A federal district court ordered a Massachusetts investment advisor to pay more than $1 million to settle two Securities and Exchange Commission (SEC) fraud cases, in which he was accused of misleading his investors and hiding his father’s securities industry bar from customers.
According to a statement from the SEC, Benjamin Lee Grant and his investment advisor firm, Sage Advisory Group LLC, were found liable for fraud in the first case and admitted liability for fraud in the second case.
“Lee Grant saw the switch from being a broker to an investment adviser as a simple business proposition, one that promised a steady income stream and a heftier bottom line,” Paul Levenson, Regional Director of the SEC’s Boston Regional Office, said in a statement. “But in pushing his clients to sign up he ignored his fiduciary duties and concealed his own financial interests. Instead of cashing in, he now he finds himself barred from the industry and paying over a million dollars.”
In the first case, filed in September of 2010, the SEC said that Lee Grant made false and misleading statements to his former brokerage customers to entice them to do move their accounts to his newly-minted investment advisory firm, Sage. Prior to October 2005, Lee Grant was a registered representative of broker-dealer Wedbush Morgan Securities and had customer accounts totaling about $100 million in assets, almost all of which were managed by the California-based investment adviser First Wilshire Securities Management.
When he resigned to open up his own shop, authorities said, Lee Grant misled customers by telling them the changes in their accounts were being done at the suggestion of First Wilshire and that that firm was not willing to continue managing their assets if they stayed with Wedbush. He also told customers the “wrap fee” program offered by Sage would offer potential savings, without disclosing that a new arrangement with a discount broker would produce substantial savings to the benefit of Sage – not its customers. The SEC said Lee Grant also falsely suggested his customers might suffer disruption in First Wilshire’s management of their assets unless they signed and returned the new advisory and custodial account documents as soon as possible.
In the second case, filed in September of 2011, the SEC alleged that Sage and Lee Grant – and Lee Grant’s father Jack Grant – violated the antifraud provisions of the Investment Advisers Act by affiliating with Lee Grant’s father. Jack Grant had been barred from the industry based on a 1988 enforcement action alleging that he sold $5.5 million in unregistered securities and misappropriated investors’ funds.
According to the SEC’s complaint, Jack Grant retooled his service as the Law Offices of Jack Grant and then used his son to help implement his investment advice. Furthermore, the SEC said, Jack Grant, Lee Grant and Sage failed to inform their clients that Jack Grant had been barred from associating with investment advisers. The court entered a final judgment against Jack Grant in May 2013, and he was ordered to pay $201,392.27, among other relief.
