SEC Slaps Emperor Investments with $25,000 Fine for Defrauding U.S. Investors

The Securities and Exchange Commission (SEC) announced that it has charged Emperor Investments, Inc. (Emperor), a Canada-based robo-adviser registered as an investment adviser with the Commission, with defrauding U.S. investors.

Specifically, the U.S. regulator alleged that from June 2018 until October 2019, Emperor operated a robo-adviser, an automated digital investment advisory program that was marketed to individuals through its website and social media platforms. Whereas, the SEC found that, Emperor disseminated misleading marketing materials and performance data on its website, which was accessible to clients and prospective clients. 

For instance, the defendant claimed that it had outperformed the market for the past 11 years when, in fact, the claim was based on modeled returns and it had been in operation for less than two years, during which time it underperformed the market. The SEC pointed out that Emperor paid bloggers, which were a significant source of Emperor's new clients, for referrals without complying with cash solicitation disclosure and documentation requirements. In addition, it failed to adopt or implement policies and procedures reasonably designed to prevent these securities law violations.

Without admitting or denying the SEC's findings, Emperor consented to a cease-and-desist order finding that it violated the antifraud provisions of Sections 206(2) and 206(4) of the Advisers Act and Rules 206(4)-1, 206(4)-3, and 206(4)-7 thereunder, imposing a censure, and ordering it to pay a civil penalty of $25,000.