Betterment slapped with $400,000 fine from Finra

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

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."

Latest News

Advisor moves: RBC swipes $1.7B UBS team, Baird duo departs for LPL's Linsco channel
Advisor moves: RBC swipes $1.7B UBS team, Baird duo departs for LPL's Linsco channel

RBC Wealth Management's latest move in New York adds an elite eight-member team to its recently opened Westchester office.

Stifel star broker, Chuck Roberts, leaves firm under cloud of investor complaints
Stifel star broker, Chuck Roberts, leaves firm under cloud of investor complaints

Stifel – so far - is on the hook for more than $166 million in damages, legal fees and settlements in investor complaints involving Roberts, a 35-year industry veteran.

iCapital secures $820M in latest funding, hits $7.5B
iCapital secures $820M in latest funding, hits $7.5B

The giant alt investments platform's latest financing led by T. Rowe Price and SurgoCap Partners, along with State Street, UBS, and BNY, will fuel additional growth on multiple fronts.

Merrill Lynch on the hook for $3.7M after clients claimed sale of unsuitable private equity
Merrill Lynch on the hook for $3.7M after clients claimed sale of unsuitable private equity

Some investors recently have seen million dollar plus decisions by FINRA arbitration panels involving complex products decisions go their way.

What does it take to feel 'financially comfortable' or 'wealthy' in 2025?
What does it take to feel 'financially comfortable' or 'wealthy' in 2025?

New report shines a light on how Americans view wealth today.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.