The SEC’s complaint, filed on Feb. 12, alleges that MacArthur and the other defendants listed recommended that their advisory clients invest more than $16 million in four private real estate investment funds without disclosing that the fund managers had paid them more than $1 million from 2014 to 2017.

Mark MacArthur, a son of Pastor John MacArthur of Grace Community Church in California, has been charged by the Securities and Exchange Commission along with a wealth management company he founded with defrauding their advisory clients.

The federal agency announced earlier this month that MacArthur, 52, his Criterion Management Insurance Services, Inc., as well as then co-owner Robert Gravette, allegedly breached their fiduciary duty and defrauded their advisory clients by failing to disclose significant financial conflicts of interest when recommending investments in private real estate investment funds.

The SEC’s complaint, filed on Feb. 12, alleges that MacArthur and the other defendants listed recommended that their advisory clients invest more than $16 million in four private real estate investment funds without disclosing that the fund managers had paid them more than $1 million from 2014 to 2017.

The $1 million payment was on top of the fees clients were already charged directly. The actions of MacArthur and his company also resulted in reduced returns for some of their clients.

“Because this additional side compensation was recurring and depended on Criterion’s clients remaining invested in the subject funds, Criterion, Gravette, and MacArthur not only had a financial incentive to recommend that their clients invest in the first instance, they were also incentivized to keep their clients in the funds going forward, rather than allocating their capital elsewhere. For two of the private placement funds, the undisclosed compensation that defendants received reduced the investment returns that defendants’ advisory clients would have otherwise received,” the complaint says.

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