The Securities and Exchange Commission settled allegations with six investment advisory firms and six broker/dealers alleging that they did not deliver their Form Client Relationship Summary to clients in a timely manner; Some do not even include information required by the SEC, the regulator said.
The new penalty follows the SEC’s Department of Enforcement action against 27 firms last July for failing to “file and deliver on time” on their Form CRS; Those settled charges marked the first enforcement actions taken since the Customer Relationship Document requirement with Regulation Best Interest took effect in June 2020.
According to Sanjay Wadhwa, deputy director of the SEC’s Enforcement Division, this week’s action brought the total number of actions against firms for CRS defaults to 42.
“We urge firms that are delinquent in meeting their Form CRS obligations to comply with the law and self-report to the SEC,” Wadhwa said.
According to the SEC, all 12 firms failed to deliver their Form CRS to potential and new customers by June 30, 2020, to existing retail customers a month later, and “prominently post” their current Form CRS on their website. also failed to do so. , if applicable; In some cases, firms didn’t file or distribute forms until after they were contacted by the SEC, in some cases eventually doing so for more than a year after implementation.
In some cases, the Commission alleged that the firm failed to include information necessary to meet CRS requirements, although the action did not specify what information was lacking.
Of the six advisory firms charged, four range between approximately $135 million and $184 million in assets under management, Stone Run Capital manages $316 million in assets and personal financial plan Management of approximately $896 million. Twelve firms are located throughout the country, three of which are located in New York City and several in California, Michigan and Georgia.
Civil penalties were mostly in the low-to-mid five figures, with five firms ordered to pay $25,000, two ordered to pay $15,000 and four ordered to pay $10,000. However, Wall Street AccessA b/d, based in New York, was ordered to pay $97,523.
As for Kurt Wolfe, an attorney in SEC enforcement practice at the law firm Quinn Emanuel Urquhart & Sullivan, Wadwa’s language suggested that “for the time being,” the commission would touch relatively lightly with the seriousness of the penalties it imposed. But he also argued that the enforcement actions were a sign that the SEC was reaching the end of its patience over the firms’ failure to comply with filing deadlines, and urged firms not to test the SEC.
“(They’re saying) ‘If we come to you, don’t expect a light touch,'” Wolff said. “‘But here’s your chance. Come to us if you think you have a problem.'”
Other than this July 2021 21 investment advisors and six B/Ds. action againstThe SEC’s Enforcement Department also found A $391 million AUM Syracuse-based firm And Year $81 million New York based firm For similar conduct in October last year. Like those examples, the firms named this week did not accept or reject the commission’s findings, but agreed to civil penalties as well as censure and cease-and-desist orders.
According to Ben Edwards, a professor in the William S. Boyd School of Law at the University of Nevada in Las Vegas, charging firms with a failure to deliver documents on time is an easy matter for the SEC, as it requires little regulator. resources from the side.
“You can describe it as a low-hanging fruit. In some sense, this fruit doesn’t even hang on the tree,” he said Tuesday during a panel sponsored by the Institute for the Fiduciary Standard. “It’s lying on the ground.” “