Forgery: the act or legal offense of imitating or counterfeiting documents, signatures, ... [with intent] to deceive.

FINRA recently barred or suspended several principals and brokers for permitting someone other than the customer to sign account documents or applications.  They often compounded the problem by certifying that they witnessed the customer do the signing.  The first element of the "crime" is punishable with, say, a $5K fine and 20- or 30-day suspension.  The second can result in a 6-month suspension. 

In today's WWW story, a broker with Thrivent Investment Management allowed a customer to sign relatives’ names on life insurance applications, and before submitting for processing, she signed the applications and certified that she witnessed each of the proposed signatures on the insurance applications.  She also allegedly falsely certified on the  Representative’s Information Supplement document for each insurance application that she had personally seen each proposed insured at the time the application was completed.  On another occasion, the broker personally affixed a client’s signature on an application without the client’s authorization, consent or knowledge.  The broker was fined $5K and suspended 6-months.

    Alternatives.   Oftentimes, a customer agrees to consummate a transaction - say purchase an insurance contract - but is not available to sign the document.  One would think that a firm, in certain circumstances, would permit the customer to sign a Letter of Authorization, or "LOA," designating a 3rd party as his or her representative.  While this may require some forethought on the part of the broker and/or customer(s), and would likely require prior approval by a supervisory principal. 

It's undoubtedly a viable alternative to taking the "easy way out" and forging the customer's signature - regardless of whether the customer had verbally  agreed to allow another person to sign on his or her behalf. The customer is not expected to necessarily know "right from wrong" when it comes to "dotting the i's and crossing the t's" when transacting a a financial instrument.

    Bold Initiative: Amnesty Program.   Here's a bold concept for a firm to consider - and obtain prior "approval" or some sort of "no action" letter from FINRA or another SRO - an amnesty program to its registered persons. 

The firm would invite its producers to identify instances where customers' signatures had been forged, and then work with those producers to obtain "after-the-fact" authorizations from the affected customers.  [This presumes that the customer authorized the transaction in the first place.]

The key is that neither the firm nor the regulator mete punish the registered person, so long as he or she agrees to fulfill training sessions and vows not to commit such violations in the future.  The firm can subject those persons to some form of "heightened supervision," as it pertains to customer signatures and authorizations.

Compliance Insights welcomes its readers to flush out this issue with additional alternatives or concerns.  Thanks.

Go to our What Went Wrong page to read about the disciplinary action referred to above - "Another Broker Forgery, Another 6-Month Suspension," posted 4/29/11.