Initiated By
FINRA
Allegations
FINRA RULE 2010: GRIVAS FORMED A FUND TO POOL FUNDS FOR THE SOLE PURPOSE OF INVESTING, ACQUIRING, HOLDING AND/OR SELLING FACEBOOK, INC. (FACEBOOK) SECURITIES. THE FUND'S INTENTION, AS SET OUT IN THE PRIVATE PLACEMENT MEMORANDUM (PPM), WAS TO PURCHASE SHARES OF FACEBOOK ON THE SECONDARY MARKET FOR PRIVATE COMPANY STOCK. BY OFFERING INVESTORS THE OPPORTUNITY TO INVEST IN THE FUND, THEY WOULD GAIN AN INDIRECT INTEREST IN PRIVATELY HELD FACEBOOK STOCK BEFORE AN INITIAL PUBLIC OFFERING.
GRIVAS WAS THE SOLE DESIGNATED MANAGER FOR THE FUND AND HAD SOLE AUTHORITY TO INVEST ASSETS, PAY EXPENSES, AND OTHERWISE TRANSFER THE ASSETS OF THE FUND. GRIVAS HAD SOLE SIGNATORY AUTHORITY OVER THE FUND'S OPERATING ACCOUNT, WHICH INVESTED THE FUND'S ASSETS AND THE FUND'S MANAGEMENT ACCOUNT, WHICH WAS SET UP TO RECEIVE ANY OF THE MANAGEMENT FEES DUE TO THE FUND.
GRIVAS' MEMBER FIRM WAS ONE OF THREE PLACEMENT AGENTS THAT SOLD INTERESTS IN THE FUND. THE FUND USED THE MONEY RAISED FROM THE OFFERING TO PURCHASE FACEBOOK SHARES. DUE TO LIMITED AVAILABILITY OF SHARES IN THE SECONDARY MARKET, THE FUND WAS UNABLE TO INVEST ALL THE FUNDS IT RAISED INTO FACEBOOK SHARES.
GRIVAS WIRED $224,046 FROM THE FUND'S OPERATING ACCOUNT TO ITS MANAGEMENT ACCOUNT, AS HIS MANAGEMENT FEE PURSUANT TO THE TERMS OF THE FUND'S PPM, CONSTITUTING 2 PERCENT OF THE GROSS PROCEEDS OF THE OFFERING. GRIVAS WIRED AN ADDITIONAL $280,000 FROM THE FUND'S OPERATING ACCOUNT TO ITS MANAGEMENT ACCOUNT AND THEN IMMEDIATELY TRANSFERRED THE $280,000 FROM THE FUND'S MANAGEMENT ACCOUNT TO A BANK ACCOUNT THAT HE OWNS AND MAINTAINS FOR HIS OWN PERSONAL INVESTMENT PURPOSES WITH THE SOLE AUTHORITY TO WITHDRAW FUNDS FROM THE ACCOUNT. THE SAME DAY, GRIVAS WIRED THE ENTIRE $280,000 FROM HIS BANK ACCOUNT TO THE BANK ACCOUNT OF HIS FIRM'S HOLDING COMPANY. THE NEXT DAY, GRIVAS WIRED $280,000 FROM THE HOLDING COMPANY'S BANK ACCOUNT TO HIS FIRM'S BANK ACCOUNT, WHICH WAS EXPERIENCING FINANCIAL DIFFICULTIES.
THE FIRM SUBMITTED A SECURITIES EXCHANGE ACT OF 1934 RULE 17A-11(B) NOTIFICATION, INDICATING THAT THE FIRM HAD A NET CAPITAL DEFICIENCY OF $110,000 AND INDICATED THAT THE FIRM HAD RECEIVED A CAPITAL CONTRIBUTION OF $280,000, WHICH ALLOWED THE FIRM TO GET BACK INTO NET CAPITAL COMPLIANCE.
GRIVAS WAS NOT ENTITLED TO WITHDRAW $280,000 AND TRANSFER IT TO HIS CAPITAL-DEFICIENT FIRM. NEITHER THE FUND'S PPM NOR THE OPERATING AGREEMENT ALLOWED GRIVAS TO RECEIVE MORE THAN THE MAXIMUM 2 PERCENT MANAGEMENT FEE FROM THE FUND WHICH HE HAD ALREADY WITHDRAWN. GRIVAS DID NOT PROVIDE ANY NOTICE, BEFORE OR AFTERWARD, TO THE INVESTORS IN THE FUND THAT HE WAS WITHDRAWING $280,000 FROM THE FUND OR USING PROCEEDS OF THE FUND TO CAPITALIZE HIS FIRM. GRIVAS DID NOT ISSUE A NOTE OR ANY OTHER TYPE OF AGREEMENT, IN HIS OR HIS FIRM'S BEHALF, ACKNOWLEDGING THE $280,000 WITHDRAWAL FROM THE FUND'S BANK ACCOUNT.
FOR PURPOSES OF ASSISTING GRIVAS WITH THE FUND'S BUSINESS ACTIVITIES, GRIVAS RETAINED A CONSULTANT ON BEHALF OF THE FUND. GRIVAS DID NOT DISCLOSE TO THE CONSULTANT THAT HE HAD TRANSFERRED $280,000 FROM THE FUND TO THE FIRM UNTIL THE DAY BEFORE THE CONSULTANT PROVIDED INVESTIGATIVE TESTIMONY TO FINRA. UNTIL THAT TIME, THE CONSULTANT SENT GRIVAS REPEATED EMAILS INFORMING HIM THAT THE FUND NEEDED TO RETURN THE REMAINING UNINVESTED FUNDS TO INVESTORS.
Resolution
Decision
Bar
Bar (Permanent)
Registration Capacities Affected
All Capacities
Duration
Indefinite
Start Date
7/16/2015
Sanctions
Monetary Penalty other than Fines
Amount
$7,307.43
Regulator Statement
HEARING PANEL DECISION RENDERED FEBRUARY 14, 2014 WHEREIN GRIVAS IS FOUND TO HAVE CONVERTED FUNDS, IN VIOLATION OF FINRA RULE 2010, THEREFORE HE IS BARRED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY AND ORDERED TO PAY COSTS IN THE AMOUNT OF $5,649.95. ON MARCH 10, 2014, GRIVAS APPEALED THE DECISION TO THE NATIONAL ADJUDICATORY COUNCIL (NAC).
NAC DECISION RENDERED JULY 16, 2015 WHEREIN GRIVAS WAS ORDERED TO PAY COSTS IN THE AMOUNT OF $7,307.43 AND BARRED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY. THE SANCTIONS WERE BASED ON FINDINGS THAT GRIVAS CONVERTED FUNDS BELONGING TO AN INVESTMENT FUND THAT HE FORMED AND MANAGED.
SEC decision rendered March 29, 2016. Accordingly, on the basis of the Commission's opinion issued, it is ordered that the disciplinary action taken by FINRA against Grivas, and the assessment of costs imposed, is sustained. The sanctions were based on findings that Grivas converted funds of an investment fund that he formed and managed and transferred those funds to his member firm in order to cure the firm's net capital deficiency. The findings stated that to cure the deficiency, Grivas transferred $280,000 from the fund to his firm. Grivas failed to notify fund investors of the transfer. The findings also stated that FINRA began an investigation of the firm. As part of this investigation, both Grivas and a consultant to the fund appeared for OTR testimony. On February 20, 2013, the day before the consultant's OTR and over eight months after the $280,000 transfer, Grivas told the consultant for the first time that the fund's management had withdrawn $280,000 from the fund's operating account. Two months after Grivas' OTR and almost eleven months after the $280,000 transfer, Grivas repaid the $280,000 into the fund's operating account. The decision became final May 31, 2016.
Broker Comment
I STRONGLY DENY ALL ALLEGATIONS AND CLAIMS OF ANY WRONGDOING IN THEIR ENTIRETY, AND I AM IN THE PROCESS OF VIGOURSLY DEFENDING THESE ALLEGATIONS AND CLAIMS AND I FEEL THAT I WILL BE EXONERATED COMPLETELY
