceptance of the Settlement Agreement, pursuant to section 24.1.1(b) of MFDA By-law No. 1;
    3. the Respondent shall pay costs in the amount of $2,500 in certified funds upon acceptance of the Settlement Agreement, pursuant to section 24.2 of MFDA By-law No. 1; and
    4. the Respondent shall in the future comply with MFDA Rules 1.1.1, 2.1.1, 1.1.2, and 2.5.1;
    5. the Respondent will attend in person, on the date set for the Settlement Hearing.

VII. STAFF COMMITMENT

27. 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 facts set out in Part iv and the contraventions described in Part v of this Settlement Agreement, subject to the provisions of Part ix 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 Parts iv and v 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 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 

28. 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 www.mfda.ca.
29. 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.
30. 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. 24.1.1 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.
31. 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. 
32. 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.

IX. NON-ACCEPTANCE OD SETTLEMENT AGREEMENT

33. 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.
34. 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.

X. DISCLOSURE OF AGREEMENT

35. 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.
36. Any obligations of confidentiality shall terminate upon acceptance of this Settlement Agreement by the Hearing Panel.

XI. EXECUTION OF SETTLEMENT AGREEMENT 

37. This Settlement Agreement may be signed in one or more counterparts which together shall constitute a binding agreement
38. An electronic copy of any signature shall be effective as an original signature.

[1] On September 28, 2009, as a result of the implementation of National Instrument 31-103, the mutual fund salesperson registration category was changed to “dealing representative – mutual fund dealer”.