The United States District Court for the District of Massachusetts has ordered Sage Advisory Group and principal Benjamin Lee Grant (“Lee Grant”) to pay over $1M for two SEC fraud cases. The ruling comes after a federal jury found both of them liable.
In the first case, the regulator is accusing Lee Grant of using allegedly false and misleading statements to fraudulently persuade brokerage customers to move their assets to Sage, which was the firm he was starting in 2005. He purportedly told clients that the 2% wrap fee they would have to pay Sage for transaction, management, and advisory services would not cost as much in the long run as the 1% fee and trading commissions that his former employer, brokerage firm Wedbush Morgan Securities, charged them.
The SEC said that Lee Grant claimed it was First Wilshire Securities Management Inc. that was recommending that clients move their assets to Sage with him. Wilshire Securities Management was the investment adviser managing the assets of these clients at Wedbush. The regulator contends, however, that First Wilshire Securities never made such a recommendation.
Lee Grant also purportedly told customers that if they didn’t move their assets over to Sage, First Wilshire Securities would no longer be willing to manage their funds at Wedbush. These clients were not aware that Lee Grant was profiting from their investments. He earned around $500K in compensation in ’04-’05 and then over $1M in ’06-07. In the final judgment of the SEC case, Lee Grant and Sage were ordered to pay $500K in disgorgement, over $51K in prejudgment interest, and a $350K civil penalty.
The other securities case involves Lee Grant’s father, Jack Grant, whom the SEC had barred in 1988 for investor fund misappropriation and unregistered securities sales of $5.5M. He allegedly set up almost all of his clients with accounts at his son’s firm and then worked with Lee Grant to provide investment advice to small businesses and individuals.
Clients are said to have paid Jack for financial planning, while his son’s firm received an asset management fee. Investors were never notified that Jack was barred from working with investment advisers.
In 2013, a court entered a final judgment against the older Grant, ordering him to pay over $201K and other relief. Lee Grant was ordered to pay a civil penalty of $150K. He and his firm also admitted not just to violating the federal securities laws but also to the underlying facts related to the violations. He agreed to a permanent bar from associating with any investment adviser, dealer, or broker.
Investors are the ones who suffer when brokers commit fraud. We, at Shepherd Smith Edwards and Kantas, LTD LLP, have helped thousands to recover their financial losses. To find out whether you have grounds for a broker fraud case, contact our securities law firm today and ask for your free case consultation.
Court Orders Massachusetts Investment Adviser to Pay Over $1 Million to Conclude Two SEC Fraud Cases, SEC, June 1, 2015
Jury Returns Verdict Against Massachusetts Investment Adviser in SEC Fraud Case, SEC, August 13, 2014
SEC Examines Municipal Advisers and Alternative Mutual Funds, Reviews “Wrap-Fee” Accounts, Stockbroker Fraud Blog, August 20, 2014