The embattled financial adviser handling more than $1 billion in pension assets for the Metropolitan Water Reclamation District Retirement Fund appears to be on the way out.

Board members voted Dec. 18 to begin a search for investment consulting services in light of a growing controversy facing their current adviser, Gray & Co.

The Atlanta-based firm has been under investigation by the U.S. Securities and Exchange Commission after allegations of misconduct surfaced earlier this year.

While advising a public-sector pension plan in Atlanta, Larry Gray, the company’s founder and president, was accused of steering investment money toward a private fund controlled by Gray & Co. without adequately informing board members of the conflict of interest.

More transparency problems surfaced after it was discovered Gray had $425,000 in tax liens and a $1 million legal settlement that had not been previously disclosed to clients or regulators.

What’s more, Gray & Co. failed to notify the MWRD fund about the SEC investigation until months after it began, even though the firm’s contract with the retirement plan calls for notification within five business days.

Gray pleaded his case at the November board meeting of the MWRD fund and apologized to trustees for the “oversight.”

After several weeks of inaction, the board now seems to be looking for other options. Trustees approved a plan to issue a request for proposals this month with the goal of making a final decision about a new adviser in March.

“Due to concerns related to recent disclosures regarding Gray & Co., the Trustees made the decision to issue an RFP for Investment Consulting Services,” Susan Boutin, the fund’s executive director, told the BGA via email.

A spokeswoman for the firm declined to comment.

Gray & Co. entered into a five-year agreement with the MWRD fund in 2011, making $170,000 a year to provide research and advice on investment matters.

According to Boutin, the board can terminate the agreement “with or without cause at any time.”

Gray & Co. will continue to oversee the fund’s investment portfolio until a final decision is made.

The MWRD pension plan has about 2,300 beneficiaries currently collecting retirement income and about 1,800 active members who work for the sanitary district and contribute up to 10 percent of their pay to the fund.

For more on the MWRD fund’s relationship with Gray & Co., click here for our previous investigation and here for a prior blog post.

Gray & Co. is also the investment consultant to the Chicago Transit Authority’s retiree and health-care plans. Click here to read that investigation.

And lastly, to read Andy Shaw’s take on the matter in “Pensions, Politics and Peccadilloes,” click here.

This blog post was written and reported by the Better Government Association’s Katie Drews, who can be reached at kdrews@bettergov.org or (312) 821-9027.