The Mutual Fund Dealers Association of Canada (MFDA) says the number of cases it opened increased slightly in 2020 compared to 2019 numbers, and the number of cases closed declined during the year, this according to the self-regulatory organization’s 2020 Annual Enforcement Report.
The report, which highlights key enforcement activity that took place over the course of 2020, states that 79 disciplinary proceedings commenced during the period, up from 78 in 2019.
Of those proceedings commenced in 2020, the MFDA says the majority – 39 cases included allegations where approved persons made use of pre-signed forms. “The MFDA continued its efforts to address cases involving the use of pre-signed forms and situations where client signatures are falsified by approved persons. Most of the cases investigated by the MFDA do not involve client complaints, an intent on the part of the approved person to harm the client or resulting in financial harm to the client,” they write. “The activity is done for the purposes of client or advisor convenience. Activity of this type was an allegation in 39 of the 79 formal proceedings commenced by the MFDA in 2020, which is consistent with 2019.”
They add that in a small number of cases – four out of 79 formal proceedings commenced in 2020 – signature falsification was used for further rule violations including discretionary or unauthorized trading or misappropriation.
In addition to signature falsification and addressing the use of pre-signed forms, the MFDA says going forward it will also continue to focus on complaint handling, sales practices, supervision, and cases involving seniors or vulnerable persons. In 2020, they say 30 per cent of commenced proceedings involved seniors or vulnerable persons.
All told, the number of cases it opened during the year increased to 461, up from 453 in 2019, while the number of cases closed declined from 503 in 2019 to 457 in 2020. Concluded hearings resulted in 16 permanent prohibitions, 24 suspensions, total fines of almost $3.4-million and $369,501 in costs. Total fines imposed declined significantly relative to 2019 when the MFDA imposed almost $9.3-million in fines and $558,425 in costs. Of the $3.4-million in fines imposed in 2020, only $840,351 or 25 per cent has been collected. “Since the commencement of MFDA disciplinary activity in 2004, MFDA hearing panels have imposed total fines of $100,347,447, of which (only) $14,618,434, approximately 14 per cent, has been collected,” the MFDA states.
In a discussion about the self-regulatory organization’s enforcement process, they add that the use of videoconferencing has proven to be very successful, cost-effective and efficient. “Given this positive experience, it is likely that the use of videoconferencing will remain part of MFDA processes going forward,” writes the MFDA’s president and CEO, Mark Gordon.
As of December 31, 2020 the MFDA had 90 members with approximately $627-billion of mutual fund assets under administration.
