ADMINISTRATIVE PROCEEDING
File No. 3-20371

June 24, 2021 – The Securities and Exchange Commission today announced settled charges against Crown Capital Securities, L.P. (Crown), a dually-registered investment adviser and broker-dealer based in California, for its disclosure failures regarding investment advice it gave about mutual funds and cash sweep money market funds.

The SEC’s order finds that Crown engaged in practices that violated its fiduciary duty to its advisory clients. For example, the order finds that Crown provided inadequate disclosures regarding its receipt of 12b-1 fees from client investments, and although Crown was eligible to self-report to the Commission pursuant to the Division of Enforcement’s Share Class Selection Disclosure Initiative, Crown failed to do so. The order also finds that Crown received revenue sharing from its investment in certain mutual funds and cash sweep money market funds without disclosing the conflict of interest to its clients. According to the order, Crown further breached its duty to seek best execution by causing certain advisory clients to invest in fund shares that charged 12b-1 fees when share classes of the same funds were available to the clients that presented a more favorable value under the particular circumstances in place at the time of the transactions. Finally, the order finds that Crown failed to adopt and implement written compliance policies and procedures reasonably designed to prevent these violations.

The SEC’s order finds that Crown violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder. Without admitting or denying the findings, Crown consented to a cease-and-desist order and a censure, and agreed to pay disgorgement of $1,138,740, prejudgment interest of $154,173, and a civil penalty of $295,000. Crown has also agreed to distribute funds to harmed clients and comply with certain undertakings.

The SEC’s investigation was conducted by Payam Danialypour and Gary Y. Leung, both of the Asset Management Unit in the Los Angeles Regional Office. John Farinacci, an industry expert in the Asset Management Unit, assisted with the investigation.