SEC charges robo-adviser Wahed over misleading statements, compliance failures

The Securities and Exchange Commission on Feb. 10 charged New York-based Wahed Invest LLC over alleged misleading statements, breach of fiduciary duty and compliance failures.

From September 2018 until July 2019, the robo-adviser advertised its own proprietary funds when no such funds existed and promised investors that it would periodically rebalance their advisory accounts but did not do so, the SEC's order found. The company also allegedly used clients' advisory assets to seed a proprietary exchange-traded fund it ultimately launched in July 2019 without prior disclosure to clients of any conflicts of interest.

Moreover, Wahed Invest marketed itself as an advisory services provider compliant with Islamic, or Shariah, law but did not adopt and implement written policies and procedures regarding how it would guarantee compliance to such law on an ongoing basis, according to the order.

Without admitting or denying the commission's findings, Wahed Invest agreed to a cease-and-desist order, to pay a $300,000 penalty and to retain an independent compliance consultant, among other undertakings.