SEC Fines Cetera Again $10 Million For Alleged Fraud

The Securities and Exchange Commission (SEC) is seeking to recover an additional $10 million in its case against two companies of the Cetera Financial Group for alleged fraud.


The firms did not disclose conflicts of interest to clients relating to the compensation of approximately $ 21 million of mutual funds and their external compensation agent, the SEC stated in a revised complaint. Cetera Advisor Networks, RIA and a stockbroker, as a defendant in his previous filed action, were sent against Cetera Consultants, an independent stockbroker.

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Cetera Advisors Fees Investigation

Matthew Thibaut, Esq. of at noted their firm is investigating allegations of potential misconduct by Cetera Advisors. Matthew Thibaut, Esq. also added that under the rules of the Financial Industry Regulatory Authority (FINRA), broker-dealer firms including Cetera Advisors are liable for the misconduct or negligence by any brokers or financial advisors that are working for those firms. Investors who have suffered losses may be able to file claims and recoup their investment losses through a private arbitration procedure with the FINRA Office of Dispute Resolution.

According to the new complaint, filed with the US District Court for Colorado, the companies failed to comply with their fiduciary duty and fraudulently served customers on retail advice by not disclosing conflicts of interest relating to non-disclosure of fees. mutual, share of income, administration fees, and surcharges.

In August, the SEC was accused by Cetera Consultants to defraud customers of nearly $ 11 million in unquoted rates. The new complaint adds a further $ 10 million in illegal fees for which the agency seeks repayment, plus interest, as well as civil fines.


The SEC says that Cetera customers paid millions of dollars in essential fundraising fees and that companies received $ 10 million more than the client’s assets were invested in low-cost share classes that were readily available.

The common fund rates, known as 12b-1 rates, can create conflicts of interest for the investment firms, as often the fees are paid to the consultant who recommends the most expensive fund or to a company.

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It is alleged that the companies received at least $ 4.1 million as a direct result of clients’ investment in funds that included fees for participation in unquoted income.

Also, Cetera companies did not disclose the conflict arising from the receipt of compensation of at least $ 4.3 million paid by certain mutual funds to the compensation agent, who shared the rates with them.

The SEC also states that companies ordered the compensation broker to mark certain non-transaction fees up to 300%, giving companies at least $3.5 million.

The SEC has been trying to take strong action against abuse of the 12b-1 rate in recent months. In March, 79 consultancy companies agreed to pay $125 million for allegedly placing their clients in more expensive share classes. On October, 17 other companies agreed to pay more than $10 million for the same practices.

Cetera Finance Group is a private equity firm owned by Genstar Capital.

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