The Mutual Fund Dealers Association has published a report to update members on its operations, including its enforcement activities.
As of August 31, MFDA staff had performed 105 compliance examinations. Common deficiencies identified in those examinations include:
- unacceptable accounting practices;
- untimely processing of trades;
- missing or incomplete new account application forms or know-your-client information;
- failure to maintain a centralized complaints log;
- lack of a training program for new reps; and
- insufficient supervisory reviews of trading.
From January 1 to September 30, 2004 the MFDA’s enforcement department opened 239 cases. Some of the most serious types of misconduct under review are:
- unsuitable investments;
- unsuitable leverage recommendations;
- unauthorized outside business activities; member supervision; and
- member complaint handling.
During that time, the enforcement department closed 274 cases, because:
- they involved issues outside of MFDA jurisdiction;
- warning letters were sent;
- the issue was resolved;
- it was referred externally to another regulatory agency;
- it was referred to another MFDA branch; or
- the allegation was not supported by evidence.
As at September 30, the enforcement department had a caseload of 165 active case files at various stages of the process. It is anticipated that the first disciplinary proceedings will be commenced prior to year-end.
The update notes that as of October 25, the MFDA had 190 member firms with approximately 70,000 reps, representing $225 billion in assets under administration. It also provides a breakdown of the MFDA membership by geography and size of dealer.