Shariah robo-adviser charged, penalized by SEC

A robo-adviser that operates under Islamic Shariah law was charged last week by the Securities and Exchange Commission with making misleading statements and breaching its fiduciary duty, as well as for compliance failures related to its Shariah advisory business.

The robo registered investment adviser, Wahed Invest, is based in New York and has $147 million in assets, according to its Form ADV. When the SEC announced its charges on Thursday, it also said that Wahed Invest had reached an agreement to pay a $300,000 penalty over the matter, which centered on nonexistent proprietary investments.

From September 2018 through July 2019, Wahed Invest advertised the existence of its own proprietary funds when no such funds existed, and also promised investors that it would periodically rebalance their advisory accounts, but did not do so, according to the SEC.

The firm agreed to the settlement without admitting or denying the SEC’s findings. A message on Monday for Musa Abdul-Basser, the firm’s chief compliance officer and chief legal officer, was not returned.

Shariah is the religious law forming Islamic tradition. There are a number of such “faith-based” exchange-traded funds right now.

“Anyone can invest their wealth, large or small, and feel comfortable that they’re not compromising on their values,” according to the Wahed Invest website. “We’ve written the rulebook on delivering halal financial investments.”

According to the SEC, Wahed Invest marketed itself as providing advisory services compliant with Shariah law, including marketing the importance of its income purification process on its website.

Despite these representations, the SEC found that that the firm did not implement written policies and procedures addressing how it would assure Shariah compliance on an ongoing basis.

And according to the SEC, when Wahed Invest ultimately launched a proprietary ETF in July 2019, it used its clients’ advisory assets to seed the ETF without prior disclosure to clients of any conflicts of interest.

The post Shariah robo-adviser charged, penalized by SEC appeared first on InvestmentNews.

Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.

Andrew Vincent
Andrew is half-human, half-gamer. He's also a science fiction author writing for BleeBot.
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