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SEC Fines 27 Investment Advisers for Form CRS Issues

By Robert D. Conca, Partner of Shustak Reynolds & Partners, P.C. posted on Wednesday, July 28, 2021.

Robert D. Conca

Robert D. Conca

Of Counsel

Location: San Diego, California
[email protected]

The SEC’s Division of Enforcement announced action against a whopping 27 investment advisers in connection with issues relating to the filing and distribution of Form CRS. According to the SEC announcement, the 27 investment advisers failed to timely file (even after being notified by the SEC to do so) and deliver their Form CRS documents to clients, and thereby engaged in violations of the federal securities laws. Fine amounts ranged from $10,000 to a hefty $97,523.

Form CRS, also known as Form ADV Part 3, is a short relationship summary that is intended to provide clients and prospective clients with a summary of the services an advisory firm [1] offers, its fees, general information about conflicts of interest and other details that the SEC views as important for a client to have about the business of an adviser. Form CRS is a mandatory document for SEC-registered investment advisers that work with retail clients (i.e., natural persons). Generally, Form CRS must be delivered to a client at the inception of an advisory relationship, when a new account is opened that is different from the client’s existing account(s), when a client rolls over assets from a retirement account, and when an adviser provides a new service.

The SEC did issue a Risk Alert devoted to Form CRS in April 2020, which makes this announcement of enforcement activity focused on Form CRS issues consistent with SEC’s overall approach to educate, examine and enforce.

This announcement serves as an important lesson to investment advisers that all parts of Form ADV are critical to the operation and administration of a proper regulatory compliance program. We encourage firms to review their regulatory filings and their processes to ensure timely delivery of all Form ADV documents, including Form CRS. Advisers should make regulatory compliance a priority. We can help.

Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes.
We represent many broker-dealers, registered representatives, investment advisors, investors and businesses.
Attorney Robert D. Conca can be reached in the firm’s San Diego office at (619) 696-9500.

[1] Certain registered investment advisors (“RIAs”) and broker-dealers have Form CRS obligations; this article focuses on RIAs.







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