Robo-advisers settle charges with the SEC

The SEC has reached settlements with two robo-advisers after charging them with violating rules on anti-fraud, advertising, and compliance.

Written by Folake Dosu
Published on Dec. 28, 2018
Robo-advisers settle charges with the SEC

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Robo-advisers, which use automation to advise clients on investments, are not exempt from regulatory action. Business Insider reports that the Securities and Exchange Commission has reached settlements with two of these companies after charging them with violating rules on anti-fraud, advertising, and compliance. 

"Technology is rapidly changing the way investment advisers are able to advertise and deliver their services to clients. Regardless of their format, however, all advisers must take seriously their obligations to comply with the securities laws, which were put in place to protect investors."

"Technology is rapidly changing the way investment advisers are able to advertise and deliver their services to clients," said C. Dabney O'Riordan, the head of the SEC's asset management enforcement division, in a statement. "Regardless of their format, however, all advisers must take seriously their obligations to comply with the securities laws, which were put in place to protect investors."

Robo-advisers are becoming a huge presence in the investment world and drawing increased scrutiny from regulators. Juniper Research predicts that assets managed through automation will swell from $330 billion last year to $4.1 trillion in 2022.

After facing accusations of improper advertising, inadequate compliance, and misleading clients, Wealthfront settled with the SEC for $250,000 and agreed to communicate the settlement to its clients and certify compliance with the SEC.

"We take our regulatory duties seriously at Wealthfront and are happy to have reached a settlement with the SEC," Wealthfront, the second-largest robo-adviser, said in a statement.

Hedgeable, whose advisory business is now defunct, had about $80 million in assets from 1,698 clients, per an SEC filing.

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For making misleading comparisons about its performance relative to two competitors and failing to maintain proper documentation and compliance, Hedgeable paid a $80,000 settlement to the SEC. Its founders have since shifted its focus to blockchain.

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