SEC PROSECUTES DISCLOSURE ON USE OF PORTFOLIO CASH ALLOCATIONS
The SEC charged a U.S. dealer with making false and misleading statements advertisements regarding its robo-advisor’s portfolio allocation resolved by a no contest agreement. The findings from the SEC provide insight.
The dealer’s disclosures regarding its robo-advisor product stated it would seek optimal returns with no advisory or hidden fees. The dealer earned a return from cash allocations in the portfolio by loaning it to its affiliate bank and retaining the interest differential. Its data suggested that cash in the portfolios could earn higher returns with similar risk.