The Mutual Fund Dealers Association of Canada has published a couple of bulletins spelling out common compliance deficiencies it has encountered in firms’ financial reporting and the work of firms’ auditors.

On Monday the MFDA published a bulletin to highlight what it calls “the more serious financial compliance deficiencies” that it found during on-site examinations of its’ members, which may have resulted in material capital implications leading to capital deficiencies or other early warning tests.

“Often, the cause of the deficiencies arise as a result of a firm not adequately managing or considering the capital implications of significant changes in their business such as: back office system conversions; business expansions through acquisitions or amalgamations; offering new products for distribution; or investing the firm’s own capital in new or different investment products,” it notes.

These deficiencies include:

• the incorrect margin rate being applied to securities owned by the firm;

• securities not being held at an acceptable location; incomplete reporting;

• trust accounts that aren’t reconciled to back office systems; and

• client nominee name assets not being reconciled to third party information on a monthly basis.

In a separate bulletin, the MFDA sets out the special audit requirements for external auditors engaged to perform financial audits of MFDA firms, and identifies some of the common deficiencies that its’ staff found in reviewing auditor files.

Those deficiencies include failing to document reviews, failing to report deficiencies and, incorrect reporting of balances.