SEC fines 13 US advice firms $2.2m over false ETF claims

Added 31st August 2016

Thirteen financial advice firms have been fined a combined $2.2m (£1.7m, €1.9m) by the US Securities and Exchange Commission (SEC) for making false claims in relation to the ill-fated ETF manager F-Squared Investments, which filed for bankruptcy last July.

SEC fines 13 US advice firms $2.2m over false ETF claims

In a statement on its website, the enforcement agency said the firms had “negligently relied upon” flawed claims made by F-Squared that its strategy for investing in exchange-traded funds (ETFs), known as “AlphaSector”, had outperformed the S&P 500 for several years.

The regulator found that the advisory firms repeated many of these false claims when advising clients to buy F-Squared products without finding out whether the claims were actually true.

The penalties are based on how much commission each firm earned from selling the F-Squared products, the SEC said, with the largest fine being $500,000 while the lowest is $100,000.

“When an investment adviser echoes another firm’s performance claims in its own advertisements, it must verify the information first rather than merely accept it as fact,” said Andrew Ceresney, director of the SEC Enforcement Division. 

“These advisers negligently passed many of F-Squared’s claims onto their own clients, who were consequently relying upon false and misleading information when making investment decisions,” he added.

In 2014, F-Squared admitted to wrongdoing and agreed to pay $35m to settle SEC charges that it defrauded investors through false-performance advertising. The company subsequently filed for bankruptcy in July 2015.

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Monira Matin

Senior Reporter

Monira joined International Adviser in March 2016 from Informa Global Markets where she worked as a eurobond reporter for over two years, covering fixed income markets. She has previously held a number of editorial positions covering politics, insurance and technology. Monira has a degree in Journalism and Economics from City University.

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