SEC to court: Fine Jeffrey Cutter up to $700K, force disclosure of verdict

The Securities and Exchange Commission is recommending a fine of $300,000 to $700,000 for advisor-agent Jeffrey Cutter and Cutter Financial Group.

Additionally, the SEC asked the court to bar Cutter and CFG from receiving any client compensation for five years unless clients are shown a copy of the civil judgment.

The SEC filed the “motion for remedies and entry of final judgment” on Thursday.

In April, a jury determined that Cutter and CFG did not violate Section 206(1) of the Investment Advisers Act of 1940, but did find violations of Section 206(2), which 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.”

The SEC claims Cutter shows a lack of remorse and takes no responsibility for his actions, and warrants a stiff penalty as a result.

"[A] prohibition on Defendants’ receipt of compensation until the Final Judgment is provided to clients will ensure those clients receive accurate and complete information about the jury’s liability finding and the remedies imposed against their chosen investment adviser," the SEC motion reads. "Such a remedy is narrowly tailored to reduce the likelihood that Defendants will continue to employ the same business practices that the jury determined violated the federal securities laws."

Cutter's legal team could be reached for comment on the SEC's penalty request.

The SEC is not finished with the case. In a June filing, the agency asked for court approval to conduct discovery on two issues, including the press release CFG issued in response to the verdict. In it, Cutter and CFG claimed that the “Jury Clears Cutter Financial Group.”

'Inaccurate and misleading'

Likewise, the press release said the jury found CFG “negligent in not also disclosing the specific upfront amount of those commissions for a limited number of clients.”

“This is inaccurate and misleading for several reasons, including because the finding of liability under Section 206(2) was not limited to specific clients and not limited only to CFG,” the SEC said in its motion for discovery.

The SEC also wants to conduct further discovery into testimony from Jill Cutter, a licensed insurance agent since 2003 and co-owner of CFG, regarding a specific annuity replacement transaction.

In total, the agency is asking the court to OK “up to six subpoenas” on the two issues.

In its response, Cutter accused the SEC of conducting “a fishing expedition” that will further burden his six-person office.

“For nearly five years, this case has imposed an enormous strain on Defendants,” the Cutter response said, “who have had to manage the financial, emotional, and resource demands of ‘fighting city hall’ while still performing their day jobs of providing financial advice to clients.”

In March 2023, the SEC filed charges against Cutter and CFG, 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 widespread attention from the industry.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.