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SEC charges Mass. advisor with defrauding clients on annuity sales

On Behalf of | Mar 29, 2023 | Financial Advisor Misconduct

A Massachusetts-based investment advisor has been charged with defrauding his clients in connection with the sales of annuities, InvestmentNews reports.

The Securities and Exchange Commission filed a complaint in federal court against 55-year-old Jeffrey Cutter and his advisory firm, Cutter Financial Group LLC (CFG).

The SEC said that between at least 2014 and 2022, Cutter “engaged in a pattern of deception” in which he recommended that advisory clients invest in annuities that paid Cutter a substantial up-front commission without adequately disclosing Cutter’s and CFG’s financial incentive to recommend those annuities over other investment options.

Cutter also allegedly made false statements in applications for the insurance products and made false statements to at least one client regarding his commission compensation. Overall, the SEC said clients paid $640,000 in surrender charges over a four-year period as a result of Cutter’s actions.
The complaint states that Cutter received through CFG an annual asset-based advisory fee of about 1.5% to 2% on assets managed in a client’s advisory account, but received up-front commissions on annuity sales of about 7% of the annuity’s total value. The SEC said Cutter did not tell clients the amount or up-front nature of the annuity commissions, or how the annuity commissions compared to the fees on assets in advisory accounts, in violation of Cutter’s and CFG’s fiduciary duty.

Cutter is accused of recommending that some clients surrender a fixed index annuity they already owned and use the funds to buy a new fixed annuity that would generate a second up-front commission for himself but sometimes left clients with surrender charges, without disclosing his conflict of interest.

CFG is charged with violating the antifraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 (“Advisers Act”) as well as Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. Cutter is charged with violating Sections 206(1) and 206(2) of the Advisers Act and aiding and abetting CFG’s violation of Section 206(4) and Rule 206(4)-7. The SEC is seeking permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and penalties against the defendants.

The attorneys at Lewitas Hyman have decades of experience dealing with securities fraud cases and have a deep understanding of how capital markets and financial service firms are intended to work to protect investors. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact Lewitas Hyman at (888) 655-6002 or through our online contact form for a no-cost evaluation of your matter.