Brokers News

Boston broker-dealer fined for allegedly misleading F-Squared ads


Boston-based broker-dealer Cantella & Co. has been hit with a $100,000 fine by federal regulators for running advertisements that allegedly inflated the track record of a strategy developed by F-Squared Investments.

Cantella offered F-Squared’s so-called AlphaSector strategy to its own investors between 2012 and 2015, ending the relationship shortly before Wellesley-based F-Squared — once one of the region’s most successful managers of exchange-traded funds — declared bankruptcy in July.

For nearly a year, from 2012 to 2013, Cantella ran ads that relied on false statements from F-Squared that assets invested in the strategy had significantly outperformed the S&P 500 index from 2001 to 2008, according to the U.S. Securities and Exchange Commission. But no assets followed the strategy during that time span, and F-Squared miscalculated the strategy’s performance over that time anyway, the SEC said.

“Cantella advertised the AlphaSector strategy by using hypothetical and back-tested historical performance that was inflated substantially over what performance would have been if F-Squared had applied the signals accurately,” the SEC said in an administrative filing.

Cantella should have done more to verify the accuracy of F-Squared’s claims, according to the SEC. F-Squared reached a settlement with the SEC over related allegations in late 2014.

A Cantella spokesman declined comment on the SEC’s allegations. The firm had $941 million in assets under management as of September.

Risk Warning:

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.


The author Paul