Settlement Agreement

I. INTRODUCTION

1. Staff of the Mutual Fund Dealers Association of Canada (“Staff”) and the Respondent, John Paul Hillsdon (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 June 16, 2014 and May 24, 2019, the Respondent obtained, possessed, and in some instances, used to process transactions, 14 pre-signed account forms in respect of 7 clients, contrary to MFDA Rule 2.1.1; and
   2. between September 22, 2014 and August 15, 2017, the Respondent altered, and used to process transactions, 11 account forms in respect of 9 clients by altering information on the account forms without having the client initial the alterations, 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 $15,000 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 s. 24.1.1(f) of By-law No. 1;
   4. the Respondent shall successfully complete the branch manager’s course offered by either the Canadian Securities Institute or the Investment Funds Institute of Canada prior to acting as a branch manager in the future, pursuant to 24.1.1(f) of MFDA By-law No. 1;
   5. the Respondent shall in the future comply with MFDA Rule 2.1.1; and
   6. the Respondent will attend in person or by videoconference 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. Commencing in 2003, the Respondent has been registered in the securities industry.
8. Since July 5, 2012, the Respondent has been registered in Ontario as a dealing representative with Investia Financial Services Inc. (the “Member”), a Member of the MFDA.
9. From around 2005 until December 12, 2016, the Member designated the Respondent as a Branch Manager
10. At all material times, the Respondent conducted business in the Markham, Ontario area.

Pre-Signed Account Forms

11. At all material times, the Member’s policies and procedures prohibited the use of pre-signed forms.
12. Between June 16, 2014 and May 24, 2019, the Respondent was an Approved Person of the Member, he obtained, possessed and, in some instances, used to process transactions, 14 pre-signed account forms in respect of 7 clients.
13. The pre-signed account forms included: 1 Registered Savings Plan (“RSP”) Account Application, 1 Know-Your-Client (“KYC”) Update Form, 2 Registered Education Savings Plan (“RESP”) Withdrawal Form, 4 Order Instruction Forms, 1 Application for Family ESP Account, 1 Application for Investment Account, 1 Transfer Authorization for Non-Registered Investments Form, 2 New Account Application Forms, and 1 Consent To Electronic Delivery of Documents.

Altered Account Forms

14. Between September 22, 2014 and August 15, 2017, the Respondent altered, and used to process transactions, 11 account forms in respect of 9 clients, by altering information on the account forms without having the client initial the alterations.
15. The altered account forms included: 1 RESP Educational Assistance Payment Withdrawal Form, 1 Letter of Direction, 6 KYC Update Forms, 1 New Client Application Form, and 2 Order Instruction Forms.
16. The alterations made by the Respondent consist of alterations to: investment instructions; client information (client income and net worth), plan type, and fund codes.

The Member’s Investigation

17. On August 19, 2019, during the course of a branch review, the Member conducted a full review of the client files maintained by the Respondent and identified the pre-signed and altered account forms that are described above.
18. In December 2019, the Member contacted all affected clients to determine whether the Respondent had engaged in any unauthorized activity in any of their accounts, to confirm the accuracy of their KYC information, and to ensure their investments were suitable. No clients reported any concerns with respect to the handling of their accounts.
19. The Member deducted $863 from the Respondent’s commissions for the cost of issuing the audit letters to clients.
20. On November 19, 2019, the Member placed the Respondent on strict supervision for a period of 90 days.
21. On February 27, 2020, the Member issued a letter to the Respondent regarding the conduct described above.

Additional Factors

22. There is no evidence that the Respondent received any financial benefit from the conduct set out above beyond any commissions and fees that he would ordinarily be entitled to receive had the transactions been carried out in the proper manner.
23. There is no evidence of client loss, complaints, or lack of authorization.
24. The Respondent has not previously been the subject of MFDA disciplinary proceedings.
25. 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

26. 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.
27. 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.
28. 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.
29. 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 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. 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 of the 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.
30. 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.
31. 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.
32. 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.