Rudyard Kipling famously quipped “Oh, East is East and West is West and never the twain shall meet.” Although crafted in 1889, this sentiment is newly applicable to a D.C. Circuit Court of Appeals opinion in The Robare Group v. S.E.C, 922 F.3d 468, 479-80 (D.C. Cir. 2019). The D.C. Circuit essentially held that Willfulness is Willfulness and Negligence is Negligence, and never the twain shall meet, only less poetically. This potentially landmark decision held that willfulness and negligence are mutually exclusive standards of liability – one requiring intent to commit wrongdoing and the other requiring a lack of intent to commit wrongdoing – and the SEC cannot impose civil liability under both standards for the same conduct.
Robare arose out of a 2014 administrative cease and desist proceeding against The Robare Group (“TRG”), an investment advisory firm, and its principals and co-owners, Mark L. Robare and Jack L. Jones. The complaint alleged that respondents received a fee from Fidelity Investments (“Fidelity”), which provided clearing services for TRG’s advisory clients, whenever TRG’s clients invested in certain funds offered on Fidelity’s online platform. The SEC further alleged that TRG failed to disclose this fee and that TRG had a conflict of interest arising from the revenue-sharing arrangement between TRG and Fidelity. Continue reading