FINRA Sanctions American Wealth Management for Reg BI Failures
According to the Financial Industry Regulatory Authority (FINRA), the regulator has censured and fined American Wealth Management $35,000. FINRA is the self-regulator that oversees brokers and brokerage firms. Since July 23, 2020, American Wealth Management has allegedly omitted required information from the firm’s customer relationship summary (Form CRS).
According to a letter of acceptance, from July 23, 2020, to March 31, 2022, the firm purportedly failed to disclose on its Form CRS that it and six of its financial professionals had legal or disciplinary history. By filing and delivering to customers a Form CRS that omitted required information, American Wealth Management reportedly violated Section 17(a)(1) of the Securities Exchange Act of 1934, Exchange Act Rule 17a-14, and FINRA Rule 2010.
Reg BI and Form CRS
Regulation Best Interest (REG BI), a regulation that calls for brokers to act in the best interest of their clients when making investment recommendations, was approved in 2019.
The rule includes the new Form CRS relationship summary which provides customers with information about the types of services the firm offers; the fees, costs, conflicts of interest, and required standard of conduct associated with those services; whether the firm and its investment professionals have reportable legal or disciplinary history; and how to get more information about the firm. Form CRS also includes required “conversation starters” to help begin a discussion with a broker-dealer about the relationship, including their services, fees, costs, conflicts, and disciplinary information. The compliance date for Form CRS was June 30, 2020.
According to public disclosures on FINRA’s website, the self-regulator has reportedly sanctioned five firms this week for Form CRS failures. See FINRA ups its Game with Reg BI Enforcement
FINRA Rule 2010
FINRA Rule 2010 is a broad ethical principle that requires all FINRA member firms and their associated persons to observe high standards of commercial honor and just and equitable principles of trade. It is known as the “Standards of Commercial Honor and Principles of Trade” rule.
The rule is designed to promote ethical conduct and fair dealing in the securities industry. It covers a wide range of activities, including the solicitation, sale, and execution of securities transactions, as well as the handling of customer accounts and the dissemination of investment recommendations.
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Tags: American Wealth Management, finra sanctions, Form CRS, Reg bi Last modified: May 22, 2023