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client conversations
MFDA racking up fines
for false signatures
Good intentions are no excuse
internal discipline,” and to the MFDA’s enforce- ment actions.
Those actions include steeper fines for infractions that occurred after the bulletin was issued. As of January 2020, the MFDA said it has issued $1.97 million in fines related to pre-signed forms and signature falsifica- tion since releasing the 2015 bulletin.
The organization has acknowledged that most cases involving signature falsification don’t result from client complaints, nor is there an intent to harm. “In many of the cases, the activ- ity is done for purposes of client or advisor con- venience,” the 2016 enforcement report said.
But that’s no excuse: falsifying a signature still violates Rule 2.1.1, which requires mem- bers to deal honestly and fairly with clients.
The Investment Industry Regulatory Organ- ization of Canada (IIROC) reminded investment dealers last year that they can use e-signatures, issuing updated guidance. The MFDA has permitted e-signatures since 2003. If it’s con- venience clients are seeking, it may be time for
Anyone paying attention to the weekly trickle of Mutual Fund Deal- ers Association of Canada (MFDA) reasons-for-decision documents will have noticed the high number related to false signatures.
The self-regulatory organization issued dozens of decisions last year covering pre- signed forms and signature falsification, many resulting in fines of more than $10,000 or temporary bans — or even permanent pro- hibition when advisors didn’t co-operate.
The cases involve several variations on the same theme: forging initials for a change in
a client’s risk tolerance or time horizon; pos- sessing or using pre-signed account forms, such as transfer authorizations, redemption requests and limited trade authorizations; and signing beneficiary change forms on a client’s behalf, to name a few.
personality data from more than 3,600 people in the U.S. over the age of 50 (the average age was 70). The data were from the 2012 and 2014 Health and Retirement Study, conducted by the University of Michigan and sponsored by the National Institute on Aging. The authors paired the personality data with tax data from the same participants to exam- ine withdrawals from Individual Retirement Accounts (analogous to a TFSA in Canada).
The authors found that characteristics associated with saving and wealth accumula- tion, such as conscientiousness, extraversion and positive emotions, were related to lower withdrawal rates in retirement. Clients pos- sessing characteristics associated with poorer financial decisions and lower wealth accumu- lation — such as agreeableness, openness, neuroticism and negative emotions — may
be at greater risk of impulsive spending and depleting portfolios.
Overall, the findings were consistent with other research: those who are good at accumulating wealth demonstrate the same saving-oriented behaviour in the decumula- tion phase.
The MFDA has broadcast its intent regard- ing such actions. Bulletin #0661-E, issued
in October 2015, reminded advisors about pre-signed forms and signature falsification. Those infractions have also headlined recent annual enforcement reports.
The number of new proceedings nearly doubled from 2015 to 2016 due primarily to sig- nature falsification cases, with 60 commenced that year. Pre-signed forms and signature falsi- fication accounted for the most new proceed- ings in 2017 (84) and again in 2018 (101).
However, once the fines are issued for older cases, the numbers are likely to decrease. New allegations (the first stage of enforcement, with proceedings launching later) related to signature falsification have been declining since Bulletin #0661-E was issued: from 130 in 2016 to 84 in 2018. In a statement, the MFDA said this is due to members’ “increased detection, training and
Related uses
As more firms turn to behavioural finance, personality tests are making their way into risk analysis questionnaires and the know-your- client process. For example, a TD Wealth
tool asks clients to rate the accuracy of 50
short statements covering topics as varied as vocabulary, attitude to chores and comfort with strangers. It then produces a “wealth person- ality” that describes traits such as spontaneity, self-discipline and amenability.
Advisors may benefit from adding psycho- logical tests to client profiles, the author said. This would allow specific recommendations that recognize “the personality and psych- ological characteristics” influencing clients’ portfolio withdrawal behaviour.
“Identifying and understanding these relationships can inform financial planners
and consumers about the characteristics and attitudes that clients bring to the relationship and that influence their behavioural choices,” the paper said. “With this insight, financial planners can more actively engage their cli- ents, understand what triggers their financial behaviour, and guide them to more favourable long-term financial outcomes.” —Mark Burgess
dealers to digitize.
—Mark Burgess
The “big five” personality traits
Openness to experience: creative, imaginative, adventurous and curi- ous; tend to be imprudent money managers
Conscientiousness: organized, thorough, hardworking and cau- tious; associated with prudent financial behaviour Extroversion: outgoing, talkative and lively; associated with higher net worth and “future-
oriented” financial behaviour Agreeableness: sympathetic, car- ing and helpful; associated with being more financially generous, potentially putting financial goals at risk
Neuroticism: nervous, moody and not calm; associated with poor investment decisions and higher portfolio withdrawals
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