Alert:
A nationwide postal strike or lockout may occur as early as November 3, 2024. Dealer Members must take steps to ensure that document delivery requirements prescribed under CIRO Rules continue to be met.
MFDA Staff continue to encounter situations where Approved Persons (“AP’s”) have created, possessed or used documents such as Know-Your-Client forms, trade forms and cheques which have been pre-signed or on which client signatures have been falsified through other means.
This Bulletin is a reminder that Hearing Panels of the MFDA Regional Councils have consistently ruled that falsification of client signatures is not permissible under MFDA Rules.
Members and AP’s may only use forms that are properly executed by the client after information on the form has been properly completed. Examples of signature falsification include, but are not limited to:
Further examples are set out at the end of this Bulletin.
Any falsification is unacceptable whether or not:
The improper use of forms can:
AP’s also must not instruct or permit others to create, use or possess falsified documents.AP’s must ensure that in their supervision of support persons they pro-actively address the issue of signature falsification.
The MFDA receives information regarding instances of signature falsification from many sources. These situations are often detected by Members and reported to MFDA Staff by Members through their reports to the MFDA. The Enforcement Department often receives reports of signature falsification from MFDA Compliance staff. MFDA Enforcement staff also identifies cases involving falsified signatures when assessing client complaints.
MFDA Staff commences formal disciplinary proceedings or takes informal disciplinary action in such cases. Where a form containing a falsified signature has been used to commit another violation, disciplinary action is also taken in regard to that other violation.
In the period 2012-2014 the MFDA commenced 41 proceedings in which there were allegations involving pre-signed forms and/or other types of signature falsification.
AP’s have faced significant penalties, including suspensions, fines, and requirements to take educational courses. Where signature falsification has been used to commit further violations, this has led to additional sanctions including permanent prohibitions. Examples of recent penalties include:
The MFDA has recently been and will continue seeking increased penalties in upcoming cases involving signature falsification.
In addition to sanctions by the MFDA, signature falsification may result in action from provincial securities regulators, through either enforcement or registration activity. For recent examples see the decision of the Ontario Securities Commission in Reaney (Re), and the decision of the Alberta Securities Commission in Lamontagne (Re).
Members are required to maintain policies and procedures designed to detect and prevent signature falsification, which may include the use of AP questionnaires. Where AP’s fail to follow these procedures, including failing to respond truthfully to questionnaires, AP’s are subject to internal disciplinary sanctions established by Members in accordance with MFDA Policy No. 3 (Complaint Handling, Supervisory Investigations and Internal Discipline).
Members are asked to distribute a copy of this Bulletin to all Member AP’s and to maintain a record of the distribution.
Member-specific guidance on signature falsification will be provided in the future.
For reference, the following is a non-exhaustive list of examples of signature falsification which have been identified in disciplinary cases:
References to previous cases can be found in the 2014, 2013 and 2012 MFDA Enforcement Department Annual Reports.
Examples of cases which involved pre-signed forms include Pizzimenti (Re) [2013], Durotoye (Re) [2014] and Bowness (Re) [2013].
Examples of cases which involved other forms of client signature falsification include Khodorkovski (Re) [2012], Welsh (Re) [2015] and Kelly (Re) [2013].
Examples of cases which involved the falsification of signatures to commit other violations of MFDA Rules include Man (Re) [2014] and Fried (Re) [2014].