The NYSE has a big influence over the lives of its members. How big an influence can be seen by the case of a floor broker who lost his job over an incident that had nothing to do with his work.
Paul Grassi Jr., a CIBC World Markets broker, suffered from chronic back pain. Four years ago, a doctor at Comprehensive Health Services (CHS), which operates a clinic at the NYSE for members and employees, examined Grassi and wrote him a prescription for the painkiller Vicodin. When Grassi went to fill the prescription, he discovered that a blank prescription form was attached to the one filled out by the doctor.
A week after the initial examination, Grassi returned to CHS complaining of back pain and another doctor wrote a new Vicodin prescription, however, this doctor instructed Grassi to see his own physician and noted on the patient's chart that no additional Vicodin prescriptions would be written.
A few days later, Grassi paid an acquaintance $20 to complete the blank form by writing a Vicodin prescription and forging a CHS doctor's signature. When Grassi attempted to fill the prescription, the pharmacist noticed the forged signature and called CHS. The clinic informed the pharmacist that the CHS doctor did not write the prescription.
Grassi was arrested and criminal charges were brought by the New York County district attorney's office, but six months later the case was dismissed. Case closed, right? Not by a long shot.
The NYSE Weighs In — Heavily
The NYSE learned of the criminal case and decided to investigate Grassi's behavior. A year after the criminal charges were dismissed, the NYSE decided he had engaged in acts detrimental to the interest or welfare of the NYSE. He was censured by the hearing panel and barred from the industry for two consecutive five-year terms.
He spent a year appealing the matter to little avail. (The extra five-year ban prohibiting him from being a member of the NYSE was changed to a concurrent term.) [For details concerning the above NYSE history, visit In the Matter of Paul K. Grassi Jr. (NYSE 03-217) http://www.nyse.com/pdfs/03-217A.pdf].
Grassi next appealed to the SEC, arguing that the violation with which he was charged had nothing to do with his industry employment. Not so, said the SEC. In prior cases, the SEC sustained an SRO's jurisdiction where misconduct did not involve securities but did reflect on a person's ability to comply with the industry's regulatory requirements and to fulfill his fiduciary duties. Accordingly, the SEC found that Grassi's actions called into serious question his ability to comply with the fundamental requirements of candor and truthful representation required of securities-industry personnel.
The SEC sustained the NYSE's findings of violations but remanded the sanctions for reconsideration, with specific reference to the imposition of concurrent five-year bars.
Final Observations
Without question, Grassi's conduct was wrong — not just for the criminal allegations but also because of the dangers of self-medicating and using powerful prescriptions without a doctor's consultation.
Still, the issues and ramifications of this case are very troubling.
Grassi's criminal case was adjourned and dismissed, but the NYSE basically tried him for the same offense and found him guilty. If we're going to bar Grassi for five years for actions that had nothing to do with his work, then what other areas should the NYSE be investigating in an effort to protect its pristine integrity and reputation?
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smoking in a no-smoking zone;
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driving without seatbelts;
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first-time driving under the influence;
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sexual discrimination or harassment;
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racial discrimination or harassment; and
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misuse of a Form U5 to interfere with a departing broker's ability to compete
Some may ask where the regulation of individuals on Wall Street ends. I see an even more ominous question: Where does the regulation of individuals on Wall Street begin?
Writer's BIO: Bill Singer is a practicing regulatory lawyer and the publisher of RRBDLAW.com
