SEC Charges Florida Investment Adviser and His Company With Defrauding Investors
In an order instituting administrative proceedings the SEC Enforcement Division alleges that from at least mid-2009 through July 2014:
- Jacob and IBS misrepresented the risks and profitability of investments he purchased for investment advisory clients. Jacob was informed of investment risks of certain exchange traded funds but failed to disclose these risks to clients and told them that the investment strategy he used was safe, carried low or no risk, and would produce predictable profits.
- Jacob concealed from clients his disciplinary history, which included being disbarred as a lawyer for misappropriating client funds and other professional misconduct.
- Jacob and IBS were not registered with the SEC or any state as investment advisers and Jacob falsely told clients that he and IBS were not required to register as an investment adviser.
- Jacob gave false information to a brokerage firm about the advisory services he and IBS provided so that he could retain trading authorization over clients’ accounts and continue to receive advisory fees for managing the accounts.
“Investment advisers owe their clients a duty of full and fair disclosure of all material facts,” said Antonia Chion, an Associate Director in the SEC’s Division of Enforcement. “Advisers who conceal their disciplinary history and mislead clients about their investment strategy and the risks associated with it, as we allege Jacob did, are in breach of that duty.”
The SEC’s order alleges that Jacob and IBS willfully violated the antifraud provisions of federal securities laws and an SEC antifraud rule. The matter will be scheduled for a public hearing before an administrative law judge to adjudicate and determine what if any remedial actions are appropriate.
The SEC’s investigation, which is continuing, has been conducted by Breanne Atzert, Helaine Schwartz, and Ranah Esmaili, and supervised by Lisa Deitch. The Enforcement Division’s litigation will be led by Stephan Schlegelmilch and Joshua Braunstein.