Six investment advisors and six broker-dealers will pay nearly $300,000 in penalties to settle charges that they failed to provide client relationship summaries to their retail investors by the required deadlines and, in some cases, failed to include all required information, the SEC announced today.
"With today’s actions, the SEC has now charged forty-two financial firms for failing to meet the obligations that are required to ensure retail investors understand their relationships with their securities industry professionals," Sanjay Wadhwa, deputy director of the SEC’s Enforcement Division, said in a statement.
"We urge firms that continue to be delinquent in fulfilling their Form CRS obligations to come into compliance with the law and to self-report to the SEC," he added.
One of the advisor firms, Arthur Zaske & Associates LLC, (AZA) a Bingham Farms, Mich.-based investment advisor with $134 million in assets under management, “willfully violated” CRS rules by not delivering Form CRS to the SEC or to prospective or existing clients by deadline, the SEC’s charging document states.
Until contacted by SEC examiners, AZA did not file Form CRS with the SEC until February 26, 2021, and the firm did not deliver the form to its retail investor clients until March 10, 2021. In addition, AZA failed to post Form CRS on its website until March 19, 2021, the SEC said. The firm was censured and hit with a $15,000 civil penalty, the SEC announced.
A message left on AZA’s main phone number seeking comment was not returned by deadline.
The SEC adopted Form CRS regulations as the critical investor disclosure piece of Regulation Best Interest in June 2020. The regulations required SEC-registered investment advisors and SEC-registered broker-dealers to file their forms with the SEC and begin delivering them to prospective and new retail investors by June 30, 2020. The deadline to deliver them to existing retail investor clients or customers was July 30, 2020.
The SEC also required firms to prominently post their current forms on their website, if they had one.
According to the SEC’s orders, each of the firms charged today missed those regulatory deadlines. In addition, the orders find that certain firms failed to include information and language specifically required for Form CRS.
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, Mich.-based investment advisor, has agreed to pay a $15,000 civil penalty.
• Banyan Securities LLC, a Greenbrae, Calif.-based broker-dealer, has agreed to pay a $10,000 civil penalty.
• Church, Gregory, Adams Securities Corporation, a Decatur, Ga.-based broker dealer, has agreed to pay a $10,000 civil penalty.
• Gutt Financial Management LLC, an Atlanta, Ga.-based investment advisor, has agreed to pay a $25,000 civil penalty.
• Hinsdale Associates Inc., a Hinsdale, Ill.-based investment advisor, has agreed to pay a $25,000 civil penalty.
• J.K. Financial Services Inc., a Norco, Calif.-based broker-dealer, has agreed to pay a $10,000 civil penalty.
• N.V.N.G. Investments Inc. a Kalamazoo, Mich.-based investment advisor, has agreed to pay a $15,000 civil penalty.
• Personal Financial Planning Inc., a Deerfield, Ill.-based investment advisor, has agreed to pay a $25,000 civil penalty.
• Stone Run Capital LLC, a New York City-based investment advisor, has agreed to pay a $25,000 civil penalty.
• The Winning Edge Financial Group Inc., a Clifton, N.J.-based broker-dealer, has agreed to pay a $10,000 civil penalty.
• Wall Street Access, a New York City-based broker-dealer, has agreed to pay a $97,523 civil penalty.
• Watermark Securities Inc., a New York City-based broker-dealer, has agreed to pay a $25,000 civil penalty.
On July 26, the SEC announced settlements with 27 other financial firms for similar violations. Three other investment advisors subsequently settled with the SEC in separate administrative proceedings: Disciplined Capital Management LLC, Lexicon Capital Management LP and Newman Ladd Capital Advisors LLC.