In 2016, the MFDA commenced 111 disciplinary proceedings and finished 85, reveals an MFDA bulletin — the highest numbers ever. The bulletin also notes that MFDA initiated 11 proceedings against members.
Alleged member misconduct in 2016 includes:
- failure to supervise approved persons regarding investment and leveraging recommendations, outside activity and the appointment of approved persons as powers of attorney and executors of clients;
- failure to handle client complaints; and
- conducting securities-related business outside members’ books and records.
In 2017, member supervision will continue to be under the microscope, the report indicates. And, as expected, suitability remains the number-one focus of MFDA examinations.
Read: MFDA sanctions IPC for failure to supervise
Enhancements to suitability testing in 2016 allow the MFDA to zero in on high-risk transactions and strategic priorities like the protection of seniors from unsuitable advice. In 2016, the enhancements helped identify issues like concentration risk, suitability of funds with deferred sales charges and uniformity of KYC information.
Other examination priorities are:
- signature falsification;
- compensation practices and internal controls to manage conflicts;
- testing of fee-based accounts to assess the controls that administer these accounts, calculate fees and prevent double-dipping;
- testing of CRM2 requirements; and
- compensation disclosure of members of integrated firms who don’t receive commissions directly.
Read the full bulletin.
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