Phoenix-Based Investment Adviser Charged with Fraud, SEC Alleges Undisclosed Conflicts of Interest
Last week, the SEC filed charges against Phoenix-based investment advisor Walter J. Clarke for allegedly recommending investments to his clients without disclosing important conflicts of interest. In particular, the SEC alleges that Clarke recommended investments in two businesses that he co-owned without advising his clients of his personal stake in the companies. The businesses subsequently failed, causing investors to suffer hundreds of thousands of dollars in losses.
According to the SEC, in 2007 and 2008, Clarke convinced three Oxford Investment Partners clients to invest a total of more than $300,000 in loans originated by Cornerstone Funding Group, which Clarke co-owned. He also convinced four clients to invest approximately $40,000 in a privately held company called HotStix, which was owned by several co-owners of Oxford, including Clarke. None of the seven clients was told of the ownership conflicts of interest, and all lost their money shortly after investing in the companies. Clarke also stands accused of fraudulently inflating the value of Oxford Investment Partners LLC in order to oversell 7.5% of his personal stake in the company by at least $112,000.
“Investment advisers have a fiduciary duty to be forthcoming with their clients and act in their best interests,” said Marshall S. Sprung, Deputy Chief of the SEC Enforcement Division’s Asset Management Unit. “Clarke breached that duty by deliberately overvaluing the firm and staying mum on his personal ties to the recommended investments.”