Note to CSA : Signature forgery impacts retail investors and wealth management industry

                                                                                     December , 2017

Note to CSA : Signature forgery impacts retail investors and wealth management industry 

Forgery or as regulators call it “signature falsification” takes place in two ways:

1. pre-signed forms, which involves salespersons (“advisors “) having clients sign a form that is blank or only partially completed, or altering an existing signed form without the client's written approval of the changes;

2. actively falsified forms, in which salespersons sign the client's name or initials on a document, or reproduce the signature in some way.

In some cases, signature falsification is being used by salespersons to engage in serious regulatory infractions and lawbreaking, such as unauthorized trading, cash transfers and theft (“misappropriation of funds” per the regulators).

This has been going on for years but It's something that has not caught the attention of the CSA in s meaningful way. For example , recent  disciplinary decisions by the MFDA include a one-year prohibition against a salesperson  who had obtained, possessed and used more than 200 pre-signed account forms over a two-year period, and a $1,500 fine and six-month prohibition handed down to a branch manager who had reviewed and approved the use of three forms with falsified signatures. Is this how Signature forgery should be disciplined from an “advisor” and Industry responsible for your retirement income security?

When deciding on disciplinary action in cases of signature forgery, the regulators say they consider factors such as whether the forgery resulted in financial harm to the client, the number of times the advisor engaged in the practice, and whether the advisor tried to mislead the dealer/ regulator during the investigation. We argue that they should consider that even one forgery is a sign of a serious ethics breach of trust.

The real impact of forgery is on the reputation of the entire advice industry. Like workplace sexual assault, it just gets worse over time and spreads like a cancer.  It can lead to document adulteration which involves changing or adding client information after a document has been signed. The changes usually involve risk tolerance, net worth or investor knowledge. For dual -licensed salespersons this unsavoury practice can lead to problems with insurance, the purchase of more expensive products like Segregated Funds or improperly signing people up for unwanted annuities. 

A corporate and regulatory culture that tolerates forgery is not one in which investors, especially the elderly, can feel safe. This will only become a more serious issue with changing age demographics. See SIPA Special report on forgery at http://www.sipa.ca/library/SIPAsubmissions/160%20SIPA%20REPORT_FalsifiedDocuments_20170526.pdf

Perhaps 2018 will be the year the CSA gets serious about salesperson practices including the misleading titles being used to build trust. We can hope.