According to FINRA, DMK Advisor Group, Inc. was censured and fined $35,000 for willfully violating Section 17(a)(1) of the Securities Exchange Act and Rule 17a-14 regarding Customer Relationship Summary (Form CRS) requirements, and for failing to establish adequate supervisory procedures for Regulation Best Interest (Reg BI).

The firm failed to establish and maintain written supervisory procedures for complying with Form CRS requirements. Its procedures did not prescribe how the firm should file, deliver, and update Form CRS. The firm failed to timely deliver Form CRS to approximately 25 percent of its retail customers. While the firm arranged for its clearing firm to deliver Form CRS to customers with clearing firm accounts, it failed to deliver the form to customers who did direct business with the firm and did not have clearing firm accounts. After FINRA identified this issue, the firm subsequently delivered Form CRS to affected customers and updated its procedures.

The firm also failed to establish adequate supervisory procedures for Reg BI compliance. Its written procedures provided only general background information about Reg BI's purpose but did not address the Care or Conflict of Interest Obligations. The procedures did not describe how to prevent, detect, or promptly correct Reg BI violations or otherwise achieve compliance. The firm has since updated its procedures regarding Reg BI.

This case illustrates the importance of implementing comprehensive compliance systems for new regulatory requirements. Form CRS is designed to provide retail investors with clear, concise information about the relationships and services a firm offers. Reg BI establishes a best interest standard for broker-dealers when making recommendations to retail customers. Investors should ensure they receive and review Form CRS from their financial services providers.