- The New Self-Regulatory Organization of Canada, a consolidation of IIROC and the MFDA (the “Corporation”), will announce that it proposes to hold a hearing (the “Settlement Hearing”) to consider whether, pursuant to Mutual Fund Dealer Rule 126.96.36.199, a hearing panel of the Ontario District Committee (the “Hearing Panel”) of the Corporation should accept the settlement agreement (the “Settlement Agreement”) entered into between Staff of the Corporation (“Staff”) and Stephanie Vaarsi (the “Respondent”).
- Staff and the Respondent consent and agree to the terms of this Settlement Agreement.
- Staff and the Respondent jointly recommend that the Hearing Panel accept the Settlement Agreement.
- The Respondent admits to the following violations of the Mutual Fund Dealer Rules:
- Between May 24, 2016 and November 6, 2018, the Respondent altered 26 account forms in respect of 22 clients by altering information on the account forms without having the client initial the alterations, contrary to Mutual Fund Dealer Rule 2.1.1 (formerly MFDA Rule 2.1.1).
III. TERMS OF SETTLEMENT
- Staff and the Respondent agree and consent to the following terms of settlement:
- the Respondent shall pay a fine in the amount of $22,500 in certified funds upon acceptance of the Settlement Agreement, pursuant to Mutual Fund Dealer Rule 188.8.131.52(b);
- the Respondent shall pay costs in the amount of $2,500 in certified funds upon acceptance of the Settlement Agreement, pursuant to Mutual Fund Dealer Rule 7.4.2;
- the Respondent shall in the future comply with Mutual Fund Dealer Rule 2.1.1; and
- the Respondent will attend in person by videoconference on the date set for the Settlement Hearing.
- 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
- Since 1992, the Respondent has been registered in Ontario as a dealing representative with Sun Life Financial Investment Services (Canada) Inc. (the “Dealer Member”), a Dealer Member of the Corporation registered as a mutual fund dealer (formerly a Member of the MFDA).
- Since November 2, 2016 in British Columbia, and since March 12, 2020 in Alberta, the Respondent has been registered as a dealing representative with the Dealer Member.
- At all material times, the Respondent conducted business in the Toronto, Ontario area.
Altered Know-Your-Client Update Forms
- At all material times, the Dealer Member’s policies and procedures prohibited its Approved Persons from altering or correcting any information on a signed document, without the client initialling the document to show the change was approved.
- Between May 24, 2016 and November 6, 2018, the Respondent altered 26 Know-Your-Client (“KYC”) Update Forms in respect of 22 clients by altering information on the forms without having the client initial the alterations.
- The Respondent submitted all of the altered account forms described above to the Dealer Member for processing.
- The alterations which the Respondent made to the forms included alterations to the clients’ risk tolerance, investment objectives, annual income, and net worth.
The Dealer Member’s Investigation
- Beginning in July 2020, the Dealer Member’s Compliance Department conducted a review of the Respondent’s business practices, which resulted in the discovery of the 26 altered KYC Update Forms that are the subject of this proceeding.
- In May 2021 and again in August 2022, the Dealer Member sent audit letters to the clients with respect to whom the Respondent had altered KYC Update Forms and asked the clients to advise if the KYC information recorded with the Dealer Member was inaccurate. No clients responded to the Dealer Member’s letter with complaints concerning the recording of their KYC information.
- On June 10, 2021, the Dealer Member issued a warning letter to the Respondent with regard to her altering account forms without obtaining client initials and other issues that are not the subject of this proceeding. The Dealer Member fined the Respondent $10,000, placed the Respondent on close supervision for 6 months, and required that the Respondent review the Dealer Member’s policies and procedures, including the section dealing with signature falsification. The Respondent has paid the fine and completed the term of close supervision.
Previous Dealer Member Warning
- On January 22, 2016, the Dealer Member issued a warning letter to the Respondent concerning, among other things, three pre-signed account forms and re-used/altered pre-authorized contribution account forms found in the client files maintained by the Respondent.
- The Dealer Member’s warning letter indicated that the account forms described above in paragraph 17 had been obtained at the direction of the Respondent’s former assistant without the Respondent’s knowledge, but that the Respondent was responsible for the acts of her assistant.
- In respect of this conduct, the Dealer Member placed the Respondent under close supervision for six months, required her to complete the Mutual Fund Dealer Compliance Course, and required her to review the Dealer Member’s policies and procedures, including the section dealing with pre-signed forms.
- The Respondent altered all of the account forms that are the subject of this Settlement Agreement in the period after the Dealer Member previously warned the Respondent on January 22, 2016.
- There is no evidence that the Respondent received any financial benefit from the conduct set out above beyond any commissions and fees to which she would ordinarily have been entitled had the transactions been carried out in the proper manner.
- There is no evidence of client loss or a lack of authorization, and none of the clients have complained to the Dealer Member or Staff.
- The Respondent has not previously been the subject of disciplinary proceedings by the Corporation.
- By entering into this Settlement Agreement, the Respondent has accepted responsibility for her misconduct and saved the Corporation the time, resources, and expenses that would have otherwise been necessary to conduct a contested hearing of the allegations.
V. ADDITIONAL TERMS OF SETTLEMENT
- This settlement is agreed upon in accordance with Mutual Fund Dealer Rule 7.4.4 and Rules 14 and 15 of the Mutual Fund Dealer Rules of Procedure (the “ROP”).
- 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. Settlement Hearings are typically held in the absence of the public pursuant to Mutual Fund Dealer Rule 7.3.5 and Rule 15.2(2) of the ROP. 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.
- Staff and the Respondent agree that if this Settlement Agreement is accepted by the Hearing Panel:
- the Settlement Agreement will constitute the entirety of the evidence to be submitted at the settlement hearing, subject to Rule 15.3 of the ROP;
- the Respondent agrees to waive any rights to a full hearing, a review hearing or appeal, including before the Board of Directors of the Corporation 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;
- except for any proceedings commenced to address an alleged failure to comply with this Settlement Agreement, Staff will not initiate any proceeding under the Mutual Fund Dealer Rules against the Respondent in respect of the contraventions described in this Settlement Agreement. Nothing in this Settlement Agreement precludes Staff from investigating or initiating proceedings in respect of any 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;
- the Respondent shall be deemed to have been penalized by the Hearing Panel pursuant to Mutual Fund Dealer Rule 184.108.40.206 for the purpose of giving notice to the public thereof in accordance with Mutual Fund Dealer Rule 7.4.5; and
- 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.
- 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 Mutual Fund Dealer Rule 7.4.3 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.
- 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 agreed, 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.
- 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 Mutual Fund Dealer Rules 7.3 and 7.4, unaffected by the Settlement Agreement or the settlement negotiations.
- 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.
- 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.
JVWitness - Signature
JVWitness - Print Name
Per: Charles Toth
On January 1, 2023, the Investment Industry Regulatory Organization of Canada (“IIROC”) and the Mutual Fund Dealers Association of Canada (the “MFDA”) were consolidated into a single self-regulatory organization recognized under applicable securities legislation. The New Self-Regulatory Organization of Canada (referred to herein as the “Corporation”) adopted interim rules that incorporate the pre-amalgamation regulatory requirements contained in the rules and policies of IIROC and the by-law, rules and policies of the MFDA (the “Interim Rules”). The Interim Rules include (i) the Investment Dealer and Partially Consolidated Rules, (ii) the UMIR and (iii) the Mutual Fund Dealer Rules. These rules are largely based on the rules of IIROC and certain by-laws, rules and policies of the MFDA that were in force immediately prior to amalgamation. Where the rules of IIROC and the by-laws, rules and policies of the MFDA that were in force immediately prior to amalgamation have been incorporated into the Interim Rules, Enforcement Staff have referenced the relevant section of the Interim Rules. Pursuant to Mutual Fund Dealer Rule 1A and s.14.6 of By-Law No.1 of the Corporation, contraventions of former MFDA regulatory requirements may be enforced by the Corporation.