Cetera Advisors Fair Fund

On October 11, 2019, the SEC filed an Amended Complaint against Cetera Advisors LLC and Cetera Advisor Networks LLC (collectively, “Defendants” or “Cetera”). According to the Complaint, Cetera invested and held clients in mutual fund share classes that charged 12b-1 fees—which are recurring fees deducted from the fund's assets—even when it knew these clients were eligible to invest in lower-cost shares of the same funds without 12b-1 fees. Clients whom Cetera invested in the higher-cost, otherwise identical share classes paid additional compensation to Cetera for as long as they held these investments. The Complaint also alleged that Cetera participated in a program offered by its clearing broker whereby it agreed to share with Cetera revenues and service fees it received from certain mutual funds. As a result, Cetera had an incentive to favor these mutual funds in the program over other investments when advising clients. The Complaint further alleged that Cetera directed its clearing broker to mark-up certain fees charged to Cetera's advisory clients, which Cetera then received indirectly from these same clients.

According to the Complaint, Cetera failed to adequately disclose to its advisory clients each of these practices and the conflicts of interest associated with them. As a result of these failures, the SEC alleged that Cetera generated over $10 million in undisclosed compensation. The Complaint charged Cetera with violations of Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-7 thereunder.

Defendants consented to the entry of a Final Judgment against them without admitting or denying the Complaint's allegations, enjoining them from violating the provisions of the federal securities laws that are the subject of the allegations in the Complaint. The Court entered the Final Judgment on October 13, 2022. In the Final Judgment, the Defendants were ordered to jointly or severally pay disgorgement of $5,614,509; prejudgment interest of $990,961; and combined penalties of $2,000,000. The total amount ordered to be paid by all Defendants was $8,605,470. Defendants satisfied this obligation and made full payment to the Commission. The funds are being held in an SEC-designated account with the United States Department of the Treasury.

On July 14, 2023, the Court established a Fair Fund so that the penalties, disgorgement, and prejudgment interest collected can be distributed to harmed investors. On the same day, the Court appointed Heffler, Radetich & Saitta, LLP as Tax Administrator for the Fair Fund.

On November 6, 2023, the Commission filed a Motion for an Order appointing Epiq Class Action & Claims Solutions, Inc., as Distribution Agent for the Fair Fund.

On November 16, 2023, the Court appointed Epiq Class Action & Claims Solutions, Inc., as Distribution Agent for the Fair Fund.

To qualify for a payment from the Cetera Advisors Fair Fund, you must satisfy certain eligibility criteria that are described in detail in the Plan. The Plan is available on the Important Documents page of this website and on the Commission’s public website at https://www.sec.gov/enforcement/information-for-harmed-investors/cetera. You can also request a copy of the Plan Notice by calling the Distribution Agent at 1-877-267-0136 or by emailing at Info@CeteraAdvisorsFairFund.com.

A Preliminary Claimant means a Person, or their lawful successors, identified by the Distribution Agent based on its review and analysis of applicable records obtained by the Commission during its investigation, who may have suffered a loss as a result of paying 12b-1 Fees or Markups to Defendants in connection with investment advisory or brokerage services during the Relevant Period. The Relevant Period is defined as follows:

1. For claims relating to Cetera Advisors:
   1. September 8, 2012 through December 31, 2016, inclusive, for conduct involving 12b-1 Fees.
   2. September 8, 2012 through March 29, 2018, inclusive, for conduct involving Markups.
2. For claims relating to Cetera Advisor Networks:
   1. April 20, 2014 through December 31, 2016, inclusive, for conduct involving 12b-1 Fees.
   2. April 20, 2014 through March 29, 2018, inclusive, for conduct involving to Markups.

The Certification Form you received sets forth your total excess 12b-1 Fee and Markup Fee amounts, upon which your Distribution Payment will be calculated. You are required to provide your confirmation or dispute the Excess Fee amounts set forth in the Certification Form not later than April 22, 2024. If you fail to respond to the Certification Notice by April 22, 2024, you will be deemed an Unresponsive Preliminary Claimant and will not be eligible for a Distribution Payment.

The Recognized Loss amount attributable to a Preliminary Claimant means the 12b-1 Fees and/or Markups paid calculated in accordance with the Plan of Allocation. The methodology used to determine eligibility and calculate Distribution Payments is set forth in Paragraph 44 of the Plan and the Plan of Allocation which is set forth in Exhibit A attached thereto.

In the Final Judgment, the Defendants were ordered to pay disgorgement, prejudgment interest, and combined penalties totaling $8,605,470.

The SEC proposes distributing on a pro rata basis. The Commission’s counsel has identified Preliminary Claimants, who are presumptively eligible to receive a Distribution Payment.

Preliminary Claimants are persons, or their lawful successors, identified by the Distribution Agent based on its review and analysis of applicable records obtained by the Commission during its investigation who may have suffered a loss as a result of paying 12b-1 Fees or Markups to Defendants that the Commission alleged were not properly disclosed in connection with investment advisory or brokerage services during the Relevant Period.

A Certification Form is being mailed together with notice to all preliminary claimants known to the distribution agent. If you do not receive a Certification Form in the mail and believe that you should be included as a preliminary claimant, you must contact the distribution agent prior to May 7, 2024, to establish that you should be considered a preliminary claimant.

The deadline to submit a Certification Form at the address below is April 22, 2024. If you fail to submit a completed Certification Form on or before April 22, 2024, you will be barred from receiving a payment from the Cetera Advisors Fair Fund. If you choose to dispute your recognized loss amount your Certification Form should be accompanied by appropriate supporting documents for each fee you are disputing.

You must complete and sign the Certification Form and submit it to the Distribution Agent either electronically (through the Submit a Certification Form page) or via email to Info@CeteraAdvisorsFairFund.com so that it is received no later than April 22, 2024, or by mail so that it is postmarked no later than April 22, 2024, at the address listed below in order to be considered for eligibility to receive a distribution payment from the Cetera Advisors Fair Fund:

Cetera Advisors Fair Fund
Distribution Agent
P.O. Box 2676
Portland, OR 97208-2676

If you fail to return the Certification Form by April 22, 2024, you will not be eligible for a distribution under the Plan.

Additional information regarding the Fair Fund may be found in the Plan Notice. You may obtain additional information by calling the Fair Fund’s toll-free hotline at 1-877-267-0136 or by emailing Info@CeteraAdvisorsFairFund.com.

Please check this website frequently for updates.