MFDA too lenient on pre-signed forms, going after dealer members

• the Alberta Securities Commission,
• the British Columbia Securities Commission,
• the Financial and Consumer Affairs Authority of Saskatchewan,
• the Financial and Consumer Services Commission of New Brunswick,
• the Manitoba Securities Commission,
• the Nova Scotia Securities Commission and
• the Ontario Securities Commission.

The Prince Edward Island Office of the Superintendent of Securities also recognizes the MFDA but did not participate.

The regulators used a risk-based approach to evaluate whether certain regulatory processes were effective, efficient, consistent and fairly applied. Processes and activities in functions that were assessed as high and above-average risk were chosen for review, including enforcement, financial compliance, policy and sales compliance.

In the report, the regulators identified two high-priority findings in the enforcement department. The first finding involved what the regulators felt was too lenient of a punishment for falsifying signatures. In this case, there was a “large number of affected clients, falsified client documents and pre-signed forms.” The MFDA had only issued a warning letter to the alleged offender; the regulators say the MFDA should have escalated the case to the investigation group. The MFDA now has new guidelines for such cases.

Read: MFDA bans advisor for secret side business

The second finding involved cases against approved persons where the regulators found it was “unclear why the dealer member was not also named as a respondent.” The regulators say, “Only taking action against approved persons, and not dealer members when warranted, undermines the effectiveness of enforcement activity.” MFDA is amending its processes and must report back to the regulators by January 31, 2017.

Read: Calgary advisor had undisclosed potential conflicts, says MFDA

There was one high-priority finding in the financial compliance department relating to member responses to examination files. The regulators also identified five medium-priority findings: two in enforcement, two in financial compliance and one in policy.

Other than the findings noted, the regulators did not identify concerns with the MFDA meeting the relevant terms and conditions of the recognition orders in the areas reviewed. The regulators will continue to monitor the MFDA’s progress in resolving these findings as part of their ongoing oversight activities.

View the full report here.

Also read: Blank-check company manufacturer charged with fraud