Betterment Played Favorites With Clients After Brexit Vote: Massachusetts Regulator

The Massachusetts regulator, headed by William Galvin, Secretary of the Commonwealth, had sent Betterment a letter July 6 inquiring about the trading halt and received a response in a July 27 letter stating that "all of Betterment's clients, regardless of whether they came direct or through advisors, were subject to the same trade management practices on June 24, 2016."

But Betterment's letter, according to the Massachusetts securities division, also indicated that "while Betterment did not notify any of its clients" about the trading halt, "Betterment Institutional sent notifications to the 252 advisory firms … on its institutional platform.

"There is a presumption that Betterment Institutional was privy to information to which the rest of Betterment's clients did not have access," according to Foehl's letter. "There is also a presumption that this unequal access creates preferential treatment for some of Betterment's clients."

When asked for comment on the latest letter from the Massachusetts securities regulator, Betterment spokesman Ziemer wrote, "As a company policy, we don't comment on regulatory matters."

 –Related on ThinkAdvisor:

• Why Betterment Delayed Trading After Brexit Vote
• Betterment Renames, Restructures Its Advisor Platform
• Betterment Study Urges Strong Oversight of Advisors Working With 401(k) Plans