SEC Slams 12 More Firms for Form CRS Failures

The Securities and Exchange Commission said Wednesday that six investment advisors and six broker-dealers have agreed to settle charges related to failing to file and deliver a customer relationship summary, or Form CRS, to their retail clients.

The advisors and BDs failed to file and deliver the form to retail investors by the required deadline and, in some cases, failed to include necessary information and language, the SEC said.

With the actions Wednesday, the SEC has now charged 42 financial firms “for failing to meet the obligations that are required to ensure retail investors understand their relationships with their securities industry professionals,” said Sanjay Wadhwa, deputy director of the SEC’s Enforcement Division, in a statement.

Wadhwa urged 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.”

In July, the SEC announced settlements with 27 other financial firms for similar failures to timely file and deliver their Forms CRS to retail investors.

Just before Christmas, the SEC issued sweeping guidance on Form CRS, pointing to numerous disclosure aspects of the rule where advisors are falling short.

On Feb. 9, the Financial Industry Regulatory Authority followed suit by releasing its initial exam findings for compliance with Form CRS by broker-dealers, citing numerous deficiencies.

Along with Regulation Best Interest, requirements to file Form CRS became effective on June 30, 2020, and 2021 marked the first full calendar year during which FINRA examined how broker-dealers have implemented the rule.

The SEC requires 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 Wednesday missed those regulatory deadlines.

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 advisor, 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 Corp., a Decatur, Georgia-based broker‑dealer, has agreed to pay a $10,000 civil penalty.
• Gutt Financial Management LLC, an Atlanta-based investment advisor, has agreed to pay a $25,000 civil penalty.
• Hinsdale Associates Inc., a Hinsdale, Illinois-based investment advisor, 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 advisor, has agreed to pay a $15,000 civil penalty.
• Personal Financial Planning Inc., a Deerfield, Illinois-based investment advisor, has agreed to pay a $25,000 civil penalty.
• Stone Run Capital, LLC, a New York, New York-based investment advisor, 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.