Texas Securities Commissioner fines Grove Capital Management over violation of plain language rule

Maria Nikolova

For eight years the company has failed to use a form designed to provide disclosures to clients in plain language.

Grove Capital Management Inc. paid a $5,000 fine and has been ordered to improve its compliance procedures after failing for eight years to use a form aimed at providing disclosures to clients in plain language.

Earlier this week, Texas Securities Commissioner Travis J. Iles entered a Disciplinary Order against Grove Capital for failing to use the version of Form ADV Part 2 that has been required since 2011. Prior to 2011, advisers made disclosures in a check-the-box format. The current Part 2 requires an adviser to prepare a plain English narrative brochure disclosing information business practices, fees and compensation, conflicts of interest, and other required disclosures.

Grove Capital had never updated its Part 2 brochure. From 2014 to August 2018, the firm added three new clients who received the disclosure form that should have been updated to the new format.

In addition to the fine, the firm agreed to hire an outside consultant to help it comply with securities laws, including updating its ADV Part 2.

The regulator reminds the public that investment advisers are required to provide their background information on Form ADV, which is split into two parts. Part 1 is a check-the-box form with information about the IA’s business, employees, ownership, clients, and any disciplinary actions involving the IA or its employees.

Part 2 is a plain language narrative that serves as the primary disclosure document for investment advisers. It contains information about:

The IA’s business practices and any significant changes the firm has undergone recently;

  • Fees and compensation;
  • Multiple costs folded into a “wrap fee” charged to clients;
  • Conflicts of interest that the firm has or may have in representing someone;
  • Firm’s social media accounts;
  • Types of clients the firm has;
  • Disciplinary information, if any, about the firm and its employees;
  • When and how the firm reviews client accounts;
  • Financial information about the firm.

Investors should thoroughly review Parts 1 and 2 before doing business with an investment adviser.

Read this next

Digital Assets

Tether earns $700 million in Q1, taking excess reserves to $1.6 billion

Tether chief technology officer Paolo Ardoino said the world’s largest stablecoin issuer expects to earn more than $700 million in the January-Mach quarter, which will be added to the reserve backing its stablecoin (USDT).

Digital Assets

Narwhal Finance Secures $1M in Seed Funding Led by Animoca Ventures

Narwhal Finance received strong support from Animoca Ventures and angel investors in a $1 million seed funding round, reinforcing the company’s vision of providing an accessible platform to all.


SteelEye tries ChatGPT for market surveillance

This capability can be used as a starting point for initiating a surveillance investigation and to standardize workflow processes to boost the throughput and consistency of cases. It is also useful when analyzing communications in foreign languages, as the system returns the above insights in English regardless of the languages being used.

Industry News

SEC charges ex-Morgan Stanley advisor of NBA players after $13m fraud

Darryl Matthew Cohen was arrested this week and is facing three different federal counts of fraud, which could amount to 20 years in prison if convicted, besides the SEC complaint. 

Industry News

AWS FinTech Africa Accelerator launched, applications until April 27, 2023

Founders will be offered tech resources, expert guidance, and a global network of industry leaders, technologists, entrepreneurs, investors, associations, and partners, in order to build their fintech products. 

Industry News

Interactive Brokers pays unmatched interest up to USD 4.33% on cash balances over $10,000

For clients of Interactive Brokers, interest accrues daily, and payments are posted on a monthly basis. Interactive Brokers’ cash management is integrated into client broker accounts, making it simple to earn interest and borrow at the lowest rates without transferring cash.

Retail FX

FP Markets adds cTrader to roster of trading platforms that include MT4, MT5, Iress

“Our market share swings towards the more sophisticated segment of traders and we have been inundated with requests for an additional platform with more institutional-style characteristics. The addition of the cTrader trading platform offering allows our clients the choice to further shape their trading experience with us.”

Digital Assets

SEC mulls lawsuit against Coinbase’s staking and spot trading

Shares in Coinbase fell 15 percent after the US Securities and Exchange Commission threatened a potential enforcement action against the crypto exchange over certain products.

Digital Assets

Kraken halts ACH transactions amid banking crisis

San Francisco-based cryptocurrency exchange Kraken says it will no longer process Automated Clearing House (ACH) following the failure of its payments partner, Silvergate Bank.