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SEC Amends Complaint Against Cetera Financial Group

Levin Law | 1.7.2020

Cetera Advisors Accused Of Receiving $21 Million In Unlawful Gains

The Securities and Exchange Commission (SEC) has filed an Amended Complaint against Cetera Advisors LLC, and Cetera Advisor Networks LLC in the United States District Court for the District of Colorado.  According to the complaint, Cetera Advisors and Cetera Advisor Networks breached the fiduciary duty owed to their clients by failing to act in their clients’ best interests and failing to disclose all material facts about the advisory relationship.  In addition, the SEC alleges that the advisory firms “regularly and repeatedly put their interests ahead of their clients,” receiving more than $21 million in unlawful gains.

The SEC notes four (4) primary ways Cetera advisors defrauded their clients and breached their fiduciary duties:

  1.     Despite knowing that there was a conflict of interest, Cetera advisors failed to disclose the material conflicts to their clients. The advisors regularly recommended higher-priced investments despite there being “less expensive, identical investments” available.  The higher-cost investments were in a different “share class” within the same mutual fund. Advisors received additional compensation for recommending and investing in these higher-priced but identical shares. This breach of fiduciary duty resulted in clients paying millions of dollars in unnecessary fees.
  2.     Cetera advisors regularly received compensation from a third-party broker-dealer (“Clearing Broker”) for investing in “certain mutual funds.”  This “Revenue Sharing” arrangement resulted in a clear conflict of interest that was not disclosed to their clients. Advisors received additional compensation for recommending these Revenue Sharing investments over other mutual funds.
  3.     Clients were not informed of at least “$4.3 million of compensation that certain mutual funds paid to the Clearing Broker.”  The compensation, according to the complaint, was then shared with Cetera Advisors and Cetera Advisor Networks, creating a conflict of interest that was not disclosed to investors.
  4.     Cetera then directed the Clearing Broker to “mark-up certain fees (“non-transaction fees”) by up to 300% that the Clearing Broker charged their advisory clients.”  The marked-up fees were paid back to Cetera advisors.

Levin Law’s attorneys have recovered millions on behalf of investors who have suffered financial damages as a result of investment fraud and stockbroker misconduct. Contact Levin Law today at (305) 402-9050.  Most cases are handled on a contingent basis, meaning that you do not pay attorneys’ fees unless we recover money for you.

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