Advisor fined, prohibited from “securities-related business” for three years

The MFDA hearing panel also found that, prior to learning of the taped call but after the MFDA was aware of the complaint, Rempel sent a written statement to the MFDA falsely denying that he tried to persuade the client to withdraw his complaint. In the statement, he also denied attempting to negotiate a settlement with the client without the prior written consent of his firm, Armstrong and Quaile Associates Inc. (Q&A). The firm was bought by Windsor, Ont.-based Sterling Mutuals Inc. in June.

Under the terms of the MFDA ruling, Rempel is prohibited from conducting “securities-related business” through any MFDA member firm until Aug. 5, 2018. Should he re-register and be employed or associated with an MFDA member after that date, he is to be strictly supervised by that member for 12 months from his re-registration date, according to the MFDA announcement released on Monday. He is also required to pay the $100,000 fine and $25,000 in costs before possible re-registration.

The case involves Rempel’s dealings with a client referred to as “KS,” in the MFDA’s September decision. KS was employed by Rempel between July 2008 and May 2011 and became a client in December 2008. KS’ investment strategy involved leveraging and using the proceeds from his loans to invest in mutual funds at A&Q in accounts serviced by Rempel.

However, the relationship soured and KS was terminated in May 2011. Rempel received an email in July from KS who stated he wanted to pay off his loans through the sale of his open investments and expected any incurred DSC charges to be reimbursed by Rempel.

When Rempel refused to do so, KS sent another email to his former advisor, detailing various allegations, including one that Rempel had falsely indicated on a loan application that KS’ wife was receiving income.

After KS sent those allegations to Ken Armstrong, president of A&Q, and Linda Anderson, the firm’s chief compliance officer, in late August, Armstrong communicated to Rempel that the advisor was not authorized to make a settlement offer to KS and that Anderson would be reviewing the situation to see if it should be reported to the MFDA.

However, on Sept. 19, a phone call took place between Rempel and KS, which KS recorded. Through the audio file, Rempel is heard telling KS that his allegation regarding the falsified income could trigger an MFDA investigation and that the DSC fees would be reimbursed if KS were to retract that allegation. Rempel also told KS that they could not refer to this conversation in emails as the conversation would then have to be reported to the MFDA, which would negate the possibility of reimbursement, according to a transcript of that conversation in the MFDA’s decision.

Although Rempel argued that the audio file is not authentic and that the conversation was longer than what was represented through the file, “the respondent does not deny that it was his voice on the audio file,” states the MFDA’s decision. “Further, the respondent does not deny that, during the telephone conversation with KS on September 19, 2011, he said the words which were recorded on the audio file.”

The hearing panel found that Rempel’s actions did not follow the standard of conduct required by the MFDA and that he contravened both MFDA policy and his firm’s policy when he, as the subject of the complaint, attempted to handle the matter instead of allowing a supervisor or a compliance team member resolve it.

The second allegation concerns Rempel’s response to an inquiry by MFDA staff in November 2011 following KS’ formal complaint to the MFDA: that complaint included the audio recording. The MFDA asked Rempel for a written statement to confirm or deny that Rempel had asked KS to retract any allegations and that he had offered to reimburse DSC fees if KS agreed. Rempel was also asked to detail whether he had entered into any private settlements with any clients or had handled any client complaints directly.

Rempel responded that he had not advised KS to rescind any allegations and that he had told KS that a portion of DSC fees could be rebated through A&Q’s process as a gesture of goodwill but that it was no longer possible following the presence of allegations. Rempel also stated that he had never discussed a private settlement with any clients.

“In this case, we find that the report made by the respondent to the MFDA on November 28, 2011, was not truthful,” states the regulator’s decision. “The statements made are inconsistent with the words spoken by the respondent in the September 19, 2011 telephone conversation with KS.”

The MFDA’s decision notes that Rempel has been a registered mutual fund salesperson in Ontario since September 1994 and is also registered as a dealing representative in four other provinces. He is also a certified management accountant, professional accountant and a licensed insurance agent.