Commission Disclosure Trial Ends With A Split Decision

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A case involving failure to disclose exact commission figures earned on certain fixed-index annuity sales

A federal jury in Boston last week found Jeffrey Cutter and his advisory firm, Cutter Financial Group LLC (“CFG”), liable under Section 206(2) of the Investment Advisers Act for negligently failing to disclose the exact commissions earned on certain fixed-indexed annuity (“FIA”) sales. The same jury cleared Cutter and CFG of the Act’s two more serious fraud counts—Sections 206(1) and 206(4)—after a seven-day trial that drew close attention from the insurance and securities communities.

Although the verdict leaves key penalty questions to Judge Denise J. Casper, it already offers a case study for Massachusetts professionals who market insurance-based annuities alongside investment advisory services.

Background: From Complaint to Courtroom

Who the defendants are

• Cutter Financial Group LLC—registered with the SEC in 2017; headquartered in Falmouth with offices in Duxbury and Mansfield.
• Jeffrey Cutter is a firm founder, dual-licensed as an investment adviser representative, and Massachusetts insurance producer.
• Cutterinsure, Inc. is an affiliated P&C agency that placed the annuity contracts at issue.

The SEC’s March 2023 complaint

• Alleged that between 2014 and 2022, Cutter earned roughly $9.3 million in up-front commissions by steering 580 clients into FIAs while omitting the precise dollar amounts of those commissions.
• Claimed Cutter and CFG also benefited from $1.1 million in marketing reimbursements and other incentives paid by field-marketing organizations (“FMOs”).
• Charged three counts:
  1. § 206(1) – intentional or reckless fraud;
  2. § 206(2) – negligent deception;
  3. § 206(4) – failure to maintain reasonable compliance policies.
• (For a detailed summary of the SEC’s original allegations, see my April 11, 2023, article, “Investment Adviser & Affiliated Insurance Agency Trigger SEC Disgorgement Lawsuit Over Undisclosed Commissions.”

Why annuities sit at the center of this case

Unlike variable annuities, fixed-indexed annuities are insurance contracts, not securities. While the SEC does not regulate insurance annuities, it does regulate investment advisors. In this case, the SEC’s theory focused on Cutter’s fiduciary duty as an investment adviser—not on insurance-product-suitability rules—to argue that clients needed more transparent disclosure of the exact up-front commissions embedded in each replacement transaction.

Trial Week in Boston (April 14 – 23, 2025)

Date	Courtroom Highlights
Mon 4/14	Jury empaneled; SEC and defense openings. Plaintiff began its case with two client witnesses.
Tue 4/15 – Thu 4/17	Seven former clients testified about annuity replacements, advisory fees, and what they recalled (or did not recall) about commission discussions. Defense moved mid-trial for judgment as a matter of law (“JMOL”); Motion denied by Court.
Fri 4/18	Defense case opened. Jeffrey Cutter testified, followed by his wife Jill Cutter and outside compliance consultant Daniel Rome.
Tue 4/22	Defense completed its witnesses, including former SEC deputy director Jane Jarcho. SEC offered one expert in rebuttal. Closing arguments delivered; jury received Part I of the charge.
Wed 4/23	Judge Casper finalized instructions, denied a renewed JMOL without prejudice, and sent the jury out at 12:45 p.m. After roughly five hours of deliberation, the panel returned its verdict.

Verdict Highlights

• Liable under Section 206(2)
  The jury concluded that Cutter and CFG negligently failed to provide full and fair disclosure of exact commission amounts tied to a limited set of annuity replacements.
• Not liable under Sections 206(1) and 206(4)
  Jurors rejected claims that the defendants intentionally or recklessly defrauded clients, and they found CFG’s written compliance procedures adequate under the Act’s “policies and procedures” rule.
• Statements from both sides
  • SEC Acting Enforcement Director Samuel Waldon hailed the decision as holding the firm “accountable for breaching their fiduciary duties.”
  • Jeffrey Cutter said the verdict showed “we did not intentionally or recklessly defraud any clients,” calling the case “claims that should never have been brought in the first place.”

The split decision narrows the potential remedies—the more draconian intent-based penalties are off the table—but Section 206(2) still authorizes disgorgement, prejudgment interest, and “Tier II” civil penalties.

What Happens Next

1. Remedies briefing
   Judge Casper ordered the parties to file a joint schedule by April 30. The SEC is expected to seek:
   • Disgorgement of all commissions it deems “ill-gotten”;
   • Prejudgment interest;
   • Civil penalties up to the greater of US$129,000 per violation (adjusted for inflation) or the gross gain.
2. Conduct-based injunctions
   The court could impose forward-looking restrictions—such as requiring an independent compliance consultant or limiting Cutter’s ability to recommend annuity replacements—if it found them appropriate under the circumstances.
3. Follow-on administrative action
   After final judgment, the SEC could launch a separate proceeding to suspend or bar Cutter from associating with SEC-registered advisers, citing the jury’s finding of fiduciary breach.
4. Possible appeals
   If either side objects to Judge Casper’s ultimate remedy order—or the Cutter Defendants appeal her denial of their Rule 50 motions for judgment in their favor—the First Circuit must decide the case.

Conclusion

The Cutter case verdict reinforces a core principle: even negligent nondisclosure of conflicts can violate federal fiduciary duties. Massachusetts insurance professionals watching the case unfold should note that the jury’s finding rested on how much detail clients received about compensation, not on the suitability of the annuity products.

With the remedies phase now in Judge Casper’s hands, the final dollar impact—and any operational restrictions—remain to be determined. Agency Checklists will continue monitoring the docket and reporting on the court’s rulings, the SEC’s penalty requests, and any implications for marketing fixed-indexed annuities in the Commonwealth.

Editor’s note: Those interested in reprinting this article, please attribute it to Owen Gallagher, and link back to the Agency Checklists website. Thank you.