The watchdog accused the adviser and his firm for hiding crucial information from clients, which must be exposed before the investors.
In its probe, the US regulator found that advisor advised clients at Oxford Investment Partners to invest in two businesses without disclosing the conflicts of interest that he co-owned one of them and had financial ties to the owners of the other.
Later, when both investments failed, Clarke tried to dispose his stake in Oxford to a client, he fraudulently inflated the value of his firm by at least $1.5m to make the client overpay by at least $112,000.
The SEC said in its allegation that in between 2007 to 2008, Clarke convinced three clients and extracted over $300,000 in loans originated by Cornerstone Funding Group, a company co-owned by Clarke. Although, Clarke never informed the investors that Clarke was a co-owner and would personally profit from successfully originated loans.
In a similar incident, in November 2008, Clarke convinced four clients to invest approximately $40,000 in HotStix, a privately-held company. The clients were not informed that the owners of HotStix were also co-owners and paid consultants of Oxford.
Commenting on the fraud committed by the advisor, SEC Enforcement Division’s Asset Management Unit Deputy Chief Marshall S Sprung said investment advisers have a fiduciary duty to be forthcoming with their clients and act in their best interests.
"Clarke breached that duty by deliberately overvaluing the firm and staying mum on his personal ties to the recommended investments," Sprung added.
