Settlement Agreement

I. INTRODUCTION

1. Staff of the Mutual Fund Dealers Association of Canada (“Staff”) and the Respondent, Mary Elizabeth Innes (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 January 2013 and October 2018, the Respondent, acting in her capacity as branch manager, reviewed and approved the use of a total of 113 pre-signed and altered account forms, contrary to MFDA Rules 2.5.5(f) and 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 $9,000 in certified funds upon acceptance of the Settlement Agreement, pursuant to section 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 section 24.2 of MFDA By-law No. 1;
   3. the Respondent shall be prohibited from acting as a branch manager or in any supervisory capacity for a Member of the MFDA for a period of 6 months commencing upon the date the Settlement Agreement is accepted by the Hearing Panel, pursuant to section 24.1.1(f) of MFDA By-law No. 1;
   4. the Respondent shall successfully complete the branch manager’s course offered by either the Canadian Securities Institute of the Investment Funds Institute of Canada prior to acting as a branch manager in the future, pursuant to section 24.1.1(f) of MFDA By-law No. 1;
   5. the Respondent shall in the future comply with MFDA Rules 2.5.5(f) and 2.1.1; and
   6. 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. Since September 1992, the Respondent has been registered in the securities industry.
8. Since October 2002, the Respondent has been registered in Ontario as a dealing representative (formerly known as a mutual fund salesperson)^[1] with Investia Financial Services Inc. (the “Member”), a Member of the MFDA.
9. Between January 2011 and May 2019, the Member designated the Respondent as a branch manager at a branch of the Member located in Belleville, Ontario (the “Branch”).

Approval of Pre-Signed and Altered Account Forms

10. At all material times, the Member’s branch manager manual required all branch managers to:
    1. “ensur[e] that business conducted on behalf of [the Member] by Representatives and other employees and agents at the branch is in compliance with regulations and [the Member’s] policies and procedures.”
11. Between January 2013 and October 2018, DL, an Approved Person who the Respondent had the responsibility to supervise as his branch manager, submitted to the Respondent for approval 81 pre-signed account forms and 32 account forms where information had been altered on the forms without having the client initial the alterations.
12. The Respondent, acting in her capacity as branch manager, reviewed and approved the use of these forms which she knew or ought to have known were either pre-signed forms or altered account forms.
13. The pre-signed and altered account forms the Respondent approved as branch manager consisted of: 76 Know-Your-Client (“KYC”) Update Forms, 24 New Client Account Forms, 9 Order Instruction Forms, 3 RESP Forms and 1 Systematic Instruction Form.
14. The alterations made to the 32 altered account forms include alterations to: client KYC information, client contact information, plan types, investment amounts and fund descriptions.

The Member’s Investigation

15. In or around December 2018, the Member conducted an audit of client files at the Branch, during which the Member identified some of the account forms that are the subject of this Settlement Agreement.
16. In January 2019, the Member commenced an investigation into, among other things, the Respondent’s activities, which revealed the remainder of the account forms that are the subject of this Settlement Agreement.
17. On May 10, 2019, the Respondent resigned from her position as a branch manager.
18. On May 17, 2019, the Member sent letters to the clients whose client files contained the pre-signed or altered account forms along with a transaction history for the prior 3 years and, where applicable, the KYC information on file for the client. The Member asked the clients to review the transactions within their account and to review their KYC information to ensure that all transactions and KYC information were accurate. No clients raised any concerns to the Member about the activity within their accounts.

Additional Factors

19. At the material time, the Respondent was a salaried employee with the Member and therefore received no commissions or financial benefit from the transactions which relate to the pre-signed and altered forms which are the subject of this Settlement Agreement.
20. There is no evidence of client loss or lack of authorization.
21. The Respondent has not previously been the subject of MFDA disciplinary proceedings.
22. 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

23. 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.
24. 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.
25. 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.
26. 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 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;
    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.
27. 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.
28. 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.
29. 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.

[1] In September 2009, the registration category mutual fund salesperson was changed to “dealing representative” when National Instrument 31-103 came into force.