A FINRA panel has suspended former broker Anthony Grey for two years, fined him $30,000, and ordered him to disgorge $16,000 in ill-gotten gains for routing muni bond trades through his personal accounts before selling them, through his firm, to retail customers at excessive markups.

In a June 20 decision, the three-member hearing panel said Grey did not disclose to customers his personal involvement in the trades or that they paid more than prevailing market prices, in violation of the securities fraud laws. The markups ranged 8.62% to 19.12%.

The panel, which held a two-day hearing on the case in February after a complaint was filed against Grey in late 2011, also charged him with violating the federal securities fraud laws as well as Municipal Securities Rulemaking Board rules G-17 on fair dealing and G-30 on prices and commissions.

Grey, who is no longer registered, but at the time was a broker at Winter Park, Fla.-based Gardnyr Michael Capital, Inc., ignored his firm’s internal policy, which warned that regulators would object, and might file fraud charges, over any markup of a fixed income security in excess of 3%.

In discussing the findings and sanctions in its 40-page decision, the hearing board said, “At the hearing, [Grey] not only displayed no remorse, but in some instances he denied the plain truth,” claiming that he gave customers “wholesale” prices and had no conflict of interests.

“Grey’s whole pattern of doing business was to treat his customers as a resource for his own profit and liquidity in connection with his personal bond trading,” the hearing board said. “He purposefully put his self-interest ahead of his duty to his customers to look out for their interest, and he designed a method of trading for his own benefit that concealed from his customers that he was charging them far more than industry standard markups. He engaged in the misconduct to enrich himself.”

Peter Aldrich, a lawyer in Palm Beach Gardens, Fla. who is representing Grey, could not be reached for comment on the hearing panel’s findings and sanctions or whether Grey will appeal its decision.

The hearing panel’s charges stem around six muni bonds Grey sold in 10 transactions to retail customers, with the most serious charges pertaining to six of those trades. In each case, Grey acquired bonds for his firm or his own account. In either case, the bonds ended up in his personal account. The one to four days later, Grey moved the bonds to the firm’s account and simultaneously sold them to his retail customers at much higher prices than he had paid.

No interdealer trades occurred during the four days, so there was no indication in a shift of the prevailing market prices of the bonds, the panel said.

FINRA examiner Barbara Walley discovered the trades during a routine examination of the firm.

Grey attributed about half his income during the 2008-2009 period to his personal trading, the panel said. He engaged in thousands of bond trades during a year, it said. In 2009, Grey leveraged his capital and increased his trading capacity by rolling over money from his individual retirement account to a profit-sharing plan of a company he owned so he could buy on margin. The former broker claimed he used his personal accounts because the firm did not have a proprietary trading account until July 2009.

Walley tracked the trades, using the MSRB’s EMMA system, which provides some trade data, without identifying firms, to the public and all trade data to regulators. In one case, Grey bought some Florida state bonds for the firm for $59.000 and sold them to a customer for $72.525, the panel said. In another, he purchased Highlands health care bonds for himself at $69.194 and sold them to three customers for $76.030 each.

Grey claimed he didn’t charge markups, because the prices at which he sold the bonds to retail customers were the same prices he would have charged other dealers. He also denied he had any conflicts of interest using his own personal accounts, saying he gave the customers good prices on the bonds.

The former broker claimed he did not run afoul of the firm’s policy on markups because the policy only applied to government bonds, not muni bonds, a contention the hearing panel rejected.

James D. McKinney, who was manager of all fixed income securities at William Blair for almost three decades and now advises the firm, testified as an expert for FINRA’s enforcement division. He said the markups were “egregious” and called Grey’s trading “chicanery.” McKinney testified that for at least a dozen years the muni industry has understood a 3% markup to the be the maximum permitted on a muni bond.

David Paulakaitis, who held increasing senior positions at NASD for 23 years before joining Mainstay Capital Markets Consultants, and John Bagley, president of the Bond Desk Trading Group, testified on behalf of Grey.

Paulakaitis testified Grey’s alleged conflict of interest was no different than that of a proprietary account at a broker-dealer, but the panel disagreed with him. Bagley testified Grey’s customers paid a fair price for the bonds, but the hearing panel found, in part, that his methodology was flawed.

The hearing panel said Grey’s suspension should start Aug. 19 and end at the close of business on Aug. 18, 2015. It also ordered him to pay the hearing costs, which was more than $5,200.

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