On Dec. 21, SEC charged two robo-advisors with false disclosures.
- Wealthfront Advisers LLC (formerly known as Wealthfront), and Hedgeable Inc.
Wealthfront Alleged Violations
- Wealthfront with $11bn client assets made false statements re tax-loss harvesting.
- Disclosed to that by employing its tax-loss harvesting strategy it would monitor all client accounts for transactions that might trigger a wash sale, but failed to do so.
- During the 3 years making this disclosure, wash sales occurred in 31% of accounts.
- Firm improperly re-tweeted client testimonials and paid bloggers for client referrals.
- Failed to obtain required disclosure, documentation, and have compliance program.
Hedgeable Alleged Violations
- Hedgeable Inc had $81mn under management, also made misleading statements.
- The company posted on its website and social media purported comparison of the
investment performance of its clients with those of two robo-adviser competitors. - Comparisons included less than 4% of accounts with higher-than-average returns.
- Did not have required documentation and failed to maintain a compliance program.
Settlement
- Wealthfront ordered to cease and desist from further violations, and fined $250k.
- Hedgeable is ordered to cease and desist from further violations, and fined $80k.
