SEC Charges Betterment For Misstatements Regarding Tax Loss Harvesting Service

Posted on April 25th, 2023 at 1:20 PM
SEC Charges Betterment For Misstatements Regarding Tax Loss Harvesting Service

From the desk of Jim Eccleston at Eccleston Law 

The Securities and Exchange Commission (SEC) has charged Betterment LLC for material misstatements and omissions regarding its automated tax loss harvesting services (TLH). 

Betterment, which agreed to pay $9 million as part of a settlement, allegedly failed to provide clients with notice of changes to contracts as well as preserve required books and records, according to the SEC. The SEC determined that Betterment misstated or omitted numerous material facts to clients between 2016 and 2019 regarding TLH, which is a service that monitors clients’ accounts for opportunities to lessen their tax burden.

Additionally, Betterment failed to disclose a programming issue that impacted certain clients as well as two separate computer coding errors that restricted TLH from harvesting losses for some clients. The SEC estimated that the issues negatively impacted at least 25,000 client accounts and resulted in clients losing nearly $4 million in potential tax reductions. Betterment, which did not admit or deny any of the SEC’s investigatory findings, agreed to pay a $9 million civil penalty that will be distributed to impacted clients.

Eccleston Law LLC represents financial advisors and investors nationwide in securities, employment, transition, regulatory and disciplinary matters.

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