SEC Charges Investment Adviser, Affiliated Broker-Dealer and Their President for False and Misleading Statements and Omissions

October 1, 2021/US SEC

The Securities and Exchange Commission charged Laguna Niguel, California-based TCFG Investment Advisors, LLC (TCFG), TCFG’s affiliated broker-dealer TCFG Wealth Management, LLC (TCFG Wealth), and Richard James Roberts – their CEO, president, and managing member – with making materially false and misleading statements and omissions related to fee markups charged to TCFG’s advisory clients.

According to the SEC’s complaint, filed in the U.S. District Court for the Central District of California, from June 2014 through April 2020, TCFG and Roberts breached their fiduciary duty to advisory clients. As alleged, TCFG and Roberts disclosed that TCFG Wealth “may” receive portions of the fees charged to TCFG accounts by its unaffiliated clearing and custody firm when, in fact, Roberts had directed that firm to charge TCFG clients significant markup fees that were paid to TCFG Wealth. The complaint alleges that TCFG and Roberts later disclosed the existence of markups, but continued to mislead TCFG clients by claiming that it was only imposed “in some limited instances.” Roberts and TCFG allegedly knew, or were reckless and negligent for not knowing, that the clearing and custody firm’s ticket charges were instead marked up approximately 60 percent of the time. The complaint further alleges that TCFG – for which Roberts served as chief compliance officer – failed to implement written policies and procedures reasonably designed to prevent the sorts of disclosure and conflict of interest violations that arose from these practices. According to the complaint, Roberts used TCFG Wealth to aid and abet TCFG’s and Roberts’s violations.

The complaint charges TCFG and Roberts with violating the antifraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, and charges TCFG Wealth with aiding and abetting those violations. The complaint also charges TCFG with violating Advisers Act Section 206(4) and Rule 206(4)-7 thereunder, and Roberts with aiding and abetting those violations. The complaint seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties.

The SEC’s investigation was conducted by David M. Rosen and Gary Y. Leung in the Los Angeles Regional Office. The litigation will be conducted by Douglas M. Miller of the Los Angeles Regional Office, and supervised by Amy Jane Longo. The matter arose out of a referral from the Los Angeles Regional Office’s examination program with the exam conducted by Shawn McEnnis, Chris Jung, and Brian Krechman and supervised by Sang Lee.

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