Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CASES OF NOTE :: NYSE
2009
NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.
Gregory W. Gray, Jr.
Request for Review b

On Appeal, Individual Disciplined for Sales Practice Violations Gregory W. Gray, Jr. Hearing Board Decision: 08-003 07 Jan 2009

Gregory W. Gray, Jr. (“Respondent”), a former registered representative with Quick & Reilly, Inc. (“Quick & Reilly”) and H&R Block Financial Advisors (“H&R Block”), both member organizations, was charged with having: 

I. Violated NYSE Rule 476(a)(6) by engaging in conduct inconsistent with just and equitable principles of trade, in that he effected unauthorized trades in the accounts of one or more customers. 

II. Violated NYSE Rule 476(a)(7) by engaging in acts detrimental to the interest or welfare of the Exchange in that he threatened and/or harassed one or more complaining customers and/or their family members. 

The Charge Memorandum specifically identified two instances in which Respondent was alleged to have executed trades in the accounts of Customers A and B without the prior authorization of those customers. In his Answer, and at the hearing, Respondent admitted to having executed the unauthorized trade in Customer B’s account. Respondent testified that he purchased $150,000 in shares of XYZ for Customer B’s account so that he could “park” the shares until they could be transferred into the account of the customer for whom they were originally intended. Respondent stated that he was not able to purchase the shares for that customer directly because the customer’s account was restricted and Respondent’s supervisor had refused to authorize the trade, but he he believed his supervisor would later change his mind and approve the trade. The Hearing Panel accepted Respondent’s admission regarding the unauthorized trade in Customer B’s account. 

Respondent denied that the trade in Customer A’s account was unauthorized. He testified that Customer A authorized the purchase of $100,000 in shares of ABC for her son’s custodian account, but later changed her mind when she learned that her father, on whom she relied for investment advice, disapproved of the purchase. When Customer A complained, he immediately sold the shares without charging Customer A a commission. Given Customer A’s history of trading inactivity, lack of sophistication regarding securities issues and conservative investment objectives, the Panel did not credit Respondent’s testimony that Customer A had agreed to such a large purchase of shares in a closed end fund that she did not understand. 

The Panel took Respondent's admission of parking in Customer B's account and its finding of unauthorized trading in Customer A's account, and found Count I sustained.

Count II alleged that Customers A, C and D made complaints about Respondent to Quick & Reilly and H&R Block, Respondent called those customers and their family members and made threatening and harassing remarks in an effort to cause them to withdraw their complaints. Testimony from  Customer A, Customer D’s son and Respondent’s former supervisor at H&R Block was presented at the hearing. The Panel found Respondent guilty on Count II.

The Board affirmed the Hearing Panel's sanctions.

Gregory W. Gray, Jr.: Censured; Barred for 3 years from membership, allied membership, approved person status, and from employment or association in any capacity with any member or member organization.
Bill Singer's Comment
Page 9 of the Decision states in stark terms:

In considering Charge II, the Hearing Panel found the similarities among the experiences of the three unrelated complaining customers to be significant. In the case of each complaining customer, the evidence and testimony presented by Enforcement documented Respondent’s inability to handle customer complaints in an appropriate or professional manner. The Panel found Customer A’s testimony regarding the menacing message left on her answering machine to be credible, and also credited the testimony of Customer D’s son that he felt threatened by Respondent’s comments regarding the making of a false accusation against him. In addition to the credible testimony and the police reports filed by two of the customers, Respondent admitted yelling at both Customer C and Customer D’s son. 

Respondent claimed that his actions were justified. The Panel finds no justification for Respondent’s actions. The frequency and tone of the telephone calls Respondent placed to these three customers and their family members were unreasonable and inconsistent with the behavior that is expected of a registered representative. While the Panel recognizes that there will inevitably be disagreements and even conflicts between registered representative and their customers, there are procedures within the firms and the self-regulatory organizations to resolve them. Yelling, cursing, harassing and threatening are inappropriate and unprofessional – especially, as here, when such behavior is repeated – and constitute acts detrimental to the interests of the NYSE, which requires that customers be treated with respect, even during difficult times.

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