SEC Charges Its First Robo Actions – Increasing Scrutiny of the Investment Platform

It was never a question of if, but rather, when would the Securities and Exchange Commission launch its first charges against robo-advisors and what those charges would be. Following the then SEC Chairperson’s, Mary Jo White, keynote address at the SEC-Rock Center on Corporate Governance in 2016, regulators have been carefully monitoring robo-advisors’ compliance with the Investment Advisers Act of 1940 (“Advisers Act”).[1] In two recent Orders the SEC found, Wealthfront Advisers made false statements about its tax-loss harvesting program (“TLH”), and Hedgeable made false performance comparisons about its investment performance. Both robo-advisors were also in violation of the Advisers Act for their marketing use on social media platforms. False Statement in Whitepaper Description Wealthfront designed its TLH program to incentivize clients to sell certain assets at a loss to create tax benefits. On its website, Wealthfront provided…

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