US authorities have charged two Tampa-based investment advisors with fraud for allegedly failing to inform clients about compensation received from offshore funds they were recommending as safe investments, despite substantial risks.

US authorities have
charged two Tampa, FL-based investment advisors with fraud for allegedly failing to
inform clients about compensation received from offshore funds they were
recommending as safe investments, despite substantial risks.

The Securities and Exchange Commission alleges
that Gregory Adams and Larry Grossman failed to disclose that they
were paid for investments they recommended to clients.

The advisors have also been 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. 

According to the SEC, Grossman was paid
approximately $3.3 million and Adams received
$1 million in the undisclosed compensation arrangements. 

The SEC alleges that the advisors solicited
and directed clients of their investment firm Sovereign International Asset
Management to invest almost exclusively in funds controlled by asset manager Nikolai
Battoo, who 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, the SEC said.

The SEC said that while
Grossman and Adams had promoted the investments as being safe, they had failed
to investigate numerous red flags surrounding Battoo and his funds.