SEC announces penalties for 13 investment advisory firms that allegedly spread false claims

By Mark Iandolo | Aug 26, 2016

WASHINGTON (Legal Newsline) — The Securities and Exchange Commission (SEC) has announced penalties for 13 investment advisory firms that allegedly violated securities laws. These companies purportedly spread the false claims made by F-Squared Investments about its flagship product, AlphaSector.


“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 J. 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.”


F-Squared’s product, AlphaSector, provided a strategy for investing in exchange-traded funds (ETFs). The SEC charged the company touted the product as outperforming the S&P Index for several years. The firms penalized by the SEC allegedly recommended the investment to their own clients without obtaining sufficient documentation about the whether the advertisement was true.


“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,” said Anthony S. Kelly, co-chief of the SEC Enforcement Division’s asset management unit.


The firms did not admit or deny the findings, but consented to the entry of orders. Each company will pay between $100,000 and $500,000 in penalties.

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