Pre-signed forms land father-daughter team in hot waterpar Andrew Rickard | January 26 2016 11:34AM
The Mutual Fund Dealers Association (MFDA) has issued yet another fine for the use of pre-signed forms.
On Jan. 19, an MFDA hearing panel released its reasons for decision in the matter of Mervyn Sutton and Rachel Sutton Akers. The regulator found that the two respondents, a father and daughter advisor team with FundEx in Saskatchewan, had obtained and in some cases used 35 blank or partially complete pre-signed account forms for 21 clients.
In particular, the pre-signed forms consisted of deregistration / withdrawal requests, mutual fund trade tickets, a new client account form, order entry forms, and systematic instruction forms.
There was no evidence of misappropriation, unauthorized trading, or client harm in the case, nor was there any evidence that the advisors had received any financial benefit from using the pre-signed forms. In fact, the regulators note that all of the transactions processed using the pre-signed forms were done with the knowledge and approval of the clients, and were used to implement their instructions. However, the MFDA points out that the use of pre-signed forms still constitutes a breach of its standard of conduct in Rule 2.1.1.
FundEX has already issued a letter of reprimand to the team and placed them under strict supervision for four months, charging them $500 a month to cover the cost of this oversight. The regulators also note that Sutton and Sutton Akers cooperated fully during the course of the investigation and agreed to a settlement, thereby avoiding the costs of a full hearing. Bearing these factors in mind, the MFDA panel chose to impose a fine of $10,000, as well as costs in the amount of $2,500.
"This Panel considers the amounts of forms and clients to be more than trivial numbers," reads the decision. "The Respondents Sutton and Sutton Akers have worked in the securities industry ... since October 1, 2001 and September 1, 2006 respectively. This Panel considers these time periods indicate the Respondents knew, or should have known before the time period in question, that the practice under investigation was prohibited by the Rules of the MFDA."