SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22081 / September 1, 2011
Securities and Exchange Commission v. John A. Grant, Sage Advisory Group, LLC and Benjamin Lee Grant, 1:11-CV-11538 (D. Mass. September 1, 2011)
SEC CHARGES MASSACHUSETTS-BASED ATTORNEY FOR VIOLATING AN INVESTMENT ADVISER BAR AND HIS SON FOR FAILING TO DISCLOSE HIS FATHER’S BAR TO ADVISORY CLIENTS
The Securities and Exchange Commission announced that it filed a civil injunctive action today in federal district court in Massachusetts against John A. “Jack” Grant (“Jack Grant”), Sage Advisory Group, LLC, a Massachusetts-based investment adviser registered with the Commission, and its sole principal, owner, and employee, Benjamin Lee Grant (“Lee Grant”). The Commission’s complaint alleges that Jack Grant, a lawyer and former stockbroker, has violated and continues to violate a Commission bar from association with investment advisers by associating with his son Lee Grant’s investment advisory firm, Sage, and by acting as an investment adviser himself. The Complaint further alleges that Jack Grant, Lee Grant and Sage fraudulently failed to disclose Jack Grant’s barred status and disciplinary history to Sage’s advisory clients.
According to the Complaint, the Commission filed a previous enforcement action against Jack Grant in 1988 alleging that he sold $5,500,000 of unregistered securities and misappropriated investors’ funds. At that time, Jack Grant agreed to settle the case and to settle related administrative proceedings that resulted in a July 1988 Order issued by the Commission barring Jack Grant from association with broker, dealers, and investment advisers. Notwithstanding his bar from associating with investment advisers, Jack Grant did not remove himself from the securities business. Jack Grant continued to advise individuals and small businesses on the management of their assets and investments, including prior brokerage customers. He retooled his service as the Law Offices of Jack Grant, and continued providing investment advice, using his son, Lee Grant, to help implement his investment advice.
The Complaint alleges that, from at least 1998, Jack Grant has advised clients to invest through his son Lee Grant, who worked first as an associated person of an investment adviser, then as a registered representative of a broker-dealer and, since 2005, as the principal and sole director of a registered investment adviser, Sage. Lee Grant has been fully aware of Jack Grant’s bar from associating with investment advisers, but allowed his association with Sage nonetheless. Jack Grant, Lee Grant, and Sage failed to inform their advisory clients that Jack Grant is barred from associating with investment advisers. They also failed to disclose Jack Grant’s other disciplinary history: his suspension from practicing law for one year, imposed in 1994 following an indictment and conviction for bankruptcy fraud.
The Commission’s complaint alleges that Jack Grant, Sage and Lee Grant violated Section 206 of the Investment Advisers Act of 1940 (“Advisers Act”) and that Sage and Lee Grant violated Section 207 of the Advisers Act. The Commission seeks, among other things, the entry of a permanent injunction, disgorgement of ill-gotten gains plus pre-judgment interest, and the imposition of civil monetary penalties against Jack Grant, Sage and Lee Grant.
The Commission filed a separate civil injunctive action against Sage and Lee Grant on September 29, 2010, alleging that Sage and Lee Grant made material misrepresentations and omissions to his former brokerage customers in order to induce them to transfer their assets to Sage, his new advisory firm. That action is still pending.
For further information, see Litigation Release No. 21672 (September 29, 2010)(SEC charges Massachusetts-based investment adviser with fraud).