The US Securities and Exchange Commission is expected to charge Navellier & Associates with fraud. The registered investment advisor, in a Form ADV brochure filing, disclosed that the regulator’s enforcement staff had preliminarily determined to recommend that the SEC file a case.
The Commission has been investigating advisory firms that marketed F-Squared Investments-related exchange-traded fund investment strategies. F-Squared Investments admitted that some of its marketing strategy performance records were inflated.
Last year, at least 13 brokerage firms and RIAs settled with the SEC for including the Boston-based firm’s claims in their own marketing collateral, including that the AlphaSector ETF strategy had been out-performing the S & P 500 for a number of years. F-Squared promoted the strategy as utilizing an algorithm that could indicate when it was time to sell.
The Commission accused them firms of failing to collect enough documentation to confirm the claims made by F-Squared yet they touted them to customers. The settlements the firms paid were as high as $500K although none of them denied or admitted to the findings.
It was in 2014 that F-Squared agreed to pay a $35M penalty and admitted that what it claimed was a solid track record for its AlphaSector ETF Strategy was in fact based on inflated, back-tested performance.
ETFs can provide diversification at a low cost. However certain exchange-traded funds do come with risks that are not advisable for traditional investors to take on. ETFs are not suitable for everyone. Providing customers with inflated or other inaccurate marketing information about an ETF prevents an investor from knowing whether investing in ETFs is truly right for them.
Because exchange-traded funds are traded every time an investor purchases or sells shares, the broker involved makes a commission. This should not be the main incentive for recommending an ETF to an investor.
If you suspect that your investment losses are because of fraud, contact our experienced ETF fraud law firm today.
At The SSEK Partners Group, our ETF fraud lawyers are here to try to help our investor clients recoup their losses. Contact us today.
SEC Weighs Fraud Charges Against Navellier, AdvisorHub, March 14, 2017
Investment Advisers Paying Penalties for Advertising False Performance Claims, SEC, August 25, 2016