(Originally published December 1, 2015) By Paul L. Vorndran
As a cautionary tale, Colorado licensed investment advisers should be mindful that non-securities transactions with their clients will be scrutinized by the Colorado Divisions of Securities. In December 2013, Secure Retirement Group, Inc. doing business as Secure Financial Group, Inc. and its principal, David L. Gonzales, entered into a Stipulation for Consent Order with the DOS. The Stipulation recites DOS allegations that Secure Financial, a licensed investment adviser, had engaged in the sale of precious metals to its advisory clients. Secure Financial recommended that clients liquidate a portion of their securities, took custody of these liquidated client funds prior to the purchase of the coins, and marked up the purchase from third parties precious metal vendors without disclosing this to their clients. The Stipulation stated that Secure Financial violated requirements of the Colorado Securities Act relating to custody of client funds, § 11-51-407(5), C.R.S., and failed to disclose substantial markups of the coins to its clients.
The DOS apparently took a very dim view of this ‘side’ business in which Secure Financial was engaged, and insisted that Secure Financial and Gonzales withdraw their licenses and agree not to reapply for licensure in Colorado in the Order . Investment advisers should be aware that any transactions with their clients will be closely scrutinized by regulators.
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