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Regulation and Compliance > Federal Regulation > FINRA

FINRA Fines 5 Firms for Reg BI, Form CRS Violations

By Melanie Waddell

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The Financial Industry Regulatory Authority recently fined five firms for violating Regulation Best Interest and for missteps related to the Customer Relationship Summary, or Form CRS.

Harpeth Securities acted as a placement agent for two private placements, for about 490 retail investors, yet “the firm’s written policies and procedures contained no provisions relating to Reg BI” for nearly two years after the regulation’s June 30, 2020, compliance date, according to FINRA.

Harpeth also failed to prepare, file and deliver its Form CRS, which violated FINRA Rules 3110 and 2010. Harpeth was censured and fined $35,000.

Axos Invest LLC was censured and fined $75,000 for falsely responding “No” to the question concerning legal or disciplinary history on the initial Form CRS it filed on June 29, 2020, and on the amended Form CRS it filed on April 22, 2022.

At the time Axos filed its initial Form CRS, a control affiliate and one of the firm’s registered reps had prior legal or disciplinary history. At the time the firm filed its amended Form CRS, the affiliate and two of the firm’s registered reps had prior legal or disciplinary history.

Highlander Capital was censured and fined $5,000 for falsely representing on the firm’s Form CRS that neither it nor its associated persons had any legal or disciplinary history. “In fact, both the firm and two of its registered representatives had prior legal or disciplinary history,” the order states.

American Wealth Management, meanwhile, was censured and fined $35,000 for omitting required information from the firm’s Form CRS. Most significantly, from July 23, 2020, to March 31, 2022, the firm failed to disclose on its Form CRS that it and six of its financial professionals had legal or disciplinary history, the order states.

DMK Advisor Group Inc. was censured and fined $35,000 for failing to establish, maintain and enforce a supervisory system, including written supervisory procedures, which required the firm to timely prepare, file and deliver its Form CRS to retail customers by July 30, 2020.

DMK also failed to deliver its Form CRS to certain of its customers until October 2022.

The broker-dealer DMK also failed to establish, maintain and enforce a supervisory system, including WSPs, reasonably designed to achieve compliance with Reg BI and Form CRS, according to FINRA.

Melanie Waddell

@Think_MelanieW

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