Help! What Can I Do if My Broker Forges My Signature?

How closely do you review transactions in your securities account? Forgery is a common source of investor complaints in the securities industry and is often the first step toward the misappropriation of funds. It’s also a type of misconduct that many investors do not notice until the fraud has already taken place.

You may be surprised to learn that brokers who forge their investors’ signatures are not always barred from the securities industry.

Forgery in the securities industry goes beyond forged signatures. Certain enterprising fraudsters will forge entire account statements. According to FINRA notice 09–64 (FINRA stands for Financial Industry Regulatory Authority), “In some [cases], employees concealed their misconduct by diverting customers’ genuine account statements to a post office box or address under the employee’s control and replacing them with fabricated statements.”

Why Do Brokers Forge Signatures?

The investor may not suffer financial losses as a result — a broker might forge a signature to simply save some time. Investors must authorize transactions unless they approve their account for discretionary trading. To circumvent this, some brokers have forged their investor’s signatures on authorization forms. Other common forgeries include brokers who alter agreements after the investor has signed the document. This might allow them to increase their fees.

• In 2017, a broker entered into an Acceptance, Waiver, and Consent (AWC) agreement with FINRA in which he consented to the findings that he asked investors to sign blank forms. FINRA alleges he then photocopied investor signatures and kept them in his office. He allegedly used the signatures to effect transactions that the investors did not actually authorize. As part of the terms of the AWC, the broker consented to a three-month suspension and a $5,000 fine. You can read a copy of the AWC here.
• Another AWC agreement revealed that a broker had cut customers’ signatures from physical documents and pasted or taped them onto new forms, which he then photocopied. FINRA also alleges the broker used white-out to adjust information in forms that investors had already signed. The broker consented to a fine of $15,000 and a one-year suspension. You can read a copy of the AWC here.

How Do Brokers Get Caught?

Brokerage firms have a duty to review their representatives’ transactions and any requests for fund withdrawals. As part of their review, firms should review their brokers’ transactions and verify that the signatures appear to be genuine. According to FINRA Rule 4530, firms have a duty to report any instances of forgery within 30 calendar days.

Investors can also catch a broker forging signatures by reviewing their transactions and following up on transactions they don’t remember authorizing.

How Do I Find Out if My Broker Has a History of Forgery?

Broker-dealers and must use their Customer Relationship Summary form (Form CRS) to disclose any instances of misconduct on their representatives’ record, including forgery. Unfortunately, it doesn’t always work out that way.

According to a recent survey, many firms have struggled to adhere to this relatively new requirement. The Wall Street Journal reported in August 2020 that nearly one-quarter of firms they surveyed failed to disclose all of the misconduct on their advisers’ records.

Always review your broker’s record on BrokerCheck, the FINRA-maintained public record of investor complaints. You can look up your investor by name, but it’s better to use their registration number — also called a CRD number — to avoid confusion.

What Happens When a Broker Gets Caught Forging Signatures?

FINRA recently barred a broker from working with investors, following allegations that he had used “non-genuine” signatures. He was fired from his firm for the same allegations. But forgeries do not always result in a ban from the securities industry. Many FINRA-broker agreements reveal that brokers often only have to pay a fine endure a suspension before they can return to business as usual.

FINRA: Not Very Effective at Keeping Forgers out of the Industry

Criminal forgery convictions would result in a 10-year disqualification from registration with FINRA, but dishonest brokers can undermine this rule. Another fine and suspension agreement from FINRA reveals that one broker flew under the radar for several years. He was charged with a felony forgery in 2012 and did not inform his firm. His firm did not discover his conviction and fire him until 2016. The broker could have provided financial services to investors who had no way of knowing of his previous misconduct, even if they reviewed his BrokerCheck record.

Getting around a FINRA suspension for forgery is often as easy as switching to a different license. In an article titled “The Barred Brokers in Our Midsts” The Wall Street Journal pointed out that a broker who FINRA had barred simply switched to working as a financial adviser instead.

Note: FINRA regulates brokers, while the SEC regulates Registered Investment Advisers (RIAs). Both can call themselves “financial advisers” and many financial advisers have both RIA and FINRA broker licenses. For more information, read our article on the differences between brokers and investment advisers.

What Can I Do to Prevent My Broker from Getting Away with Forgery?

Check your account statements regularly. Double-check to make sure there are no changes to documents you previously signed — make sure you always maintain your own copies of agreements. And if you believe your broker forged your signature, contact a securities attorney before you decide what to do next.