Broker-Dealer Fined for Inaccurate Customer Relationship Summaries

A broker-dealer settled FINRA charges for submitting customer relationship summaries ("Form CRS") that contained inaccurate information on disciplinary history.

In a Letter of Acceptance, Waiver and Consent, FINRA stated that a broker-dealer responded "No" to a question regarding legal or disciplinary history on Form CRS even though certain employees and an affiliate had disciplinary history. FINRA found that the affiliate, while under different ownership, had been subject to 13 disciplinary actions for failure to (i) file suspicious activity reports regarding the deposit and sale of low-priced securities, (ii) provide margin interest rate disclosures to customers, (iii) establish and maintain an AML program in compliance with the Bank Secrecy Act and (iv) comply with Regulation SHO close-out requirements for short sales.

As a result, FINRA concluded that the broker-dealer violated Exchange Act Section 17(a)(1) ("Records and Reports"), Exchange Act Rule 17a-14 ("Form CRS, for preparation, filing and delivery of Form CRS") and FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade").

To settle the charges, the broker-dealer agreed to a (i) censure and (ii) $75,000 fine.