SEC Charges 21 Registered Investment Advisors and 6 Brokers Dealers

My Take on the SEC’s Recent Actions Against Investment Advisors and Brokers

As someone who analyzes and writes about finance, I have consistently highlighted how crucial transparency and accountability are in the financial sector. Recent reports indicate that the Securities and Exchange Commission (SEC) has decisively acted against 21 investment advisors and six broker-dealers. The reason for this action was their failure to fulfill the requirement of filing and distributing what is referred to as Form CRS to their clients promptly.

In terms of penalties, we’re looking at fines ranging from $10,000 to a steep $97,500. This is no drop in the bucket, and it sends a clear signal about the regulatory expectations and where these firms fell short.

Back in June 2019, the SEC set out new rules intended to tighten up the standards of advice given by financial professionals. The package included the Regulation Best Interest — a rule for brokers — and the Form CRS, which requires advisors and brokers to share important details about their services, fees, and potential conflicts of interest. The goal was to foster an environment where retail investors are better informed about the relationships they enter into with firms and professionals handling their money.

The deadline for compliance with these regulations was June 30, 2020. Registered firms were supposed to file their documents with the SEC and deliver them to new and existing clients. They also needed to post this information on their website if they had one. Unfortunately, according to the SEC, 27 firms neglected these requirements, even after being reminded twice.

SEC Enforcement Division Director Gurbir Grewal put it plainly when he noted that being an SEC-registered advisor or broker-dealer comes with mandatory filing and disclosure responsibilities. Failing to meet these obligations deprives retail investors of essential information needed to understand their investment relationships.

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Let’s look at some specifics. The SEC reprimanded and fined a swathe of firms, including but not limited to, a Massachusetts-based advisor, James Stephen Altschuler, and Rhode Island’s Canton Hathaway LLC, each fined $25,000. New York-based Cohen Klingenstein LLC faced a hefty fine of $97,523, demonstrating the serious financial repercussions of these oversights. Even smaller firms like Dynamic Trading Management LLC in New York got hit with a $10,000 fine.

Firms like Harold Davidson & Associates Inc. in California and O’Brien Greene & Co. Inc. in Pennsylvania were also on the list, each fined $25,000 for their failure to adhere to SEC regulations. Broker/dealers weren’t exempt either, with entities like Bill Parker Agency in California and Birkelbach and Co. in Florida each penalized $10,000.

This sweep by the SEC serves as a stark reminder to the finance world. As the famous quote by Warren Buffet goes, “It takes 20 years to build a reputation and five minutes to ruin it.” These firms now have the challenging task of rebuilding trust with the market and their clients.

For investors, these cases highlight a valuable fact: not all advisors are equally dependable. A troubling statistic notes that poor or unethical advice from financial advisors costs Americans billions of dollars each year. This underlines the importance of doing your due diligence and checking an advisor’s [FINRA CRM number](https://brokercheck.finra.org/), which can provide insights into their track record.

My advice to you, readers and investors alike, is to always be vigilant. The finance industry can be complex, and while most professionals are well-intending, the occasional bad actor or negligent firm does exist. Ensuring that you’re dealing with SEC-compliant professionals isn’t just smart—it’s essential for the well-being of your financial future.

So, if you’re looking to engage with a financial advisor or broker-dealer, always ask for their relationship summary documents. This simple action can safeguard you from potential pitfalls. By staying informed and being proactive, you can ensure that your investments and trust are well placed.

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