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,
“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.