The SRO argues a hearing panel erred by failing to impose a fine against a rep who misappropriated a client’s money
The Mutual Fund Dealers Association of Canada (MFDA) is seeking a review of a regulatory hearing panel decision, arguing that the sanctions it imposed aren’t adequate.
The Ontario Securities Commission (OSC) will hold a hearing on April 26 to consider an application brought by the MFDA, which is appealing a hearing panel decision that was delivered in January.
In its application, the MFDA argued that the sanctions that were imposed against a former rep in a disciplinary case aren’t sufficient.
The hearing panel in the case ordered that a former rep with Royal Mutual Funds Inc., Omar Enrique Rojas Diaz, be permanently banned and pay $2,500 in costs after he admitted to misappropriating $39,270 from a client’s line of credit in an agreed statement of facts.
The panel rejected the MFDA’s request for a fine in the case, saying that while Diaz’s misconduct “would ordinarily warrant a financial penalty,” in this case, a penalty was “neither fair nor appropriate.”
According to the MFDA’s reasons for the decision, the panel found that Diaz had no ability to pay a monetary penalty, that he only earned $9,235 in 2019, that his wife was laid off in April 2020 and that government benefits were their only source of income.
The panel concluded that a monetary penalty on top of a permanent ban would “punish past conduct” rather than seek to prevent future misconduct.
The MFDA’s application to the OSC argues that the hearing panel made a number of errors in reaching its sanctions decision, including that it “treated the respondent’s inability to pay as a predominate sanction factor…without adequately considering the ‘egregious nature’ of his misconduct and the need for general deterrence.”
In the review, the MFDA is seeking an order imposing a fine of at least $52,270 on Diaz, or at least “an amount sufficient to disgorge the financial benefit that the respondent obtained by engaging in the misconduct.”
Alternatively, the MFDA is asking that the case be returned to the panel for a new penalty hearing.
Source: Investment Executive