James Daughtry, a former investment adviser based in Dothan, Alabama who previously operated under Kestra Investment Services and Ameriprise Financial, has received a final consent judgment from the U.S. District Court for the Middle District of Alabama that permanently bars him from associating with any broker, dealer, or investment adviser, permanently enjoins him from future violations of Section 206(2) of the Investment Advisers Act, and orders him to pay a $50,000 civil penalty. The judgment, entered May 20, 2026, resolves a nearly four-year SEC civil action arising from Daughtry’s decision to sell his approximately $43 million advisory book across roughly 150 clients to GraySail Advisors LLC, a Florida firm controlled by Jared Eakes, who subsequently stole approximately $2.6 million from GraySail’s clients using fake promissory notes, casino withdrawals, and personal expenses.
Approximately $2 million of those losses came from clients who had formerly been Daughtry’s. The SEC found that Daughtry, though unaware of the fraud, breached his fiduciary duties by failing to disclose that he had sold their accounts for substantial personal compensation, promising to monitor their accounts and then not doing so, and ignoring client complaints about unusual GraySail transactions. Eakes, who disappeared for two years after the scheme collapsed, was located by the FBI in May 2024, pleaded guilty in September 2025 to wire fraud and bank fraud, and separately admitted to defrauding the federal government of $4.7 million in pandemic relief funds. The SEC’s litigation against Eakes remains pending in the Middle District of Florida.
Daughtry Sold His Dothan Practice for $1M Plus and Promised Clients He Would Still Watch Over Them
Daughtry operated a small investment advisory practice in Dothan, Alabama with approximately $43 million in assets under management and roughly 150 clients. In March 2019, he agreed to sell that book of business to Jared Eakes, who had formed GraySail Advisors specifically to purchase Daughtry’s practice and to acquire additional clients from an Arkansas-based broker-dealer. The sale gave GraySail approximately 47 clients and $8.6 million in assets under management at closing. The purchase price included $1 million or more in compensation to Daughtry.
What Daughtry did not tell his clients was that he had sold their accounts and received compensation for doing so. Instead, according to the SEC’s complaint, Daughtry told clients who questioned the transition that he would continue to monitor their accounts and review any proposed investments with GraySail before they were executed. He also actively recruited new clients to GraySail after the sale closed, making the same assurances about continued oversight. He then failed to perform that oversight. When clients raised concerns about unusual activity in their GraySail accounts, Daughtry did not act on those complaints or investigate further.
Eakes Used Fake Small World Capital Promissory Notes to Steal $2.6M from Clients Including Daughtry’s
Jared Eakes began misappropriating client funds in January 2019, almost immediately after GraySail was operational. His primary mechanism was inducing clients to purchase promissory notes that he claimed were issued by Small World Capital LLC. The notes were fake. Eakes did not have authority to act on behalf of Small World Capital and the company did not issue the notes. Clients who purchased them were transferring their retirement savings into accounts Eakes controlled. He used the proceeds to pay personal and business loans, engage in unauthorized options trading in his personal brokerage accounts, wire $116,000 to a Las Vegas casino for gambling, and cover other personal expenses.
By December 2019, approximately $2.6 million had been misappropriated. Approximately $2 million of that amount came from former Daughtry clients who had followed their adviser’s assurances into GraySail’s custody. After the scheme collapsed and civil charges were filed in September 2022, Eakes disappeared for nearly two years. He was located by the FBI in May 2024. He pleaded guilty in September 2025 in Florida to wire fraud and bank fraud charges stemming from both the GraySail client scheme and a separate scheme in which he fraudulently obtained approximately $4.7 million in federal pandemic relief funds. As part of his plea, Eakes agreed to forfeit proceeds and make full restitution to victims. The criminal case has not yet resulted in sentencing as of the final judgment against Daughtry.
Daughtry Was Barred by FINRA and Alabama Before the SEC Civil Case Resolved in May 2026
Daughtry faced regulatory consequences well before the SEC’s civil case reached its conclusion. Kestra Investment Services, his registered representative firm, terminated him in March 2020. FINRA permanently barred him the same month. In September 2022, the Alabama Securities Commission issued a bar order against both Daughtry and Eakes in connection with the same conduct. The SEC’s civil case, filed the same month as the Alabama action, was severed from the Eakes litigation and transferred to the Middle District of Alabama, where it proceeded separately over the following nearly four years. The $50,000 civil penalty and permanent Section 206(2) injunction imposed by the May 20, 2026 final judgment represent the federal regulatory conclusion of a case that the state and FINRA had already acted on years earlier.
Daughtry’s own attorney has argued in related civil proceedings that Daughtry was also a victim of Eakes, who allegedly made false representations to Daughtry about GraySail’s registration status and capabilities when inducing him to sell his practice. A civil complaint filed by Daughtry’s counsel in Alabama federal court alleges that Eakes committed fraud against Daughtry as well. The SEC’s position, reflected in the final judgment, is that regardless of Eakes’ misrepresentations to Daughtry, Daughtry owed his clients a fiduciary duty that he breached by failing to disclose the sale, failing to monitor their accounts, and failing to act on their complaints.
Conclusion
The Daughtry case presents a compliance lesson at the intersection of practice acquisition and client fiduciary duty. Daughtry sold his clients’ accounts for substantial personal compensation, told those clients he would continue to watch over them, did not, ignored their complaints, and enabled a fraud that cost them $2 million. The SEC found him negligent rather than complicit — Section 206(2) does not require intent, only a failure of the care an investment adviser owes to clients. He paid $50,000 and received a permanent industry bar. Eakes, who actively stole the money, is awaiting sentencing after pleading guilty in September 2025. The SEC’s civil case against Eakes continues in Florida.
