1. MFDA Update on Continuing Education (CE) and Signature Falsification
Independent Financial Brokers of Canada
2017 IFB Toronto Fall Summit
November 7, 2017

2. Continuing Education – Background
Member Working Group – March 2015
1st Discussion Paper - June 22, (MFDA Bulletin #0644-P)
Solicit feedback on various components of a CE program
21 submissions were received
Summary of these comments issued December 1, (MFDA Bulletin #0666-P)

3. Continuing Education – Background
2nd Discussion Paper – January 12, (MFDA Bulletin #0711-P)
Solicit feedback on draft Rules and Policy
24 submissions were received
Summary of these comments issued September 14, (MFDA Bulletin #0730-P)

4. 2nd Discussion Paper Proposed Structure
2 year cycle beginning on December 1st of an odd- numbered year
3 components: Business Conduct, Professional Development and MFDA Compliance
MFDA accreditation
MFDA system for tracking and reporting
Non-compliance penalties

5. 2nd Discussion Paper Proposed Requirements
For Dealing Representatives
10 Business Conduct credits per cycle
20 Professional Development credits per cycle
2 MFDA Compliance credits per cycle
For CCOs, UDPs, BMs and Alternate CCOs/BMs (who are not Dealing Reps)

6. Business Conduct
Ethics (minimum of 1 credit) – content that examines ethical principles and moral or ethical problems
Other Business Conduct topics include:
Conflicts of interests, personal financial dealings
Regulatory requirements and initiatives that affect Member operations
Disclosure of information to clients
Documentation standards
Know-Your-Client standard and suitability
Anti-money laundering
Security and privacy of information
Complaint handling

7. Professional Development
Material that further enhances Approved Person’s knowledge in areas relevant to their business and their Member’s operations
Topics include:
Member operations
Product knowledge
Financial, retirement, tax and estate planning
Investment strategies and asset allocation
Client management techniques
Economics, accounting, and finance
Insurance

8. MFDA Compliance MFDA designated material
To be released at least annually (e.g. a webcast)
Content will be priority items of MFDA that have applicability across all or a majority of Members (e.g. suitability, KYC, supervision)
Will include update on examination findings, enforcement investigations, policy initiatives etc.
Will be delivered via a variety of platforms

9. 2nd Discussion Paper Summary of Comments
Credits
Content and Delivery
Accreditation
Tracking and Reporting
Non-compliance

10. Continuing Education Next Steps
Consider the comments received, prepare and publish proposed Rules and Policy for a formal public comment period (part of regular Rule development process)
Continue to develop the processes and systems that will administer the CE program

11. Signature Falsification

12. Signature Falsification Consists Of:
Allegations of Pre-signed Forms:
Pre-Signed Forms:
Having a client sign a form which is blank or only partially completed, as well as using a photocopy of this type of form
Altered Forms:
These are defined as forms that have been properly completed and signed by a client, where the Approved Person (“AP”) then changes information on instructions from the client but where the AP does not have the client initial the change on the document. This would include crossing out information and changing it, as well as using liquid paper to update information on the form

13. Signature Falsification Consists Of:
Allegations of Actively Falsified Forms:
These are defined as forms where the client’s signature or initials have been actively falsified. For example:
signing a client’s name or initials on a document
photocopying or using correction fluid to “re-use” a document that was properly signed by a client
cutting and pasting a signature from one form to another

14. Ongoing Issue
2015
38 of the 69 disciplinary proceedings involved a Signature Falsification allegation
2016
60 of the 111 disciplinary proceedings involved a Signature Falsification allegation
In 5 of the 60 proceedings, the AP used Signature Falsification to conduct a further violation of MFDA Rules such as discretionary trading, unauthorized trading, or misappropriation

15. MFDA Guidance
The prohibition against falsifying forms exists regardless of the existence of client authorization or the motive behind the use of the form.
Guidance regarding Signature Falsification has been provided for a number of years
MSN-0035 dated Dec. 20, 2004 (Recording and Maintaining Evidence of Client Trade Instructions)
MSN-0066 dated Oct. 31, 2007 (Signature Falsification)
MFDA Bulletin #00661-E dated Oct. 2, 2015 (Signature Falsification)
MSN-0066 updated Jan. 26, 2017

16. Recent Policy and Regulation Efforts
October 2, 2015, MDFA published Bulletin #0661-E on Signature Falsification
January 26, 2017, MFDA published updated MSN-0066 (Signature Falsification)
Both documents outline:
Examples of Signature Falsification
Examples of Aggravating Factors
What Signature Falsification can result in
That the MFDA will seek enhanced penalties for Signature Falsification occurring after the publication of the Bulletin

17. Examples of Signature Falsification Identified in Hearing Panel Decisions
Cutting and pasting a signature from one form to another
Keeping a Pre-Signed Form, even where there is no intention of submitting the form for processing
Photocopying a previously-submitted account form and altering the trade details in order to process a new trade
Altering any information on a signed document without the client initialing the document to show the change was approved
Signing a client’s name or initial to a document

18. Signature Falsification can violate MFDA Rule 2.1.1
Under MFDA Rule (Standard of Conduct), Members and APs are obligated to deal fairly, honestly and in good faith with their clients and observe high standards of ethics and conduct in the transaction of business.

19. Signature Falsification can violate MFDA Rule 2.1.1 whether or not:
It is done for the purposes of client convenience
The client instructs or otherwise consents to the AP falsifying the document
The client complains or there is financial harm to the client
It is the AP’s intention to deceive a client or another person
The document is used to commit a further breach of requirements under MFDA By-laws, Rules and Policies and applicable securities regulation

20. Falsification By Other Persons
Signature Falsification is still a violation of MFDA Rule if your assistant does it or if you instruct an assistant to do it
APs must not instruct or permit others to create, use or possess falsified documents
APs must ensure that in their supervision of support persons they pro-actively address the issue of Signature Falsification

21. Signature Falsification can:
Adversely affect the integrity and reliability of documents
Destroy the audit trail
Impact the ability of APs to produce valid documentation to support transactions that come into question
Prejudice a client by making it appear that they executed a particular document when they did not
Mislead Member supervisory personnel
Negatively affect the credibility of the AP
Negatively affect Member complaint handling
Facilitate other misconduct such as unauthorized trading, fraud and misappropriation of funds

22. Aggravating Factors Client financial harm or client complaint
Number of incidents
Previous history of Signature Falsification
AP misled Member or MFDA during its investigation
AP is Branch Manager
Conduct occurred in response to a Member supervisory inquiry
Conduct occurred after publication of Bulletin 0661-E
Conflicts with annual compliance questionnaire or other attestation about compliance with Member’s policies and procedures

23. Member’s Response (as per MSN-0066)
Once Signature Falsification is found by a Member, it is to:
Report on METS (and update as appropriate)
Review the AP’s files
Complete an RSI (Reasonable Supervisory Investigation)
May include contacting clients
The Member may also impose internal discipline including a fine, close or strict supervision, other conditions, or terminate the AP

24. How To Avoid?
Train and supervise your licensed assistants, support staff
Know your Member’s policies and procedures
LTA (Limited Trade Authorization) may be used in appropriate circumstances in accordance with the Member policies and procedures and MFDA Rules and 5.1 (b). For example, taking notes of the discussion
Ensure forms are properly completed before submitting (may need clients to return to office to sign/initial forms)
Contact Supervisory Staff when you have questions or are uncertain how to proceed

25. Recent Signature Falsification Cases

26. Walter Georgijev (Jun 2017)
Between February 2014 and May 2015, the AP:
falsified and used to process transactions, 3 account forms by altering information on the account forms without having the clients initial the alterations; and
obtained, possessed, and in some instances, used to process transactions, 24 pre-signed account forms in respect of 10 clients
Penalty: Fine of $10,00 and costs of $2,500

27. Laverne Peters (Oct 2017)
Between March 2014 and March 2015 the AP, or his assistant, obtained, possessed and, in some instances, used to process transactions, 34 pre- signed account forms for 10 clients
Penalty:
3 month prohibition
costs of $2,500

28. Giuseppe Cichello (Jan 2017)
Between May 11, 2015 and May 13, 2015 the AP falsified 3 client signatures on account forms and used the forms to process transactions
Penalty:
5 month prohibition
costs of $1,000

29. Michael Charles Nisbet (Apr 2017)
Between June 2011 and February 2015 the AP obtained, possessed and used to process transactions, 3 pre-signed forms
Between June 2011 and March 2014 the AP signed 3 forms, as an Approved Person, falsely stating he had reviewed the details with the client
Penalty:
6 month prohibition from acting as a BM
fine of $6,500 and costs of $2,500

30. Annaji Kumar (Apr 2017) Branch Manager
On or about June 19, 2015, the AP falsified a client signature on an account form
Between 2004 and June 2015, the AP:
falsified and used to process transactions, 2 account forms in respect of 2 clients, by altering information on the account forms without obtaining client initials authorizing the alterations
obtained, possessed, and used to process transactions, 2 pre-signed account forms in respect of 2 clients

31. Annaji Kumar (Apr 2017)
Between October 2009 and June 2015, acting in his capacity as branch manager, the AP reviewed and approved the use of 3 of these forms.
Penalty:
6 month prohibition
must successfully complete a BM course prior to being re-designated as a BM
fine of $1,500

32. Mohabeer Rambarran (Nov 2016)
Branch Manager
Between September 2006 and August 2014, the AP:
obtained, possessed, and in some instances, used to process transactions, 51 pre-signed account forms in respect of 22 clients
falsified, and in some instances, used to process transactions, 13 account forms in respect of 10 clients
acting in the capacity of alternate branch manager, reviewed and approved 54 of the account forms described above.
Penalty: 5 month branch manager prohibition, and prior to being re-designated as a BM, successfully complete a BM course. Fine of $10,000 and costs of $2,500

33. Martine Yargeau (Oct 2017)
On or about October 27, 2014 the AP falsified 2 client signatures on a form and submitted for processing
Between January 2013 and February 2015, the AP obtained, possessed and, in some instances, used to process transactions, 203 pre-signed account forms for 45 clients
Penalty: 1 year prohibition

34. Yangyi Xie (May 2017) Between August and September 2014 the AP:
processed 3 authorized discretionary trades as part of a dollar-cost averaging strategy for a client
Between August and October 2014 the AP:
falsified the signature of 1 client on 4 account forms
processed 2 unauthorized discretionary trades
Penalty:
18 month prohibition
fine of $5,500 and costs of $2,500

35. Questions?