Settlement Agreement

I. INTRODUCTION

1. Staff of the Mutual Fund Dealers Association of Canada (“Staff”) and the Respondent, David Edward Dekker (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 Mutual Fund Dealers Association of Canada (“MFDA”):
   1. between December 2003 and January 2017, the Respondent obtained, possessed, and in some instances, used to process transactions, 22 pre-signed account forms in respect of 17 clients, contrary to MFDA Rule 2.1.1;
   2. between November 2010 and March 2014, the Respondent altered and used to process transactions, 13 account forms in respect of 10 clients by altering information on the account forms without having the client initial the alterations, contrary to MFDA Rule 2.1.1; and
   3. between October 2002 and August 2014, the Respondent submitted 7 Letters of Direction directly to mutual fund companies to process transactions in the accounts of 2 clients without the knowledge or approval of the Member, contrary to the Member’s policies and procedures and MFDA Rules 1.1.1(a), 1.1.2, 2.1.1, and 2.5.1.
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 $12,500 in certified funds upon acceptance of the Settlement Agreement, pursuant to s. 24.1.1(b) of MFDA By-law No.1, in instalments as follows:
      1. $7,500, in certified funds, upon acceptance of this Settlement Agreement by the Hearing Panel; and
      2. $5,000, on or before the last business day of the sixth month following the acceptance of the Settlement Agreement by the Hearing Panel.
   2. 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;
   3. the Respondent shall in the future comply with MFDA Rules 1.1.1(a), 1.1.2, 2.1.1 and 2.5.1; and
   4. the Respondent will attend in person or by teleconference 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. Since May 1992, the Respondent has been registered in the mutual fund industry.
8. Since January 1994 the Respondent has been registered in Ontario as a mutual fund salesperson (now known as a dealing representative) with Y.I.S. Financial Inc. (the “Member”), a Member of the MFDA.
9. At all material times, the Respondent conducted business in the Thorold, Ontario area.

Pre-Signed Account Forms

10. Beginning in December 2012, the Member had policies and procedures that prohibited its Approved Persons from using pre-signed account forms.
11. Between December 2003 and January 2017, the Respondent obtained, possessed, and in some instances, used to process transactions, 22 pre-signed account forms in respect of 17 clients.
12. The pre-signed forms consisted of:
    1. 4 Know Your Client forms;
    2. 7 Switch forms;
    3. 1 Processing Instruction form;
    4. 4 New Account Application forms;
    5. 2 Transfer Authorization for Registered Investments (“TARI”) forms;
    6. 1 Direct Deposit form;
    7. 1 Registered Education Savings Plan (“RESP”) Application form; and
    8. 2 Tax Free Savings Account Application forms.

Altered Account Forms

13. Beginning in December 2012, the Member had policies and procedures that prohibited its Approved Persons from using altered account forms.
14. Between November 2010 and March 2014, the Respondent altered and used to process transactions, 13 account forms in respect of 10 clients by altering the following information on the account forms without having the client initial the alterations:
    1. mutual fund codes;
    2. mutual fund companies; and
    3. investment instructions.
15. The altered account forms consisted of:
    1. 7 Switch forms;
    2. 3 TARI forms;
    3. 2 Pre-authorized Chequing Agreement forms; and
    4. 1 RESP Application form.

Processing Transactions Directly with Mutual Fund Companies

16. Beginning in December 2007, the Member had policies and procedures that:
    1. prohibited its Approved Persons from directly processing transactions with mutual fund companies i.e. off book transactions;
    2. required that Approved Persons process all business activity through the Approved Person’s branch or the Member’s head office; and
    3. required all trading activity of Approved Persons to be reviewed and approved by a branch manager.
17. Between October 2002 and August 2014, the Respondent submitted 7 Letters of Direction directly to mutual fund companies to process the following transactions in the accounts of 2 clients without the knowledge or approval of the Member:
    1. changes to existing systematic withdrawal payments out of a client’s Registered Retirement Investment Fund;
    2. changes to existing systematic withdrawal payments out of a client’s Life Income Funds; and
    3. transferred monies from a client’s Registered Retirement Savings Plan (“RRSP”) to the client’s Registered Retirement Income Fund (“RRIF”) in order to complete a rollover of the RRSP into the RRIF.
18. The Respondent:
    1. did not process any of the LOD described above at paragraph 17 through the facilities of the Member; and
    2. did not obtain approval from his branch manager prior to submitting the LOD directly to mutual fund companies.

The Member’s Investigation

19. Between January 23 and January 26, 2018, during the course of a MFDA compliance audit of the Respondent’s branch, MFDA Compliance Staff identified some of the account forms that are the subject of this Settlement Agreement.
20. During its investigation, the Member reviewed:
    1. the client files serviced by the Respondent during the period of January 1, 2010 to February 28, 2018 and identified the remainder of the account forms that are the subject of this Settlement Agreement;
    2. the client files maintained by the Respondent where pre-signed or altered account forms were identified; and
    3. the transactions conducted pursuant to the LOD, and the transaction history of the accounts of the 2 clients for whom the Respondent submitted LOD.
21. The Member did not receive any client complaints with respect to Respondent’s use of the account forms and LOD described above.
22. On February 2, 2018, the Member placed the Respondent under close supervision. The Member has confirmed that the Respondent remains under close supervision pending the determination of this MFDA matter.
23. On June 15, 2018, the Member commenced reducing the Respondent’s eligible commission percentage as a result of the Respondent’s misconduct described herein. As of January 15, 2019, the Respondent’s commissions have been reduced by $3,167.92 and the Member continues to reduce the Respondent’s commissions.

Additional Factors

24. There is no evidence that the Respondent received any benefit from the conduct set out above beyond the commissions or fees he would ordinarily be entitled to receive had the transactions been carried out in the proper manner.
25. There is no evidence of client loss or lack of authorization for the underlying transactions.
26. No clients have complained about the Respondent’s misconduct described herein.
27. The Respondent has not previously been the subject of MFDA disciplinary proceedings.
28. 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.

IV. ADDITIONAL TERMS OF SETTLEMENT

29. 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.
30. 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. 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.
31. 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.
32. 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 contraventions described in this Settlement Agreement. Nothing in this Settlement Agreement precludes Staff from investigating or initiating proceedings in respect of any 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.
33. 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.
34. 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.
35. 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.