Finra imposed $185,000 in financial penalties on five brokerages for compliance failures related to the broker-dealer standard of conduct, Regulation Best Interest, and a related disclosure document, Form CRS.
The Financial Industry Regulatory Authority Inc. found that some firms lacked policies and procedures to ensure that their registered representatives adhered to Reg BI, which prohibits them from putting their financial interests ahead of their customers’ interests in achieving as high a return as possible.
Some firms missed deadlines for making available Form CRS — which outlines a firm’s services, fees, conflicts of interest, disciplinary history and other information — or omitted required information from the form.
Two firms were cited for both Reg BI and Form CRS violations.
The actions illustrate Finra’s continuing crackdown on compliance shortcomings related to the conduct standard that the Securities and Exchange Commission implemented in June 2020.
Similar to previous Finra Reg BI cases, the citations and penalties were minor. The SEC filed the first substantive Reg BI case last year. Both regulators have warned that they intend to step up Reg BI enforcement.
Finra’s latest actions involved the following firms, none of whom admitted nor denied Finra’s findings:
Finra found that DMK Advisor Group Inc. failed to deliver Form CRS to some customers until October 2022. The document was due by July 30, 2020. The firm also failed to put into place policies and procedures to comply with Reg BI from June 30, 2020, until June 15, 2022. Finra imposed a $35,000 fine.
Finra found that Harpeth Securities did not have policies and procedures in place to comply with Reg BI from June 30, 2020, until April 22, 2022. During that time, the firm acted as a placement agent for two private placements, recommending them to approximately 490 retail investors, the Finra order states. During the same time frame, the firm failed to implement policies and procedures to comply with Form CRS. Finra imposed a $35,000 fine.
Finra found that from June 30, 2020, until Aug. 30, 2021, Highlander Capital Group Inc.’s Form CRS did not mention disciplinary history when the firm and two of its reps had prior legal and disciplinary violations. Finra imposed a $5,000 fine.
Finra found that from June 30, 2020, until Feb. 6, 2023, Axos Invest failed to report on its Form CRS that an affiliate and two of its reps had prior legal and disciplinary histories. Finra imposed a $75,000 fine.
Finra found that American Wealth Management failed to report on its Form CRS from July 23, 2020, until March 31, 2022, that the firm and six of its financial professionals had prior legal and disciplinary histories. Finra imposed a $35,000 fine.
FA-IQ first reported Finra’s latest Reg BI and Form CRS enforcement actions.
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