All In The Family

Son faces fraud charges for allegedly helping father avoid SEC regulatory bar

A financial advisor previously barred by the SEC allegedly crafted a succession plan to keep himself involved in his firm — by going into business with his son.

Before the bar went through, the advisor, Walter Grenda, sold his book of business to his son, Gregory Grenda, according to investigators. Afterwards, Walter Grenda allegedly kept working with clients in an office space shared with his son, without disclosing his bar to clients.

Gregory Grenda and his firm, Grenda Group, are being charged with fraud. Walter Grenda is being charged with aiding and abetting in the fraud by the SEC, as well as violating his bar.

"Bars are designed to protect retail investors from those the SEC has deemed unfit to provide advisory services,” Marc Berger, director of the SEC’s New York regional office, said in a statement. “Here, we allege that bar was circumvented, and took action to ensure investors are protected.”

Gregory Grenda and his firm deny the SEC’s complaints against them, according to their attorney.

“When these alleged activities [from Walter Grenda] came to our attention, we were very surprised by them,” the lawyer, Joseph Makowski, says.

Walter Grenda’s lawyer, April Orlowski, did not respond to a request for comment.

The SEC originally barred Walter Grenda and then-fellow advisor Timothy Dembski, co-owners of the financial firm Reliance Financial in Buffalo, New York, in December of 2014 for advising clients to invest in a hedge fund that lost 80% of its value in a single month. Reliance’s registration as an investment advisor was revoked, according to the SEC order.

Even before the bar took place, Walter Grenda had already sold the firm to his son, in anticipation of how the SEC investigation would turn out, the complaint says.

The Grenda Group had filed an application, which was approved, to succeed Reliance by early 2014, nearly a year before the SEC order. Over 70% of Gregory Grenda’s client accounts at Grenda Group were once affiliated with his father, according to the SEC complaint.

Clients received a letter that Gregory would “assume day-to-day management” of the firm in March of 2014, while the father would "fully concentrate on investment and market research, risk management, and portfolio management techniques," says the SEC complaint.

Walter Grenda opened a new firm, Generational Wealth Management, an estate planning and tax services company, in a shared office space with Grenda Group, according to the complaint.

The father was still the owner of the building, and he stayed there to run his business, his lawyer, says.

“It wasn’t a situation where my client was in a position to bar him from the building, because it was his building,” he says.

But Walter Grenda wasn’t just working in the same office space, according to the SEC complaint — the two companies were tied together.

Walter Grenda offered his services as a package deal to his son’s clients at Grenda Group, the complaint says. Both father and son communicated with clients on behalf of both Grenda Group and Generational Wealth Management. Additionally, Maryann Grenda, Walter’s wife and Gregory’s mother, worked for and answered phones for both of companies according to the SEC complaint.

Thus situated, Walter Grenda allegedly accessed Grenda Group client files, logged into client investment accounts, interacted with clients and even met with a potential client. Clients were never informed that Walter Grenda had been barred by the SEC, according to the complaint. Instead, he made misleading statements to clients who inquired about his regulatory troubles.

Additionally, Walter Grenda impersonated others on the phone with the firm's broker-dealer, Schwab, after the SEC settlement. On at least five different phone calls with Schwab, Walter Grenda impersonated his son; he also impersonated at least one client, the SEC claims.

As a result, Schwab investigated and later terminated services with Grenda Group, citing the firm’s failure to adhere to their business standards, according to the SEC.

Schwab did not immediately respond to a request for comment.

However, the lawyer said Grenda Group left Schwab of its own volition.

“My client was in the process of leaving the Schwab platform for technical reasons, the ability to allocate trades,” says Makowski. "There were apparently some issues with respect to the Schwab platform that was causing my client to look at different platforms, independent of Mr. Grenda’s alleged activities.”

The SEC complaint will seek as-yet undisclosed penalties and permanent injunctions.

PQS

 

 

 

Reprint In Part: OnWallStreet

 

“Securities offered through BB Graham & Co. a Registered Broker/Dealer, member FINRA/SIPC. Principal Planning Service Inc. is not affiliated with BB Graham & Co.”