Betterment Fined $400k For Violating Regulatory Guidelines

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The Betterment investment platform has found itself in a tight fix that involves a 400,000 fine for allegedly violating customer protection rules, practicing improper bookkeeping and also breaking other rules set by the Securities and Exchange Commission.

The $400,000 fine was imposed on the investment platform by US Financial Industry Regulatory Authority (FINRA) which has also fined two former executives of the fintech startup. The U.S regulator claims that Betterment is guilty of “window dressing” from October 2013 to January 2015. FINRA claims that the firm made some changes to the way it offered customer services as part of its plan to lower its capital requirements.

The two former Betterment executives that were fined include president Eli Broverman who left his position in 2017 and Richard Feldman, the company’s former financial and operations principal. Broverman was fined $10,000 while Fieldman was fined $5,000.

Betterment has also been accused of failing to create and maintain timely data showing the cash movements that relate to the sale and purchase of customer services. FINRA also claims that the company did not properly record the disbursement and receipt of dividends from June 2012 to July 2014. The company has however released a statement defending itself.

“Betterment Securities worked cooperatively with Finra during the 2014 review to address its concerns and we are proud that every examination since then has been completed without any deficiency findings,” stated a Betterment spokeswoman.

Relevant changes have been made since then

The spokeswoman also added that Betterment has improved its procedures and policies ever since the 2014 examination and that every examination since then has not been characterized by irregularities. She also revealed that the firm has also made various other changes including personnel to make sure that it is compliant with all the relevant regulatory authorities.

FINRA believes that Betterment’s problems were the results of early payouts that it made to clients after shifting deposits between two accounts and regulators considered this to be an unfair advantage to the firm. Betterment also revealed to FINRA that it has updated its supervisory procedures, hired a new Chief Compliance Officer and also terminated its pre-settlement withdrawal program.