The MFDA has issued an important bulletin regarding signature falsification on client documents (i.e. KYC forms, trade forms and cheques). As outlined in the bulletin, signature falsification may include, but is not limited to:
  • Signing a client’s name to a document;
  • Having a client sign a form which is blank or only partially completed (considered a “presigned form”);
  • Photocopying, cutting or pasting, or using correction fluid on a document to “re-use” a previous signature; and
  • Altering any information on a signed document, without the client initialing the document to show the change was approved.

Clients must sign a fully completed document, and the entirety of the document must be provided for the client’s signature (i.e. the client cannot be provided with just the last page of a document to sign, the client must be given the entire document, even if their signature is only required on the last page). All corrections made to a document after it has been signed by the client must be initialed by the client.

The MFDA considers this a serious issue and notes that MFDA Hearing Panels have consistently ruled that falsification of client signatures is not permissible under MFDA Rules and serious penalties will be imposed for this type of conduct.

HUB Capital Inc. strictly prohibits the use of pre-signed forms and signature falsification. HCI does permit the use of a Limited Trading Authorization for the express purpose of facilitating trade execution and thereby avoid the requirement of the Representative to obtain a client signature for all trade orders from the client. (Please refer to MR-0066 Prohibition on Use of Pre-Signed Forms.) Please note that when using an LTA, the Representative must provide details as to the time, date and means by which the trade was discussed with the client, as well as confirmation of all fees and commissions discussed with the client, on the trade form. Detailed notes of the discussion with the client must also be kept in the Representative’s client file.

If HCI identifies a case of signature falsification or pre-signed forms, we are required to conduct a review of additional client files to determine if other cases can be identified. We are also required to report all such cases to the MFDA on the METS system, regardless of whether there is only one instance found, or multiple trades and clients are involved.

 

Examples of signature falsifications encountered during Compliance reviews include:

  • Client redeeming funds from one Fund Company and using the proceeds to make purchases into several different fund companies. Client signed one blank trade form, which was then photocopied. Investment instructions were added to the trade forms with the photocopy of the client’s signature in order to make the purchases.
  • Client was sent a KYC form to sign, however the Plan Objective and Time Horizon were not completed on the form and the AML/PEFP questions had not been answered. Client signed the KYC and emailed a copy back to the Representative. The missing information was then added after the client signed the KYC. These additions were not initialed by the client.
  • Client signed trade form with instructions to make multiple switches in their account. After the client signed the trade form the Representative discovered that the client no longer held one of the funds indicated on the form, therefore that switch could not be made. The switch was crossed out by the Representative and all other trades were processed. The change was not initialed by the client.
  • Client signed a fund company application/order form that did not include any indication of the load type of the fund(s) being purchased. The load types (both DSC and FE) were added after the client signed the form. These additions were not initialed by the client.
  • A fund code on an application was changed from a DSC code to a FE code after the form was signed by the client (there was no change to the fund being purchased). The change was not initialed by the client.

Attached to this bulletin is a copy of the MFDA Bulletin, as well as a copy of the presentation made by the MFDA during their webcast on Signature Falsification on October 5, 2015.  Please read through both documents, as well as MR-0066 Prohibition on Use of Pre-Signed Forms.
 
If you have any questions regarding this communication please contact your Regional Compliance Officer or Branch Manager.