The U.S. Securities and Exchange Commission filed its first-ever enforcement actions against robo-advisers, accusing Wealthfront Advisers LLC and another firm of making false statements about investment products and publishing misleading advertisements.
Wealthfront, a robo-adviser with more than $11 billion in client assets under management, made false statements over a three-year period about a tax-loss harvesting strategy it offered to clients, the SEC said in a statement Friday. The agency also said the firm broke rules in re-tweeting client testimonials, paying bloggers for referrals and failing to maintain a compliance program sufficient to prevent violations of the securities laws.
Hedgeable Inc., a New York-based robo-adviser with approximately $81 million in client assets under management, was separately accused by the SEC of making a series of misleading statements about performance comparisons from 2016 until April 2017.
“Technology is rapidly changing the way investment advisers are able to advertise and deliver their services to clients,” said C. Dabney O’Riordan, chief of the SEC Enforcement Division’s Asset Management Unit. “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.”
Without admitting or denying the findings, Wealthfront agreed to pay a $250,000 penalty. Hedgeable agreed to an $80,000 penalty, also without admitting or denying the agency’s findings.
Attorneys for Wealthfront and Hedgeable didn’t immediately respond to requests for comment.