FINRA Imposes $75,000 Penalty on Crown Capital

Financial Industry Regulatory Authority (FINRA) has recently penalized Crown Capital Securities for paying nearly $19.3 million in transaction-based compensation to unregistered entities.

Crown Capital, a company that has been a member of FINRA since 1972, provides a broad list of financial services to clients. Headquartered in California, the company has approximately 300 registered representatives.

FINRA noted that Crown Capital was fined due to the violation of its Rules 2040 and 2010. Between January 2017 and January 2021, the company paid the money to unregistered entities. As a result, FINRA has imposed a fine worth $75,000 on the financial services provider.

“Between January 2017 and January 2021, Crown Capital paid approximately $19.3 million in commissions earned by 18 of its registered representatives to 18 unregistered entities. The unregistered entities were corporations and limited liability companies created by the registered representatives to serve as doing business as names for their securities businesses and were disclosed and approved outside business activities. Crown Capital made payments to the unregistered entities instead of paying commissions directly to the registered representatives,” FINRA highlighted.

Crown Capital Securities

According to FINRA, the company has 164 registered branch offices. In response to the recent penalty imposed by the authority, Crown Capital has agreed to pay the fine. Moreover, the respondent has submitted an Election of Payment form showing the method by which it proposes to pay the fine imposed.

The penalty by FINRA includes a censure and a certification signed by an officer and principal of the firm that, as of the date of the certification, all of Crown Capital's commission and payment arrangements, including but not limited to those paid in connection with any networking agreements, comply with FINRA Rule 2040.

Earlier this year, FINRA imposed a fine worth $350k on E*TRADE for failure in the establishment and maintenance of supervisory systems.