Settlement Agreement

I. INTRODUCTION

1. By Notice of Settlement Hearing, the Mutual Fund Dealers Association of Canada (the “MFDA”) will announce 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 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, Richard Verm Boker.

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 April 2004 until November 2019, the Respondent was registered as a dealing representative in Ontario with PFSL Investments Canada Ltd. (the “Member”), a Member of the MFDA.
7. From December 2009 until November 2019, the Member designated the Respondent as a Branch Manager.
8. On November 27, 2019, the Respondent resigned from the Member, and he is not currently registered in the securities industry in any capacity.
9. At all material times, the Respondent conducted business in the Thornton, Ontario area.

Personal Financial Dealings with Clients

10. Commencing in 2009, the Respondent approached 12 clients (collectively, the “Clients”) and requested loans from the Clients in order to assist the Respondent to make timely payments on a mortgage secured against his personal residence and to pay other debt obligations that he owed to creditors.
11. Between 2010 and 2018, the Respondent borrowed approximately $177,908 from the Clients, as follows:

12. With respect to clients RL and RA, the Respondent signed promissory notes that documented the principal amount, term, and the amount or rate of interest and fees payable on the amounts that the Respondent borrowed. With the remaining 10 Clients, the Respondent entered into verbal agreements with respect to the terms of the loans that he obtained. The Respondent did not provide the Clients with any collateral as security for any of the loans.
13. With respect to Clients RL and RA, the promissory notes specified that the principal amount and interest were to be repaid on September 28, 2018 and June 27, 2019, respectively. Neither loan was repaid in full to Clients RL and RA as of the repayment deadlines specified in the promissory notes.
14. For at least nine of the Clients (RL, NR, LL, RA, EW, RL2, AC, DL, and RR) the source of the monies that they loaned to the Respondent were redemptions from mutual funds that they held in accounts at the Member. In three of these instances (Clients RL, NR, and RA, and RL2) the Clients incurred deferred sales charge fees arising from the redemption of mutual funds that ranged from approximately $200 to $1,400, and which totaled approximately $2,800. Two Clients (clients EW and RR) incurred withholding taxes of approximately $1,000 each as a result of the mutual fund redemptions that were processed in their investment accounts to facilitate loans to the Respondent.
15. The loans that the Respondent obtained from the Clients gave rise to conflicts or potential conflicts of interest that the Respondent failed to disclose to the Member or otherwise address by the exercise of responsible business judgment influenced only by the best interests of the Clients.
16. As of September 2021, the Respondent has provided evidence that he has repaid all the clients in full. The Respondent states that the amounts repaid to the Clients included the deferred sales charge fees and withholding taxes referred to in paragraph 14, above.

Annual Attestations

17. Between 2010 and 2018, the Respondent signed the Member’s annual attestations stating to the Member that he acknowledged, among other things, that he must not and will not accept money from a client, nor would he be involved in any kind of borrowing or money lending arrangements with a client.
18. The Respondent borrowed monies from the Clients between 2010 and 2018 as described above.

Additional Factors

19. The Respondent has not previously been the subject of MFDA disciplinary proceedings.
20. There is no evidence of client complaints.
21. 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.

V. CONTRAVENTIONS

22. The Respondent admits that between 2010 and 2018, he engaged in personal financial dealings with clients by borrowing monies from clients, which gave rise to conflicts or potential conflicts of interest that he failed to disclose to the Member or otherwise address by the exercise of responsible business judgment influenced only by the best interests of the clients, contrary to MFDA Rules 2.1.4^[2] and 1.1.

VI. TERMS OF SETTLEMENT

23. The Respondent agrees to the following terms of settlement:
    1. the Respondent shall be prohibited for a period of 7 years from conducting securities related business in any capacity while in the employ of or associated with any MFDA Member, commencing from the date the Settlement Agreement is accepted by the Hearing Panel, pursuant to s. 24.1.1(e) of MFDA By-law No. 1;
    2. the Respondent shall be permanently prohibited from acting as a Branch Manager or acting in any other MFDA related supervisory capacity while in the employ of or associated with any MFDA Member, pursuant to s. 24.1.1(f) of By-law No. 1;
    3. the Respondent shall pay a fine in the amount of $22,000 in certified funds, pursuant to s. 24.1.1(b) of MFDA By-law No. 1;
    4. the Respondent shall pay costs in the amount of $5,000 in certified funds, pursuant to s. 24.2 of MFDA By-law No. 1;
    5. the payment by the Respondent of the Fine and Costs shall be made and received by MFDA Staff in certified funds as follows:
       1. $5,000 (Costs) upon acceptance of the Settlement Agreement by the Hearing Panel;
       2. $5,000 (Fine) upon acceptance of the Settlement Agreement by the Hearing Panel; and
       3. $17,000 (Fine) on or before the last business day of the first month following the date of the Settlement Agreement;
    6. the Respondent shall in the future comply with MFDA Rules 2.1.4 and 1.1.2, and
    7. the Respondent will attend in person via videoconference on the date set for the Settlement Hearing.

VII. STAFF COMMITMENT

24. 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 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 contraventions that are not set out in Part 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 Part IV, 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

25. Acceptance of this Settlement Agreement shall be sought at a hearing of the Central 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.
26. 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 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.
27. 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 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.
28. 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 him.

IX. FAILURE TO HONOUR SETTLEMENT AGREEMENT

29. 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 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

30. 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.
31. 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

32. 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.
33. Any obligations of confidentiality shall terminate upon acceptance of this Settlement Agreement by the Hearing Panel.

XII. EXECUTION OF SETTLEMENT AGREEMENT

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

[1] The Respondent also owed the Clients interest based on the terms of each specific loan.
[2] On June 30, 2021, MFDA Rule 2.1.4 was amended to conform with client focused reform amendments to National Instrument 31-103 that came into effect on the same day.  As the conduct addressed in this Notice of Hearing pre-dated the amendment to this Rule, all allegations set out in this Notice of Hearing that make reference to that Rule concern the version of the Rule that was in effect between February 27, 2006 and June 30, 2021.