Date: May 3, 2017
As many of you know we have had numerous issues regarding alterations being made on client signed documents. The term “accommodation forgery” is used because the changes are often made with the client’s best interests in mind, and are done so that the client does not have to be bothered with what may be considered non-material documentation deficiencies. Although the alterations that have been made are generally in the favor of the client, it is still an improper business practice that could result in fines and other sanctions from our regulators. This is an area that both the SEC and FINRA have taken a growing interest in, as well as state securities and insurance departments. Firms and individuals have been fined for making alterations to client signed documents. In addition, depending on the facts and circumstances an individual may be charged with a felony for making alterations to client signed documents.
Due to the legal, financial, regulatory and reputational risks involved, we have a ZERO Tolerance policy towards alterations made on client signed documents. There are procedures to follow when changes are made to a client signed document, and we ask you to not berate or bully your HIM support team members for ensuring these procedures are followed on a consistent basis.
Any client paperwork, including Horter paperwork or Custodian paperwork, is considered a legal document and alterations made by anyone other than the client will not be accepted. Any alterations made to these documents should be changed by having a client strike through the wrong information, initial, and date the change. Alternatively, you can ask the client to sign new, corrected paperwork. If there is an alteration made on any paperwork without the clients consent the paperwork is considered void.
Some of you may not be aware of this, but clients receive a copy of all finalized paperwork after it has been countersigned and executed at Horter. Therefore any changes made will eventually be seen by the client, and they may not like the idea of seeing documents they executed changed without their permission, even if the change is considered minor or non-material. We have received complaints from clients for this very issue.
Please note that TD Ameritrade is unique in that they will not accept any altered documents, even with client initials. If there are documentation deficiencies on TD Ameritrade paperwork, the client will need to complete and sign a new, corrected document.
No alterations can be made by the HIM Support Team. Once you send in the paperwork if there is anything incorrect it will be rejected and you will be required to get updated, correct paperwork. We also automatically reject any paperwork that shows evidence of white out being used. Even if the client dates and initials the white-out change, we have no idea whether white out was applied multiple times to the document. It is a best practice to not keep white out in your office or allow assistants to keep white out, to avoid any potential issues.
Please also note that Horter may randomly call clients to ensure that alterations made to account documents were in fact executed by the client. If the client does not confirm that the alterations were made by them the account paperwork will be automatically rejected.
Please remember your best way to avoid any issues is to review paperwork carefully before the client arrives for an appointment. A best practice is to have the paperwork reviewed by two people to prevent any errors.
We understand it is an inconvenience to go back to the client after they have left your office to get corrected documentation, which is why we ask you to not put us in the position of having to demand that. We do this to protect Horter and to protect you. Please do not ask your HIM support team to make any changes, and please do not ask your HIM support team to make any exceptions.
Recently we received an on-site visit from a law enforcement officer with the Kentucky Insurance Fraud Investigation Division who was investigating photocopied documents being used to open up multiple insurance contracts. The investigator noted that the “Investment Adviser” on the application had been changed, using white out, from the IAR’s business name to Horter Investment Management. He was concerned that the client did not date or initial that change proving they knew that there was a change on a form that had their signature. He knew it was done after the client meeting because he also had the original signed application. He stated that the person who made that change was essentially guilty of a felony, and had the client called the state regulator to complain that person would have been charged with a felony forgery. In this case, the investigator talked with the client who was very happy with their advisor and with Horter, and no charges were filed. We wanted to share this story, because although it had a happy ending, it very easily could have gone the other way. We have had clients complain to us about making alterations. If those clients had contacted their state regulators it may have resulted in criminal charges for the advisor or Horter staff member responsible.
If you would like a refresher course on how client paperwork is properly filled out please email email@example.com to sign up for our New Business Orientation Webinar. This webinar is hosted every Tuesday at 3:00 P.M. EST.
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