In June 2019, the Securities and Exchange Commission (SEC) unveiled regulation Form CRS, which requires registered investment advisers (RIAs) and broker-dealers file and deliver their client or customer relationship summaries to their retail investors.
Firms had to begin delivering documents to prospective and new retail investors by 30 June 2020 and deliver them to existing retail investor clients or customers by 30 July 2020.
The SEC also required firms to prominently post their current Form CRS on their website if they had one.
However, some businesses have not complied with the newly established piece of regulation that came into force last year.
Fines
On 26 July 2021, the US financial watchdog said that 21 investment advisers and 6 broker-dealers have agreed to settle charges that they failed to meet Form CRS regulations.
According to the SEC’s orders, each of the firms charged missed those regulatory deadlines.
The orders found that none of the firms filed or delivered its Form CRS, or posted it to its website, until being twice reminded of the missed deadlines by regulators—in the case of investment advisers, by the SEC’s division of examinations, and in the case of broker-dealers, by the Financial Industry Regulatory Authority (Finra).
The SEC has handed out fines of $910,092 (£660,094, €772,127) in total.
Without admitting or denying the findings, the firms agreed to be censured, to cease and desist from violating the charged provisions, and to pay the following civil penalties:
- Dynamic Trading Management; Eastside Financial Advisors; Sauberan & Company; Birkelbach & Co; Green Investment Services; Bill Parker Agency; and ST Invest d/b/a Trade App have all agreed to pay $10,000.
- James Stephen Altschuler; Canton Hathaway; Carmel Capital Management; Castle Wealth Planning; Harold Davidson & Associates; John A Bysko Associates; Madden Funds Management; Medallion Wealth Advisors; Mighty Oak Strong America Investment Company; O’Brien Greene & Co; Quantitative Asset Management; Summit Financial Advisors; Westbourne Investments; and Capital Portfolio Management have all agreed to pay $25,000.
- The Cavanaugh Group and Tradier Brokerage has agreed to pay $50,000.
- Cohen Klingenstein; Embree Financial Group; Minot DeBlois Advisors; and Paratus Financial have all agreed to pay $97,523.
Deprive clients
Gurbir Grewal, director of the SEC’s enforcement division, said: “Registration with the SEC as an investment adviser or broker-dealer comes with mandated filing and disclosure obligations.
“[The] cases reinforce the importance of meeting those obligations and providing retail investors with information that is intended to help them understand their relationships with their securities industry professionals.”
Adam Aderton, co-chief of the SEC enforcement division’s asset management unit, added: “Form CRS is intended to provide retail investors with a brief summary about the services a firm offers, its fees, conflicts of interest, and other information that can help investors make more informed choices.
“By failing to file, deliver, and post this form, these firms deprived their clients and customers of the benefits of that information.”
