A Massachusetts court has ordered Boston firm Sage Advisory Group and its principal Benjamin Lee Grant to pay more than $1 million, concluding two fraud cases. Mr. Grant has also agreed to a permanent bar, according to the Securities and Exchange Commission.
The SEC said that Mr. Grant had participated in fraudulent activity on two occasions, once when Mr. Grant allegedly encouraged his brokerage customers to transfer their funds to his new advisory firm, Sage Advisory Group, in 2010.
The second was when Mr. Grant and the firm allegedly violated a commission rule by creating a securities business and failing to tell clients that the SEC had barred his father, John "Jack" Grant, in 2011.
On May 29, the United States District Court for the District of Massachusetts made final judgments on the two cases. A federal court jury previously found Mr. Grant and his firm liable for fraud, and Mr. Grant admitted liability for fraud in the second case.
Mr. Grant could not be reached for comment. His attorney, William Haddad, did not reply to a request for comment.
In Mr. Grant's BrokerCheck report, however, Mr. Grant responded to the first case by saying "I disagree with the allegations of the SEC and intend to vigorously defend against them."
In the first case, Mr. Grant, who in 2005 left his former employer, broker-dealer Wedbush Morgan Securities, allegedly told his clients they would pay a 2% wrap fee to Sage that would cover advisory, management and transaction costs. He allegedly said that structure would work out to be less than the 1% fee plus trading commissions Wedbush charged.
Mr. Grant went on to say that the brokerage managing clients' assets, First Wilshire Securities Management Inc., suggested that those assets should be moved to Charles Schwab & Co., according to the SEC. According to the case documents, First Wilshire Securities never made that suggestion.
What Mr. Grant's clients did not know was that Mr. Grant was the one benefitting. Mr. Grant's compensation reached more than $1 million in 2006-2007, up from $500,000 in 2004-2005, according to the SEC.
In the second case, Mr. Grant's father, who had been barred by the SEC in 1988 because of his sale of unregistered securities and misappropriation of investor funds, continued to act as an investment adviser and set up 95% of his clients with accounts at his son's firm. Clients allegedly paid the elder Grant for his financial-planning services and paid an asset management fee to Sage Advisory Group.