Undisclosed Conflicts for Adviser Equals a Breach of Duty
Investment advisers are frequently named as defendants or respondents in actions initiated by the Commission. Indeed, cases involving advisers are often one of the largest groups of enforcement actions brought by the agency.
The predicate for this trend is, in large part, undisclosed conflicts of interest. Advisers have a fiduciary duty which may be breached by failing to disclose material conflicts of interest with their clients. Despite the continuing stream of enforcement cases initiated against advisers on this basis, the trend continues. The Commission’s latest case in this area is SEC v. Cutter Financial Group, LLP, Civil Action No. 1:23-cv-10589 (D. Mass. Filed March 17, 2023).
Defendant Jeffrey Cutter served as an investment advisory represent for a number of years before founding Cutter Financial Group in 2017. He is the President and 50% owner of the firm.
Beginning in 2014, and continuing for the next eight years, Mr. Cutter repeatedly failed to disclose conflicts with his clients when making certain recommendations in disregard of his fiduciary duty. Specifically, during the time period Mr. Cutter repeatedly represented to clients that they should switch out of annuity contracts he had previously recommended and purchase new annuities. The transactions netted him substantial undisclosed fees.
The scheme began with a lie to the insurance carrier to get the client out of the the annuity contract. It continued when there was no disclosure of the $1.1 million received from marketing firms in exchange for recommending that clients switch out of their existing annuity and purchase a new one. Those acts resulted in a breach of Defendants’ fiduciary duty to their clients. The complaint alleges violations of Advisers Act Sections 206(1), 206(2) and 206(4). The case is pending.
Undisclosed Conflicts for Adviser Equals a Breach of Duty
Investment advisers are frequently named as defendants or respondents in actions initiated by the Commission. Indeed, cases involving advisers are often one of the largest groups of enforcement actions brought by the agency.
The predicate for this trend is, in large part, undisclosed conflicts of interest. Advisers have a fiduciary duty which may be breached by failing to disclose material conflicts of interest with their clients. Despite the continuing stream of enforcement cases initiated against advisers on this basis, the trend continues. The Commission’s latest case in this area is SEC v. Cutter Financial Group, LLP, Civil Action No. 1:23-cv-10589 (D. Mass. Filed March 17, 2023).
Defendant Jeffrey Cutter served as an investment advisory represent for a number of years before founding Cutter Financial Group in 2017. He is the President and 50% owner of the firm.
Beginning in 2014, and continuing for the next eight years, Mr. Cutter repeatedly failed to disclose conflicts with his clients when making certain recommendations in disregard of his fiduciary duty. Specifically, during the time period Mr. Cutter repeatedly represented to clients that they should switch out of annuity contracts he had previously recommended and purchase new annuities. The transactions netted him substantial undisclosed fees.
The scheme began with a lie to the insurance carrier to get the client out of the the annuity contract. It continued when there was no disclosure of the $1.1 million received from marketing firms in exchange for recommending that clients switch out of their existing annuity and purchase a new one. Those acts resulted in a breach of Defendants’ fiduciary duty to their clients. The complaint alleges violations of Advisers Act Sections 206(1), 206(2) and 206(4). The case is pending.