WASHINGTON (CN) - Two Tampa-area investment advisers made $4.3 million by failing to tell clients they were being paid by offshore funds they recommended despite "substantial risks and red flags," the SEC said in an enforcement action Wednesday.
The SEC filed a cease and desist order against Larry C. Grossman and Gregory J. Adams.
It claims that Grossman made $3.3 million and Adams $1 million through the "undisclosed compensation arrangements."
In a statement announcing its order, the SEC said that Adams and Grossman "solicited and directed 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 charged in a separate enforcement action last year. Grossman and Adams failed to inform 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."
Grossman lives in Tarpon Springs, Fla., Adams in Palm Harbor. Both are 58.
Grossman is the principal manager of Sovereign International Pension Services, Inc., an IRA administrator.
Adams bought Sovereign and affiliates from Grossman in October 2008, and still owns and operates Sovereign Wealth Inc., the SEC said. He's also managing director of Weybridge Capital, which manages the Sheffield family of funds registered and licensed in the British Virgin Islands. Adams filed for Chapter 7 bankruptcy in May.
They have 20 days to file an answer.
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