The MFDA has issued a revised Notice regarding signature falsification on client documents, including KYC forms, trade forms and cheques. The notice has been updated because the MFDA continues to encounter situations where representatives have had clients sign blank or partially completed forms, or client signatures have been falsified by other means.
 
Examples of signature falsification identified by the MFDA in the notice include, but are not limited to:
  • Having a client sign a form which is blank or only partially completed (“pre-signed form”);
  • Having a client sign multiple forms for future trading;
  • Signing a client’s name to a document;
  • Cutting and pasting, photocopying or using liquid paper on a document in order to “re-use” a previous signature;
  • Altering or correcting any information on a signed document, without the client initialing the document to show the change was approved; and
  • Using liquid paper to white out old instructions and write in new instructions on a signed form.
 
Clients must always sign a fully completed form.  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 and dated by the client.
 
Signature falsification and the use of pre-signed forms by representatives are strictly prohibited by HUB Capital Inc.  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:
 
  1. 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. 
  2. 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. 
  3. 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. 
  4. 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. 
  5. Client signed a transfer form that did not include investment instructions for the proceeds once received at the ‘Receiving Institution’. This section was left blank. Investment instructions were provided separately on the Fund Company Application. The transfer form would be viewed as a partially completed form when signed by the client. If you do not wish to provide investment instructions on the transfer form a note to “refer to the Fund Company Application” or “HCI Order Ticket” must be included on the transfer form under investment instructions when signed by the client.
 
The MFDA considers signature falsification a serious issue and, in most cases, will impose disciplinary action against a Representative including, but not limited too, fines and the suspension of a Representative’s mutual fund registration.
 
One of the tools that Representatives have available to them is the Limited Trading Authorization (“LTA”), which will help manage these types of situations.  HCI does permit the use of LTAs for the express purpose of facilitating trade execution and thus avoiding the requirement of the Representative to obtain a client signature for all trade instructions from a client.  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 and authorized by 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.  LTA note templates are available on HUBlink, under the ‘Forms’ section in HUB Capital.  These templates provide you with the information that must be recorded regarding discussions with your clients where an LTA is being used for a trade.  HCI encourages Representatives to use LTAs were possible.
 
Please note that Representatives are responsible to ensure that all support staff working for them (i.e. Assistants or Administrators) are aware of these policies and abide by them.
 
Included with this bulletin is a copy of the MFDA’s revised Notice.  Please review the Notice carefully and ensure that you take the time to review all documentation for its completeness before it is provided to the client for their signature.  Also, please ensure that any changes that must be made to a completed form are initialed and dated by the client.

In addition to any regulatory action that may be taken by the MFDA, HCI will also impose sanctions, including a minimum fine of $2500, Close Supervision and/or termination of a Representative’s registration where a pre-signed blank form or other form of signature falsification is identified for a client.
 
If you have any questions regarding this Bulletin please contact your Regional Compliance Officer or Branch Manager.