The US Securities and Exchange Commission has imposed a $1.75M penalty on Ameriprise (AMP) related to its sale of F-Squared Alpha Sector strategies. The financial firm must also disgorge $7.3M.
According to the regulator, F-Squared Investments made mistakes when calculating the historical performance of its Alpha Sector investment strategies. These sector rotation strategies were predicated upon the use of an algorithm that gave off a “signal” noting whether to sell or purchase certain exchange-traded funds that collectively comprised the industries in the S & P 500 Index.
However, claimed the regulator, F-Squared erred when it implemented these signals prior to when they could have happened. The Commission accused the firm of employing back-tested and hypothetical historical performance data that was inflated, rather than using what the AlphaSector’s performance would have been if there hadn’t been any signal-related errors, to come up with the investment’s track record.
In 2014, F-Squared settled the SEC’s charges against it by consenting to pay $35M. It also admitted wrongdoing. In 2015, the firm filed for bankruptcy protection.
Now, the SEC is claiming that Ameriprise used F-Squared’s inaccurate performance claims in their sales presentations and failed to conduct its own due diligence. This was counter to Ameriprise’s policies.
The regulator said that in 2013, F-Squared notified Ameriprise to take out from its advertising collateral any references to performance data prior to September 2008. The SEC said that Ameriprise either knew or, if not, then it should have known, that this information should have been removed.
Also facing and settling similar SEC allegations over their sale of F-Squared Alpha Sector strategies are Horter Investment Management and Institutional Investor Advisors. Horter must disgorge more than $482K and pay a $250K penalty. Institutional Investor Advisors must pay a $200K penalty.
Last month, the SEC asked a federal judge to impose a $13M penalty on Howard Present, the former F-Squared CEO. A civil jury had found him liable and agreed with the Commission’s contention that he knowingly lied about AlphaSector’s track record. Present owes $13M in disgorgement.
Exchange Traded Fund Fraud
At The SSEK Partners Group, our exchange-traded fund fraud lawyers work with investors throughout the US in their efforts to recover losses they sustained because of the wrongful, careless, or negligent acts of a financial adviser, investment adviser, broker, money manager, or others. There may be more than one party, individual, or entity that should be held liable for your ETF fraud losses.
Investing in an ETF is not the right choice for everyone. If you believe that that investments recommended were not appropriate for your portfolio or financial goals, or were improperly aligned with the degree of risk that you could handle—causing you significant losses as a result—you may have grounds for an ETF fraud claim. Brokers have a responsibility to make sure that the investments they recommend and the strategies that they employ are right for each investor. They also need to be sure that the customer understands the investment and the risks involved.
Your initial consultation is a free, no obligation session. Contact us today.
SEC orders Ameriprise and other firms to pay $9 million for F-Squared sales, InvestmentNews, December 8, 2017
SEC Says F-Squared Founder Owes $13M, Law360, November 17, 2017
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Ex-Illinois Mayor Accused in $5.2M Municipal Bond Fraud, Institutional Investor Securities Blog, November 30, 2017
SEC Orders Wells Fargo Advisors to Pay $3.5M Penalty, Institutional Investor Securities Blog, November 13, 2017
SEC Orders 235 LLCs to Produce Documents Related to Its Woodbridge Fraud Probe, Stockbroker Fraud Blog, November 5, 2017
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