The Mutual Fund Dealers Association (MFDA) has ordered Dianne Stuart to pay a $7 million fine while her ex-husband Howard Stuart has been fined $1 million. These penalties are supposed to be paid within 24 months, but the regulators admit there is little hope they will collect the money.
The MFDA permanently prohibited the Stuarts from working in the mutual fund industry earlier this month after it was determined that 180 clients of the W. H. Stuart fund dealership lost more than $6 million in bogus investment notes. Neither Dianne Stuart nor Howard Stuart showed up at the hearing. On May 16, the MFDA announced that it had settled on appropriate penalties for their misconduct. The Stuarts did not appear for this part of the proceedings either.
In their decision and reasons for penalty, hearing panel chairman Mark Sandler and industry representatives Kenneth Mann and Vasant Pachapurkar said that Dianne Stuart's conduct "falls at the most serious end of the spectrum of wrongdoing" and described her as the "prime architect of a sophisticated, lengthy scheme involving deliberate dishonesty". The panel found that her former husband Howard Stuart made a "deliberate choice not to cooperate" with the investigation. While the regulators did not make other allegations against him, the panel says he was "undeniably aware" of the fact the dealership needed funds to fuel the litigation it was facing at the time.
“We certainly hope so”
As we reported earlier, the Alberta Securities Commission (ASC) banned Dianne Stuart from the industry for the rest of her life in August 2000. How was she able to maintain registration as an officer and director in Ontario? There is no answer to this question in the MFDA documents, but the panel did say it was "troubling" that her previous misconduct was no roadblock to her ability to do business in Ontario. "In fairness, Enforcement Counsel was not in a position to comment on what had transpired years earlier in this regard, though he expressed his understanding that reciprocity and cooperation between regulators across Canada has improved significantly over the years. We certainly hope so," reads the decision.
Very limited expectation
The decision goes on to say that, given the financial difficulties that the Stuarts were in, and since the MFDA has no way of enforcing its decisions on people who are no longer registered, "there may be very limited expectation that fines of this magnitude will be paid by the individual Respondents."