The Securities and Exchange Commission has filed charges against investment advisor Jeffrey Cutter and Cutter Financial Group LLC for recommending insurance to clients without disclosing the financial incentive. Cutter received substantial upfront commissions for these products, without informing his clients. He made false claims in insurance applications, and at least to one client about his compensation.
Cutter, according to the SEC complaint, has been selling fixed-index annuities to clients of advisory firms since 2014 without disclosing CFG and his financial incentives to recommend these products as opposed to other investment options. Cutter was paid annual advisory fees based on assets in clients’ accounts. However, he received an upfront commission of 7% of the total value of the fixed index annuity. Cutter allegedly failed to disclose these commissions and their upfront nature, which violated his fiduciary duties. Cutter allegedly also recommended that clients surrender existing annuities to purchase new ones with him. This would generate a second upfront commission, and cause clients to incur surrender fees, without disclosing this conflict of interest.
Cutter also misrepresented the financial situation of clients in annuity requests to gain approval from insurance companies. The complaint also states that Cutter misrepresented the percentages of commissions on annuity purchases. Cutter and CFG also received free marketing services worth over $148,000 from a field-marketing organization that supported the annuity sales.
In its complaint, the SEC charges CFG of violating the antifraud provision of the Investment Advisers Act of 1941. It also accuses Jeffrey Cutter of violating these provisions as well as aiding and abetining CFG’s violations. The SEC seeks permanent injunctions and disgorgement of gains ill-gotten with prejudgment interests, as well as penalties against defendants.
Jennifer Cardello (SEC Boston Regional Office), Alicia Reed, William Donahue Rory Alex Amy Burkart Robert Baker, Susan Anderson and Susan Anderson are all involved in the case. Lynn Murphy and Paul Prata, both of the Boston Regional Office, conducted the investigation that led to the charges.
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SEC
Securities and Exchange Commission, or SEC for short, is the regulatory agency of the United States. It oversees and enforces securities laws. Its primary goal is to safeguard investors, promote fair and efficient market conditions, and encourage capital formation. The SEC accomplishes these goals by regulating the securities markets, requiring that companies disclose important financial data to the public and taking enforcement action against fraudulent activities. To ensure securities professionals are acting in the interests of investors, the commission supervises brokers, mutual fund managers and investment advisors. The SEC is crucial in maintaining the stability and integrity of the U.S. Financial System.
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