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SEC Censures Ameriprise in Connection With Sales of F-Squared AlphaSector Strategies

financial charts and stockbrokerOn December 8, 2017, the Securities and Exchange Commission (“SEC”) issued a Cease-and-Desist Order (“Order”) against Ameriprise Financial Services, Inc. (“Ameriprise”) in connection with allegations that Ameriprise and its employees or agents purportedly misrepresented the performance of certain ETF strategies.  Specifically, the SEC’s investigation focused on sales of AlphaSector strategies by ETF manager F-Squared Investments, Inc. (“F-Squared”).  The F-Squared AlphaSector strategies, which were based upon an algorithm, were sector rotation strategies designed to issue a “signal” as to whether to buy or sell certain ETFs, that together, comprised the industries in the S&P 500 Index.

Pursuant to the Order, the SEC has alleged that F-Squared materially miscalculated the historical performance of its AlphaSector strategies (from April 2001 to September 2008) by incorrectly implementing signals in advance of when such signals could have occurred.  In addition, the SEC alleged that F-Squared relied upon hypothetical and back-tested historical performance that was purportedly inflated substantially over what actual performance would have been had F-Squared applied the signals accurately.

In December 2014, F-Squared agreed to pay a $35 million fine to the SEC, and furthermore, admitting to wrongdoing regarding falsifying performance numbers in its advertising and marketing materials.  See In the Matter of F-Squared Investments, Inc., Admin. Proceeding No. 3-16325 (Dec. 22, 2014).  By July 2015, F-Squared filed for Chapter 11 bankruptcy protection.

As further alleged in the SEC’s Order, Ameriprise negligently relied upon misrepresentations made by F-Squared, including that the AlphaSector strategies had a history dating back to April 2001 and had been in use since then, and that the AlphaSector strategies’ “[t]rack record had significantly outperformed the S&P 500 Index from April 2001 through September 2008.”  According to the SEC’s allegations, “[A]meriprise knew or should have known that it did not have a reasonable basis to believe that F-Squared’s advertising claims for the AlphaSector strategies were accurate.”

Moreover, the SEC has alleged that “[A]meriprise also provided its financial advisors – the primary interface between Ameriprise and its clients when soliciting investments in the AlphaSector strategies – with inaccurate information.”  Notably, the Order alleges that “[A]meriprise represented inaccurately to Ameriprise financial advisors that the AlphaSector Rotation strategy was able to double investor money since 2001 and stressed the ‘proven results’ of AlphaSector strategies…”

Without admitting or denying any of the SEC’s findings encapsulated in the Order, Ameriprise is required to pay disgorgement of $6.3 million, prejudgment interest of $700,000, and a civil penalty of $1.75 million to the SEC.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in representing investors who have incurred losses in connection with various alternative investments, including leveraged and inverse ETFs.  Investors may contact our office at (866) 966-9598 or via email at for a no-cost, confidential consultation.

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