SEC Charges Two Florida-Based Investment Advisers with Preying on Retirees and Violating the Custody Rule

The SEC announced fraud charges against two Tampa-area investment advisers accused of failing to inform clients truthfully about compensation received from offshore funds. The advisers recommended the funds as safe investments despite substantial risks and red flags.

The SEC's Enforcement Division alleged that Gregory J. Adams and Larry C. Grossman solicited and directed the clients of their investment firm, Sovereign International Asset Management, to invest almost exclusively in funds controlled by an asset manager named Nikolai Battoo, whom the SEC has previously charged in a separate enforcement action. Adams and Grossman promoted the investments as safe, diversified, independently administered and audited, and suitable for the investment objectives and risk profiles of their clients, who were often retirees.

The advisers are 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.

See: SEC Press Release and Order.
Related news: "SEC Extends No-Action Relief under Advisers Act Custody Rule" (November 6, 2013); "SEC Charges Three Firms with Violating Custody Rule (with Lofchie Comment)" (October 28, 2013); "SEC Issues Guidance Update Regarding IAA Custody Rule (with Lofchie Comment)" (August 7, 2013).