The MFDA commenced 111 proceedings last year, compared to 69 in 2015 and 48 in 2014, reveals the SRO’s 2016 enforcement report. The increase was due primarily to signature falsification cases, with 60 such cases last year. In 2015, there were 38 signature falsification cases commenced. (Most proceedings commenced involve more than one alleged violation of MFDA rules, bylaws or policies, says the report.)
“In many of the cases, [signature falsification] is done for purposes of client or advisor convenience,” acknowledges the report.
But: “Regardless of whether the conduct is for the purposes of convenience or to commit a further regulatory violation, MFDA hearing panels have consistently ruled that all types of signature falsification violate MFDA Rule 2.1.1, which requires members and approved persons to deal fairly, honestly and in good faith with clients and observe high standards of ethics and conduct in the transaction of business.”
Guidance on signature falsification was issued in January 2017, which specifically stated that pre-signing forms is a type of falsification.
The remaining top-three allegations that resulted in proceedings commenced were investment suitability (41 cases) and leveraging suitability (28 cases).
The report says the SRO’s overall increase in disciplinary hearings against members was the result of its focus on member supervision and complaint handling.
“Going forward, we will continue to rigorously enforce these two important regulatory requirements,” says Mark T. Gordon, president and CEO of the MFDA, in his message at the beginning of the report.
The report also notes the increase in proceedings commenced that used the bulk track process. That’s when a duty panel is used “whereby multiple hearings are conducted before a single hearing panel on one day,” says the report. Of the 111 proceedings commenced, 52 were bulk track cases. (In 2015, of the 69 proceedings commenced, 36 were bulk track cases.)
The MFDA concluded 85 hearings last year, and fines totalled $21,104,750. Of that amount, $627,753 (about 3%) has been collected. About a quarter of these cases (22) resulted in permanent prohibition, while slightly more than that (26) resulted in suspension.
Since the commencement of MFDA disciplinary activity in 2004, MFDA hearing panels have imposed total fines of $73,598,211 of which $7,299,267 (about 10%) has been collected, reveals the report.
The SRO has power to collect fines from former approved persons in Alberta and P.E.I. And, this year, Ontario enacted legislation that gives SROs powers to collect fines from former registrants.
Read the full MFDA 2016 enforcement report, which includes case highlights.