Form CRS Failures can have serious implications.
For example, in January 2022 the SEC filed, and settled charges with six investment advisers and six broker-dealers for failing to file and deliver client or customer relationship summaries – known as Form CRS – to their retail investors by the required deadline and, in some cases, failed to include all information necessary to satisfy Form CRS requirements.
So far, the SEC has filed charges against 42 firms for failing to meet teh requirements of Form CRS.
Background of Form CRS
On June 5, 2019, the SEC adopted Form CRS and required SEC-registered investment advisers and SEC-registered broker-dealers to file their respective Forms CRS with the SEC, begin delivering them to prospective and new retail investors by June 30, 2020, and deliver them to existing retail investor clients or customers by July 30, 2020. The SEC also required firms to prominently post their current Form CRS on their website, if they had one. According to the SEC’s orders, each of the firms charged missed those regulatory deadlines. In addition, the orders find that certain firms failed to include information and language specifically required for Form CRS.
The SEC’s orders find that the investment advisers violated Section 204 of the Investment Advisers Act of 1940 and Advisers Act Rules 204-1 and 204-5, and that the broker-dealers violated Section 17(a)(1) of the Securities Exchange Act of 1934 and Exchange Act Rule 17a-14. Without admitting or denying the findings, each of the firms agreed to be censured, to cease and desist from violating the charged provisions, and to pay the following civil penalties:
- Arthur Zaske & Associates, LLC, a Bingham Farms, Michigan-based investment adviser, has agreed to pay a $15,000 civil penalty.
- Banyan Securities, LLC, a Greenbrae, California-based broker-dealer, has agreed to pay a $10,000 civil penalty.
- Church, Gregory, Adams Securities Corporation, a Decatur, Georgia-based broker‑dealer, has agreed to pay a $10,000 civil penalty.
- Gutt Financial Management, LLC, an Atlanta, Georgia-based investment adviser, has agreed to pay a $25,000 civil penalty.
- Hinsdale Associates, Inc., a Hinsdale, Illinois-based investment adviser, has agreed to pay a $25,000 civil penalty.
- J.K. Financial Services, Inc., a Norco, California-based broker-dealer, has agreed to pay a $10,000 civil penalty.
- N.V.N.G. Investments, Inc., a Kalamazoo, Michigan-based investment adviser, has agreed to pay a $15,000 civil penalty.
- Personal Financial Planning, Inc., a Deerfield, Illinois-based investment adviser, has agreed to pay a $25,000 civil penalty.
- Stone Run Capital, LLC, a New York, New York-based investment adviser, has agreed to pay a $25,000 civil penalty.
- The Winning Edge Financial Group, Inc., a Clifton, New Jersey-based broker-dealer, has agreed to pay a $10,000 civil penalty.
- Wall Street Access, a New York, New York-based broker-dealer, has agreed to pay a $97,523 civil penalty.
- Watermark Securities, Inc., a New York, New York-based broker-dealer, has agreed to pay a $25,000 civil penalty.
On July 26, 2021, the SEC announced settlements with 27 other financial firms for similar failures to timely file and deliver their Forms CRS to their retail investors. https://www.sec.gov/news/press-release/2021-139. Three other investment advisers subsequently settled with the SEC in separate administrative proceedings: Disciplined Capital Management LLC; Lexicon Capital Management LP; and Newman Ladd Capital Advisors, LLC.
Have a securities law question? Call New York Securities Lawyers at 212-509-6544.
Visit The Securities Law Home Page – news and tips from securities regulators and top securities attorneys
