A former White Rock businesswoman who admitted to misconduct in connection with two “off-book” sales of shares in her company has been fined $20,000 and banned from securities-related business for 4½ years.
According to a decision announced last month by the Mutual Fund Dealers Association of Canada, the sanctions on Penny Deming will enhance investor protection and strengthen public confidence in the industry.
“The respondent exposed two investors to actual risks of loss… Further, the funds went to the respondent personally, and to a company she controlled,” the decision states.
Deming, however, said the issue boils down to “a business mistake.”
“I think the whole thing has been blown out of proportion… so skewed,” she told Peace Arch News last week from Mexico. “MFDA was clear that there’s no fraud, no misrepresentations.
“It's because I didn't hold the right licence. They got me on a technicality.”
The MFDA regulates the operations, standards of practice and business conduct of Canadian mutual-fund dealers.
Disciplinary proceedings against Deming, 51, were announced last December.
Deming initially denied any wrongdoing.
In an agreed statement of facts that was presented during a hearing last June, however, Deming admitted to engaging in securities-related business contrary to association rules and standard of conduct by selling shares in her company, SHE Financial Group Ltd., while working as a mutual-fund advisor for Worldsource Financial Management Inc.
The shares – worth a total $100,000 and which the disciplinary panel heard were not approved by WFM for sale – were sold to women identified as A.W. and M.M.
Deming said the two women were her business partners.
Deming did not attend the hearing – although she was in White Rock at the time, she said – but was represented by lawyer Simon Kent.
The three-member panel also heard that Deming “did not intentionally contravene the rules of MFDA.”
However, “… we have no doubt that she was aware of the regulatory and dealer imposed obligations regarding off-book business,” the decision states.
The document notes Deming co-operated with the investigation, with the exception of providing financial records for SHE.
She told PAN last week that the information was withheld on the advice of her lawyer, and that "it wasn't going to change anything." She said the $100,000 in question "went into the business."
"There's nothing underhanded. It was spent on office rental, staff, promotion of the business," she said.
And while the panel heard that Deming agreed the imposed penalty – which exceeds that recommended in MFDA guidelines – would be appropriate for her behaviour, the document notes she now claims she is "impecunious and unable to pay any amount towards either a fine or costs."
Deming, who declared personal bankruptcy in May 2012, told PAN she wouldn't pay even if she could.
"I'm not going to pay money like that for something I never did," she said, adding she agreed to the penalty for health reasons.
"I just wanted it to go away. My lawyer did not advise me on that. Because of my circumstances, I couldn't fight the battle."
Deming also said that WFM knew about the two women investors, and that her downfall was not being able to locate anything in writing to prove it.
At the June disciplinary hearing, panel chair Stephen Gill described Deming as “a rogue broker.”
Deming's penalty includes an order to pay $2,500 in costs.
Marcie Munro, who told PAN she is victim M.M., said last week she is grateful to the MFDA for ensuring that Deming's culpability is in the public domain.
"Word of mouth will get around," she said.
Recovering from the financial hit is another matter.
"It's a very difficult lesson learned," she said, adding efforts to recover the funds are ongoing.