The Mutual Fund Dealers Association is reminding fund dealers that they are required to report any client complaints alleging forgery, theft or misappropriation of securities.

In bulletin to members issued earlier this week, the regulator notes that dealers are obliged to report these sorts of complaints to the MFDA Membership Services Department whenever the firm or any partner, director, officer, salesperson, employee or agent receives such a complaint from a client. “To comply with both the spirit and the letter of the rule, any complaint where forgery, theft or misappropriation of funds is involved must be reported, whether or not a specific allegation of such issues has been made by the client,” it says.

“For example, the member may receive a complaint from a client stating only a general concern that the approved person has mishandled an account. Theft or fraud may only be discovered upon further investigation of the matter by the firm. Any such complaint must be promptly reported,” it explains.

Also, firms have a responsibility to report to the MFDA whenever:

  • they have entered into a private settlement or has disposed of any claim in securities-related litigation or arbitration by judgment, award or settlement where the amount of the judgment, award or settlement exceeds $25,000; or
  • a partner, director, officer, salesperson, employee or agent has entered into a settlement, judgment, or award for more than $15,000.

Reports must be made in every case where a complaint relates to securities related business for both on book and off book activity. Firms must also report the termination of an employment or agency relationship with a rep where the individual was dismissed for cause or discloses information regarding unresolved client complaints, internal discipline matters, or restrictions for violation of regulatory requirements.

Firms must also reveal if they, or any partner, director, officer or significant shareholder is refused registration, or has its registration suspended or cancelled or is subject to any securities regulatory proceedings, or is charged or indicted under criminal laws or securities regulations.