Two missing signatures could have costly consequences for one mutual funds dealer who took it upon himself to fill in the gaps.
If a printer problem prevents you from completing a client’s requested transaction, forgery shouldn’t be workaround. A former TD mutual funds dealer faces potential penalties of up to $10 million for forgery of two client signatures, with maximum fines not each violation being up to $5 million per offence.
The Mutual Fund Dealers Association (MFDA) has started disciplinary proceedings in against a former TD Investment Services (TDIS) mutual fund salesperson, Brent Barnai, alleging two instances of forgery and accusing him of being uncooperative in the MFDA’s investigation. Potential penalties are more likely to be on the lower end of the scale, with fines equal to three times the profit obtained or loss avoided as the result of the violations.
“We reserve the most serious penalties for the most serious matters,” said Hugh Corbett, managing director of enforcement at the MFDA. “A five-million dollar fine is rare.”
The MFDA’s largest fine ever, he noted, happened this April when the organization handed a $6 million penalty handed to former Investors Group advisor Paul Yoannou, who stole at least $6,000,000 from 18 clients and other individuals and used the cover of his employment by Investors Group to advance his fraudulent schemes.
Still, Corbett added that the MFDA takes matters of forgery very seriously, even when done at the behest of a client, as it corrupts the audit chain. Also, he added, as a self-regulatory industry body, the MFDA views non-cooperation with an investigation as a serious matter as it impacts the industry’s ability to police itself.
The MFDA alleges that between January and February 2012, Barnai falsified the signatures of two clients on account forms. It also alleges that from May 2012, he failed to provide a written statement requested by the MFDA as part of the investigation.
Barnai who was working in TDIS’ Port Colborne, ON, resigned from the company on March 1, 2012, after he became aware that TD had started an investigation into his activities.
Initially the TDIS branch manager noticed, while conducting daily trade reviews, that Barnai had not submitted a transaction and account maintenance form in respect to a redemption in the account of a client referred to as “NS.” The branch manager contacted Barnai and requested that he provide a form completed by client.
MFDA said Barnai falsified the client’s signature on a form and submitted it to the branch manager on February 13, 2012. The branch manager reviewed the form and noticed that the signature did not match the client’s signature on prior account documents. As a result, TDIS commenced an internal investigation of Barnai.
During the investigation, Barnai told TDIS that he had met the client on February 9, 2012 and received instructions to process the redemption. However, as a result of problems with his computer, he was unable to generate a form for client NS to sign. He therefore arranged for client NS to return to his office on a later date to sign the form.
During the investigation, TDIS spoke with client NS, who acknowledged that she had authorized the redemption in her account but also stated that the signature on the Transaction Form was not hers and that she had not signed the transaction form on either February 9, 2012 or thereafter.
The circumstances in the second incidence of forgery were similar with a client referred to as OB confirming that she had requested an RRSP contribution, which Barnai had processed, but that she had never signed the transaction form.
As Barnai was no longer cooperating with the investigation, the MFDA was unable to provide his reason for the alleged forgery.