What is the Punishment for Forgery?

The punishment for forgery depends on the type of forgery, the jurisdiction in which it occurs, and which agency investigates the allegations.  If a stockbroker forges an investor’s signature, the most likely punishments would include being terminated from their broker-dealer, as well as a fine and/or suspension handed down by the Financial Industry Regulatory Authority (FINRA). FINRA does not charge brokers with crimes—criminal charges for forgery would be brought by the state or federal government.   In extreme cases, stockbrokers may be barred from the securities industry by FINRA. 

What is Forgery?

Forgery is the alteration of a document with the intent to defraud. It does not always involve the artful reproduction of a signature. In some cases, brokers have cut out an investor’s signature, then affixed the cut-out signature to another document and made a photocopy. Electronic signatures make forgery even easier. Scammers may also alter the substance of a document after it has already been signed.  

Is Forging a Signature a Crime?

Forging a signature may be prosecuted as a crime since forgery is a type of fraud. Each state has its own forgery laws. In addition to state forgery laws, FINRA also has its own rules and regulations designed to prevent forgery.  

Is Forgery a Felony?

Forgery may be a felony, depending on the type of forgery and state forgery laws.

In New York, for example, there are three degrees of forgery charges. First and second-degree forgeries are felonies, while forgery in the third degree is a misdemeanor.

New York Forgery Sentence Examples

• Forgery in the first degree refers to forging money, stocks, or other financial instruments. This charge comes with a possible 15-year prison sentence.
• Forgery in the second degree involves a deed, will, or commercial instrument. These forgery charges can carry a 7-year prison sentence.
• Forgery in the third degree typically refers to the possession of a forged instrument. If found guilty, forgers could face up to a year in prison.

No matter where you live, it is illegal to forge someone else’s name on a financial instrument (like a check) or a contract.

FINRA Rules and Regulations Cited in Forgery Punishment

In the securities industry, forgery is a violation of FINRA Rules 4511 and 2010. Rule 4511 requires brokers to maintain accurate records, and Rule 2010 requires brokers to uphold high standards of commercial honor. Forgery may also be used to “misappropriate funds” (i.e., steal money from an account), which violates FINRA Rule 2150.

If a broker is charged with misdemeanor or felony fraud, they will not be able to register as a broker for a period of 10 years. FINRA describes forgery as a “statutory disqualification.”

Forgery in the Securities Industry

Common examples of forgery in the securities industry include signing authorization forms on behalf of an investor. There have been many cases of brokers forging a customer’s signature on an account form to execute trades.

Some brokerage firms may allow brokers to sign documents on an investor’s behalf, so long as they have the investor’s permission. In that case, the broker must indicate that they are signing on behalf of their investor. However, signing on behalf of an investor is normally against a firm’s policies, regardless of whether the investor gives permission. 

Punishment for Forgery in the Securities Industry

Unfortunately, in many cases, stockbrokers who engage in forgery receive relatively light punishments.

Forgery and Unauthorized Transactions

For instance, one recent regulatory action alleged that a broker forged an investor signature on a form acknowledging that by replacing one annuity with another, the investor would forego guaranteed income. FINRA sanctioned the broker with a two-month suspension and a $5,000 fine.

Forgery and Conversion

More serious cases of forgery can result in a bar from the securities industry. For instance, in 2021, a broker was fired by Edward Jones and barred by FINRA after FINRA alleged that the broker had misappropriated $44,200 from her own mother’s brokerage account. “Misappropriation” and “conversion” are the terms most often used for “the unauthorized taking of and/or exercise of ownership over property by one who neither owns the property nor is entitled to possess it.” Outside of the securities industry, this behavior would be described as stealing or theft. The broker transferred the money from her mother’s brokerage account to a third-party account, without her mother’s knowledge or authorization.

Forgery for Commissions

Forgery often involves financial products that come with steep commissions for the broker. Many allegations of fraud revolve around high-commission annuities. In one regulatory action, FINRA barred a broker after the regulator alleged he had forged his customer’s signature on multiple life insurance applications, worth a total of $23,950,000. Additionally, the broker allegedly applied for loans on the policies worth approximately $1,000,000. When the brokerage firm questioned these policies and loans, the broker allegedly falsified letters from the customer’s estate attorney and accountant. This broker has been barred by FINRA.

Forgery Punishment

Regrettably, in many cases, barred and fined brokers never face any criminal charges for their forgeries. This makes investor vigilance especially important. Always research your broker’s record on BrokerCheck before signing an investment contract – any investor disputes, terminations, or regulatory actions should give you pause.

What to Do if Someone Forges My Signature?

Contact local law enforcement if you believe someone forged your signature on a contract, a check, or any type of financial instrument.

If a stockbroker forges your signature, reach out to a securities attorney to determine the best next steps. Investment attorneys may be able to recover any losses through FINRA arbitration or mediation. Contact info@kurtalawfirm.com or (877) 600-0098.