Jul 10
2019

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 designed to provide disclosures to clients in plain language.

Texas Securities Commissioner Travis J. Iles on July 9 entered a Disciplinary Order against Grove Capital for failing to use the version of Form ADV Part 2 that has been required since 2011. James Grove is president of the firm.

The Form ADV is the primary disclosure document that investment advisers provide to their clients and file with both state securities authorities and the SEC. (See Form ADV: Essential Adviser Information, right.)

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.

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