The Mutual Fund Dealers Association has released a list of the common deficiencies it found during on-site examinations of members. As well, the regulator says that the transition periods for minimum capital requirements are ending soon.

In a recent bulletin, the MFDA lists the deficiencies found during its inspections. They include:

  • New Account Application Forms that are not on file, or are incomplete;
  • unsuitable trades;
  • lack of client authorization for trades;
  • trades not processed in a timely manner;
  • firms failing to log client complaints;
  • firms commingling cash held on behalf of clients with the firm’s own property;
  • firms serving clients in jurisdiction where they don’t have registration; and
  • misleading advertising.

In a separate bulletin, the MFDA notes that transition periods for minimum capital requirements are ending soon.

The MFDA board of directors approved a three-year transition period (commencing March 1, 2001) to allow Level 2, 3 and 4 dealers to meet the minimum capital requirements. This transition period expires March 1 this year.

The board also approved a two-year transition period to allow members to comply with the MFDA monthly financial reporting requirement. During this transition period, firms were required to file with the MFDA financial reports on a quarterly basis, unless otherwise required by the MFDA to file more frequently. The board subsequently approved a one-year extension to the transition period for this requirement. At March 1, this transition period expires too.

The first monthly financial report to be filed for financial periods ending on or after March 1, 2004 will depend upon the member’s fiscal year end and its current filing requirements with the MFDA. All member firms will be required to report financial information for the period since its last financial filing.

Similarly, the transition period for the implementation of automatic early warning sanctions is ending March 1. All members filing a financial report with the MFDA which indicates they triggered one of the Early Warning Tests will automatically be designated in Early Warning.