Zoe Financial Pays $450K to Settle SEC Conflict-of-Interest Charges
Zoe Financial Inc., a New York-based investment adviser that operates a referral network matching investors with third-party advisers, agreed to pay a $450,000 civil penalty to settle U.S. Securities and Exchange Commission charges that it failed to disclose its financial incentive to steer clients toward advisers using its own asset management platform.
The SEC said Sept. 28 that between January 2023 and December 2024, Zoe Financial did not adequately disclose the conflict of interest tied to Zoe Wealth, a turnkey platform the firm launched in January 2023. The agency also found that Zoe Financial misleadingly described how it mitigated a separate conflict created by minority ownership stakes that some network advisers hold in the company.
Zoe Financial has been registered with the SEC since December 2019. In a March 30, 2026, update, the firm reported 1,689 advisory clients and about $284 million in regulatory assets under management, plus 20,538 clients for whom it provided advisory services without managing assets.
Zoe Financial launched in February 2018 as a referral service. Individuals seeking an adviser filled out an online questionnaire covering age, financial goals, assets, location and income, and an algorithm matched them with advisers in Zoe Financial’s network, according to the order. Network advisers agreed to pay Zoe Financial a portion of the advisory fees collected from clients it referred. The network ranged from about 128 to 225 advisers during the period at issue.
When individuals received matches but did not follow up, Zoe Financial salespeople typically contacted them and often recommended additional advisers. During the relevant period, clients hired a network adviser who was not among the algorithm’s initial matches about 46% of the time, the SEC found. Salespeople received no specific guidance or training on what factors they could consider.
Through Zoe Wealth, Zoe Financial offers sub-advisory services, account onboarding assistance, and other back-office support. For part of the period, it charged advisers an additional platform fee to use the service, and internal communications showed the firm was focused on growing the number of advisers and the amount of assets on the platform, according to the order.
Zoe Financial employees linked adoption of Zoe Wealth to additional referrals in conversations with current and prospective network advisers, the SEC found. One former vice president, who did not supervise the sales team, told an adviser he would not “call it a quid pro quo, but obviously the firms that are using Zoe Wealth are just going to get more referrals.”
The firm later began telling advisers that they would be removed from the referral network if they did not adopt Zoe Wealth. By the end of 2024, it had separated from most advisers that would not use the platform, according to the order.
The SEC said the algorithm itself did not consider whether an adviser used Zoe Wealth. But because salespeople frequently suggested advisers the algorithm had not recommended, the referral process was not limited to the algorithm, the agency said.
Disclosure Came Nearly Two Years Late
From Zoe Wealth’s launch until Oct. 28, 2024, Zoe Financial’s brochures for its referral program did not mention the platform or any related conflict, according to the order.
The Oct. 28, 2024, brochure said the firm “reserves the right to require advisers to use [Zoe Wealth], and maintain a cumulative minimum account value at the platform, in order to also be included in the adviser referral program.” The SEC said that language still did not disclose Zoe Financial’s financial interest in the requirement.
A brochure filed Dec. 30, 2024, disclosed that the firm had an “incentive to refer [u]sers to [investment advisers] that utilize the Zoe Wealth Platform.”
Certain registered investment advisory firms that participate in the referral network hold indirect minority interests in Zoe Financial. The firm disclosed that conflict but told clients it mitigated it by referring them “solely based on that individual’s answer to questions during the potential client’s onboarding process” and did not “give preferential treatment on the number of referrals” to adviser-owners, according to the order.
The SEC called that description misleading because once salespeople got involved, referrals “could be based on any number of factors” and could have been affected by conflicts including those equity interests. Zoe Financial has since removed or revised the language.
“Investment advisers have a fiduciary obligation to fully and fairly disclose material conflicts of interest,” said Sheldon Pollock, associate director of the SEC’s New York Regional Office. “Advisers must live up to those disclosure obligations in all aspects of their advisory services, including when they offer a new technology or new feature to their clients.”
The SEC found that Zoe Financial willfully violated Section 206(2) of the Investment Advisers Act of 1940, an antifraud provision that can be violated through negligence alone. Without admitting the findings, Zoe Financial agreed to a cease-and-desist order and a censure and to pay the $450,000 penalty within 14 days.
In accepting the settlement, the SEC considered remedial steps the firm took. Zoe Financial revised its compliance manual to make clear that salespeople are not to give clients their own recommendations, and it hired a full-time, in-house chief compliance officer.
Visit the AltsWire directory page.
