MFDA disciplines advisor for using pre-signed formsBy The IJ Staff | January 06 2020 02:45PM
The Mutual Fund Dealers Association of Canada (MFDA) recently fined and prohibited Lloyd Smith of Ottawa from conducting securities related business in any capacity for any MFDA member firm for six months. The regulator has subsequently published its reasons for disciplining the former FundEX Investments Inc. advisor.
In Smith’s settlement agreement, the representative admits that he altered 30 account forms for 28 clients without having clients initial the alterations. He also admitted to possessing and sometimes using 215 pre-signed account forms for 25 clients. “Using these forms are proscribed (forbidden) because their use adversely affects the integrity and reliability of account documents, leads to the destruction of the audit trail, has a negative impact on complaint handling and has the potential for misuse in the form of unauthorized trading, fraud, and misappropriation,” say the decision’s authors.
“Altered forms are especially serious because, unlike pre-signed forms that the client knows are blank when he or she signs the form, an alteration may be done without the client’s knowledge. This is not an isolated case,” they add. “The conduct went on for many years with many clients.” The conduct is especially serious, they say, because Smith had already received a warning from FundEX about using pre-signed forms.
Among its list of mitigating factors, the MFDA says no clients reported concerns about their dealings with Smith and there is no evidence that he received any benefit from his misconduct beyond the commissions or fees he would ordinarily be entitled to receive if the transactions had been carried out in the proper manner. The regulator also took into consideration the fact that his firm had already deducted $7,000 in financial penalties from his commissions.
In addition to his six-month suspension, the MFDA notice confirms that Smith has paid a fine of $20,000 and costs of $2,500.