Settlement Agreement

I. INTRODUCTION

1. Staff of the Mutual Fund Dealers Association of Canada (“Staff”) and the Respondent, Adrian George Botescu (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. on or about May 17, 2018, in response to a supervisory inquiry from the Respondent’s branch manager regarding the suitability of a client’s investment holdings, the Respondent altered a client’s investment objective on a Know-Your-Client account form without having met or discussed the information with the client, and also signed the client’s signature and initials on the account form, contrary to MFDA Rules 2.2.1 and 2.1.1;
   2. on or about May 17, 2018, the Respondent created two meeting notes that falsely stated that the Respondent had met with a client to approve changes to the client’s KYC information, when the Respondent had not met with the client, and also signed the client’s initials on the meeting notes, contrary to MFDA Rule 2.1.1; and
   3. on or about May 25, 2018, the Respondent misled the Member during the course of its investigation into his conduct, when the Respondent falsely represented to the Member that he had met with a client to approve changes to the client’s KYC information, 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 $12,000 in certified funds upon acceptance of the Settlement Agreement, pursuant to s. 24.1.1(b) of MFDA By-law No.1;
   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 2.1.1 and 2.2.1; and
   4. the Respondent will attend in person 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. Between November 2010 to May 2018 and from November 26, 2018 to December 31, 2019, the Respondent was registered in Ontario as a dealing representative (formerly known as a mutual fund salesperson) with WFG Securities Inc. (the “Member”), a Member of the MFDA.
8. On December 31, 2019, the Member terminated the Respondent’s registration and he is not currently registered in the securities industry in any capacity.
9. At all material times, the Respondent conducted business in the Toronto, Ontario area.

The Respondent Signed a Client’s Signature and Initials on a KYC Update Form

10. At all material times, the Member had policies and procedures that:
    1. prohibited its Approved Persons from signing a client’s signature;
    2. required its Approved Persons to have clients initial all changes made to client Know Your Client (“KYC”) documentation; and
    3. required its Approved Persons to take notes of meetings with clients regarding amendments to client KYC information that stated in writing the reason why the KYC was being amended, and required the client to sign and date the Approved Person’s meeting notes indicating that the clients agree with the changes.
11. At all material times, client AS was a client of the Member whose accounts were serviced by the Respondent.
12. On May 17, 2018, the Respondent’s branch manager advised the Respondent that a recent MFDA audit had identified an inconsistency between client AS’s recorded investment objective on a KYC Update account form, and the composition of the current investment holdings in client AS’s Registered Retirement Savings Plan (“RRSP”) account. The branch manager directed the Respondent to conduct a review with client AS of the investment objective and investment holdings in client AS’s RRSP account.
13. On or about May 17, 2018, the Respondent altered client AS’s investment objective on a KYC Update form to match client AS’s investment holdings in client AS’s RRSP account without having met or discussed the information with client AS. The Respondent also signed client AS’s initials beside the alterations on the KYC Update account form and signed client AS’s signature on the KYC Update account form. The Respondent then submitted the KYC Update account form to the Member for processing.

The Respondent Created False Client Meeting Notes

14. On or about May 17, 2018, the Respondent prepared and submitted to the Member two client meeting notes that stated that the Respondent met with client AS on May 17, 2018 to discuss client AS’s KYC information and RRSP account holdings, as described above in paragraph 13. Prior to submitting the client meeting notes to the Member, the Respondent signed client AS’s initials on the client meeting notes to represent that client AS acknowledged the contents of the client meeting notes. The client meeting notes were false because the Respondent never met with client AS to review changes to his KYC information. 

Misleading the Member

15. On or about May 18, 2018, the Member’s compliance staff identified inconsistencies between client AS’s signature on the KYC Update account form submitted by the Respondent, described above in paragraph 13, and client AS’s signature on other client documents contained in client AS’s client file. The Member commenced an investigation into the Respondent’s conduct.
16. On or about May 18, 2018, client AS advised the Member that he had not met with the Respondent or completed or signed any documents on May 17, 2018.
17. On or about May 23, 2018, the Member placed the Respondent on an administrative suspension in response to client AS’s statement to the Member.
18. On May 25, 2018, the Member interviewed the Respondent, during which the Respondent falsely stated that he met with client AS in client AS’s home on May 17, 2018 to complete the KYC Update account form described above at paragraph 13.
19. The Member advised the Respondent during the interview that it had obtained a statement from client AS who denied meeting with the Respondent or signing or initialing the KYC Update account form, as the Respondent stated had occurred. The Respondent then admitted to the Member that the Respondent did not meet with client AS, and that he had signed client AS’s initials and signature on the KYC Update account form described above at paragraph 13. The Respondent also admitted that he created the two false client meeting notes described above at paragraph 14, and that he signed client AS’s initials on the client meeting notes.

The Member’s Response

20. On May 25, 2018, the Member suspended the Respondent from conducting securities related business for 6 months as a result of the misconduct that is the subject of this Settlement Agreement.
21. As part of its investigation, the Member conducted a full transaction history review of client AS’s accounts. The Member did not identify any additional evidence of misconduct.
22. The Member also reviewed purchases and redemptions in all of the client files serviced by the Respondent for inconsistencies with client signatures and initials. The Member did not identify any additional evidence of misconduct.
23. On or about June 8, 2018, the Member sent a letter with an account history to all clients serviced by the Respondent. The Member requested that the clients review their account history to ensure that all transactions had been processed as requested, and report any questions to the Member. No clients responded to the Member with any concerns.
24. The Member required the Respondent to complete an internal compliance course, which the Respondent has completed.
25. On or about September 21, 2018, the Member sent a letter with current KYC information to all clients serviced by with Respondent. The Member requested that the clients review their KYC information to ensure that the information was accurate, that all transactions had been processed as requested, and to report any questions to the Member. No clients responded to the Member with any concerns.
26. On November 26, 2018, the Member reinstated the Respondent’s registration and placed the Respondent on increased supervision until the conclusion of the current MFDA proceeding. The Member also required the Respondent to meet with each of the clients that the Respondent serviced within 90 days to update their KYC information.
27. On December 20, 2018, the Respondent completed further internal training provided by the Member on proper KYC collection procedures.
28. On or about March 8, 2019, the Respondent met with client AS to update client AS’s KYC information, and submitted a completed KYC Update account form for client AS to the Member for processing.
29. On March 29, 2019, the Respondent signed an Acknowledgment from the Member confirming that the Respondent understood the Member’s policies and procedures with respect to proper completion of account forms and proper KYC collection procedures, and that the Respondent would abide by the Member’s policies and procedures.
30. On April 3, 2019, the Respondent also signed an Acknowledgement from the Member agreeing that the Respondent would adhere to the Member’s policies and procedures specific to proper collection of KYC information, and confirmed that the Respondent would not match client KYC information to current investment holdings for clients.

Additional Factors

31. 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.
32. There is no evidence of client complaints or client loss.
33. The Respondent has not previously been the subject of MFDA disciplinary proceedings.
34. 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

35. 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.
36. 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 mfda.ca.
37. 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.
38. Staff and the Respondent agree that if this Settlement Agreement is accepted by the Hearing Panel:
39. the Settlement Agreement will constitute the entirety of the evidence to be submitted respecting the Respondent in this matter;
40. 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;
41. 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;
42. 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
43. 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.
44. 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.
45. 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.
46. 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.