© 2014 The Texas Lawbook.
By Natalie Posgate – (September 2) – The U.S. Securities & Exchange Commission announced Tuesday fraud charges it brought on Houston-based Robare Group Ltd.
The SEC claims in Tuesday’s cease-and-desist order that the investment advisory firm failed to disclose a conflict of interest to its clients when it recommended they invest in particular mutual funds and in turn received compensation from the broker that was selling the funds.
Catherine Floyd and Barbara Gunn of the SEC’s Fort Worth Regional Office conducted the investigation that led to the commission’s conclusions, as well as John Farinacci. Fort Worth SEC attorney Janie Frank will lead the litigation.
Chicago attorney Alan Wolper of Ulmer & Berne, who defends Robare Group, told The Texas Lawbook that his client denies the allegations and intends to defend the allegations vigorously.
“We look forward to hearing whatever the SEC may put before the ALJ in its effort to meet its burden of proof… we also look forward, ultimately, to prevailing,” he said.
In its complaint, the SEC claims that Robare Group and the broker, whose identification was undisclosed, began their arrangement in 2004 and that Robare received approximately $440,000 throughout eight years from the broker.
The complaint also says that Robare Group disclosed of the compensation agreement in a December 2011 filing with the SEC, but the disclosure was inadequate because it stated Robare Group “may receive compensation from broker when it was, in fact, receiving payments from broker.” The SEC also claims the firm’s disclosure falsely represented that it does not receive any economic benefit from a non-client for providing investment advice.
In addition to the firm itself, the SEC is charging Robare founder, majority shareholder and limited partner Mark Robare as well as Jack Jones, Jr., who is also a limited partner of the firm. According to the complaint, Robare Group served as an investment adviser to approximately 350 managed discretionary accounts and had assets under management of approximately $150 million as of Aug. 26.
In a statement, Marshall Sprung, the co-chief of the SEC Enforcement Division’s Asset Management Unit, said payments to investment advisers may taint their ability to provide impartial advice to their clients.
“By failing to fully disclose its agreements with the brokerage firm, Robare Group deprived its clients of important information they were entitled to receive,” he said.
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