Settlement Agreement

I. INTRODUCTION

1. Staff of the Mutual Fund Dealers Association of Canada (“Staff”) and the Respondent, Kosal Vibhav Sunkara (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. Staff and the Respondent agree with the facts set out in Part III herein for the purposes of this Settlement Agreement only.
5. 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 February 20, 2019, the Respondent opened an account for a client and processed transactions in the client’s account without obtaining the client’s authorization, and recorded the client’s Know-Your-Client information without communicating with the client, contrary to the Member’s policies and procedures and MFDA Rules 2.1.1, 2.2.1., 2.2.2(b), 1.1.2, and 2.5.1.
6. Staff and the Respondent agree and consent to the following terms of settlement:
   1. The Respondent shall pay a fine in the amount of $7,500 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, 2.2.1., 2.2.2(b), 1.1.2, and 2.5.1; and
   4. The Respondent will attend in person on the date set for the Settlement Hearing.
7. 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

8. Since March 12, 2018, the Respondent has been registered in British Columbia as a dealing representative with Scotia Securities Inc. (the “Member”), a Member of the MFDA.
9. At all material times, the Respondent conducted business in the Vernon, British Columbia area.

Policies and Procedures

10. At all material times, the Member’s policies and procedures required:
    1. Approved Persons to meet with clients in person at a branch when opening accounts and when collecting Know Your Client (“KYC”) information when opening new accounts; and
    2. for new accounts opened at the branch, that clients sign the following documents: Account Application form, Scotia Investment Selector forms, and, if the account set up included initial investments, Investment Directions forms.

Conduct

11. At all material times, client LL and client KL were spouses and clients of the Member whose accounts were serviced by the Respondent.
12. The Respondent states that, on January 31, 2019, the Respondent discussed with LL the opportunity to open a Tax-Free Savings Account. Arrangements were made for LL and KL to come in to the branch to meet with the Respondent to discuss that opportunity for both of them.
13. On February 20, 2019, client KL met with the Respondent at the Respondent’s branch. KL advised the Respondent that LL was not able to make the appointment.  During that meeting, the Respondent and client KL discussed opening a Tax-Free Savings Account (“TFSA”) for herself and for her spouse, client LL, who was not present at the meeting.
14. On February 20, 2019, when meeting with client KL, the Respondent:
    1. opened a TFSA account for client LL;
    2. obtained, from client KL, KYC information relating to client LL, including client LL’s risk tolerance, time horizon, and investment objectives; and
    3. processed an initial trade for the $500 purchase of a mutual fund in client LL’s TFSA, and set-up a monthly pre-authorized contribution (“PAC”) of $1,000 in client LL’s TFSA.
15. The Respondent did not obtain client LL’s authorization to open a TFSA, purchase a mutual fund, or set-up a PAC on his behalf. The Respondent states that it was his understanding that LL would come into the branch the next morning to sign the documents required to authorize the account opening and transactions.
16. The Respondent recorded Know-Your-Client information for client LL on the Member’s back office system that he obtained from client KL, without having communicated with client LL. The Respondent thereby failed to use due diligence to learn the essential facts relative to client LL and to each order or account accepted.
17. As described above, in order to open the TFSA account and process the transactions described above, the Respondent was required to obtain the signature of client LL on the following documents: TFSA Application, Scotia Investment Selector Form, and the Investment Directions Form. The Respondent failed to obtain client LL’s signature on these forms when processing the opening of the TFSA or the transactions described above at paragraph 14, contrary to the Member’s policies and procedures.
18. By failing to obtain the signature of client LL on the TFSA Application to open a new account for client LL at the Member, the Respondent engaged in conduct that was contrary to MFDA Rule 2.2.2(b).
19. On March 13 and 16, 2019, client LL contacted the Member and complained that he had not authorized the opening of the TFSA account, the $500 trade, or the setting up of the PAC.
20. On March 21, 2019, the Member reversed the $500 trade and cancelled the PAC that the Respondent had set up in client LL’s account. On March 31, 2019, the Member closed client LL’s TFSA account as instructed by client LL.
21. On or about June 13, 2019, the Member issued a warning letter to the Respondent for the conduct described above and placed him under close supervision. .

Additional Factors

22. There is no evidence that the Respondent received any financial benefit from engaging in the misconduct described in this Settlement Agreement.
23. As a result of the actions taken by the Member described in paragraph 20 above, the client has not incurred any financial harm resulting from the conduct described in this Settlement Agreement.
24. At the time of the transactions described above, the Respondent was 25 years old and had not previously been the subject of MFDA disciplinary proceedings.
25. The Respondent cooperated fully with the investigation by Staff of the MFDA.
26. By entering into this Settlement Agreement, the Respondent has saved the MFDA the time, resources, and expense associated with conducting a full hearing of the allegations.

IV. ADDITIONAL TERMS OF SETTLEMENT

27. 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.
28. 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.
29. 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.
30. 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 or contraventions described in this Settlement Agreement. Nothing in this Settlement Agreement precludes Staff from investigating or initiating proceedings in respect of any facts or 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.
31. 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.
32. 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.
33. 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.