A former White Rock businesswoman investigated by the Mutual Fund Dealers Association of Canada has admitted to misconduct in connection with two “off-book” sales of shares in her company.
And while Penny Diann Deming has agreed a fine of $20,000 and the imposition of a 4½-year ban on conducting securities-related business is an appropriate penalty, comments last week by the chair of the disciplinary panel that will impose the sanction hinted at a higher penance.
“I’m trying to understand how this will look to the industry and to the public,” said Stephen Gill, noting two women each lost $50,000 in the dealings at question.
“For me, it sort of doesn’t pass the smell test. Is the industry going to look at this as a reasonable penalty?” Gill asked.
“My gut reaction is it’s not appropriate.”
The MFDA regulates the conduct of Canadian mutual-fund dealers.
Disciplinary proceedings against Deming were announced Dec. 3. An agreed statement of facts read into the record June 4 by MFDA enforcement counsel Faye Emmanuel states that Deming engaged in securities-related business contrary to association rules and standard of conduct by selling 240 shares in her company, SHE Financial Group Ltd., while working as a mutual-fund advisor for Worldsource Financial Management Inc.
Deming did not disclose the transactions to WFM, the panel heard.
The shares were sold to two women identified in documents and at the hearing as A.W. and M.M. Two women who attended the hearing told Peace Arch News that the initials referred to them – Aimie Wallace and Marcie Munro, a South Surrey resident who told PAN in January that she filed the complaint that started the association’s investigation.
Deming, 51, did not attend the hearing, but was represented by lawyer Simon Kent.
According to the agreed statement of facts, the activities in question occurred between May and August 2010.
Deming declared personal bankruptcy in May 2012, and currently resides in Mexico.
In a reply last December to the MFDA notice of hearing, Deming denied “the facts alleged and conclusions drawn,” and stated the dealer she worked with “was fully aware and supported my development of the firm and at no time provided any advice that this should be handled differently.”
The panel heard last week that Deming “did not intentionally contravene the rules of MFDA.”
In June 4 submissions, Emmanuel pointed out that the association’s rules are to ensure all members “deal fairly, honestly and in good faith with clients,” and that the suggested penalty “reflects the seriousness of the respondent’s misconduct.”
Gill said he is concerned about the benefit Deming received as a result of the “improper activities.”
“We have $100,000 that went sideways to this representative. Is the fine intended in any way to reflect that benefit?” Gill said. “Off the top, I would say we’re missing the mark.”
Gill described A.W. and M.M. as “two gullible investors” and Deming as “a rogue broker.”
Emmanuel said the suggested penalty takes into account that Deming has no previous disciplinary history, and that she co-operated with the investigation. Also, there was no finding of fraud or misappropriation, she said.
“The proposed penalty does send a strong message of general deterrence… that this type of conduct is not tolerated.”
Deming’s lawyer argued that what happened to the money is “irrelevant.”
“Some issues are left unknown in this document and I suggest to you that’s just the way it is,” he said.
Kent said Deming became a registered mutual-fund salesperson in 2003, and that SHE was incorporated in 2006. He noted Worldsource loaned $50,000 to Deming for SHE – a move that shows it was “not a fly-by-night operation.”
Kent called the suspect investment “a business transaction… that didn’t work out,” and that Deming’s only mistake was in not informing Worldsource.
Gill described not knowing where the money went as “a little troubling.”
He noted that while Deming is described as having co-operated in the MFDA investigation, it was “not as full as it might well have been.” He was referring to Deming’s failure to provide requested financial records.
Gill and panel colleagues Holly Millar and Brian Cheung reserved decision.
Munro told PAN she hopes what she and Wallace – who flew in from Toronto for the hearing – experienced will help other women.
“No matter what, it creates an awareness. I would be so remiss if I didn’t come forward.”