For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Rodney Patrick Gray submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In The Matter of Rodney Patrick Gray, Respondent (AWC 2010025124001, December 31, 2012).
Gray first became registered in 1993 and during the relevant period of 2008 through April 8, 2010, was registered with Fidelity Brokerage Services, LLC; and thereafter, with Morgan Stanley. The AWC asserts that he had no prior FINRA disciplinary history.
Not Semper Fidelity
As with so many folks during the Great Recession, Gray apparently felt the urge to move or got happy feet or saw greener pastures on the other side of the fence; and on March 31, 2010, he resigned from Fidelity Brokerage and joined Morgan Stanley. In and of itself, not that big a deal and apparently it seemed as if things had gone off without a hitch, relatively speaking. Ahh, but it's that "relatively speaking" stuff that often lulls us all into a false sense of complacency.
In November 2010 - some eight months after Gray's departure from Fidelity Brokerage - his former firm notified Morgan Stanley that it believed he had improperly taken nonpublic customer information. Following an internal investigation, Morgan Stanley apparently determined that, in fact, Gray "retained" information for approximately 975 Fidelity customers.
SIDE BAR: The AWC asserts that Gray had "retained" the cited account information, which I interpret as meaning that prior to his resignation, he had such data in his possession during his tenure at Fidelity - the inference being that he hadn't surreptitiously downloaded the customer information from Fidelity's computers as part of a plan to steal customer data. On the other hand, the AWC also asserts that Morgan Stanley's inquiry discovered that Gray had information for "certain individuals whose accounts Gray did not service" at Fidelity, including social security numbers and other information constituting nonpublic personal information under Regulation S-P (which requires brokerage firms to have policies and procedures addressing the protection of customer information and records). Ultimately, it appears that Gray opened accounts at Morgan Stanley for at least eight former Fidelity customers who were not serviced by him during his time at the former employer.
After Morgan Stanley notified Gray that it had received the complaint from Fidelity, he turned over to Morgan Stanely the cited nonpublic information in his possession, which the firm then then returned to Fidelity. As of January 7, 2013, online FINRA documents indicate that Gray remains registered with Morgan Stanley.
FINRA alleged that by taking nonpublic personal information from Fidelity and using it at Morgan Stanley, Gray violated FINRA Rule 2010. In accordance with the terms of the AWC, FINRA imposed upon the Gray the sanctions of a $5,000 fine and a 15-business-day suspension from association with any FINRA member in any capacity.
So, watta we got here?
Gray apparently took with him confidential data about 975 Fidelity customers, not all of whom he had serviced during his time at the firm.
How many of those 975 were not clients he had serviced? The AWC doesn't spell that out.
Were any of those non-serviced clients at least folks who Gray had cold called or solicited? Again, we aren't told.
The recitation of facts in this AWC fails us. We don't know if Gray knew that he had retained non-serviced account information, and we don't know if any of the eight cited Fidelity non-serviced clients had previously dealt with Gray. As such, we lack a number of reference points to better judge the fairness of the fine and suspension. What we do know is that Gray opened accounts for eight former Fidelity customers he had not serviced during his tenure at that firm. Hardly data that suggests the nefarious doings of an out-of-control stockbroker; to the contrary, the facts strongly suggest an inadvertent miscue or oversight. For me, this AWC is little more than a big shrug and a failure by Wall Street‘s self-regulator to cogently convey its findings in a disciplinary case.