The reporting requirements for brokers and financial advisors is often changing. Although this evolution is arguably important to help protect clients, it can make it very difficult for professionals to make sure they are in full compliance with the United States Securities and Exchange Commission’s (SEC) requirements.
Recently, the SEC adopted a requirement that certain broker dealers and investment advisors file and deliver client or customer relationship summaries to retail investors. The feds required use of these documents, also known as Form CRS, by June 5, 2019. Brokers were expected to start delivering these forms to existing and potential retail investors by June 30, 2020.
The SEC has since actively pursued investigations into allegations brokers and investment advisors failed to meet these requirements. The feds announced its plans to move forward with charging six investment advisors and six broker dealers for failures to meet client or customer relationship summary expectations.
This is not the first wave of charges involving CRS obligations. The SEC has already charged 42 financial firms for similar failures.
What if I have not met these requirements?
The SEC can move forward with penalties, including monetary fines. Recent cases have included the SEC issuing civil penalties ranging from $10,000 to almost $100,000 to individual broker-dealers and investment advisors.
What can firms learn from these cases?
The SEC is looking into CRS obligations. Those who are not up to date on their filings are wise to review their options to come into compliance or prepare to face similar charges.