Settlement Agreement

I. INTRODUCTION

1. The Mutual Fund Dealers Association of Canada (the “MFDA”) will announce by new release that it proposes to hold a hearing to consider whether, pursuant to section 24.4 of By-law No. 1, a hearing panel of the Pacific 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 Xiao Feng Xin (the “Respondent”).

II. JOINT SETTLEMENT RECOMMENDATION

2. Staff conducted an investigation of the Respondent’s activities. The investigation disclosed that the Respondent had engaged in 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.
3. Staff and the Respondent recommend settlement of the matters disclosed by the investigation in accordance with the terms and conditions set out below. The Respondent agrees to the settlement on the basis of the facts set out in Part IV herein and consents to the making of an Order in the form attached as Schedule “A”.
4. Staff and the Respondent agree that the terms of this 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.

III. ACKNOWLEDGEMENT

5. Staff and the Respondent agree with the facts set out in Part IV herein for the purposes of this Settlement Agreement only and further agree that this agreement of facts is without prejudice to the Respondent or Staff in any other proceeding of any kind including, but without limiting the generality of the foregoing, any proceedings brought by the MFDA (subject to Part IX) or any civil or other proceedings which may be brought by any other person or agency, whether or not this Settlement Agreement is accepted by the Hearing Panel.

IV. AGREED FACTS

Registration History

6. From January 2015 to May 2015, the Respondent was registered in British Columbia as a dealing representative with CIBC Securities Inc., a Member of the MFDA.
7. From March 2, 2017 to May 28, 2018, the Respondent was registered in British Columbia as a dealing representative with TD Investment Services Inc. (“TDISI”), a Member of the MFDA.
8. On May 28, 2018, the TDISI terminated the Respondent, and he is not currently registered in the securities industry in any capacity.
9. At all material times, the Respondent was also employed with a bank affiliated with TDISI (the “Bank”).
10. At all material times, the Respondent carried on business in the New Westminster, British Columbia area.

Unauthorized Account Opening and Trading, and Signing a Client’s Signature

11. At all material times, TDISI’s policies and procedures prohibited its Approved Persons from:
    1. placing an order to trade in mutual funds without the client’s authorization;
    2. falsifying any account information, record or document in any way; and
    3. signing or initialing documentation for or on behalf of clients.
12. At all material times, client JW was a client of TDISI whose Tax Free Savings Account (“TFSA”) at TDISI was serviced by the Respondent.
13. Between on or about May 8 and 9, 2018, without client JW’s knowledge or authorization, the Respondent:
    1. redeemed the investments held in client JW’s TFSA;
    2. closed client JW’s TFSA;
    3. opened a new TFSA for client JW; and
    4. repurchased investments in the new TFSA that client JW had previously held in his TFSA.
14. Without the knowledge or authorization of client JW, the Respondent facilitated the steps described above in paragraph 13 by engaging in the following conduct:
    1. the Respondent signed client JW’s signature on a Transaction and Account Maintenance form and submitted it to the Member for processing in order to redeem approximately $16,679 from client JW’s TFSA;
    2. the Respondent signed client JW’s signature on a TFSA account opening application form that he then used to open a new TFSA (the “New TFSA”) for client JW;
    3. the Respondent submitted paperwork to TDISI to purchase $16,780 of the same mutual funds which were redeemed from the TFSA that client JW held prior to May 8, 2018 in the New TFSA [by means of the transaction described in sub-paragraph 14(a) above]; and
    4. registered client JW for a Pre-Authorized Purchase Plan (“PPP”) in the amount of $50 per month.
15. The Respondent’s compensation was primarily salary based. However, the Respondent was eligible to receive a semi-annual bonus that was calculated taking into account the Respondent’s performance as measured against certain key performance indicators.
16. By opening of a new TFSA for client JW and registering client JW for a monthly PPP without the client’s authorization, the Respondent stood to earn credit towards his eligibility for semi-annual bonus income in January 2019. As a result of his termination in May 2018, the Respondent did not receive a bonus in January 2019. The unauthorized transactions in this case would have earned the Respondent 0.2% of the credit that he required to become eligible for a bonus.
17. Client JW incurred a tax penalty of $1,593.24 due to the over contribution to his TFSA arising from the Respondent’s actions described above at sub-paragraph 14(c).
18. In July 2019, client JW complained to TDISI that the redemption from his TFSA and the opening of the New TFSA were both processed without his knowledge or authorization.
19. TDISI reversed the unauthorized transactions that had been processed in client JW’s TFSA and New TFSA. The Bank compensated client JW for the tax penalty that he had incurred.

Additional Factors

20. By entering into this Settlement Agreement, the Respondent has saved the MFDA the time, resources, and expenses associated with conducting a contested hearing of the allegations.
21. The Respondent has not previously been the subject of MFDA disciplinary proceedings.

V. CONTRAVENTIONS

22. The Respondent admits that in May 2018, without the authorization of a client, the Respondent opened an account, processed redemptions, and set up a pre-authorized purchase plan for a client, contrary to the Member’s policies and procedures and MFDA Rules 2.1.4, 2.1.1, 2.5.1, and 1.1.2.
23. The Respondent admits that in May 2018, he signed a client’s signature on two account forms and submitted the account forms to the Member for processing, contrary to MFDA Rule 2.1.1.

VI. TERMS OF SETTLEMENT

24. The Respondent agrees to the following terms of settlement:
    1. The Respondent shall be prohibited from conducting securities related business in any capacity while in the employ or associated with any Member of the MFDA for a period of 12 months commencing from the date the settlement agreement is accepted by the Hearing Panel, pursuant to section 24.1.1(e) of MFDA By-law No. 1;
    2. The Respondent shall pay a fine in the amount of $10,000, pursuant to section 24.1.1(b) of By-law No. 1;
    3. The Respondent shall pay costs in the amount of $5,000, pursuant to section 24.2 of By-law No. 1;
    4. If the Respondent becomes registered again in the future, he shall in the future comply with MFDA Rules 2.1.1, 2.1.4, 2.5.1and 1.1.2; and
    5. The Respondent will attend in person or by videoconference, on the date set for the Settlement Hearing.

VII. STAFF COMMITMENT

25. If this Settlement Agreement is accepted by the Hearing Panel, Staff will not initiate any proceeding under the By-laws of the MFDA against the Respondent in respect of the facts set out in Part IV and the contraventions described in Part V of this Settlement Agreement, subject to the provisions of Part IX below. 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 Parts IV and V of this Settlement Agreement or in respect of conduct that occurred outside the specified date ranges of the facts and contraventions set out in Parts IV and V, 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.

VIII. PROCEDURE FOR APPROVAL OF SETTLEMENT

26. Acceptance of this Settlement Agreement shall be sought at a hearing of the Pacific Regional Council of the MFDA on a date agreed to by counsel for Staff and the Respondent. 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.
27. Staff and the Respondent may refer to any part, or all, of the Settlement Agreement at the Settlement Hearing. Staff and the Respondent also agree that if this Settlement Agreement is accepted by the Hearing Panel, it will constitute the entirety of the evidence to be submitted respecting the Respondent in this matter, and the Respondent agrees to waive his 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.
28. Staff and the Respondent agree that if this Settlement Agreement is accepted by the Hearing Panel, then the Respondent shall be deemed to have been penalized by the Hearing Panel pursuant to s. 24.1.1 and 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.
29. Staff and the Respondent agree that if this Settlement Agreement is accepted by the Hearing Panel, 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 it him.

IX. FAILURE TO HONOUR SETTLEMENT AGREEMENT

30. 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 Part IV of the 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.

X. NON-ACCEPTANCE OF SETTLEMENT AGREEMENT

31. If, for any reason whatsoever, this Settlement Agreement is not accepted by the Hearing Panel or an Order in the form attached as Schedule “A” is not made 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 this Settlement Agreement or the settlement negotiations.
32. Whether or not this Settlement Agreement is accepted by the Hearing Panel, the Respondent agrees that he will not, in any proceeding, refer to or rely upon this Settlement Agreement or the negotiation or process of approval of this Settlement Agreement as the basis for any allegation against the MFDA of lack of jurisdiction, bias, appearance of bias, unfairness, or any other remedy or challenge that may otherwise be available.

XI. DISCLOSURE OF AGREEMENT

33. 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.
34. Any obligations of confidentiality shall terminate upon acceptance of this Settlement Agreement by the Hearing Panel.

XII. EXECUTION OF SETTLEMENT AGREEMENT

35. This Settlement Agreement may be signed in one or more counterparts which together shall constitute a binding agreement.
36. A facsimile copy of any signature shall be effective as an original signature.