FINRA Fines Firm for Inadequate Oversight of Electronic Signatures

A firm settled FINRA charges for failing to establish a supervisory system designed to detect the forgery and falsification of electronic signatures.

According to the AWC, the firm permitted associated persons to electronically sign documents and obtain electronic signatures from customers. FINRA stated that this failure allowed four associated persons at one branch to forge and falsify customer electronic signatures by using their own contact information in place of customers’. FINRA found that these individuals electronically signed more than 150 documents for over 100 customers, including more than 30 forged documents, most of which were required books and records such as account and money movement forms.

FINRA stated that the firm also allowed personnel to sign documents on behalf of registered representatives without disclosing that they were doing so, resulting in at least 500 improperly signed documents, including documents relating to money movements. FINRA determined that the firm failed to implement adequate controls to identify non-genuine electronic signatures or review certificates of completion.

FINRA noted that the firm discovered the misconduct during a review of branch paperwork and took corrective action by contacting affected customers, confirming all transactions were authorized, and obtaining re-executed documents where necessary. FINRA stated that no customers complained and that the firm implemented a weekly review of certificates of completion to identify potential forgery or falsification, later incorporating this control into its written supervisory procedures.

FINRA determined that the firm violated SEA Section 17(a) ("Records and Reports") and SEA Rule 17a-3 ("Records to be made by certain exchange members, brokers and dealers"), as well as FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 3110 ("Supervision"), and 4511 ("General Requirements").

To resolve the matter, the firm agreed to (i) a censure and (ii) a $315,000 fine.