SEC fines 27 for Poor Filing, Investor Notification Practices

The Securities and Exchange Commission (SEC) has settled charges with 21 investment advisers and 6 broker-dealers related to their failure to timely file and deliver their client or customer relationship summaries (Form CRS) to their retail investors.

On June 5, 2019, the SEC adopted Form CRS and required SEC-registered investment advisers and 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. Firms also had to prominently post a current Form CRS on their website if they had one.

According to the SEC, each of the 27 charged firms missed their deadlines with none posting or delivering them until after their second reminder.

“Registration with the SEC as an investment adviser or broker-dealer comes with mandated filing and disclosure obligations,” said Gurbir S. Grewal, director of the SEC’s Enforcement Division. “Today’s 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.”

“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,” said Adam S. Aderton, co-chief of the SEC Enforcement Division’s Asset Management Unit.  “By failing to file, deliver, and post this form, these firms deprived their clients and customers of the benefits of that information.”

The SEC found the investment advisers violated Section 204 of the Investment Advisers Act of 1940 and Advisers Act Rules 204-1 and 204-5, and 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, the firms agreed to be censured, to cease and desist from violating the charged provisions, and to pay the following civil penalties:

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