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3 Year NYSE Bar For Two Unauthorized Trades And Customer Harassment Upheld

Gregory W. Gray, Jr., Exchange Act Rel. 60361, July 22, 2009

Time since appeal – 6 months 6 days
Time since last brief – 2 months 24 days

NYSE barred Gray for three years for unauthorized trading in two customer accounts and for making threatening telephone calls to investors.

The Exchange charged Gray with two unauthorized trades. Gray denied the allegations. Gray was also accused of making harassing phone calls to other customers who had complained about his conduct. Gray admitting contacting the customers but denied making threats.

The Commission upholds self regulatory body sanctions using a preponderance of the evidence standard. Credibility determinations by the fact finder are entitled to considerable weight and are overturned only if "the record contains substantial evidence for doing so." After analyzing the facts, the Commission upheld the NYSE findings.

The Commission is required to uphold self regulatory organization sanctions unless it finds that the sanctions are oppressive, excessive, or impose an unnecessary burden on competition. It noted that even though the customers who were subjected to unauthorized trades suffered no harm due the prompt cancellation of the trades, they were exposed to substantial risk.


The Commission clearly applied the unwritten "grandmother test" i.e., would you want this man to have control over your grandmother's money? Gray apparently did not pass the test. For an earlier articulation of the test under slightly different circumstances see, Richard C. Spangler, Inc., 46 SEC 238, 254-255 (1976)("To permit [respondent] to continue to meddle with other people’s money would be contrary to the public interest.").

One unusual feature of this case was the fact that Gray was charged with acts "detrimental to the interest" of the exchange as a result of his alleged customer harassment. The Commission upheld this finding focusing only on whether NYSE's factual conclusions were adequately supported in the record. It did not discuss the legal elements of the offense in any detail. What the boundaries of this offense are remain a mystery.