The Mutual Fund Dealers Association of Canada (MFDA) ramped up enforcement activity to record levels in 2017.
The MFDA’s 2017 Annual Enforcement Report, published on Thursday, confirms and increase in the number of disciplinary cases brought and concluded last year. According to the report, the self-regulatory organization (SRO) launched 121 proceedings in 2017, up from 111 cases in 2016, to its highest annual total.
“This is the highest number of proceedings issued in a calendar year by the MFDA and is due in part to both the enforcement department’s use of efficient and flexible enforcement processes, and through increased detection by dealers of advisor wrong-doing,” states, Mark Gordon, MFDA president and CEO, in the report.
Specifically, the SRO concluded 133 cases during 2017, compared with 85 cases in the previous year. In addition, the number of settled cases more than doubled to 111 in 2017 from 51 in 2016, while the number of hearings completed (both contested and uncontested proceedings) dropped from to 22 from 34 in 2016.
In terms of penalties, the MFDA imposed 22 permanent prohibitions against approved persons last year (unchanged from 2016), and handed down 48 suspensions (up from 26 in 2016). Monetary sanctions levied against both mutual fund dealers and mutual fund advisors totalled $8.5 million in 2017, down from $21.1 million in 2016.
Of last year’s penalty total, almost $1.9 million has been collected, the MFDA reports. The SRO’s collection rate for 2017 was approximately 22%, which is well ahead of the historical rate of 11%, according to the report. Since 2004, the MFDA has imposed $81.6 million in total fines, and about $8.9 million of that has been collected.
The report also lists the types of issues that prompted the MFDA to open an enforcement case in 2017. These include: advisors using pre-signed forms; investment suitability; business standards and signature falsification. For fund dealers, the top issues include supervision and complaint handling deficiencies.