TORONTO, July 18, 2012 /CNW/ - A Settlement Hearing in the matter of David George Rounthwaite (the "Respondent") was held July 16, 2012 in Toronto, Ontario before a Hearing Panel of the MFDA's Central Regional Council.
The Hearing Panel accepted the Settlement Agreement between MFDA Staff and the Respondent, as a consequence of which the Respondent has paid a fine in the amount of $20,000 and costs in the amount of $5,000.
In the Settlement Agreement, the Respondent admitted that he:
(a) engaged in discretionary trading as part of his general practice; and specifically, from 2006 to 2009, engaged in discretionary trading in 29 instances in the accounts of 14 clients, seven of whom had provided the Respondent with a Limited Trading Authorization, contrary to MFDA Rule 2.3 and Rule 2.1.1, and the terms of his registration as a mutual fund salesperson; and
(b) facilitated an investment by a client in 2008 in a charitable donation program which had not been approved for sale by Worldsource Financial Management Inc. and after the Canada Revenue Agency had disallowed the charitable donation program in 2007, contrary to MFDA Rules 2.1.4, 1.2.1(d), and Rule 2.1.1.
According to paragraphs 16-19 of the Settlement Agreement, the discretionary trading was authorized by the clients:
16. The Respondent's general practice was to meet with a client and determine their general investing intentions and have the client sign a trade form without the particulars of the trade(s) indicated on the form. Once the client had left his office, the Respondent would decide on the particulars of the trade(s) and populate the appropriate fund codes, number of units and names of the mutual funds to be traded on the form. Alternatively, in some instances, the Respondent obtained a Limited Trading Authorization ("LTA") from the client with respect to their account, and then decided on the particulars of the trade and populated the details of the trade on the trade processing form. In both cases, the Respondent would then submit the trade for processing. In both cases, the client did not determine the specific elements of the trade(s).
17. Following the processing and confirmation of the trades, the Respondent would send the client a follow-up letter setting out the details of the completed transactions.
18. Twenty-nine specific instances of this form of 'authorized' discretionary trading were identified in accounts serviced by the Respondent during the period 2006 to 2009. These instances occurred in the accounts of 14 clients, seven of whom had provided the Respondent with a Limited Trading Authorization.
19. There have been no client complaints and no known client losses concerning the authorized discretionary trading engaged in by the Respondent."
The MFDA is the self-regulatory organization for Canadian mutual fund dealers, regulating the operations, standards of practice and business conduct of its 121 Members and their approximately 75,000 Approved Persons with a mandate to protect investors and the public interest.
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