Anyone paying attention to the weekly trickle of Mutual Fund Dealers Association of Canada (MFDA) reasons-for-decision documents will have noticed the high number related to false signatures.
The self-regulatory organization issued dozens of decisions last year covering pre-signed forms and signature falsification, many resulting in fines of more than $10,000 or temporary bans — or even permanent prohibition when advisors didn’t co-operate.
The cases involve several variations on the same theme: forging initials for a change in a client’s risk tolerance or time horizon; possessing or using pre-signed account forms, such as transfer authorizations, redemption requests and limited trade authorizations; and signing beneficiary change forms on a client’s behalf, to name a few.
The MFDA has broadcast its intent regarding such actions. Bulletin #0661-E, issued in October 2015, reminded advisors about pre-signed forms and signature falsification. Those infractions have also headlined recent annual enforcement reports.
The number of new proceedings nearly doubled from 2015 to 2016 due primarily to signature falsification cases, with 60 commenced that year. Pre-signed forms and signature falsification accounted for the most new proceedings in 2017 (84) and again in 2018 (101).
However, once the fines are issued for older cases, the numbers are likely to decrease. New allegations (the first stage of enforcement, with proceedings launching later) related to signature falsification have been declining since Bulletin #0661-E was issued: from 130 in 2016 to 84 in 2018. In a statement, the MFDA said this is due to members’ “increased detection, training and internal discipline,” and to the MFDA’s enforcement actions.
Those actions include steeper fines for infractions that occurred after the bulletin was issued. As of January 2020, the MFDA said it has issued $1.97 million in fines related to pre-signed forms and signature falsification since releasing the 2015 bulletin.
The organization has acknowledged that most cases involving signature falsification don’t result from client complaints, nor is there an intent to harm. “In many of the cases, the activity is done for purposes of client or advisor convenience,” the 2016 enforcement report said.
But that’s no excuse: falsifying a signature still violates Rule 2.1.1, which requires members to deal honestly and fairly with clients.
The Investment Industry Regulatory Organization of Canada (IIROC) reminded investment dealers last year that they can use e-signatures, issuing updated guidance. The MFDA has permitted e-signatures since 2003. If it’s convenience clients are seeking, it may be time for dealers to digitize.