Be careful whose performance claims you share. The SEC
is publicly taking to task 13 RIAs who used F-Squared
products for their clients. And the regulator may not stop with those 13 shops.
| Andrew J. Ceresney|
U.S. Securities and Exchange Commission
Director, Division of Enforcement
Yesterday Andrew Ceresney
, director of the regulatory agency's enforcement division, unveiled
combined penalties of $2.2 million for these RIAs. The SEC accuses the firms of "spreading false claims by [F-Squared] about its flagship product," the AlphaSector
strategy, "without obtaining sufficient documentation to substantiate the information being advertised." InvestmentNews
both covered the news.
, co-chief of the asset management unit within the SEC's enforcement division, says that more F-Squared-related cases like this may be on the horizon.
"The Asset Management Unit continues to investigate and pursue similar enforcement actions against other advisers that potentially misled investors and others with advertisements containing F-Squared's false historical performance data," Kelly states.
The SEC hit AssetMark
, the TAMP, with a $500,000 penalty, the biggest of the 13. The other RIAs targeted, and their penalties, are: BB&T Securities
, $200,000; Banyan Partners
, $200,000; Congress Wealth Management
, $100,000; Constellation Wealth Advisors
, $100,000; Executive Monetary Management
, $100,000; HT Partners
, $100,000; Hilliard Lyons
, $200,000; Ladenburg Thalmann Asset Management
, $200,000; Prospera Financial Services
, $100,000; Risk Paradigm Group
, $100,000; Schneider Downs Wealth Management Advisors
, $100,000; and Shamrock Asset Management
, $200,000. The 13 RIAs did not admit to or deny the SEC's findings.
"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 fast," states Ceresney. "These advisers negligently passed many of F-Squared's claims onto their own clients."
This latest regulatory action comes two years after the SEC sent
F-Squared a Wells notice, in August 2014. In December 2014, F-Squared agreed
to a $35-million settlement with the SEC and acknowledged securities law violations over what the SEC described as "false performance advertising." Meanwhile, F-Squared's founder didn't settle
and demanded a jury trial.
By January 2015, several broker-dealers and AssetMark all were reevaluating or limiting
advisors' access to F-Squared's products. F-Squared's remaining assets were bought
out of bankruptcy by a competitor
in September 2015. F-Squared also subadvised
a series of Virtus mutual funds, and Virtus sealed
its own SEC settlement in November 2015.
Neil Anderson, Managing Editor
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