The SEC is charging Robare Group Ltd., an investment advisory firm headquartered in Houston, Texas, with securities fraud. The regulator’s enforcement division says that the firm and co-owners Jack L. Jones Jr. and Mark L. Robare made mutual fund recommendations to clients even though they had a conflict.
According to the SEC, Robare and a broker-dealer purportedly had an undisclosed compensation agreement. The brokerage firm paid Robare Group compensation-a portion of each dollar that every client invested in certain mutual funds-for recommending the investments
The deal gave Robare, Jones, and the firm incentive for favoring these funds over other investments. The firm is accused of making about $440K in compensation over eight years from the agreement.
Although in 2011 Robare did modify its Form ADV to disclose the compensation agreement, the SEC claims that the form and later disclosures stated falsely that the investment advisory firm did not benefit financially for giving investment advice about the mutual funds. It wasn’t until last year that Robare disclosed there was a conflict of interest. However, the firm did not reveal that there was incentive to recommend certain mutual funds.
The SEC has been taking a closer look at compensation deals between brokers and asset managers. There is concern that payments to investment advisers for recommending certain investments is impairing their ability to give impartial advice that is in the best interests of clients. Also, investment advisers are required to disclose any conflicts of interest to customers.
Our Texas investment adviser fraud lawyers represent investors in recouping their losses. You shouldn’t have to sustain losses while an adviser, a broker, or anyone else profits at your expenses. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.
Read the SEC Order (PDF)
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