Betterment slapped with $400,000 fine from Finra

Robo-adviser cited for violating customer protection rule and not maintaining its books and records correctly

Jun 22, 2018 @ 11:56 am

By Ryan W. Neal

The Financial Industry Regulatory Authority Inc. has fined the digital advice company Betterment $400,000 for violating the customer protection rule and not properly maintaining its books and records.

From October 2013 through January 2015, a period when Betterment saw rapid growth of its automated investing service, Finra says Betterment engaged in "window dressing" by altering how it computes customer reserves to reduce its requirement. Finra said Betterment also did not properly segregate customers' wholly owned securities in a good control location.

Betterment provided early payments to customers selling securities, funding them by moving deposits from its sweep account to its omnibus account, which Finra said was beneficial to the firm.

(More: Finra sheds more light on how it determines fine amounts)

Eli Broverman, Betterment's former president who stepped down in 2017, was found responsible for the window dressing. Finra fined Mr. Broverman an additional $10,000.

Additionally, Finra said that from June 2012 to December 2014, Betterment did not create and maintain its books and records in accordance with Finra and Securities and Exchange Commission rules. For example, it did not record cash movements appropriately, and maintained its stock record on a trade date basis instead of a settlement date basis.

Finra held Richard Feldman, Betterment's financial and operations principal, responsible and fined him an additional $5,000.

Betterment filed a corrective action statement stating it would enact changes recommended by Finra, including an enhanced financial and operations principal role, expanding oversight, new compliance leadership and a review a written procedures.

"Betterment Securities takes its regulatory responsibilities seriously," a Betterment spokesperson said in a statement. "Betterment Securities worked cooperatively with FINRA during the 2014 review to address its concerns and we are proud that every examination since then has been completed without any deficiency findings. In the years since the 2014 examination, Betterment Securities has enhanced its policies and procedures and made personnel and other changes to ensure compliance with all applicable regulations."


What do you think?

View comments

Most watched


Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.


Young professionals see lots of opportunity to reinvent the advice experience

Members of the 2019 InvestmentNews class of 40 Under 40 have strategies to overcome the challenges of being young in a mature industry.

Latest news & opinion

Target-date fund design may be wrong for retirees

Researchers suggest the funds don't adequately hedge against sequence-of-returns risk in retirement.

InvestmentNews' 2019 class of 40 Under 40

Our 40 Under 40 project, now in its sixth year, highlights young talent in the financial advice industry. These individuals illustrate the tremendous potential of those coming up in the profession. These stories will surprise, entertain, educate and inspire.

New Jersey fiduciary rule: Pressure leads to public hearing, comment deadline extension

Industry push results in chance to air grievances on July 17 and another month to present objections.

Galvin to propose fiduciary rule for Massachusetts brokers

The secretary of the commonwealth is proposing a fiduciary standard in response to an SEC investment-advice rule he views as too weak.

Summer reading recommendations from financial advisers

Here are some books that will keep you informed and entertained during summer's downtime


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print