Jury delivers split decision in Jeffrey Cutter annuity sales trial
May 1, 2025 by John Hilton
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).
Wink’s Moore on the Market: More about the Cutter case:
“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.’
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.'”
(Here is the part that drives me bonkers…)
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.
**********Eight percent on the typical indexed annuity? While higher than the average commission on an indexed annuity, isn’t that about 0.80%/year for ten years? Less than the AUM that is being charged, anyhow. It seems the U.S. Securities and Exchange Commission needs to have a proper understanding of compensation outside of the securities business.**********
‘He [Ted Nickel] 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.'”
Thank you John Hilton at InsuranceNewsNet, for the great summation of this case. -sjm
