Regulator flags risks in handling pre-signed forms and alterations after Niagara advisor's settlement
A recent Canadian Investment Regulatory Organization (CIRO) hearing has underscored the serious consequences of improper handling of client account documents, resulting in a $20,000 fine and $2,500 in costs for a long-serving dealing representative.
Between 2021 and 2024, David Clarke Somerville, an Approved Person with Quadrus Investment Ltd. in Niagara, Ontario, obtained, possessed, and used 41 pre-signed account forms to process transactions.
These included Know Your Client (KYC) forms, redemption forms, and Pre-Authorized Contribution (PAC) forms.
Information such as investment instructions, fund selections, amounts, account numbers, and dates was added after clients had signed the forms, contrary to Quadrus’s policies and procedures.
The CIRO hearing panel also found that Somerville altered 18 account forms without having clients initial the changes. These alterations involved key details such as amounts, fund codes, personal information, and dates.
In addition, he photocopied and reused 36 previously signed forms to process new transactions, making further changes to fund selections, timing, and amounts.
Branch audits in 2019, 2021, and 2023 brought these practices to light.
Quadrus responded by placing Somerville under close supervision for six months and contacting affected clients, none of whom reported complaints or financial loss.
The panel concluded that Somerville’s actions contravened Mutual Fund Dealer Rule 2.1.1, which sets the standard for proper execution of account documents.
The panel accepted the Settlement Agreement, noting the penalty was consistent with CIRO guidelines and previous decisions.
