An SEC case against a Massachusetts advisor has big implications for the regulator’s oversight of insurance products, a law firm cautioned in a brief filed Monday with the federal court.
Earlier this year, the Securities and Exchange Commission brought a complaint against investment advisory firm Cutter Financial Group and its owner Jeffrey Cutter, accusing them of failing to disclose commissions and churning annuities products. Cutter, who is also an insurance agent, allegedly steered clients to fixed index annuities while not disclosing the commissions he received from those products. The SEC also accused him of pushing clients toward new annuity contracts to generate additional commissions.
Between 2014 and 2022, Cutter received more than $9 million in commissions associated with 580 annuity contracts sold to investment advisory clients, according to the SEC. A lawyer representing the defendants earlier told InvestmentNews that the regulator is wrong about the facts and the law.
But the fact that the SEC is pursuing the case, rather than a state insurance commissioner, is problematic, said Nick Morgan, a partner at law firm Paul Hastings.
“The SEC has for decades been trying to get jurisdiction over these insurance products, and it has passed rules that have been struck down, and has sought congressional authority to do it and been unsuccessful,” Morgan said. “If they’re successful, the investors will have fewer choices when it comes to engaging in purchases of these products.”
A nonprofit Morgan co-founded, Investor Choice Advocates Network, filed the amicus brief with the court. That group, which encouraged the court to dismiss the case, is represented by Paul Hastings.
Morgan said he sees a parallel in the SEC’s
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