Enforcement activity surged at the Mutual Fund Dealers Association of Canada (MFDA) last year, driven by a spike in cases involving alleged signature falsification.
The MFDA brought a record 111 proceedings against both financial advisors and dealers in 2016, up from 69 proceedings in 2015, according to its latest annual enforcement report. More than half of these cases, 60 in total, involve allegations of reps falsifying client signatures.
The self-regulatory organization (SRO) also reports that it concluded 85 hearings in 2016 and levied $21.1 million in fines and almost $500,000 in costs against reps and dealers combined. However, just 3% of those monetary sanctions have been collected, the report notes, which is below the MFDA’s historic average of 10%.
By comparison, MFDA hearing panels imposed $5.4 million in fines in 2015, but the SRO was able to collect about 16% of that total. Looking ahead, the MFDA is hoping that collection rates will improve with the Ontario government planning to adopt legislation that will give SROs the ability to enforce their fines through the courts.
In addition to the fines, the MFDA handed out 22 permanent prohibitions, and issued 26 suspensions against advisors during the year, the report notes. The MFDA also sent 120 warnings letters and 86 cautionary letters in 2016. The SRO closed 450 cases in 2016, up from 361 cases in the prior year, and it opened almost as many files, which was more or less flat from the previous year.
Although signature falsification by reps was a focus for the MFDA during the year, it continued to focus on violations of supervisory and complaint handling requirements at dealers.
The MFDA’s annual enforcement report “highlights the significant increase in enforcement activity over the past year and demonstrates the MFDA’s continued commitment to protect investors and hold those who breach MFDA rules accountable for their misconduct,” says Mark Gordon, the SRO’s president and CEO, in a statement.
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