The Securities and Exchange Commission (SEC) has sued Wahed Invest for allegedly making misleading statements and violating fiduciary duties as well as its failure to comply with Shariah business rules.
The SEC has sued Wahed Invest for violating Sections 206 (2) and 206 (4) of the Investment Advisers Act 1940 as well as Rules 206 (4) -1 (a) and 206 (4) -7.
According to SEC allegations, New York -based Wahed Invest had advertised its own non -existent proprietary fund from September 2018 to 2019, besides also promising investors that it would balance its advisors ’accounts on a regular basis but did not do so.
In addition, Wahed was also found to have launched a proprietary ETF in July 2019, where it used its clients ’assets without disclosing any notice to clients.
Wahed Invest, known as a robo-adviser company, often promotes advisory providers that comply with Islamic law (Shariah), but it is also found not to adopt or implement written policies and procedures on its implementation on an ongoing basis.
The head of the SEC's asset management unit, Adam S. Aderton, said that although Wahed was a robo-adviser, he needed to ensure that everything advertised was not misleading and any information was disclosed to investors.
He added that Wahed must also adopt and implement written policies and procedures that are reasonably designed to prevent advisors from deviating from the investment process they are claiming.
As a result, Wahed Invest without acknowledging or denying the SEC's allegations has agreed to the cease-and-desist order, in addition to paying a penalty of US $ 300,000.
