SEC Charges Two Tampa-Area Investment Advisers of Fraud | Investor

Posted on November 27th, 2013 at 2:17 PM

From the Desk of Jim Eccleston at Eccleston Law Offices:

On November 20, 2013, the Securities and Exchange Commission (“SEC”) announced charges against two Tampa-area investment advisers accused of committing fraud by failing to truthfully inform clients about compensation received from offshore funds they were recommending as safe investments despite substantial risks and red flags. In addition, the advisers were also charged with contributing to violations of the “custody rule” that requires investment advisory firms to establish specific procedures to safeguard and account for client assets.

            The SEC alleged that Gregory Adams and Larry Grossman solicited and directed clients of their investment firm, Sovereign International Asset Management, to invest almost exclusively in funds controlled by an asset manager, Nikolai Battoo. The SEC charged Battoo separately last year. Specifically, the SEC alleged that Grossman and Adams failed to inform their clients about the conflict of interest in recommending these investments as Battoo was paying them millions of dollars in compensation for steering investors to his funds.

            According to the SEC, Grossman was paid approximately $3.3 million and Adams received $1 million in the undisclosed compensation agreements. Moreover, Grossman and Adams insisted that the investments were safe, diversified, independently administered and audited, and suitable for their clients’ investment objectives and risk profiles.  Most of these clients were retirees. In all actuality, Battoo’s funds that were being sold by Grossman and Adams were risky, lacked diversification, and lacked independent administrators and auditors. Lastly, Grossman and Adams failed to investigate numerous red flags surrounding Battoo and these funds.

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

Related Attorneys: James J. Eccleston


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