Investment Adviser Settles SEC Charges and Ordered to Repay Clients Harmed by Undisclosed Conflict

ADMINISTRATIVE PROCEEDING
File No. 3-20449

August 3, 2021 - The Securities and Exchange Commission today announced settled charges against USA Financial Securities Corporation ("USAFS"), a dually-registered investment adviser and broker-dealer based in Michigan, for its disclosure failures regarding investment advice it gave about cash sweep money market funds.

According to the SEC's order, USAFS engaged in practices that violated its fiduciary duty to its advisory clients. As stated in the order, USAFS received revenue sharing when investing client assets in cash sweep money market funds without disclosing this financial conflict of interest to USAFS's clients. The order further finds that USAFS failed to adopt and implement written compliance policies and procedures reasonably designed to prevent this violation.

The SEC's order finds that USAFS 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, USAFS consented to a cease-and-desist order and a censure, and agreed to pay disgorgement of $162,918.49, prejudgment interest of $26,537.20, and a civil penalty of $60,000. USAFS 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.