A federal jury in Massachusetts last week found Cutter Financial Group and its founder violated federal law when they failed to disclose information about significant upfront commissions to their clients but sided with the defendant on two other counts.
After five hours of deliberation in the U.S. District Court for the District of Massachusetts, the jury found Wednesday the financial firm and its president, Jeffrey Cutter, liable in a suit brought by the U.S. Securities and Exchange Commission for violating Section 206(2) of the Investment Advisers Act of 1940 which prohibits “engag[ing] in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client.” The jury had a split verdict on two other counts under the Advisers Act, finding that Cutter and his firm did not engage in an intentional fraudulent scheme, and they adopted and implemented reasonable compliance policies and procedures.