SEC Charges Nashville-Based Financial Planner With Fraud

The Securities and Exchange Commission took emergency action to charge Nashville, Tenn.-based investment advisor Gordon B. Grigg and his firm ProTrust Management, with securities fraud, and obtained a court order freezing their assets. The SEC alleges that Grigg and ProTrust defrauded clients out of at least $6.5 million and misrepresented that their money was invested in the federal government's Troubled Asset Relief Program (TARP) and other securities that, in reality, do not exist.

According to the SEC's complaint, Grigg is a self-purported financial planner and investment advisor, but neither he nor his firm is registered with the SEC or a state regulator. The SEC alleges that Grigg obtained control over funds of at least 27 clients since 2007 and falsely claimed to have invested their money in securities described as "Private Placements." Grigg created fraudulent account statements reflecting his clients' ownership of these non-existent securities. The SEC further alleges that Grigg began falsely claiming in December that ProTrust had the ability to invest client funds in government-guaranteed commercial paper and bank debt as part of the TARP program. Grigg also falsely claimed to have partnerships and other business relationships with several of the nation's top investment firms.

"As alleged in our complaint, Grigg and ProTrust preyed upon investors' desire for safety by claiming associations with reputable investment firms and the government's TARP program," said Katherine Addleman, regional director of the SEC's Atlanta regional office, in a press release. "Investors should carefully check any purported affiliations. In this case, not only were such claims false, but there is in fact no program in which investors can buy debt guaranteed by the TARP program," she said.

According to the SEC's complaint, filed in the U.S. District Court for the Middle District of Tennessee, Nashville Division, the defendants have violated the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. As relief, the SEC's complaint seeks (i) a temporary restraining order, preliminary and permanent injunctions; (ii) an asset freeze; (iii) an accounting of all funds raised; (iv) an order expediting discovery and preventing the destruction of documents; (v) disgorgement of ill-gotten gains plus prejudgment interest thereon; and (vi) the imposition of financial penalties.

After the SEC's complaint was filed, Grigg and ProTrust consented to the emergency relief sought by the SEC, and the Honorable Judge William J. Haynes, Jr., U.S. District Judge for the Middle District of Tennessee, Nashville Division, issued a temporary restraining order to prevent the defendants from further violations and freezing their assets. The Commission acknowledges the assistance of the Special Inspector General of the TARP program and looks forward to continued coordination in this and other matters.