On July 13, 2022, the MFDA released its 2021 Annual Enforcement Report:
- As in past years:
- The greatest source of referrals to enforcement are METs and the public
- The most common allegations are ‘business standards’ (this is a broad description without further detail), suitability and discretionary trading
- Allegations regarding pre-signed blank forms, though down from 2019, have been consistent for 2020 and 2021 though allegations of ‘active signature falsification’ (which is distinguished from forgery) have increased. The greatest number of proceedings commenced are still regarding pre-signed forms.
- Allegations regarding KYC documentation deficiencies and commissions and fees are also down.
Highlighted cases are in keeping with past areas of enforcement focus and include:
- From a firm perspective, dealer incentive sales practices that may influence an advisor to recommend one mutual fund over another
- From an advisor perspective:
- The purchases of DSC funds with subsequent switches into pools of no-load funds
- Overconcentration in precious metal bullion funds without disclosure of material risks. Concentration was description on a per account basis ranging from 67.1% to 92.4% at the time of the complaint.
- Acting on a POA for a family (mother’s) account without notifying the member and using the POA to borrow from the family account
You can access the MFDA Enforcement Report here.