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SEC’s Broker-Dealer Fraud Case Against Cetera Advisors Reaches $21M

Cetera Advisors Fraud Case Rises To $21M

Two months after suing Cetera Advisors for more than $10M for allegedly defrauding retail clients, the US Securities and Exchange Commission (SEC) has amended its complaint, adding another Cetera Financial Group firm as a defendant. The regulator is now seeking $21M.

According to the amended complaint, Cetera Advisors Network, also a registered broker-dealer and investment advisor, made over $10M in undisclosed compensation that retail advisory clients paid for in fees, mark-ups, administrative fees, and revenue sharing. 

The SEC contends that not only did this defraud the advisory clients, but also, it caused the firm to breach its fiduciary duty to customers. 

What Are The Accusations Against The Cetera Financial Group Firms?

Both firms are accused of not disclosing conflicts of interest regarding certain compensation. Non-disclosure of such information is considered unlawful. 

The SEC said that the alleged fraud involving Cetera Advisors took place from 9/2012 to 12/2016 and that the fraud involving the other Cetera firm occurred from 4/2014 to 2/2016. 

According to the complaint, both firms chose and held mutual fund investments for the retail clients that were more costly than other mutual fund investments. The investments were identical in every way except for how much they charged in fees. 

Cetera also allegedly failed to disclose that a third-party brokerage firm paid it at least $4.1M in compensation when clients were invested in specific mutual funds that paid fees for revenue sharing. As well as at least $4.3M in compensation that some mutual funds paid to the Clearing Broker, which then shared those fees with the brokerage firms. 

Not only that but according to the SEC, for certain periods of time, both Cetera Financial Group firms instructed the Clearing Broker to markup certain non-transactional fees by over 300%. The money from the markups, at least $3.5M was then paid to the broker-dealers. 

Such fees are a conflict of interest because they can be an incentive for a broker-dealer to recommend certain investments over others in order to keep receiving those fees, as well as to stay in a relationship with the third party broker. 

This can get in the way of making investment recommendations that are in the best interests of the clients and their finances. Now, the Commission is seeking disgorgement of ill-gotten gains, permanent injunctions, penalties and prejudgement interest. 

Brokerage Firm Misconduct

If you suspect that you suffered investment losses because you were charged unnecessary fees, your broker-dealer made investment recommendations that were not in your best interests, failed to disclose certain conflicts of interest or engaged in other acts of negligence, contact Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) today. 

Over the years, SSEK Law Firm has successfully gone after the largest firms on Wall Street to help investors recover their broker fraud and negligence losses. 

A broker-dealer misconduct case is not the type of claim you want to pursue without an experienced legal firm advocating on your behalf and fighting for your right to recovery. SSEK Law Firm has recovered many millions of dollars on investors’ behalf.

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