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Cetera corporate RIA to settle with SEC over disclosure of referral relationships

Cetera headquarters

Cetera Financial Group’s corporate RIA will pay $185,000 in penalties to settle SEC allegations that the firm didn’t adequately disclose its referral relationships with about 350 banks to clients, according to the SEC.

Over a four-year period, Cetera Investment Advisors generated more than $56 million in advisory fees through referrals from the banks, according to an SEC order. Cetera shared the “vast majority” of this revenue with the banks without requiring that the financial institutions properly disclose their financial interest in making those recommendations, according to the SEC.

Cetera did not admit to or deny the allegations, and a company spokesman declined to comment. The SEC order did not specify which banks have relationships with Cetera.

Under SEC rules, RIAs may not pay a bank or credit union for referrals unless the client is given a separate written disclosure document that identifies the solicitor and the investment advisor as well as describes the terms of the referral relationship.

In 2010, Cetera acquired PrimeVest Financial Services, a firm that built investment, insurance and advisory solutions for bank and credit union clients. Two years later the IBD incorporated the firm into its brand and took over its networking arrangements, according to the SEC. At the time, PrimeVest required credit unions, but not banks, to give clients solicitation disclosures.

The SEC examined and questioned Cetera in late 2014, requesting the firm begin providing disclosures to clients about its networking agreement with banks. Cetera continued not to do so until “at least” August 2017, according to the SEC. The firm amended its agreements to provide adequate disclosure for new clients in March 2018.

Cetera was censured and given two weeks to pay the civil penalty, according to the order, which was filed at the end of last week.

The corporate RIA manages approximately $10.3 billion in client assets, according to its Form ADV.

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