The Securities and Exchange Commission (SEC) has reprimanded Ameriprise Financial in a crackdown on sales of investment products from F-Squared. The SEC has ordered Ameriprise to pay $1.75 million in penalties as well as $6.3 million of disgorgement.
In addition to Ameriprise, the SEC also penalized Horter Investment Management of Cincinnati, Ohio and Institutional Investor Advisors of Venice, Florida for selling F-Squared’s AlphaSector Rotation Strategy. Horter will pay a $250,000 penalty and disgorge $482,595. Institutional Investor Advisors has similarly been ordered to pay a civil penalty of $200,000.
According to the SEC, the three firms based their sales presentations on F-Squared’s false performance claims. The regulator also said that Ameriprise, Horter, and IIA failed to adopt and implement adequate policies and procedures to confirm that the claims were correct, which should have prevented them from promoting inaccuracies to their clients.
In the case of Ameriprise, the SEC claims that in October 2013, F-Squared instructed Ameriprise to remove references in its advertising materials to specific performance information for periods prior to September 2008.
According to the SEC, Ameriprise knew that AlphaSector performance information for periods prior to October 2008 should not have been included in its advertisements. Though the firm was aware of the inaccurate information, it continued to distribute materials that inaccurately described the performance of the AlphaSector strategies.
Penalties Aimed at F-Squared Sales
The SEC’s actions center on the firms’ F-Squared sales of AlphaSector strategies, which were sector rotation strategies based on an algorithm that yielded a "signal" indicating whether to buy or sell nine industry exchange-traded funds. Together, the funds made up the industries in the S&P 500 Index.
According to the SEC, F-Squared miscalculated AlphaSector’s historical performance by incorrectly implementing signals before they could have actually occurred. As a result, F-Squared allegedly used hypothetical and back-tested historical performance that was substantially inflated, rather than the correct data.
SEC Censures F-Squared in 2014
In December 2014, F-Squared admitted to falsifying performance numbers in its advertising and marketing materials. It also agreed to pay $35 million to the SEC. Six months later, in July of 2015, the company filed for Chapter 11 bankruptcy protection.
Are You a Victim of Securities Fraud?
If you lost money as a result of investments in F-Squared sales of AlphaSector strategies or have been misled by your stockbroker, contact a qualified securities fraud attorney today.
Call a Securities Fraud Attorney Today
If you are looking for an attorney to review your rights and options, the securities fraud lawyers at Dimond Kaplan & Rothstein, P.A. have recovered more than $100 million from banks and brokerage firms for their wrongful actions.