NASD Expels Salomon Grey Financial and Owner Rowe

Investors may have claims against a firm that securities regulators have expelled for "extensive supervisory failures, anti-money laundering violations, email retention violations, customer complaint reporting violations and unauthorized searches of NASD's Central Registration Depository (CRD)."

Portions of the press release follow.

"Any one of these violations is serious and would pose a substantial risk to the firm's customers — and anti-money laundering rule violations could compromise our national interest in preventing financial institutions from being exploited for money laundering and terrorist financing," said James Shorris, NASD Executive Vice President and Head of Enforcement. "In this unusual case, the occurrence of all of these violations in a single firm calls for the most severe sanction: expulsion.

At its peak, Salomon Grey operated as many as 14 registered branch offices located throughout the United States, with a concentration of offices in California, New York and Florida. Most of the branch offices were independently owned and operated by brokers who worked in the offices. The firm had numerous registered representatives, including several with extensive disciplinary histories.

NASD found that during the period from approximately January 2000 to March 2005, Salomon Grey's supervisory system was inadequate to supervise its dispersed group of offices and high-risk brokers. Among the firm's supervisory system deficiencies:

The firm permitted the brokers in each branch office to hire branch managers, resulting in situations where the branch managers were charged with supervising the very brokers who hired them and had the effective ability to fire them.

The firm permitted brokers with extensive disciplinary histories and ongoing regulatory actions against them (including a broker who was appealing an SEC-imposed bar from the securities industry) to serve as supervisors.

The firm failed to adequately respond to "red flags" of ongoing misconduct by several of its brokers, which led to customer harm. For example, the firm ignored ongoing warning signs of unauthorized trading by brokers who had been previously disciplined for unauthorized trading; who were the subjects of ongoing regulatory investigations for, among other things, unauthorized trading; and who were the subjects of customer complaints alleging unauthorized trading.

The firm failed to impose and/or enforce heightened supervisory measures against brokers with disciplinary histories and ongoing customer complaints, and failed to take meaningful disciplinary action against representatives and supervisors who failed to comply with or enforce purported heightened supervisory measures.

The firm employed unqualified supervisory and compliance staff."

Investors with claims should contact securities attorneys for review as soon as possible.

Source: NASD Press Release, April 27, 2006