Broker-Dealer Firms Must be Aware of SEC Regulatory Guidelines

Are you a broker-dealer or in the investment advisory business? If so, you should be aware of the SEC’s recent regulatory charges against Charles Schwab. The SEC charged three investment advisors affiliated with Schwab for failure to disclose that they were allocating client funds in a way that their own internal analyses showed would be less profitable for their clients under most market conditions. Schwab will pay $187 million to the victims of this case. 

Schwab’s mandated disclosures for its robo-advisor stated that the amount of money in the portfolios was determined through a “disciplined portfolio construction methodology.” However, data showed that the cash stored in the portfolio would likely cause investors to lose money, not gain. Schwab profited off this by sending the cash to a different bank, loaning it out, and then keeping the difference.

Jon-Jorge Aras, Partner and Chair of Securities Litigation states, “the SEC is keenly focusing on protection of retail investors and is aggressively targeting firms that make misleading disclosures. We expect more enforcement actions targeting the practices of investment advisors related to their communications with clients.”

If your broker-dealer firm is under investigation by the SEC for regulatory charges, you should seek experienced legal counsel. Additionally, if you are in the financial advisory business you must be aware of the SEC’s regulatory guidelines to prevent a major scandal, and/or financial loss. Contact the attorneys at Warren Law Group at (866) 954-7687 or email info@warren.law to schedule your consultation.

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Warren Law Group

WLG provides legal representation to financial services professionals and business owners in regulatory and compliance matters, litigation, and securities.