A Houston-based investment advisory firm steered clients to certain mutual funds without disclosing that it was receiving payments from the broker who offered those funds, the U.S. Securities and Exchange Commission alleged in a civil fraud complaint on Tuesday.
Robare Group Ltd received a percentage of every dollar that its clients invested in the mutual funds, the SEC said in the complaint. That gave the firm and co-owners Mark Robare and Jack Jones Jr. an incentive to recommend the funds to clients over other investment opportunities, the SEC said. The conflict of interest, which was unknown to investors, generated about $440,000 in additional revenue for the firm, the SEC said.
"We deny the charges. We intend to defend the allegations vigorously," said Alan Wolper, a Chicago-based lawyer who is representing the firm and its co-owners. They look forward to hearing the SEC's evidence and, ultimately, to prevailing, Wolper said.
The SEC action does not identify the broker or funds related to the dispute. The firm managed about $150 million as of August 2013, according to the SEC.
Robare Group revised its public disclosure form in late 2011 to disclose the compensation arrangement, but the SEC says the same form and more recent ones "falsely stated" that Robare did not receive an economic benefit from non-clients for giving investment advice.
The disclosures were not adequate because they said Robare Group "may" receive compensation from the broker for selling the mutual funds, when it was definitely receiving payments, the SEC said.