Earlier this week, the SEC charged a Houston financial adviser with fraud for failing to disclose to clients that it was profiting from a broker investing their money in mutual funds recommended by that broker. According to the SEC, Robare Group Ltd., a registered investment adviser that provides services for 350 separately managed accounts and currently managing about $150 million in assets, contracted in 2004 with an anonymous broker that the broker would pay Robare between two and twelve basis points on the client assets that the adviser invested in no-transaction-fee mutual funds on the broker’s platform.

From September 2005 to September 2013, Robare allegedly aquired about $441,000 in fess from that broker, using the broker for execution, custody, and clearing services for its clients. The agreement provided Mark L. Robare and Jack L. Jones, Jr., the co-owners of Robare, an incentive to recommend the broker’s mutual funds rather than other investments that might have been more suitable for the clients.

Robare also failed to disclose the revenue agreement from 2005 until December 2011 on its form ADV. At that time, Robare started disclosing the agreement, but the SEC alleges it was not sufficient. For example, it did not state that the agreement created a conflict of interest, and it stated that Robare “may receive compensation” from the broker when it was receiving the payments.

Alan Wolper, the attorney representing Robare, denied the SEC’s charges and is confident that the SEC will not be able to meet its burden of proof.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies.