In the Matter of Gray Financial Group, Inc., et al.
Admin. Proc. File No. 3-16554
On November 22, 2017, the Commission settled administrative and cease-and-desist proceedings (the “Order”) that was instituted on May 21, 2015 against Gray Financial Group, Inc. (“Gray Financial”), Laurence O. Gray (“Gray”), Robert C. Hubbard, IV (“Hubbard”) (collectively, the “Respondents”). In the Order, the Commission found that, between July 2012 and August 2013, Gray Financial, its founder Gray, and Hubbard, who was the firm’s co-CEO during part of this time, violated the federal securities laws when they recommended, offered and sold investments in a Gray Financial proprietary fund of funds, GrayCo Alternative Partners II, LP (“GrayCo Alt. II”), to four Georgia public pension clients, despite the fact that they knew, were reckless in not knowing, or should have known that these investments did not comply with the restrictions on alternative investments imposed by Georgia law. Additionally, in October 2012, when recommending GrayCo Alt. II to one of these clients, Gray Financial and Gray made specific material misrepresentations concerning the investment’s compliance with the Georgia law and the number and identity of prior investors in the fund.
The Commission ordered the Respondents to pay a total of $476,298.72 in disgorgement, prejudgment interest, and civil money penalties to the Commission, pursuant to the payment plan detailed in the Order. The Commission also created a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, so the penalties, along with the disgorgement and prejudgment interest, collected can be distributed to those harmed by the Respondents’ conduct described in the Order (the “Fair Fund”). See the Commission’s Order: Release No. IA-4812.
On August 22, 2019, the Commission published a notice of the proposed plan of distribution and opportunity for comment and simultaneously published the proposed plan of distribution (“Proposed Plan”). The Proposed Plan proposes Noel Gittens, a Commission employee, serve as the Fund Administrator to oversee the administration and distribution of the Fair Fund. The notice provides the public with 30 days to submit their comments on the Proposed Plan. See the Commission’s Notice: Release No. 34-86738 and Proposed Plan.
The Proposed Plan proposes to distribute the Net Fair Fund to investors who were harmed as a result of the Respondents’ material misrepresentations and who suffered harm as calculated by the methodology described in paragraph 10 of the Proposed Plan.
For more information, please contact the Commission:
Office of Distributions