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SEC Charges Firm With Fraud Over Undisclosed Mutual Fund Deal

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The Securities and Exchange Commission announced fraud charges on Tuesday against Robare Group Ltd., a Houston-based firm that the SEC claims was recommending mutual funds to clients without disclosing a conflict of interest.

An investigation by the SEC’s enforcement division found that Robare Group had an undisclosed compensation agreement with a brokerage firm that paid the advisory firm a percentage of every dollar clients invested in certain mutual funds, the SEC announced in a statement. Over eight years, Robare Group received approximately $440,000.

“Payments to investment advisors for recommending certain types of investments may taint their ability to provide impartial advice to their clients,” Marshall Sprung, co-chief of the SEC enforcement division’s asset management unit, said in a statement. “By failing to fully disclose its agreements with the brokerage firm, Robare Group deprived its clients of important information they were entitled to receive.”

Robare Group submitted a revised Form ADV in December 2011 that disclosed the compensation agreement, according to the SEC, but falsely said it didn’t receive compensation from a non-client for providing investment advice. The SEC also claims the disclosure was inadequate because it said the firm “may” receive benefits from the broker instead of stating that it definitely was.

The SEC is also charging that Robare Group entered a new agreement with the broker that provided similar in 2012 that it didn’t disclose — again inadequately — until June 2013.

Robare Group is owned by Mark Robare and Jack Jones. The SEC claims Robare reviewed and approved the revised Forms ADV, and Jones reviewed and signed all but one.

The SEC is charging that Robare Group as a firm and Robare as an individual “willfully violated” Sections 206(1) and 206(2) of the Investment Advisers Act, and that all three parties — Robare Group, Robare and Jones  — violated Section 207.

Check out Ex-LPL Broker to Pay $1.9M in Fraud Case on ThinkAdvisor.


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