The Securities and Exchange Commission is charging investment adviser Arthur F. Jacob and his Innovative Business Solutions LLC with fraud. The regulator claims that the two of them deceived clients from 2009 into 2014 and violated the federal securities laws’ antifraud provisions along with an SEC antifraud rule.
In its order instituting administrative proceedings regarding the purported investment adviser fraud, the SEC Enforcement Division contended that IBS and Jacob misrepresented the profitability and risks of investments he had bought for clients. Rather than disclosing the risks involved in certain exchange-traded funds, Jacob purportedly told clients that his investment approach was safe, presented no or little risk, and would garner predictable earnings. He also is accused of making misstatements to clients regarding their investments’ profitability.
Jacob and his Florida-based firm are not registered as an investment adviser with the regulator or any state. He is accused of telling clients that registration was not mandatory and of hiding his disciplinary history. For example, Jacob was disbarred from being an attorney because he misappropriated client moneys and engaged in other misconduct, including make false statements while under oath and to the Bar Counsel, submitting false tax returns for a client, charging unreasonable fees, and violating a court order.
He also purportedly gave false information to a broker-dealer about the advisory services he offered so he could obtain trading authorization over clients’ accounts and receive fees for account management.
As SEC Enforcement Division Associate Director Antonia Chion noted, investment advisers have a duty to their clients to provide fair and complete disclosure of material facts, as well as give them pertinent information about investment strategy and any risks involved. They also must disclose whether they have any disciplinary history.
Because of his alleged scam, Jacob and IBS garnered over $517,000 in client investment advisory fees.
SEC Charges Florida Investment Adviser and His Company With Defrauding Investors, SEC, October 5, 2015
Read the SEC Order (PDF)