Jury delivers split decision in Jeffrey Cutter annuity sales trial

A Massachusetts jury delivered a split verdict Wednesday against an advisor accused of making improper annuity sales.

The jury determined that Jeffrey Cutter and Cutter Financial Group did not violate Section 206(1) of the Investment Advisers Act of 1940, but did find violations of Section 206(2).

Section 206(2) bars advisors from engaging “in any transaction, practice or course of business which operates as a fraud or deceit upon any client or prospective client.”

Cutter and his legal team claimed victory in their long-running legal battle with the Securities and Exchange Commission.

“Today, the jury found what we have been saying for more than four years: that we did not intentionally or recklessly defraud any clients,” Cutter said in a news release. “The jury also found that we complied with applicable SEC rules about compliance policies and procedures. These are claims that should never have been brought in the first place. It is very difficult for a small business to stand up to federal government regulators and prevail. But that’s what we did today.”

Of the decision on Section 206(2), Cutter’s legal team said the jury found CFG “negligent in not also disclosing the specific upfront amount of those commissions for a limited number of clients.”

In March 2023, the SEC filed charges against Jeffrey Cutter and his advisory firm, Cutter Financial Group, for "recommending that their advisory clients invest in insurance products that paid Cutter a substantial up-front commission without adequately disclosing Cutter's and CFG's financial incentive to sell the products."

Cutter is also a licensed insurance agent and the case attracted the attention of industry trade associations who oppose any fiduciary regulation of agent insurance product sales.

In a statement from SEC Division of Enforcement Acting Director Samuel J. Waldon, the agency said it is satisfied with the jury's decision in the U.S. District Court for the District of Massachusetts case.

"We are pleased with the jury verdict holding Jeffrey Cutter and Cutter Financial Group, LLC accountable for breaching their fiduciary duties to their clients. As the hard work of the SEC team demonstrates, we will continue to hold investment advisers responsible when they engage in wrongdoing.”

'Simpler language'

According to the SEC complaint, Cutter earned 7-8% commissions on annuity sales as an agent, compared to 1.5-2% fees while managing assets as a fiduciary advisor. Starting in 2014, Cutter generated more than  $9.3 million in commissions from the sale of 580 annuities to his investment advisory clients, the SEC said.

As of 2022, CFG claimed to manage approximately $215 million in client assets across 476 clients, court documents say, "most of whom were individual retail investors of retirement age."

There were "no allegations that client funds were misappropriated," Cutter's legal team emphasized.

"CFG acknowledges that industry-based financial advisory disclosures can be complex. To help clients better navigate these structures, the firm will be launching educational and compliance initiatives, including an educational campaign to explain compensation structures in accessible terms," the release said.

“We believe the entire industry can benefit from clearer standards and simpler language,” said Jen Farrington, investment advisor representative and chief compliance officer. “We’re committed to leading that conversation—not just for our clients, but for the profession as a whole.”

The trial lasted seven days. Cutter's defense team called on Ted Nickel, former Wisconsin insurance commissioner and ex-president of the National Association of Insurance Commissioners. He examined the financial situations of clients cited in the complaint, the annuities that Cutter sold them, and the paperwork that Cutter used to sell them the annuities, according to court documents.

"He opined, among other things, that each annuity purchased by Named Clients was suitable and that Mr. Cutter’s sales process was consistent with insurance industry standards," a Cutter memo said. "The SEC has not disclosed any expert to rebut Mr. Nickel’s opinions."

© Entire contents copyright 2025 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.