FINRA Sanctions DMK Advisor Group, Inc. for Reg BI Failures
According to a Letter of Acceptance, Waiver and Consent, from June 30, 2020, to June 15, 2022, DMK Advisor Group allegedly failed to establish, maintain, and enforce a supervisory system, including WSPs, reasonably designed to achieve compliance with Exchange Act Rule 17a-14. The firm reportedly failed to deliver its Form CRS to certain of its customers until October 2022.
DMK Advisor Group allegedly willfully violated Section 17(a)(1) of the Exchange Act and Rule 17a-14 and FINRA Rules 3110 and 2010, according to the letter. The firm also purportedly failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures, designed to achieve compliance with Regulation Best Interest or Reg BI.
Regulation Best Interest 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.
This matter originated from a FINRA cause examination. According to public disclosures on FINRA’s website, the self-regulator has reportedly sanctioned DMK Advisor Group and four other firms this week for Form CRS failures. See FINRA ups its Game with Reg BI Enforcement
Failure to Supervise -DMK Advisor Group
FINRA Rule 3110 requires member firms to establish, maintain, and enforce a supervisory system, including WSPs, reasonably designed to achieve compliance with applicable securities laws, regulations, and FINRA rules. The rule helps prevent and detect violations of securities laws and regulations. FINRA Rule 3110 continually requires firms to designate a principal to supervise and conduct regulatory reviews of the systems’ effectiveness. A violation of Exchange Act § 17(a)(1), Exchange Act Rule 17a-14, and FINRA Rule 3110 also is a violation of FINRA Rule 2010, which requires member firms to observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business.
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Tags: DMK Advisor Group, finra sanctions, Form CRS, Reg bi, Regulation best interest Last modified: May 24, 2023