IN THE MATTER OF DISCIPLINARY PROCEEDINGS INITIATED BY THE INVESTMENT DEALERS ASSOCIATION OF CANADA. Re: ESTHER INGLIS DECISION AND REASONS

Transcription

1 IN THE MATTER OF DISCIPLINARY PROCEEDINGS INITIATED BY THE INVESTMENT DEALERS ASSOCIATION OF CANADA Re: ESTHER INGLIS DECISION AND REASONS Contested Discipline Hearing held February 1 and 2, 2005 Hearing panel: Honourable Alvin B. Rosenberg, Q.C., T. Hugh McNabney F. Michael Walsh Enforcement counsel: Kathryn Andrews Counsel for Inglis: Michael Head Investigator: Michael Arthur Although Michael Head was retained by Ms. Inglis and advised her throughout the preliminary stages of the matters leading up to discipline hearing, he advised that he would not be attending at the hearing as his retainer did not cover the hearing itself. Ms. Inglis acknowledged this and agreed to proceed with the hearing acting for herself. Ms. Inglis was charged with the following violations: VIOLATIONS Count 1: Count 2: On or about May 2000, Esther Inglis promised to reimburse client OF for a deferred sales charge and then transferred funds from OF s brokerage account to OF s bank account, without either OF or the Member firm s knowledge or consent, thereby engaging in conduct unbecoming or detrimental to the public interest, contrary to Association By-law On or about December 2001, Esther Inglis signed client WC s name on an account guarantee, without the client s knowledge or consent, thereby engaging in conduct unbecoming or detrimental to the public interest, contrary to Association By-law 29.1.

2 2 The following are the particulars of the facts alleged by the Association and the conclusions thereon are as follows: Registration history: 1. The Respondent has been registered with the Association as follows: February 17, 1994 to September 6, 1996: Registered Representative ( RR ) at Wood Gundy Inc. April 17, 1997 to May 16, 2002: RR at TD Securities Inc. ( TD ) During this time the Respondent was also registered as a Branch Manager at TD from February 4, 1999 to October 2, UTN dated May 16, 2002: 2. At all material times Inglis was a Registered Representative ( RR ) at TD Securities Inc. (now TD Waterhouse Investment Advice, a division of TD Waterhouse Canada Inc.) ( TD ), a Member of the Association. 3. This investigation arose out of a UTN provided to the Association by TD on May 31, The UTN indicates that Inglis was dismissed on May 16, It also indicates that Inglis falsified client signatures on documentation. There were also several complaints to TD which were incorporated into the investigation. Forgery involving client WC: 4. WC was a client of Inglis. In late 2001, WC wanted to open a second account in the name of his corporation entitled Ontario Ltd. On or about November 28, 2001, WC wrote to TD and requested that 1000 shares of Bonbardier Inc. and 1000 shares of GEAC Computer Corp. Ltd. be transferred from his account to his corporate account. A guarantee from WC was required before TD would open the corporate account. 5. Inglis admitted to the Association that she signed WC s name on the guarantee for Ontario Limited s account dated December 6, 2001 (the guarantee ). She stated that WC had previously signed the original guarantee, but that the original guarantee had been lost. According to Inglis, WC wanted to transfer the securities to his corporate account expeditiously, so she signed WC s signature on the guarantee. 6. There was no monetary benefit to Inglis in signing WC s name on the guarantee. The transfer of securities took place as planned. WC was aware that the guarantee existed, but was not aware that Inglis had signed his name on the guarantee.

3 3 Private settlement with OF: 7. OF became a client of Inglis through his sister-in-law, another Inglis client. He had a substantial amount to invest and was a knowledgeable investor. 8. In April 1999 Inglis purchased $250,000 of AIM Canada Mutual Funs for OF s account. OF was advised that it was a no-load fund. Inglis admitted to the Association that she did not clarify with OF that the mutual fund was being purchased on a deferred sales charge ( DSC ) basis. 9. OF asked Inglis to liquidate the mutual fund in April On or about April 30, 2000 OF was charged a redemption fee, or DSC, of $13, OF complained to Inglis about the DSC. Inglis promised OF that she would personally reimburse him for the DSC. On or about May 30, 2000, Inglis then transferred $13, from OF s brokerage account to his Royal Bank banking account. OF was not aware at the time that these funds had come from his own brokerage account. 10. In the summer of 2000, when OF realized that his brokerage account had been the source of the funds deposited in his bank account, he complained to Inglis and the Member firm. 11. TD was not aware at the time that Inglis had promised to reimburse OF. Inglis admitted to the Member firm in August 2000 that she had promised OF that he would recover the DSC. She also asked the Member firm to reimburse OF s TD account and charge the amount back to her. Subsequently OF was in fact reimbursed by TD. 12. The Respondent has not been registered by the Association since May Ms. Inglis admitted that Count 2 was established. With regard to Count 1, Ms. Inglis testified that she had spoken to her superior, Mr. Wright, on or about March or April of 2000 and he had agreed that the firm would pay the sum of $13, Mr. Wright testified and denied that such a discussion had or could have taken place. In assessing the credibility of these two witnesses, the Panel had the benefit of the evidence and cross-examination of both Ms. Inglis and Mr. Wright. The Panel had, in addition, the correspondence between them. 1. In a letter dated August 21, 2000, Ms. Inglis stated, in part, to Mr. Wright that: I did promise the client that he would recover these charges. Please authorize payment to client, charged back to me. 2. On November 7, 2000, Ms. Inglis stated, in part: I agreed on May 19 th at his home to cover the fees.

4 4 3. In a letter to the client of April 17, 2000, Ms. Inglis stated, in part, speaking of the penalty in question: However, I will honour the values quoted to you at cost which I will have to bear unless you advise differently. Even more persuasive is the content of the letter of August 21, It is clear, on a reading of this letter, that Ms. Inglis is reporting the facts to Mr. Wright for the first time, and this is completely inconsistent with her having met with him in March or April and his having agreed that the company would pay the amount. Accordingly, we find that the facts are as alleged by the Commission and that Ms. Inglis is guilty of Counts 1 and 2 in the violations quoted and in the precise terms of Count 1 and Count 2. PENALTY Re Count 2: Forgery The Association asks for a fine of $25,000 in connection with Count 2 and points out that this is the minimum shown for forgery in the guidelines. We feel that this case, in some respects, is similar to the case of Warren Neil Gee, Bulletin No In that case, although the finding was guilty of forgery, he was fined only $5,000 and the mitigating factors included: 1. Mr. Gee admitted that he had forged CF s name; 2. CIBC, as a result of the incident, terminated Mr. Gee s employment; 3. There was no negative impact on the client; 4. Mr. Gee did not benefit in any as a result of his conduct; 5. Mr. Gee had no prior disciplinary history. The Panel stated that: While the Guidelines suggest a minimum fine for specific offences, which is a baseline for those offences, the Preamble provides that a panel nevertheless has discretion to impose a lesser or greater penalty where the circumstances justify this. The Panel then analyzed the specific circumstances in the Gee case and found a fine of only $5,000. While the present case on Count 2 is somewhat similar to the Gee case, we do not feel that the amount of the penalty should be reduced to the amount in the Gee case, and find a penalty of $15,000 for Count 2.

5 5 With regard to Count 1, we find that a penalty of $25,000 is appropriate. SUSPENSIONS 1. For Count 2, we find that there should be a prohibition from approval to act in any registered capacity with any Member of the Association for a period of two (2) years. 2. With regard to Count 1, there is a similar prohibition for a period of three (3) years. 3. The two suspensions shall run consecutively so that the total suspension will be for a period of five (5) years. Ms. Inglis will also be required to take the Conduct and Practices Handbook for Securities Industry Professionals course and rewrite the examination. Simultaneously to the 5-year suspension, there will be a 10-year ban on serving in a supervisory capacity with any Member firm. This suspension shall be concurrent with the other suspensions. Ms. Inglis shall also pay costs in the amount of $15,000 towards the costs of the Association. DATED at Toronto, this llth day of March The Honourable Alvin B. Rosenberg, Q.C. Chair Mr. T. Hugh McNabney Member Mr. F. Michael Walsh Member