In re Garrison Investment Group LP

 1 
 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No. 6113 / September 9, 2022 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-21050 
 
 
In the Matter of 
 
Garrison Investment Group LP 
 
Respondent. 
 
ORDER INSTITUTING ADMINISTRATIVE 
AND CEASE-AND-DESIST PROCEEDINGS, 
PURSUANT TO SECTIONS 203(e) AND 203(k) 
OF THE INVESTMENT ADVISERS ACT OF 
1940, MAKING FINDINGS, AND IMPOSING 
REMEDIAL SANCTIONS AND A CEASE-AND-
DESIST ORDER  
 
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 
public interest that public administrative and cease-and-desist proceedings be, and hereby are, 
instituted pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 
(“Advisers Act”) against Garrison Investment Group LP (“Garrison” or “Respondent”).   
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose 
of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 
which the Commission is a party, and without admitting or denying the findings herein, except as 
to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 
admitted, Respondent consents to the entry of this Order Instituting Administrative and Cease-and-
Desist Proceedings Pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 
1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order 
(“Order”), as set forth below. 
  

 2 
 
III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that: 
 
Summary 
 
1. Garrison, a registered investment adviser, is an investment adviser to private funds. 
This matter concerns Garrison’s violations of the federal securities laws in connection with the 
financial statement audits of private funds that Garrison advised. Garrison failed to timely distribute 
annual audited financial statements prepared in accordance with Generally Accepted Accounting 
Principles (“GAAP”) to investors in certain private funds that it advised. In addition, Garrison did 
not promptly update its Forms ADV as new events regarding those audits occurred. These failures 
resulted in violations of Section 206(4) of the Advisers Act and Rule 206(4)-2 thereunder, 
commonly referred to as the “custody rule,” and Section 204(a) and Rule 204-1(a) thereunder, 
which required Garrison to update certain information about Garrison’s private fund audits in its 
Forms ADV.      
 
Respondent 
 
2. Garrison Investment Group LP (“Garrison”) is a Delaware limited partnership with 
its principal place of business in New York, New York.  Garrison has been registered with the 
Commission as an investment adviser since October 2010. On its Form ADV dated June 3, 2022, 
Garrison reported that it had approximately $1.69 billion in regulatory assets under management, 
almost all of which is managed in pooled investment vehicles. On September 13, 2019, the 
Commission instituted settled public administrative and cease-and-desist proceedings against 
Garrison and its affiliate In the Matter of Garrison Investment Group LP and Garrison Capital 
Advisers LLC, Advisers Act Rel. No. 5345, (Sept. 13, 2019). The Commission found that Garrison 
violated Sections 34(b) and 57(a)(4) of the Investment Company Act and Rule 17d-1 thereunder, 
and Section 206(4) of the Advisers Act and Rule 206(4)-2 thereunder. The firms consented to the 
order, without admitting or denying the Commission’s findings, and paid a penalty of $250,000. 
 
Other Relevant Entities 
 
3. Garrison Credit Opportunities Holdings LP (“GCOH”) is a private fund formed as a 
Cayman Islands limited partnership. At all relevant times, an affiliate under common control with 
Garrison was the general partner of GCOH. Garrison has been the investment adviser to GCOH 
since October 2010. 
 
4. Ethika Diversified Opportunity Real Estate Fund, L.P. (“Ethika”) is a private fund 
formed as a Delaware limited partnership. At all relevant times, an affiliate under common control 
with Garrison was the general partner of Ethika. Garrison has been the investment adviser to 
Ethika since September 2018. 
                                                 
1
 The findings herein are made pursuant to Respondent’s Offer and are not binding on any other person or entity in 
this or any other proceeding.  
 

 3 
 
5. Garrison Real Estate Fund IV LP (“GREFIV”) is a private fund formed as a 
Delaware limited partnership. At all relevant times, an affiliate under common control with 
Garrison was the general partner of GREFIV. Garrison has been the investment adviser to 
GREFIV since April 2018. 
 
6. Garrison European Real Estate Lending Fund I LLC (“GERELF”) is a private fund 
formed as a Delaware limited liability company. At all relevant times, an affiliate under common 
control with Garrison was the managing member of GERELF. Garrison has been the investment 
adviser to GERELF since March 2018. 
 
7. Garrison Middle Market Funding A LP (“GMMFA”) is a private fund formed as a 
Delaware limited partnership. At all relevant times, an affiliate under common control with 
Garrison was the general partner of GMMFA. Garrison has been the investment adviser to 
GMMFA since November 2012. 
 
8. Garrison Middle Market Funding II LP (“GMMFII”) is a private fund formed as a 
Delaware limited partnership. At all relevant times, an affiliate under common control with 
Garrison was the general partner of GMMFII. Garrison has been the investment adviser to 
GMMFII since February 2016. 
 
9. Garrison Middle Market Funding II A LP (“GMMFIIA”) is a private fund formed 
as a Delaware limited partnership. At all relevant times, an affiliate under common control with 
Garrison was the general partner of GMMFIIA. Garrison has been the investment adviser to 
GMMFIIA since February 2018. 
 
10. GREF IV Co-Invest LP (“GREFIVC”) is a private fund formed as a Delaware 
limited partnership. At all relevant times, an affiliate under common control with Garrison was the 
general partner of GREFIVC. Garrison has been the investment adviser to GREFIVC since 
September 2018. 
 
11. GREF IV Co-Invest A LP (“GREFIVCA”) is a private fund formed as a Delaware 
limited partnership. At all relevant times, an affiliate under common control with Garrison was the 
general partner of GREFIVCA. Garrison has been the investment adviser to GREFIVCA since 
December. 2018. 
 
Garrison Failed to Distribute Required Audited Financial Statements 
 
12. The custody rule requires that registered investment advisers who have custody of 
client funds or securities implement an enumerated set of requirements to prevent the loss, misuse, 
or misappropriation of those assets.  
 
13. An investment adviser has custody of client assets if it holds, directly or indirectly, 
client funds or securities, or if it has the ability to obtain possession of those assets. See Advisers 
Act Rule 206(4)-2(d)(2). A related person of Garrison has served as the managing member or 
general partner of GCOH and Ethika at all relevant times, and has had the authority to make 

 4 
decisions for, and act on behalf of, them. Garrison is therefore deemed to have custody of GCOH’s 
and Ethika’s assets as defined in Advisers Act Rule 206(4)-2.  
 
14. An investment adviser with custody of client assets must, among other things:  
(i) ensure that a qualified custodian maintains the client assets; (ii) notify the client in writing of 
accounts opened by the adviser at a qualified custodian on the client’s behalf; (iii) have a 
reasonable basis for believing that the qualified custodian sends account statements at least 
quarterly to clients, except if the client is a limited partnership or limited liability company for 
which the adviser or a related person is a general partner or managing member, the account 
statements must be sent to each limited partner or member; and (iv) ensure that client funds and 
securities are verified by actual examination each year by an independent public accountant at a 
time chosen by the accountant without prior notice or announcement to the adviser. See Advisers 
Act Rule 206(4)-2(a)(1)-(5).  
 
15. The custody rule provides an alternative to complying with the requirements of 
Advisers Act Rule 206(4)-2(a)(2), (3) and (4) for investment advisers to limited partnerships or 
other types of pooled investment vehicles. The custody rule provides that an investment adviser 
“shall be deemed to have complied with” the independent verification requirement and is not 
required to satisfy the notification and accounts statements delivery requirements with respect to a 
fund if the fund is subject to audit at least annually and “distributes [the fund’s] audited financial 
statements prepared in accordance with generally accepted accounting principles to all limited 
partners . . . within 120 days of the end of [the fund’s] fiscal year” (“Audited Financials 
Alternative”). See Advisers Act Rule 206(4)-2(b)(4). The accountant performing the audit must be 
an independent public accountant that is registered with, and subject to regular inspection by, the 
Public Company Accounting Oversight Board (“PCAOB”). See Advisers Act Rule 206(4)- 
2(b)(4)(ii). An investment adviser to a limited partnership that fails to meet the requirements of the 
Audited Financials Alternative to timely distribute audited financial statements prepared in 
accordance with GAAP would need to satisfy all of the requirements of Rule 206(4)-2(a)(2)-(4) in 
order to avoid violating the custody rule.  
 
16. In 2018 and 2019, with respect to GCOH, Garrison purported to rely on the Audited 
Financials Alternative in order to comply with the custody rule, but Garrison failed to have the 
required GCOH audits performed. Accordingly, Garrison did not satisfy the requirements of the 
Audited Financials Alternative in Rule 206(4)-2(b)(4) for GCOH. It was therefore obligated to 
comply with Advisers Act Rule 206(4)-2(a)(2), (3) and (4), which Garrison also failed to do.  
 
17. In 2020 and 2021, with respect to Ethika, Garrison purported to rely on the Audited 
Financials Alternative in order to comply with the custody rule, but Garrison failed to timely 
deliver the audited financials to Ethika’s investors. Accordingly, Garrison did not satisfy the 
requirements of the Audited Financials Alternative in Rule 206(4)-2(b)(4) for Ethika. It was 
therefore obligated to comply with Advisers Act Rule 206(4)-2(a)(2), (3) and (4), which Garrison 
also failed to do. 
 

 5 
Garrison Failed to Promptly Amend Information 
In Its Forms ADV Concerning the Private Fund Audits 
 
18. Item 7.B of Form ADV, Part 1A requires an investment adviser to state whether it 
is an adviser to any private fund. In that case, the adviser must also complete Section 7.B.(1) of 
Form ADV, Part 1A, Schedule D.    
 
19. Section 7.B.23.(a) requires an investment adviser to disclose the following 
information for each private fund managed by the adviser:  (i) whether the private fund’s financial 
statements are subject to an annual audit (Section 7.B.23.(a)(1)); (ii) whether those financial 
statements, if annually audited, are prepared in accordance with GAAP (Section 7.B.23.(a)(2)); 
(iii) an identification of the auditing firm and whether the firm is an independent public accountant 
registered with the PCAOB that is subject to the PCAOB’s regular inspection (Section 7.B.23.(a), 
(b), (d), (e), and (f)); and (iv) whether the private fund’s audited financial statements for the most 
recently completed fiscal year have been distributed to fund investors (Section 7.B.23.(g)).      
     
20. Last, Section 7.B.23.(h) requires an investment adviser to state whether all of the 
audit reports prepared by the auditing firm for each of its advised funds, since the adviser’s last 
annual updating amendment, contained unqualified audit opinions. In Section 7.B.23.(h), the 
private fund investment adviser must state “Yes,” “No,” or “Report Not Yet Received.”  
     
21. Section 204(a) of the Advisers Act and Rule 204-1(a) thereunder require a 
registered investment adviser to amend its Form ADV at least annually, and more frequently as 
required by the instructions to Form ADV. In addition, the instructions to Form ADV, Part 1A, 
Schedule D, Section 7.B.23.(h) state that “If you check ‘Report Not Yet Received,’ you must 
promptly file an amendment to your Form ADV to update your response when the report is 
available.”  
 
22. In its Form ADV filing dated March 29, 2019, Part 1A, Schedule D, Section 7.B., 
paragraph 23(h), concerning seven funds, GREFIVCA, GREFIVC, GERELF, GMMFA, GMMFII, 
GMMFIIA, and GREFIV, (collectively, the “Funds”), Garrison stated “Report Not Yet Received” 
to the question, “Do all of the reports prepared by the auditing firm for the private fund since your 
last updating amendment contain unqualified opinions?” Garrison received an audit opinion for 
each of the Funds on dates between April 16, 2019 and April 30, 2019. However, Garrison did not 
update or revise its Form ADV until its next annual updating amendment (approximately 11 
months after receiving the audit opinions).  
 
23. In its Form ADV filing dated March 30, 2020 and dated March 31, 2021, Part 1A, 
Schedule D, Section 7.B., paragraph 23(h), concerning GREFIV, Garrison stated “Report Not Yet 
Received” to the question, “Do all of the reports prepared by the auditing firm for the private fund 
since your last updating amendment contain unqualified opinions?” Garrison received an audit 
opinion for GREFIV on April 20, 2020 and April 9, 2021, respectively.  However, Garrison did not 
update or revise its Form ADV for 2020 until its next annual updating amendment (approximately 
11 months after receiving the audit opinion) and did not update its Form ADV for 2021 until 
approximately 7 months after receiving the audit opinion and only after it was contacted by 
Commission staff. 

 6 
 
Violations 
 
24. As a result of the conduct described above, Garrison willfully
2
 violated Sections 
204(a) and 206(4) of the Advisers Act and Rules 204-1(a) and 206(4)-2 thereunder. 
 
IV. 
 In view of the foregoing, the Commission deems it appropriate and in the public interest to 
impose the sanctions agreed to in Respondent Garrison’s Offer. 
 
 Accordingly, pursuant to Sections 203(e) and 203(k) of the Advisers Act, it is hereby 
ORDERED that: 
 
 A. Respondent cease and desist from committing or causing any violations and any 
future violations of Sections 204(a) and 206(4) of the Advisers Act and Rules 204-1(a) and 206(4)-2 
thereunder. 
 
B. Respondent is censured. 
 
C. Respondent shall, within 10 days of the entry of this Order, pay a civil money 
penalty in the amount of $330,000 to the Commission for transfer to the general fund of the United 
States Treasury, subject to the Securities Exchange Act of 1934 Section 21F(g)(3). If timely 
payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717.  
 
Payment must be made in one of the following ways:   
 
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request;  
 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
 
Enterprise Services Center 
Accounts Receivable Branch 
                                                 
2
 “Willfully,” for purposes of imposing relief under Section 203(e) of the Advisers Act “‘means no more than that the 
person charged with the duty knows what he is doing.’”  Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) 
(quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). There is no requirement that the actor “also be aware 
that he is violating one of the Rules or Acts.”  Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). The decision in The Robare 
Group, Ltd. v. SEC, which construed the term “willfully” for purposes of a differently structured statutory provision, 
does not alter that standard. 922 F.3d 468, 478-79 (D.C. Cir. 2019) (setting forth the showing required to establish that 
a person has “willfully omit[ted]” material information from a required disclosure in violation of Section 207 of the 
Advisers Act). 

 7 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter identifying 
Garrison as a Respondent in these proceedings, and the file number of these proceedings; a copy of 
the cover letter and check or money order must be sent to Kimberly L. Frederick, Assistant 
Regional Director, Denver Regional Office, Securities and Exchange Commission, 1961 Stout 
Street, Suite 1700, Denver, CO 80294.  
 
 D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
treated as penalties paid to the government for all purposes, including all tax purposes. To preserve 
the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it 
shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 
compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 
this action (“Penalty Offset”). If the court in any Related Investor Action grants such a Penalty 
Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the 
Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty 
Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an 
additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 
in this proceeding. For purposes of this paragraph, a “Related Investor Action” means a private 
damages action brought against Respondent by or on behalf of one or more investors based on 
substantially the same facts as alleged in the Order instituted by the Commission in this 
proceeding. 
 
 By the Commission. 
 
 
 
Vanessa A. Countryman 
       Secretary 
 

1 

 UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

 

INVESTMENT ADVISERS ACT OF 1940 

Release No. 6113 / September 9, 2022 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-21050 

 

 

In the Matter of 

 

Garrison Investment Group LP 

 

Respondent. 

 

ORDER INSTITUTING ADMINISTRATIVE 

AND CEASE-AND-DESIST PROCEEDINGS, 

PURSUANT TO SECTIONS 203(e) AND 203(k) 

OF THE INVESTMENT ADVISERS ACT OF 

1940, MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A CEASE-AND-

DESIST ORDER  

 

I. 
 

 The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 

public interest that public administrative and cease-and-desist proceedings be, and hereby are, 

instituted pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 

(“Advisers Act”) against Garrison Investment Group LP (“Garrison” or “Respondent”).   

 

II. 
 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose 

of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 

which the Commission is a party, and without admitting or denying the findings herein, except as 

to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 

admitted, Respondent consents to the entry of this Order Instituting Administrative and Cease-and-

Desist Proceedings Pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 

1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order 

(“Order”), as set forth below. 

  



 2 

 

III. 
 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 

 

Summary 
 

1. Garrison, a registered investment adviser, is an investment adviser to private funds. 

This matter concerns Garrison’s violations of the federal securities laws in connection with the 

financial statement audits of private funds that Garrison advised. Garrison failed to timely distribute 

annual audited financial statements prepared in accordance with Generally Accepted Accounting 

Principles (“GAAP”) to investors in certain private funds that it advised. In addition, Garrison did 

not promptly update its Forms ADV as new events regarding those audits occurred. These failures 

resulted in violations of Section 206(4) of the Advisers Act and Rule 206(4)-2 thereunder, 

commonly referred to as the “custody rule,” and Section 204(a) and Rule 204-1(a) thereunder, 

which required Garrison to update certain information about Garrison’s private fund audits in its 

Forms ADV.      

 

Respondent 

 

2. Garrison Investment Group LP (“Garrison”) is a Delaware limited partnership with 

its principal place of business in New York, New York.  Garrison has been registered with the 

Commission as an investment adviser since October 2010. On its Form ADV dated June 3, 2022, 

Garrison reported that it had approximately $1.69 billion in regulatory assets under management, 

almost all of which is managed in pooled investment vehicles. On September 13, 2019, the 

Commission instituted settled public administrative and cease-and-desist proceedings against 

Garrison and its affiliate In the Matter of Garrison Investment Group LP and Garrison Capital 

Advisers LLC, Advisers Act Rel. No. 5345, (Sept. 13, 2019). The Commission found that Garrison 

violated Sections 34(b) and 57(a)(4) of the Investment Company Act and Rule 17d-1 thereunder, 

and Section 206(4) of the Advisers Act and Rule 206(4)-2 thereunder. The firms consented to the 

order, without admitting or denying the Commission’s findings, and paid a penalty of $250,000. 

 

Other Relevant Entities 

 

3. Garrison Credit Opportunities Holdings LP (“GCOH”) is a private fund formed as a 

Cayman Islands limited partnership. At all relevant times, an affiliate under common control with 

Garrison was the general partner of GCOH. Garrison has been the investment adviser to GCOH 

since October 2010. 

 

4. Ethika Diversified Opportunity Real Estate Fund, L.P. (“Ethika”) is a private fund 

formed as a Delaware limited partnership. At all relevant times, an affiliate under common control 

with Garrison was the general partner of Ethika. Garrison has been the investment adviser to 

Ethika since September 2018. 

                                                 
1 The findings herein are made pursuant to Respondent’s Offer and are not binding on any other person or entity in 

this or any other proceeding.  

 



 3 

 

5. Garrison Real Estate Fund IV LP (“GREFIV”) is a private fund formed as a 

Delaware limited partnership. At all relevant times, an affiliate under common control with 

Garrison was the general partner of GREFIV. Garrison has been the investment adviser to 

GREFIV since April 2018. 

 

6. Garrison European Real Estate Lending Fund I LLC (“GERELF”) is a private fund 

formed as a Delaware limited liability company. At all relevant times, an affiliate under common 

control with Garrison was the managing member of GERELF. Garrison has been the investment 

adviser to GERELF since March 2018. 

 

7. Garrison Middle Market Funding A LP (“GMMFA”) is a private fund formed as a 

Delaware limited partnership. At all relevant times, an affiliate under common control with 

Garrison was the general partner of GMMFA. Garrison has been the investment adviser to 

GMMFA since November 2012. 

 

8. Garrison Middle Market Funding II LP (“GMMFII”) is a private fund formed as a 

Delaware limited partnership. At all relevant times, an affiliate under common control with 

Garrison was the general partner of GMMFII. Garrison has been the investment adviser to 

GMMFII since February 2016. 

 

9. Garrison Middle Market Funding II A LP (“GMMFIIA”) is a private fund formed 

as a Delaware limited partnership. At all relevant times, an affiliate under common control with 

Garrison was the general partner of GMMFIIA. Garrison has been the investment adviser to 

GMMFIIA since February 2018. 

 

10. GREF IV Co-Invest LP (“GREFIVC”) is a private fund formed as a Delaware 

limited partnership. At all relevant times, an affiliate under common control with Garrison was the 

general partner of GREFIVC. Garrison has been the investment adviser to GREFIVC since 

September 2018. 

 

11. GREF IV Co-Invest A LP (“GREFIVCA”) is a private fund formed as a Delaware 

limited partnership. At all relevant times, an affiliate under common control with Garrison was the 

general partner of GREFIVCA. Garrison has been the investment adviser to GREFIVCA since 

December. 2018. 

 

Garrison Failed to Distribute Required Audited Financial Statements 

 

12. The custody rule requires that registered investment advisers who have custody of 

client funds or securities implement an enumerated set of requirements to prevent the loss, misuse, 

or misappropriation of those assets.  

 

13. An investment adviser has custody of client assets if it holds, directly or indirectly, 

client funds or securities, or if it has the ability to obtain possession of those assets. See Advisers 

Act Rule 206(4)-2(d)(2). A related person of Garrison has served as the managing member or 

general partner of GCOH and Ethika at all relevant times, and has had the authority to make 



 4 

decisions for, and act on behalf of, them. Garrison is therefore deemed to have custody of GCOH’s 

and Ethika’s assets as defined in Advisers Act Rule 206(4)-2.  

 

14. An investment adviser with custody of client assets must, among other things:  

(i) ensure that a qualified custodian maintains the client assets; (ii) notify the client in writing of 

accounts opened by the adviser at a qualified custodian on the client’s behalf; (iii) have a 

reasonable basis for believing that the qualified custodian sends account statements at least 

quarterly to clients, except if the client is a limited partnership or limited liability company for 

which the adviser or a related person is a general partner or managing member, the account 

statements must be sent to each limited partner or member; and (iv) ensure that client funds and 

securities are verified by actual examination each year by an independent public accountant at a 

time chosen by the accountant without prior notice or announcement to the adviser. See Advisers 

Act Rule 206(4)-2(a)(1)-(5).  

 

15. The custody rule provides an alternative to complying with the requirements of 

Advisers Act Rule 206(4)-2(a)(2), (3) and (4) for investment advisers to limited partnerships or 

other types of pooled investment vehicles. The custody rule provides that an investment adviser 

“shall be deemed to have complied with” the independent verification requirement and is not 

required to satisfy the notification and accounts statements delivery requirements with respect to a 

fund if the fund is subject to audit at least annually and “distributes [the fund’s] audited financial 

statements prepared in accordance with generally accepted accounting principles to all limited 

partners . . . within 120 days of the end of [the fund’s] fiscal year” (“Audited Financials 

Alternative”). See Advisers Act Rule 206(4)-2(b)(4). The accountant performing the audit must be 

an independent public accountant that is registered with, and subject to regular inspection by, the 

Public Company Accounting Oversight Board (“PCAOB”). See Advisers Act Rule 206(4)- 

2(b)(4)(ii). An investment adviser to a limited partnership that fails to meet the requirements of the 

Audited Financials Alternative to timely distribute audited financial statements prepared in 

accordance with GAAP would need to satisfy all of the requirements of Rule 206(4)-2(a)(2)-(4) in 

order to avoid violating the custody rule.  

 

16. In 2018 and 2019, with respect to GCOH, Garrison purported to rely on the Audited 

Financials Alternative in order to comply with the custody rule, but Garrison failed to have the 

required GCOH audits performed. Accordingly, Garrison did not satisfy the requirements of the 

Audited Financials Alternative in Rule 206(4)-2(b)(4) for GCOH. It was therefore obligated to 

comply with Advisers Act Rule 206(4)-2(a)(2), (3) and (4), which Garrison also failed to do.  

 

17. In 2020 and 2021, with respect to Ethika, Garrison purported to rely on the Audited 

Financials Alternative in order to comply with the custody rule, but Garrison failed to timely 

deliver the audited financials to Ethika’s investors. Accordingly, Garrison did not satisfy the 

requirements of the Audited Financials Alternative in Rule 206(4)-2(b)(4) for Ethika. It was 

therefore obligated to comply with Advisers Act Rule 206(4)-2(a)(2), (3) and (4), which Garrison 

also failed to do. 

 



 5 

Garrison Failed to Promptly Amend Information 

In Its Forms ADV Concerning the Private Fund Audits 

 

18. Item 7.B of Form ADV, Part 1A requires an investment adviser to state whether it 

is an adviser to any private fund. In that case, the adviser must also complete Section 7.B.(1) of 

Form ADV, Part 1A, Schedule D.    

 

19. Section 7.B.23.(a) requires an investment adviser to disclose the following 

information for each private fund managed by the adviser:  (i) whether the private fund’s financial 

statements are subject to an annual audit (Section 7.B.23.(a)(1)); (ii) whether those financial 

statements, if annually audited, are prepared in accordance with GAAP (Section 7.B.23.(a)(2)); 

(iii) an identification of the auditing firm and whether the firm is an independent public accountant 

registered with the PCAOB that is subject to the PCAOB’s regular inspection (Section 7.B.23.(a), 

(b), (d), (e), and (f)); and (iv) whether the private fund’s audited financial statements for the most 

recently completed fiscal year have been distributed to fund investors (Section 7.B.23.(g)).      

     

20. Last, Section 7.B.23.(h) requires an investment adviser to state whether all of the 

audit reports prepared by the auditing firm for each of its advised funds, since the adviser’s last 

annual updating amendment, contained unqualified audit opinions. In Section 7.B.23.(h), the 

private fund investment adviser must state “Yes,” “No,” or “Report Not Yet Received.”  

     

21. Section 204(a) of the Advisers Act and Rule 204-1(a) thereunder require a 

registered investment adviser to amend its Form ADV at least annually, and more frequently as 

required by the instructions to Form ADV. In addition, the instructions to Form ADV, Part 1A, 

Schedule D, Section 7.B.23.(h) state that “If you check ‘Report Not Yet Received,’ you must 

promptly file an amendment to your Form ADV to update your response when the report is 

available.”  

 

22. In its Form ADV filing dated March 29, 2019, Part 1A, Schedule D, Section 7.B., 

paragraph 23(h), concerning seven funds, GREFIVCA, GREFIVC, GERELF, GMMFA, GMMFII, 

GMMFIIA, and GREFIV, (collectively, the “Funds”), Garrison stated “Report Not Yet Received” 

to the question, “Do all of the reports prepared by the auditing firm for the private fund since your 

last updating amendment contain unqualified opinions?” Garrison received an audit opinion for 

each of the Funds on dates between April 16, 2019 and April 30, 2019. However, Garrison did not 

update or revise its Form ADV until its next annual updating amendment (approximately 11 

months after receiving the audit opinions).  

 

23. In its Form ADV filing dated March 30, 2020 and dated March 31, 2021, Part 1A, 

Schedule D, Section 7.B., paragraph 23(h), concerning GREFIV, Garrison stated “Report Not Yet 

Received” to the question, “Do all of the reports prepared by the auditing firm for the private fund 

since your last updating amendment contain unqualified opinions?” Garrison received an audit 

opinion for GREFIV on April 20, 2020 and April 9, 2021, respectively.  However, Garrison did not 

update or revise its Form ADV for 2020 until its next annual updating amendment (approximately 

11 months after receiving the audit opinion) and did not update its Form ADV for 2021 until 

approximately 7 months after receiving the audit opinion and only after it was contacted by 

Commission staff. 



 6 

 

Violations 

 

24. As a result of the conduct described above, Garrison willfully2 violated Sections 

204(a) and 206(4) of the Advisers Act and Rules 204-1(a) and 206(4)-2 thereunder. 

 

IV. 

 In view of the foregoing, the Commission deems it appropriate and in the public interest to 

impose the sanctions agreed to in Respondent Garrison’s Offer. 

 

 Accordingly, pursuant to Sections 203(e) and 203(k) of the Advisers Act, it is hereby 

ORDERED that: 

 

 A. Respondent cease and desist from committing or causing any violations and any 

future violations of Sections 204(a) and 206(4) of the Advisers Act and Rules 204-1(a) and 206(4)-2 

thereunder. 

 

B. Respondent is censured. 

 

C. Respondent shall, within 10 days of the entry of this Order, pay a civil money 

penalty in the amount of $330,000 to the Commission for transfer to the general fund of the United 

States Treasury, subject to the Securities Exchange Act of 1934 Section 21F(g)(3). If timely 

payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717.  

 

Payment must be made in one of the following ways:   

 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;  

 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

 

Enterprise Services Center 

Accounts Receivable Branch 

                                                 
2 “Willfully,” for purposes of imposing relief under Section 203(e) of the Advisers Act “‘means no more than that the 

person charged with the duty knows what he is doing.’”  Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) 

(quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). There is no requirement that the actor “also be aware 

that he is violating one of the Rules or Acts.”  Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). The decision in The Robare 

Group, Ltd. v. SEC, which construed the term “willfully” for purposes of a differently structured statutory provision, 

does not alter that standard. 922 F.3d 468, 478-79 (D.C. Cir. 2019) (setting forth the showing required to establish that 

a person has “willfully omit[ted]” material information from a required disclosure in violation of Section 207 of the 

Advisers Act). 

http://www.sec.gov/about/offices/ofm.htm


 7 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter identifying 

Garrison as a Respondent in these proceedings, and the file number of these proceedings; a copy of 

the cover letter and check or money order must be sent to Kimberly L. Frederick, Assistant 

Regional Director, Denver Regional Office, Securities and Exchange Commission, 1961 Stout 

Street, Suite 1700, Denver, CO 80294.  

 

 D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 

treated as penalties paid to the government for all purposes, including all tax purposes. To preserve 

the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it 

shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 

compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 

this action (“Penalty Offset”). If the court in any Related Investor Action grants such a Penalty 

Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the 

Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty 

Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an 

additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 

in this proceeding. For purposes of this paragraph, a “Related Investor Action” means a private 

damages action brought against Respondent by or on behalf of one or more investors based on 

substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding. 

 

 By the Commission. 

 

 

 

Vanessa A. Countryman 

       Secretary