Gray Lion Capital LLC is a new registered investment advisor firm with a registration pending
with the U. S. Securities and Exchange Commission (“SEC”).
The principal owner of Gray Lion Capital LLC is Anthony M. Doran, Managing Principal.
Advisory Services
Gray Lion Capital LLC (“Gray Lion” or “Advisor”) principal service is providing fee-based
investment advisory and portfolio management services. The Advisor practices custom
management of portfolios, on a discretionary basis, according to the client’s objectives. The
Advisor’s primary approach is to use a tactical allocation strategy aimed at reducing risk and
increasing performance. The Advisor may use exchange listed securities, over-the-counter
securities, foreign securities, corporate debt securities, CDs, mutual funds, United States
government securities, and interests in real estate partnerships to accomplish this objective. The
Advisor measures and selects mutual funds by using various criteria, such as the fund manager’s
tenure, and/or overall career performance. The Advisor may recommend, on occasion,
redistributing investment allocations to diversify the portfolio in an effort to reduce risk and
increase performance. The Advisor may recommend specific stocks to increase sector weighting
and/or dividend potential. The Advisor may recommend employing cash positions as a possible
hedge against market movement which may adversely affect the portfolio. The Advisor may
recommend selling positions for reasons that include, but are not limited to, harvesting capital
gains or losses, business or sector risk exposure to a specific security or class of securities,
overvaluation or overweighting of the position(s) in the portfolio, change in risk tolerance of client,
or any risk deemed unacceptable for the client’s risk tolerance.
Selection of Other Advisors
Gray Lion may recommend and refer clients to unaffiliated money managers or investment
advisors. Through this arrangement, the client will then enter into an advisory agreement with the
third-party money manager authorizing them to assist and advise the client in establishing
investment objectives and develop an investment strategy to meet those objectives by identifying
appropriate investments and monitoring such investments. In consideration for such, the third-
party money manager will receive an investment advisory fee, billed quarterly in arrears as defined
in the third-party money manager’s Form ADV Part 2A Brochure. The third-party managers may
charge performance fees to Qualified Clients. Gray Lion will receive a portion of the investment
advisory fee and any performance fees, for the solicitation and referral of the client to the third-
party manager, and ongoing assistance to the client by completing their client questionnaire and
account opening paperwork, development of investment policy recommendations, providing
oversight of the third-party managers, and managing the ongoing client relationship.
Gray Lion will tailor its advisory services to its client’s individual needs based on meetings and
conversations with the client. If clients wish to impose certain restrictions on investing in certain
securities or types of securities, the Advisor will address those restrictions with the client to have
a clear understanding of the client’s requirements.
Gray Lion does not provide portfolio management services to wrap fee programs.
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As of the approval date of the firm, Gray Lion had no clients and therefore no client assets under
management.
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Asset Management Fees
Pursuant to an Investment Advisory contract signed by each client, the client will pay Gray Lion
an annual management fee, payable quarterly in arrears, based on the value of portfolio assets of
the account on the last business day of the preceding quarter. The management fee may be adjusted
to account for significant contributions or withdrawals made to the account during the quarter.
New account fees will be prorated from the inception of the account to the end of the first quarter.
The maximum management fee is 1.00% and may be lower depending on the type and complexity
of the investment management strategy employed as well as the size of the account or overall client
relationship. Management fees may be reduced or waived for directors, officers, and employees of
Gray Lion at the discretion of management. These fees may be negotiated by Gray Lion at its sole
discretion. The client will give written authorization permitting the Advisor to be paid directly
from their account held by the custodian. The custodian will send a statement at least quarterly to
the client. Where it is impractical to deduct fees directly from the client account, client will be
sent an invoice on a quarterly basis for any outstanding advisory fees due.
All fees paid to Gray Lion for investment advisory services are separate and distinct from the
expenses charged by mutual funds to their shareholders. These fees and expenses are described in
each fund’s prospectus. These fees will generally include a management fee and other fund
expenses.
Clients that are introduced to third-party money managers will contractually arrange to pay fees
directly to the third-party money manager. Gray Lion will receive up to 50% of the fee paid by
clients to the third-party money manager for its ongoing oversight and services depending on the
division of responsibilities between the advisors. This amount is paid by the third-party money
manager to Gray Lion, not the client.
At no time will Gray Lion accept or maintain custody of a client’s funds or securities except for
authorized fee deduction. Client is responsible for all custodial and securities execution fees
charged by the custodian and executing broker-dealer. The Advisor’s fee is separate and distinct
from the custodian and execution fees.
Neither Gray Lion nor its supervised persons accept compensation for the sale of securities or other
investment products, including asset-based sales charges or service fees from the sale of mutual
funds.
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Although Gray Lion does not charge performance-based fees to clients for which it provides direct
portfolio management services, where appropriate to the client needs, Gray Lion introduces clients
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to third-party money managers that can charge such fees to Qualified Clients. Since Gray Lion
receives up to 50% of fees paid by the client to the third-party money managers, it will indirectly
receive performance fees.
In order for the other manager to charge performance fees, the client must meet the definition of a
Qualified Client. Qualified Clients must meet one or more of the following requirements:
i. Client is a natural person who, or a company that, immediately after entering into the
contract has at least $1,000,000 under the management of the Advisor;
ii. Client is a natural person who, or a company that, immediately prior to entering into the
contract, has a net worth (together, in the case of a natural person, with assets held jointly
with a spouse) of more than $2,100,000 at the time the contract is entered into (excluding
the equity in the Clients’ primary residence) reduced by any indebtedness that is secured
by the Client’s primary residence in excess of the estimate fair market value of the
residence;
iii. Client is a qualified purchaser as defined in section 2(a)(51)(A) of the Investment Company
Act of 1940 at the time the contract is entered into.
The third-party money manager will determine suitability through due diligence inquiries
determined to be appropriate in the circumstances by the money manager. The calculation of the
performance fees, as well as the inherent conflicts of interest in charging such fees, are disclosed
in the other manager’s Form ADV Part 2A Brochure.
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The Advisor will offer its services to individuals, trusts, estates, charitable organizations,
corporations and business entities.
The Advisor’s cumulative minimum account requirement for opening and maintaining an account
is $2 million. However, the Advisor may at its sole discretion accept accounts with a lower value.
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The Advisor utilizes fundamental analysis techniques in formulating investment advice or
managing assets for clients.
Fundamental analysis of businesses involves analyzing its financial statements and health, its
management and competitive advantages and its competitors and markets. Fundamental analysis
is performed on historical and present data but with the goal of making financial forecasts. There
are several possible objectives; to conduct a company stock valuation and predict its probable price
evolution; to make a projection on its business performance; to evaluate its management and make
internal business decisions and to calculate its credit risk.
The Advisor utilizes an investment strategy of long-term purchases of securities held at least for
one year across all client accounts.
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Clients need to be aware that investing in securities involves risk of loss that clients need to be
prepared to bear.
The methods of analysis and investment strategies followed by the Advisor are utilized across all
of the Advisors clients, as applicable. One method of analysis or investment strategy is not more
significant than the other as the Advisor is considering the client’s portfolio, risk tolerance, time
horizon and individual goals. However, the client should be aware that with any trading that occurs
in the client account, the client will incur transaction and administrative costs.
Investing includes the risk that the value of an investment can be negatively affected by factors
specifically related to the investment (e.g., capability of management, competition, new inventions
by other companies, lawsuits against the company, labor issues, patent expiration, etc.), or to
factors related to investing and the markets in general (e.g., the economy, wars, civil unrest or
terrorism around the world, concern about oil prices or unemployment, etc.).
Risks of fundamental analysis may include risks that market actions, natural disasters, government
actions, world political events or other events not directly related to the price or valuation of a
specific company’s fundamental analysis can adversely impact the stock price of a company
causing a portfolio containing that security to lose value. Risks may also include that the historical
data and projections on which the fundamental analysis is performed may not continue to be
relevant to the operations of a company going forward, or that management changes or the business
direction of management of the company may not permit the company to continue to produce
metrics that are consistent with the prior company data utilized in the fundamental analysis, which
may negatively affect the Advisor’s estimate of the valuation of the company.
All investments involve some degree of risk. In finance, risk refers to the degree of uncertainty
and/or potential financial loss inherent in an investment decision. In general, as investment risks
rise, investors seek higher returns to compensate themselves for taking such risks.
Every saving and investment product have different risks and returns. Differences include how
readily investors can get their money when they need it, how fast their money will grow, and how
safe their money will be. The primary risks faced by investors include:
Business Risk
With a stock, you are purchasing a piece of ownership in a company. With a bond, you are loaning
money to a company. Returns from both of these investments require that that the company stays
in business. If a company goes bankrupt and its assets are liquidated, common stockholders are
the last in line to share in the proceeds. If there are assets, the company’s bondholders will be paid
first, then holders of preferred stock. If you are a common stockholder, you get whatever is left,
which may be nothing.
The business risk in purchasing an annuity is that the financial strength of the insurance company
issuing the annuity may decline and not be able to pay out the annuity obligation.
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Volatility Risk
Even when companies aren’t in danger of failing, their stock price may fluctuate up or
down. Large company stocks as a group, for example, have lost money on average about one out
of every three years. A stock’s price can be affected by factors inside the company, such as a
faulty product, or by events the company has no control over, such as political or market events.
Inflation Risk
Inflation is a general upward movement of prices. Inflation reduces purchasing power, which is a
risk for investors receiving a fixed rate of interest. The principal concern for individuals investing
in cash equivalents is that inflation will erode returns.
Interest Rate Risk
Interest rate changes can affect a bond’s value. If bonds are held to maturity the investor will
receive the face value, plus interest. If sold before maturity, the bond may be worth more or less
than the face value. Rising interest rates will make newly issued bonds more appealing to investors
because the newer bonds will have a higher rate of interest than older ones. To sell an older bond
with a lower interest rate, you might have to sell it at a discount.
Liquidity Risk
This refers to the risk that investors won’t find a market for their securities, potentially preventing
them from buying or selling when they want. This can be the case with the more complicated
investment products. It may also be the case with products that charge a penalty for early
withdrawal or liquidation such as a certificate of deposit (CD).
The Advisor does not primarily recommend a particular type of security. However, clients are
advised that many unexpected broad environmental factors can negatively impact the value of
portfolio securities causing the loss of some or all of the investment, including changes in interest
rates, political events, natural disasters, and acts of war or terrorism. Further, factors relevant to
specific securities may have negative effects on their value, such as competition or government
regulation. Also, the factors for which the company was selected for inclusion in a client portfolio
may change, for example, due to changes in management, new product introductions, or lawsuits.
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Neither Gray Lion nor any of its management persons are registered, or have an application
pending to register, as a broker-dealer or a registered representative of a broker-dealer, a futures
commission merchant, commodity pool operator, a commodity trading advisor, or an associated
person of the foregoing entities.
Gray Lion does not currently have any relationships or arrangements that are material to its
advisory business or clients with either a broker-dealer, municipal securities dealer, or government
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securities dealer or broker, investment company or other pooled investment vehicle (including a
mutual fund, closed-end investment company, unit investment trust, private investment company
or “hedge fund” and offshore fund), other investment advisor (except as previously noted) or
financial planner, futures commission merchant, commodity pool operator, or commodity trading
advisor, banking or thrift institution, accountant or accounting firm, lawyer or law firm, insurance
company or agency, pension consultant, real estate broker or dealer or sponsor of syndicator of
limited partnerships.
Anthony M. Doran, Managing Principal is also the Principal of Growth Advising Inc., a
management consulting firm that assists companies in developing and implementing plans for
growth, as well as finding investors to support their growth capital needs. Growth Advising Inc.
charges consulting fees to these companies for its services. The clients of Growth Advising Inc.
are not clients of Gray Lion Capital LLC, so there are no conflicts concerning compensation, and
Gray Lion will not make investment recommendations to its clients concerning Growth Advising
Inc. clients. In the event of a change in these circumstances, Gray Lion Capital LLC will provide
disclosures of any conflicts to its clients.
Gray Lion does recommend or select other investment advisors for clients. For more specific
detail see the response to 4 above.
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Trading
Gray Lion is registering with the SEC and maintains a Code of Ethics pursuant to SEC rule 204A-
1. Gray Lion has adopted a Code of Ethics that sets forth the basic policies of ethical conduct for
all managers, officers, and employees of the adviser. In addition, the Code of Ethics governs
personal trading by each employee of Gray Lion deemed to be an Access Person and is intended
to ensure that securities transactions effected by Access Persons of Gray Lion are conducted in a
manner that avoids any conflict of interest between such persons and clients of the adviser or its
affiliates. Gray Lion collects and maintains records of securities holdings and securities
transactions effected by Access Persons. These records are reviewed to identify and resolve
conflicts of interest. Gray Lion will provide a copy of the Code of Ethics to any client or
prospective client upon request.
Gray Lion and/or its investment advisor representatives may from time to time purchase or sell
products that they may recommend to clients. Gray Lion and/or its investment advisory
representatives have a fiduciary duty to put the interests of their clients ahead of their own. To the
extent that the Advisor or its investment advisor representatives are purchasing or selling securities
at or about the same time that it is recommending such securities to clients, Gray Lion will provide
the recommendations or trade the client accounts before trading their own accounts.
Gray Lion requires that its investment advisory representatives follow its basic policies and ethical
standards as set forth in its Code of Ethics.
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If requested by the client, Gray Lion may suggest brokers or dealers to be used based on execution
and custodial services offered, cost, quality of service and industry reputation. Gray Lion will
consider factors such as commission price, speed and quality of execution, client management
tools, and convenience of access for both the Advisor and client in making its suggestion.
Gray Lion may receive proprietary research services or other products as a result of recommending
a particular broker which may result in the client paying higher commissions than those obtainable
through other brokers. If Gray Lion does receive such products or services, it will follow
procedures which ensure compliance with Section 28(e) of the Securities Exchange Act of 1934
or applicable state securities rules.
The firm seeks to obtain the most favorable net results for clients’ price, execution quality, services
and commissions. Although the firm seeks competitive commission rates, it may pay commissions
on behalf of clients which may be higher than those available from other brokers in order to receive
other services. The firm may enter into such transactions so long as it determines in good faith
that the amount of commission paid was reasonable in relation to the value of the brokerage and
research services provided by the broker. The services that may be considered in this
determination of reasonableness may include (1) advice, either directly or through publications or
writing, as to the value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of securities; (2) analysis and
reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy,
and the performance of accounts; or (3) effecting securities transactions and performing functions
incidental thereto. Such research furnished by broker-dealers may be used to service any or all of
Gray Lion’s clients and may be used in connection with accounts other than those that pay
commissions to the broker-dealers providing the research. In particular, third-party research
provided by broker-dealers may be used to benefit all of the firm’s clients. This creates a conflict
of interest in that the firm has an incentive to select or recommend a broker-dealer based on its
interest in receiving the research or other products or services, rather than on the clients’ interest
in receiving most favorable execution.
Trading commissions may be used as soft dollars provided that:
• The service is primarily for the benefit of Gray Lion’s clients
• The commission rates are competitive with rates charged by comparable broker-dealers;
and
• Gray Lion does not guarantee a minimum amount of commissions to any broker-dealer.
Gray Lion does not receive client referrals from any broker-dealer or third party as a result of the
firm selecting or recommending that broker-dealer to clients.
Gray Lion recommends that all clients use a particular broker-dealer for execution and/or custodial
services. The broker-dealer is recommended based on criteria such as, but not limited to,
reasonableness of commissions charged to the client, tools and services made available to the client
and the Advisor, and convenience of access to the account trading and reporting. The client will
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provide authority to Gray Lion to direct all transactions through that broker-dealer in the
investment advisory agreement.
As an investment advisory firm, Gray Lion has a fiduciary duty to seek best execution for client
transactions. While best execution is difficult to define and challenging to measure, there is some
consensus that it does not solely mean the achievement of the best price on a given transaction.
Rather, it appears to be a collective consideration of factors concerning the trade in question. Such
factors include the security being traded, the price of the trade, the speed of the execution, apparent
conditions in the market, and the specific needs of the client. Gray Lion’s primary objectives when
placing orders for the purchase and sale of securities for client accounts is to obtain the most
favorable net results taking into account such factors as 1) price, 2) size of order, 3) difficulty of
execution, 4) confidentiality and 5) skill required of the broker. Gray Lion may not necessarily
pay the lowest commission or commission equivalent as specific transactions may involve
specialized services on the part of the broker.
Gray Lion does not permit clients to direct brokerage.
Gray Lion may combine orders into block trades when more than one account is participating in
the trade. This blocking or bunching technique must be equitable and potentially advantageous
for each such account (e.g. for the purposes of reducing brokerage commissions or obtaining a
more favorable execution price). Block trading is performed when it is consistent with the duty to
seek best execution and is consistent with the terms of Gray Lion’s investment advisory
agreements. Equity trades are blocked based upon fairness to client, both in the participation of
their account, and in the allocation of orders for the accounts of more than one client. Allocations
of all orders are performed in a timely and efficient manner. All managed accounts participating
in a block execution receive the same execution price (average share price) for the securities
purchased or sold in a trading day. Any portion of an order that remains unfilled at the end of a
given day will be rewritten on the following day as a new order with a new daily average price to
be determined at the end of the following day. Due to the low liquidity of certain securities, broker
availability may be limited. Open orders are worked until they are completely filled, which may
span the course of several days. If an order is filled in its entirety, securities purchased in the
aggregated transaction will be allocated among the accounts participating in the trade in
accordance with the allocation statement. If an order is partially filled, the securities will be
allocated pro rata based on the allocation statement. Gray Lion may allocate trades in a different
manner than indicated on the allocation statement (non-pro rata) only if all managed accounts
receive fair and equitable treatment.
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Investment advisory client accounts are monitored on an ongoing basis. Client accounts are
reviewed by Anthony Doran, Managing Principal. The nature of the review is to determine if the
client account is still in line with the client’s stated objectives.
The client is encouraged to notify the Advisor and Investment Advisor Representative if changes
occur in his/her personal financial situation that might materially affect his/her investment plan.
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The client will receive written statements no less than quarterly from the custodian. In addition,
the client will receive other supporting reports from mutual funds, asset managers, trust companies
or other custodians, insurance companies, broker-dealers and others who are involved with client
accounts. Gray Lion does not deliver separate client statements.
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Gray Lion is not compensated by anyone for providing investment advice or other advisory
services except as previously disclosed in this Brochure.
Gray Lion does not directly or indirectly compensate any person who is not a supervised person
for client referrals.
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Gray Lion does not have custody of client funds or securities, except for the withdrawal of advisory
fees directly from client accounts. However, as noted in Item 13 above, clients will receive
statements not less than quarterly from the qualified custodian, and we encourage you to review
those statements carefully. Any discrepancies should be immediately brought to the firm’s
attention.
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Gray Lion generally has discretion over the selection and amount of securities to be bought or sold
in client accounts without obtaining prior consent or approval from the client for each transaction.
However, these purchases or sales may be subject to specified investment objectives, guidelines,
or limitations previously set forth by the client and agreed to by Gray Lion.
Discretionary authority will only be provided upon full disclosure to the client. The granting of
such authority will be evidenced by the client’s execution of an Investment Advisory Agreement
containing all applicable limitations to such authority. All discretionary trades made by Gray Lion
will be in accordance with each client’s investment objectives and goals.
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Gray Lion will not vote, nor advise clients how to vote, proxies for securities held in client
accounts. The client clearly keeps the authority and responsibility for the voting of these proxies.
Also, Gray Lion cannot give any advice or take any action with respect to the voting of these
proxies. The client and Gray Lion agree to this by contract. Clients will receive proxy solicitations
from their custodian and/or transfer agent.
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Gray Lion does not require or solicit prepayment of more than $1,200 in fees per client, six months
or more in advance, and is not required to file a balance sheet.
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Gray Lion has discretionary authority over client accounts and is not aware of any financial
condition that will likely impair its ability to meet contractual commitments to clients. If Gray
Lion does become aware of any such financial condition, this brochure will be updated and clients
will be notified.
Gray Lion has never been subject to a bankruptcy petition.
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Open Brochure from SEC website