Crown Capital Securities: Broker Misconduct, Complaints

The White Law Group reviews the regulatory history of Crown Capital Securities LP.  

Crown Capital Securities, (CRD#: 6312/SEC#: 801-57663,8-17264) headquartered in Orange, CA, is a full-service broker-dealer and registered investment advisor. According to its FINRA Broker Report, the firm reportedly has 10 disclosure events on its broker record including 7 regulatory events and 3 arbitrations. 

Regulatory actions taken against a broker-dealer may include censures, fines, suspensions and restitution, among others. They can have serious consequences for a broker-dealer’s profile and reputation. The following is a review of FINRA and the SEC’s regulatory actions involving Crown Capital Securities. 

Failure to Supervise Excessive Charges

March 2022 – FINRA Sanctions Crown Capital Securities LP for Violations   

On March 11, FINRA  fined Crown Capital Securities $75,000 after allegations that the firm paid transaction-based compensation to unregistered entities. The firm was also censured and required to certify that all of its commission and payment arrangements comply with FINRA rules. From January 2017 to January 2021, Crown Capital Securities reportedly paid approximately $19.3 million in commissions earned by 18 of its registered representatives to 18 unregistered entities, against FINRA rules. 

June 2021 – Crown Capital Securities to Pay $1.6 Million for Overcharges 

The Securities and Exchange Commission reportedly sanctioned Crown Capital Securities LP to pay nearly $1.6 million to settle charges that it breached its fiduciary duties related to its mutual fund share class selection practices and undisclosed revenue sharing arrangements it had with certain unaffiliated clearing brokers. Since at least 2014, Crown Capital allegedly recommended that clients purchase or hold mutual fund share classes that charged 12b-1 fees when lower-cost share classes of the same funds were available. This led to the firm receiving fees that it would not have collected had its advisory clients been invested in the available lower-cost share classes of those funds. 

June 2019 – The Financial Industry Regulatory Authority (FINRA) reportedly sanctioned Crown Capital Securities LP with a censure and fine of $75,000 after it failed to establish and maintain a supervisory system, to monitor mutual fund switches.The firm reportedly failed to reasonably supervise short-term switches of Class A mutual fund shares conducted by two firm registered representatives. The firm reportedly compensated the customers who sustained losses due to the unsuitable mutual fund switches conducted by the two representatives, paying a total of approximately $395,000 in restitution. 

Broker Misconduct and Customer Complaints 

There have been several cases of registered representatives employed by Crown Capital Securities who were allegedly involved in broker misconduct and fraudulent activities. 

Broker Suspended for Misconduct

April 2024 A Crown Capital broker in Santa Ana, California was reportedly suspended after he exercised discretionary authority without prior written authorization from customers. Crown Capital reportedly did not accept any of the customer accounts as discretionary, and the firm’s Written Supervisory Procedures (WSPs) prohibited exercising discretionary authority in brokerage accounts.

Additionally, the representative allegedly failed to notify his firm about the full extent of his participation in an Outside Business Activity (OBA). Upon joining his firm, he disclosed his role as the owner of an accounting business, engaged in providing income tax preparation and accounting services, which the firm approved. However, his work exceeded the disclosed role as he provided additional services, including acting as a manager and consultant for clients, some of whom were also his firm’s brokerage customers. He also acted as an incorporator, filed articles of incorporation for several businesses on behalf of his clients, and was listed as a governor with decision-making authority for at least one company.

FINRA Bars Crown Capital Brokers

November 2022 – Hugh O. Barndollar III, Crown Capital, Allegedly “Sold Away” from Firm 

FINRA reportedly suspended registered investment advisor and broker Hugh “Hobby” Barndollar (CRD#: 3027317) for two years and fined him $10,000. Between November 2017 and December 2021, while registered through Crown Capital, Barndollar allegedly participated in 28 unapproved private securities transactions totaling $1,418,108, according to FINRA’s findings. Barndollar’s alleged conduct violated FINRA Rules 3280 and 2010.  Barndollar reportedly has eleven customer complaints filed against him during his career. 

February 2020 – FINRA barred former Crown Capital advisor Martin David Batstone (Marty Batstone) alleging violation of FINRA Rules 2150 and 2010 for conversion of customer funds. He reportedly has 6 customer complaints on his broker check record, according to FINRA. Allegations include unsuitable investment recommendations, among others. 

January 2016 – Former Crown Capital advisor Eric Kuchel (CRD #4118500, Yorba Linda, California) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Kuchel allegedly failed to provide complete testimony to FINRA during the course of an investigation into mutual fund transactions. FINRA’s findings stated that Kuchel did not substantially comply with the request for his testimony and failed to appear for his rescheduled testimony. Kuchel reportedly has five customer complaints filed against him. Allegations include unauthorized trading, unsuitable investments, and negligence among others. 

Supervision Rules   

All broker-dealers have a responsibility to adequately supervise its employees. They must ensure the necessary procedures and systems to detect misconduct.  Brokerage firms that fail to monitor the business activities of their employees may be liable for investment losses due to negligent supervision for the misconduct of their employees.    

When brokers violate securities laws, such as making unsuitable investments, the brokerage firm they are working with may be liable for investment losses through FINRA Arbitration.    

If your broker has defrauded you, you may be able to file a FINRA claim against your brokerage firm. FINRA arbitration can be a complex and technical process, and having an experienced attorney who is knowledgeable about securities law can greatly increase your chances of success. 

Class Action vs. Individual FINRA Arbitration Lawsuit 

You may wonder whether a large class action lawsuit is a better litigation option than an individual FINRA arbitration case.  The answer depends on many factors, but typically if the loss sustained is large (say larger than $100,000), an individual arbitration claim is likely a better option.  Class actions as a recovery option are more appropriate for grouping large numbers of individuals who have small claims – too small to generally pursue individually. 

Free Consultation with Securities Attorneys    

If you have any questions about investments you made with Crown Capital Securities or if you believe that you have been the victim of securities fraud, The White Law Group may be able to help.  To contact the firm, please call 888-637-5510           

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases.                 

Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.                  

With over 30 years of securities law experience, The White Law Group can help you recover your investment losses.                  

With offices in Seattle, Washington and Chicago, Illinois, the firm reviews securities fraud cases throughout the country. For more information on The White Law Group, please visit https://whitesecuritieslaw.com.