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Bulletin #0123-M

For further information, please contact:

Ken Woodard
Director, Communications & Membership Services
Membership Information
For Distribution to Relevant Parties within your Firm

Reporting of Enforcement Related Issues

This Bulletin is being issued to clarify the obligations of Members with respect to the reporting of complaints and certain other significant issues as required under the MFDA By-laws, Rules and Policies.

 Complaints Reporting under MFDA Policy 3

 Under MFDA Policy 3, every Member has an obligation to promptly report to the MFDA Membership Services Department whenever the Member or any partner, director, officer, salesperson, employee or agent of the Member, is the subject of a client complaint involving allegations of forgery, theft or misappropriation of funds or securities.

To comply with both the spirit and the letter of the Rule, any complaint where forgery, theft or misappropriation of funds is involved must be reported, whether or not a specific allegation of such issues has been made by the client. For example, the Member may receive a complaint from a client stating only a general concern that the Approved Person has mishandled an account. Theft or fraud may only be discovered upon further investigation of the matter by the firm. Any such complaint must be promptly reported.

In addition, each Member has a responsibility to report to the MFDA whenever:

  1. the Member has entered into a private settlement or has disposed of any claim in securities-related litigation or arbitration by judgment, award or settlement where the amount of the judgment, award or settlement exceeds $25,000; or
  2. a partner, director, officer, salesperson, employee or agent of the Member has entered into a private settlement or has disposed of any claim in securities-related litigation or arbitration by judgment, award or settlement where the amount of the judgment, award or settlement exceeds $15,000.

Reports must be made in every case where a complaint relates to securities related business, as defined in MFDA By-Law 1, for both on book and off book activity.

Other Required Reports

As noted in Member Regulation Notice MR-0027, Members must provide notice to the MFDA within 5 days of the termination of an employment or agency relationship with an Approved Person where the Notice of Termination filed with securities regulators discloses that the individual was dismissed for cause or discloses information regarding unresolved client complaints, internal discipline matters, or restrictions for violation of regulatory requirements.

Members are also required to notify the MFDA whenever the Member, or any partner, director, officer or shareholder owning a significant equity interest in the Member is refused registration or licensing, or has its registration or license suspended or cancelled or is subject to any securities regulatory proceedings, or where such Member or individual is charged or indicted pursuant to criminal laws or securities regulations.

For certain issues, Members may have in the past been directed to report information to the Enforcement Department. In the interests of consistency and clarity of process for Members going forward, notification relating to any of the issues noted above should be directed to the Membership Services Department.