Settlement Agreement

I. INTRODUCTION

1. The Mutual Fund Dealers Association of Canada (the “MFDA”) will announce that it proposes to hold a hearing (the “Settlement Hearing”) to consider whether, pursuant to section 24.4 of MFDA 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, Liliana Teresa Marin (the “Respondent”).
2. Staff and the Respondent, consent and agree to the terms of this Settlement Agreement.
3. Staff and the Respondent jointly recommend that the Hearing Panel accept the Settlement Agreement.

II. CONTRAVENTIONS

4. The Respondent admits that between January 2016 and November 2019, the Respondent engaged in personal financial dealings with a client by depositing cheques from the client into a bank account that she could access or control and paid the proceeds of those cheques to the client or to third parties on behalf of the client in accordance with the client’s directions, thereby engaging in conduct which gave rise to a conflict or potential conflict of interest that the Respondent failed to disclose to the Member or otherwise ensure was addressed by the exercise of responsible business judgment influenced only by the best interests of the client, contrary to the Member’s policies and procedures and MFDA Rules 2.1.4, 1.1.2, 2.5.1, and 2.1.1.

III. TERMS OF SETTLEMENT

5. Staff and the Respondent agree and consent to the following terms of settlement:
   1. the Respondent shall be prohibited from conducting securities related business in any capacity while in the employ of or associated with any MFDA Member for a period of one year, pursuant to s. 24.1.1(e) of MFDA By-law. No. 1;
   2. the Respondent shall pay a fine to the MFDA in the amount of $10,000 upon acceptance of the Settlement Agreement in accordance with the following schedule, pursuant to s. 24.1.1(b) of MFDA By-law no. 1;
      1. the Respondent shall pay $2,500 in certified funds on the date when this Settlement Agreement is accepted by an MFDA Hearing Panel;
      2. the Respondent shall pay $1,875 on or before May 31, 2022;
      3. the Respondent shall pay $1,875 on or before June 30, 2022;
      4. the Respondent shall pay $1,875 on or before July 31, 2022; and
      5. the Respondent shall pay $1,875 on or before August 31, 2022;
   3. the Respondent shall pay costs to the MFDA in the amount of $7,500 in certified funds on the date when this Settlement Agreement is accepted by an MFDA Hearing Panel, pursuant to s.24.2 of MFDA By-law No. 1; and
   4. the Respondent shall attend the Settlement Hearing by videoconference on the date of the Settlement Hearing.
6. Staff and the Respondent agree to the settlement on the basis of the facts set out in this Settlement Agreement herein and consent to the making of an Order in the form attached as Schedule “A”.

IV. AGREED FACTS

Registration History

7. Since 1994, the Respondent has been registered in the securities industry.
8. From September 1, 2006 to November 4, 2016 in Ontario and from September 1, 2006 to February 11, 2016 in British Columbia, the Respondent was registered as a dealing representative with FundEX Investments Inc. (“FundEX”), a Member of the MFDA.
9. Between November 7, 2016 in Ontario, and since April 18, 2019 in British Columbia, and March 31, 2022, the Respondent was registered as a dealing representative with Monarch Wealth Corporation (“Monarch”), a Member of the MFDA. The Respondent resigned from Monarch effective March 31, 2022.
10. At all material times, the Respondent conducted business in the Toronto Area.

Member Policies and Procedures

11. At all material times, FundEX and Monarch had policies and procedures that required its Approved Persons to immediately disclose to the Member if they became aware of any conflicts or potential conflicts of interest between an Approved Person and a client of the Member.
12. Monarch’s applicable policies and procedures state that:

Monarch Wealth and the AP must aware (sic) of the possibility of conflicts of interest arising between the interests of Monarch Wealth and the AP and the interests of the client. Where the AP becomes aware of any conflict of potential conflict of interest, the AP will immediately disclose such conflict or potential conflict of interest to us. In the event that such a conflict of potential conflict of interest arises, we and our AP will ensure that it is addressed by the exercise of responsible business judgment influenced only by the best interests of the client and in compliance with MFDA Rule 2.1.14(c) and (d). Any conflict or potential conflict of interest that arises will immediately be disclosed in writing to the client by Monarch Wealth, or by the AP as we direct, prior to Monarch Wealth or the AP proceeding with the proposed transaction giving rise to the conflict of interest or potential conflict of interest.

A conflict of interest is a situation where someone in a position of trust has professional or personal interests which compete or conflict with those of the interests of the client. Such competing interests can make it difficult for the AP to fulfil his or her duties impartially. Even if there is no evidence of improper actions, a conflict of interest can create an appearance of impropriety that can undermine confidence in the ability of that person to act properly in his/her position. Generally though, conflict of interest can be defined as any situation in which an individual or corporation is in a position to exploit a professional or official capacity in some way for their personal or corporate benefit.

13. Monarch’s policies and procedures expressly provide the example of commingling of client and Approved Person monies as conduct that could give rise to a conflict of interest.
14. The policies and procedures of FundEX that were applicable to the Respondent when she was an Approved Person of FundEX state that:

MFDA Rule 2.1.4 is intended to function as a rule of general application with respect (sic) the treatment of conflicts. It is meant to provide FundEX and Representatives with a broad principle under which specific standards are to be created to manage and resolve conflicts, whether real or perceived. It is important to note that there are two distinct aspects to MFDA Rule 2.1.4. There is a requirement that prior FundEX approved written disclosure be provided to clients regarding potential conflicts that have been identified. There is also an obligation to address the conflict by the exercise of responsible business judgment, influenced only by the best interests of the client. FundEX approved written disclosure must be provided in all cases where there is a reasonable likelihood that a client would consider the conflict important when entering into a proposed transaction.

A conflict may arise when a Representative, director, or employee takes action or has an interest that may make it difficult to perform their own work objectively and effectively. Conflicts of interest may also exist in circumstances where the actions or activities of the Representative may result in or give the appearance of, an undisclosed personal gain or advantage to the individual, improper gain or advantage to a third party, an ability to exert undue influence over others or an unnecessarily adverse effect on clients.

A representative shall immediately disclose to their designated BM or RBM and to Head Office Compliance full and complete details if they are in, or could reasonably be perceived to be in, a conflict of interest position not previously disclosed. If it is determined that a representative is in a conflict of interest position, FundEX will require all individuals affected by the conflict to be contacted in writing and for appropriate action to be taken to address, mitigate, or remove the conflict prior to the provision of further transactions or services. If such a conflict of potential conflict occurs, FundEX will assume the role of informing the affected client of the actual or perceived conflict of interest situation. Notification to the client will be tailored to the situation to ensure that the client understands the nature and scope of all conflicts involved.

FundEX expects its Approved Persons to avoid any activity, interest or association that might interfere, or appear to interfere with the best interests of clients, FundEX, and the public.

The Respondent’s Tax Preparation Business and Joint Bank Account

15. At all material times, the Respondent operated ML Tax and Financial Services (“MLTF”), a business that offered tax preparation services, including preparing tax returns, and payroll and HST calculations for individuals and small businesses. MLTF also offers to negotiate payment arrangements with the Canada Revenue Agency (the “CRA”).
16. The Respondent operated MLTF with her spouse, MN, who is now deceased. MN was not a dealing representative registered in the securities industry or an Approved Person of any MFDA Member.
17. MLTF was not incorporated, but was a partnership between the Respondent and her spouse.
18. At all material times, the Respondent and MN jointly owned, operated and controlled a bank account that they used for MLTF business (the “MLTF Bank Account”). The Respondent and her spouse primarily used the MLTF Bank Account for business transactions.

Client GL

19. Commencing in 2005, client GL became a client of FundEX. The Respondent was responsible for servicing client GL’s registered retirement savings plan (“RRSP”) account at FundEX. In 2016, after the Respondent transferred her registration from FundEX to Monarch, client GL became a client of Monarch, where the Respondent continued to service her account.
20. In 2015, the Respondent also began providing tax preparation services to client GL through MLTF. Among the services that the Respondent provided to client GL, she prepared and filed tax returns on behalf of client GL.

The Respondent Deposits Cheques Payable to Client GL into the Respondent’s Bank Account

21. Client GL ran a cleaning business, providing services to television and film production companies to clean apartments used to house actors and crew during production. She regularly received payment for services by cheque. Prior to 2016, client GL typically deposited her pay cheques into a Canadian bank account.
22. In or about October 2015, the CRA began garnishing money that was deposited into client GL’s personal bank account to address client GL’s outstanding tax liability (for unpaid personal income tax and HST). Client GL retained MLTF to try to negotiate a payment arrangement with CRA. Accordingly, the Respondent was aware of client GL’s outstanding tax liability and the CRA’s ongoing collection efforts.
23. In October 2015, the CRA began garnishing all monies from client GL’s bank account. In or about February 2016, client GL’s bank account was closed. Client GL did not open another bank account until March 2019.
24. In or about January 2016, the Respondent and MN agreed to deposit cheques payable to client GL that client GL received from her cleaning business into the MLTF Bank Account and to distribute the monies from these deposits in accordance with client GL’s directions.
25. The Respondent states that in most cases Client GL endorsed each of the cheques that she delivered to the Respondent or MN and after receiving the cheques, the Respondent or MN deposited the cheques into the MLTF Bank Account in the presence of client GL, who would sign her name on the withdrawal slip to indicate that client GL was aware of the manner in which the proceeds of the deposits would be disbursed, including any cash remittance.
26. There is no evidence that the Respondent misappropriated any of the monies from the proceeds of the cheques, nor has the client alleged that any of the monies from the cheques are unaccounted for.
27. The Respondent states that she and MN disbursed the proceeds from the cheques that they received from Client GL and deposited into the MLTF Bank Account in accordance with client GL’s instructions, including as follows:
    1. they made payments to the CRA on client GL’s behalf to gradually pay down client GL’s outstanding tax liability;
    2. they provided cash remittances to client GL so that client GL could meet her day to day expenses; and
    3. on two occasions, they purchased bank drafts to facilitate contributions and investment purchases in client GL’s RRSP account at Monarch.
28. By depositing cheques that she received from client GL into the MLTF Bank Account, the Respondent commingled monies received on behalf of GL and held for the benefit of GL with monies owned or controlled by the Respondent and her spouse MN.
29. Between January 2016, when the Respondent was registered at FundEX, and continuing between November 2016 and November 2019 (after she subsequently became registered at Monarch), the Respondent and MN accepted from GL, approximately 181 cheques that were payable to client GL totaling approximately $100,300 and deposited those cheques into the MLTF Bank Account. As stated in paragraph 26 above, the money received from client GL was subsequently returned to client GL in cash or applied to payments for client GL’s benefit and made pursuant to client GL’s directions.

The Respondent Did Not Disclosure Commingling Of Monies To The Member

30. Commencing in January 2016, the Respondent engaged in personal financial dealings with client GL by accepting cheques from client GL that were payable to client GL and depositing those cheques into the MLTF Bank Account and making payments to client GL or on client GL’s behalf as described above in paragraphs 24-29. Such personal financial dealings between the Respondent and client GL gave rise to a conflict of interest. The Respondent did not disclose to FundEX that she was engaging in personal financial dealings with client GL.
31. In November 2016, the Respondent transferred her registration to Monarch and became an Approved Person of Monarch. As stated in paragraph 29 above, the Respondent continued to engage in personal financial dealings with client GL after she became an Approved Person of Monarch.  The Respondent did not disclose to Monarch that she was engaging in personal financial dealings with client GL.
32. The Respondent admits that she was required to disclose to FundEX and subsequently to Monarch that she was engaged in personal financial dealings with client GL that gave rise to a conflict of interest so that FundEX and Monarch could ensure that the conflict of interest was addressed by the exercise of responsible business judgment influenced only by the best interests of the client.

Monarch Discovered That The Respondent Was Engaged In Personal Financial Dealings With Client GL

33. On February 22, 2019, the Respondent submitted to Monarch a $500 bank draft (the “2019 Bank Draft”) and the required paperwork to purchase units of a mutual fund in client GL’s RRSP account (the “2019 RRSP Contribution”).
34. Monarch’s trade desk received an error message from the mutual fund company after submitting the 2019 Bank Draft and paperwork to process the 2019 RRSP Contribution in client GL’s account. Monarch’s trade desk made inquiries to the mutual fund company to find out the reason for the error message. The mutual fund company informed Monarch that the order was on hold because the mutual fund company had received a copy of a “Requirement to Pay” notice from the CRA that required the mutual fund company to pay to the CRA any monies that the mutual fund company was holding for client GL.
35. The Respondent’s branch manager asked the Respondent to explain the source of the $500 bank draft that had been deposited into client GL’s RRSP account. The Respondent informed the branch manager that the source of the monies used to fund the purchase of the 2019 Bank Draft were cheques payable to client GL that were deposited into the MLTF Bank Account. After being informed that the Respondent had deposited money received from client GL into the MLTF Bank Account, the branch manager referred the matter to Monarch’s compliance department and Monarch commenced an investigation.
36. Monarch’s investigation revealed that in addition to the 2019 Bank Draft that had been submitted to Monarch in February 2019 to fund the 2019 RRSP Contribution, in February 2018, the Respondent had purchased a bank draft payable to Monarch in the amount of $600 (the “2018 Bank Draft”) that was applied towards the purchase of units of a mutual fund in client GL’s RRSP account at Monarch (the “2018 RRSP Contribution). The Respondent informed Monarch that the source of the monies used to fund the purchase of the 2018 Bank Draft was a cheque payable to client GL that was deposited into the MLTF Bank Account.
37. The Respondent did not disclose to Monarch that since January 2016 she had been routinely accepting cheques from client GL that were payable to client GL and depositing the cheques into the MLTF Bank Account.
38. On or about July 9, 2019, Monarch met with the Respondent and issued a letter to her setting out the findings of its investigation and the disciplinary action that Monarch intended to take in order to address the conduct of the Respondent (the “July 2, 2019 Letter”). Among other things, the July 2, 2019 Letter stated that the Respondent was prohibited from accepting cheques endorsed to her from mutual fund clients.
39. After receiving the July 2, 2019 Letter, between July 2, 2019 and November 2019, the Respondent and MN accepted at least 7 additional cheques from client GL and deposited the cheques into the MLTF Bank Account.
40. On December 11, 2019, the Respondent attended an interview with Staff to give information relevant to Staff’s investigation into her conduct. During that interview, in response to questioning by Staff, the Respondent informed Staff that she had been routinely accepting cheques from client GL and depositing those cheques into the MLTF Bank Account since January 2016.  The full duration and extent of the Respondent’s personal financial dealings with client GL came to light for the first time during her interview with Staff on December 11, 2019.

Additional Factors

41. Client GL did not complain about the Respondent’s conduct as described in this Settlement Agreement and has not alleged that any of her money is unaccounted for.
42. Staff is not aware of any evidence that indicates that the Respondent failed on any occasion to distribute monies received from client GL in accordance with client GL’s instructions.
43. The Respondent is 66 years old.
44. The Respondent states that she accepted cheques from client GL, deposited the cheques into the MLTF Bank Account and disbursed the proceeds from those cheques in accordance with client GL’s instructions in order to enable client GL to make payments owing to CRA and pay her other living expenses without having all of her income garnished.
45. The Respondent states that she mistakenly believed that she was not required to inform FundEX or Monarch that she was depositing cheques from client GL into the MLTF Bank Account because her personal financial dealings with client GL arose during the course of providing tax services to client GL. The Respondent acknowledges that she now understands that all personal financial dealings between an Approved Person and a client must be disclosed to the Member.
46. After Monarch discovered that the 2018 Bank Draft and the 2019 Bank Draft that had been submitted to Monarch to fund investment purchases in the RRSP account of client GL were purchased using monies that had been deposited into the MLTF Bank Account, Monarch imposed the following discipline on the Respondent:
    1. a requirement to complete CSI’s IFSE 90 day training course course;
    2. a requirement to complete Monarch’s anti-money laundering course;
    3. a 60 day suspension between August 1, 2019 – September 30, 2019 (the “Suspension Period”);
    4. a deduction of 50% of the commission income that the Respondent would have otherwise earned during the Suspension Period, which totaled $5,066.45; and
    5. a requirement to submit to 6 months of close supervision by Monarch compliance staff;
    6. a requirement to pay close supervision fees in the amount of $1,000/month during the 6 months of close supervision (a total of $6,000) to cover the costs to the Member of heightened supervision during that period.
47. The Respondent has not previously been the subject of MFDA disciplinary proceedings.

V. ADDITIONAL TERMS OF SETTLEMENT

48. 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.
49. The Settlement Agreement is subject to acceptance by the Hearing Panel. 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.
50. 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.
51. 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 at the settlement hearing, subject to rule 15.3 of the MFDA Rules of Procedure;
    2. the Respondent agrees to waive any rights to a full hearing, a review hearing or appeal 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. except for any proceedings commenced to address an alleged failure to comply with this Settlement Agreement, 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, 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;
    4. the Respondent shall be deemed to have been penalized by the Hearing Panel pursuant to section 24.1.1 of MFDA By-law No. 1 for the purpose of giving notice to the public thereof in accordance with section 24.5 of MFDA 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.
52. 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 this 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.
53. 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 MFDA By-law No. 1, unaffected by the Settlement Agreement or the settlement negotiations.
54. 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. The terms of the Settlement Agreement, including the attached Schedule “A”, will be released to the public if and when the Settlement Agreement is accepted by the Hearing Panel.
55. The Settlement Agreement may be signed in one or more counterparts which together shall constitute a binding agreement. A facsimile or electronic copy of any signature shall be as effective as an original signature.