Crown Capital Securities, L.P. (“Crown Capital”) (CRD# 6312) has several complaints filed by the U.S. Securities Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), state regulatory organizations, and investors such as yourself.
At the Law Offices of Robert Wayne Pearce, we have investigated Crown Capital, its regulatory and customer complaints, and have also represented investors with claims of fraud, negligence, and breach of fiduciary duty against this organization and its financial advisors.
Is Crown Capital Securities, L.P. in trouble?
Yes, Crown Capital Securities, L.P. is experiencing significant regulatory troubles and ongoing issues. In June 2024, FINRA sanctioned the firm with a $50,000 fine and ordered $116,390.58 in restitution to customers for supervisory failures.
Crown Capital Securities, L.P. Faces $50,000 Fine and Restitution Order in Regulatory Action | Bakhtiari & Harrison. More concerning, LPL Financial completed its acquisition of Crown Capital’s wealth management business in May 2024, GlobeNewswireLPL Financial, which typically signals serious underlying problems when a firm sells its operations.
The firm continues to face mounting customer complaints and regulatory scrutiny into 2024-2025, with no signs of improvement beyond what’s already documented on the page you referenced.
A BRIEF OVERVIEW OF SOME OF THE COMPLAINTS AND REGULATORY PROBLEMS CROWN CAPITAL SECURITIES HAS FACED OVER THE YEARS
Crown Capital has accumulated an extensive history of regulatory violations and customer complaints. The firm has been repeatedly censured, warned, and fined over $1.5 million for its own misconduct and failure to supervise its army of financial advisors. Crown Capital: Customer Complaints & Regulatory Actions
The most recent FINRA action in 2024 found that Crown Capital failed to properly oversee transactions that its registered representatives made directly with product sponsors, with approximately 9,000 transactions slipping through the cracks between January 2014 and December 2019. Bakhtiari & HarrisonInvestmentfraudlawyers This represents a pattern of ongoing supervisory failures that have plagued the firm for years.
Beyond the 2024 sanctions, the SEC previously sanctioned Crown Capital for mutual fund sales abuses, finding the firm invested clients in products that generated undisclosed revenue for the company without properly disclosing conflicts of interest. The firm has also faced numerous arbitrations and investigations from state regulators.
Individual brokers associated with Crown Capital have compounded these problems. For example, broker Hugh “Hobby” Barndollar was suspended by FINRA for two years and fined $10,000 for participating in unapproved private securities transactions totaling $1,418,108. Rex Securities Law Investment Fraud Attorney Investigates Hobby Barndollar formerly with Crown Capital Securities Multiple other brokers have been barred or suspended for various violations including conversion of customer funds.
The firm’s acquisition by LPL Financial in 2024 appears to be the end result of these mounting regulatory and compliance issues, effectively dissolving Crown Capital as an independent entity.
Can I Sue Crown Capital Securities, L.P.?
If you’ve lost money due to Crown Capital and/or its employees’ misconduct, then the answer is YES, you can sue Crown Capital. However, in most cases, investors unknowingly waive their right to sue in court and instead must pursue claims through a FINRA arbitration proceeding.
What is Crown Capital Securities, L.P.?
Crown Capital (CRD# 6312) predecessor was first formed in 1972 as an SEC and FINRA registered broker-dealer. Since then, there have been several name changes and restructuring of the company. The current Crown Capital iteration began operations in 1999 and is headquartered in Orange, California. Its independent broker-dealer Business Model has grown through acquisition and organic development of primarily one and two-person registered representative offices supervised remotely. Today, there are over 200 Crown Capital branch offices with over 400 registered representatives in every state.
Examples of Regulatory Problems and Complaints for Crown Capital Securities, L.P.
Crown Capital’s rapid growth has not been without consequences. There have been approximately 6 Federal, state and self-regulatory body disclosure events; that is, final and formal proceedings initiated by a regulatory authority (e.g., a state or federal securities agency like the U.S. Securities and Exchange Commission (SEC) or self-regulatory body like the Financial Industry Regulatory Authority (FINRA) and the North American Securities Administrators Association (NASAA) ) for a violation(s) of investment-related rules or regulations. In addition, there have been scores of customer complaints filed against Crown Capital for misconduct by its securities sales and investment advisory representatives that are not reported by the firm on its Central Depository Record.
We have reported and written about these regulatory problems and customer complaints for many years. Crown Capital is a repeat offender: there are 2 FINRA-reported disciplinary proceedings citing the firm with one form of supervisory lapses or another in the last decade.
A BRIEF OVERVIEW OF SOME OF THE COMPLAINTS AND REGULATORY PROBLEMS CROWN CAPITAL SECURITIES HAS FACED OVER THE YEARS*
Crown Capital has been repeatedly censured, warned, and fined over $1.5 million for its own misconduct and failure to supervise its army of financial advisors.* A few of the notable FINRA Sanctions for its Supervisory Failures are below:
SEC Sanctions Crown Capital For Mutual Fund Sales Abuses
The SEC investigated and found multiple breaches of fiduciary duty by Crown Capital, a dually-registered investment adviser and broker-dealer, in connection with its receipt of third-party compensation from client investments without fully and fairly disclosing its conflicts of interest. Specifically, the SEC found Crown Capital invested clients in: (1) mutual fund share classes that paid Crown Capital and its investment advisory representatives (“IARs,” who were also registered representatives) fees pursuant to Rule 12b-1 under the Investment Company Act of 1940 (“12b-1 fees”); (2) certain mutual funds that also generated no-transaction fee (“NTF”) revenue for the firm; and (3) cash sweep products that likewise resulted in Crown Capital receiving revenue sharing. In spite of these financial arrangements, Crown provided no disclosure or inadequate disclosure of the multiple conflicts of interest arising from the firm’s receipt of this compensation.
Further, the SEC found that Crown Capital also failed to adopt and implement written compliance policies and procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder in connection with its mutual fund share class selection practices, cash sweep revenue sharing, and NTF revenue sharing. As a result of the conduct described above, the SEC concluded Crown Capital willfully violated Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-7 thereunder and ordered it to cease-and-desist from any further violations, censured the company, and ordered to pay over $1.5 million in disgorgement, prejudgment interest, and civil penalties for the violations.
SEC Sanctions Crown Capital For Mutual Fund Sales Abuse
FINRA investigated and found Crown Capital failed to establish and maintain a supervisory system, including written supervisory procedures, for reviewing and monitoring mutual fund switches reasonably designed to achieve compliance with FINRA suitability requirements and failed to reasonably supervise short-term switches of Class A mutual fund shares conducted by two firm registered representatives, and thus Crown Capital violated NASO Rule 3010(a), NASO Rule 3010(b), and FINRA Rule 2010. As a result, the company was censured and fined $75,000.
Why Does Crown Capital Securities Have So Many Regulatory Problems And Customer Complaints?
Independent broker-dealers are notorious for their lax supervisory practices and procedures. The business model of these franchise-type operations is to open many offices nationwide for steady growth of fixed monthly revenues without the costs attendant to a full-service branch office with an on-site manager, compliance officer, and operational personnel. The registered representatives of these independent broker-dealers generally operate as separately incorporated businesses. They are not employees of the broker-dealer and, therefore, not controlled in the same manner as full-service brokerage firm representatives. The registered representatives control their structure and costs to maximize profits and often leave the protection of investors’ rights and interests as their lowest priority.
The typical supervisory organization of independent broker-dealer operations is to have other independent contractors operate Offices of Supervisory Jurisdiction (OSJs) to monitor the registered representatives from geographically remote offices and then report to the main franchisor’s compliance office at national headquarters. The supervisors at the OSJs are not employees of the franchisor and often run their own brokerage, insurance, and other businesses. They are not devoted full-time supervisors of the smaller branch offices. Consequently, OSJ managers cannot and do not supervise the day-to-day operations of the registered representatives of these Independent broker-dealers.
Generally, there is no immediate review of new accounts opened, securities transactions, business records, cash or securities receipts and deliveries, correspondence, and business activities unrelated to the securities brokerage operation at these independent brokerage firms. The lax supervision leaves investors who have transferred their accounts to the smaller independent broker-dealer vulnerable to sales of securities that have not been reviewed or authorized by anyone other than the sales representative, earning a commission. There may be no one on-site to detect forgeries of clients’ signatures on documents, the placement of inaccurate information about a client’s investment objectives and financial condition, to document the suitability of a particular investment recommendation. Oftentimes, there is no daily review of sales literature and client correspondence to protect against misrepresentations and misleading statements being made to investors. In fact, it is not unusual for there to be only one compliance audit visit per year at many of these offices.
These Independent brokerage business operations are worrisome to the North American Securities Administrators Association (NASAA), which has documented more instances of sales abuse and consequently investor losses at these firms than the traditional brokerage firms with branch offices with on-site managers and compliance personnel.
How to File an official Complaint Against Crown Capital or One of its Brokers, with FINRA
File an official complaint against Crown Capital Securities or one of its brokers by starting a FINRA arbitration claim. The Law Offices of Robert Wayne Pearce has decades of experience representing investors harmed by Crown Capital’s misconduct.
Our firm has investigated this broker-dealer extensively and recovered millions for victims of fraud, negligence, and supervisory failure. With recent FINRA sanctions, ongoing customer complaints, and SEC violations, taking action now is crucial. Don’t approach Crown Capital alone; consult with a securities lawyer who can guide your complaint and help recover your investment losses.
Related Read: Can You Sue Your Brokerage Firm?
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The securities lawyers at The Law Offices of Robert Wayne Pearce, P.A., have helped countless investors over the last 45 years recover the losses from their investment accounts that were caused by broker negligence or misconduct. The firm has extensive experience with Crown Capital cases, and Attorney Pearce is committed to seeing that those responsible for the losses you have suffered are held fully accountable.
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