SEC Charges Investment Adviser Betterment for Misstatements Concerning Tax Loss Harvesting Service

The Securities and Exchange Commission today charged investment advisory firm Betterment LLC for material misstatements and omissions related to its automated tax loss harvesting service (TLH), failing to provide clients with notice of changes to contracts, and failing to maintain certain required books and records. To settle the charges, Betterment agreed to pay a $9 million penalty and to distribute funds to affected clients.

The SEC’s order finds that, from 2016 to 2019, Betterment, in communicating with clients, misstated or omitted several material facts concerning TLH, a service that scans clients’ accounts for opportunities to reduce their tax burden. According to the order, at different times, Betterment failed to disclose a change in the software related to its scanning frequency, failed to disclose a programming constraint affecting certain clients, and had two computer coding errors that prevented TLH from harvesting losses for some clients. Collectively, these issues adversely impacted more than 25,000 client accounts, resulting in those clients losing approximately $4 million in potential tax benefits.

Source: SEC.gov | SEC Charges Investment Adviser Betterment for Misstatements Concerning Tax Loss Harvesting Service