Initiated By
FINRA
Allegations
ARTICLE V, SECTION 2 OF FINRA'S BY-LAWS, FINRA RULES 1122, 2010, 2150, NASD RULES 2110, 2330(A), 3040, INTERPRETATIVE MATERIAL 1000-1 - GREGORY ALAN SMITH SOLICITED INDIVIDUALS, INCLUDING FIRM CUSTOMERS, TO INVEST IN A MEDICAL INSTRUMENT COMPANY AND OBTAINED IN AGGREGATE $135,000 FROM THE INVESTORS TO PURCHASE COMMON STOCK. SMITH DID NOT PROVIDE THE INVESTORS WITH A CONFIRMATION, STOCK CERTIFICATE NOR ANY OTHER FORM OF PAPERWORK TO DOCUMENT THEIR PURCHASE OF THE COMMON STOCK. SMITH'S PARTICIPATION IN THE SALE OF THE COMMON STOCK WAS OUTSIDE THE REGULAR SCOPE OF HIS EMPLOYMENT WITH HIS MEMBER FIRM; SMITH FAILED TO FOLLOW PROCEDURES AND FAILED TO GIVE HIS FIRM PRIOR WRITTEN NOTIFICATION. SMITH DEPOSITED THE INVESTORS' FUNDS INTO HIS BUSINESS BANK ACCOUNT, OVER WHICH HE EXERCISED CONTROL, FORWARDED ONLY $75,000 TO PURCHASE STOCK AND RETAINED THE REMAINING $60,000 FOR OVER THREE YEARS IN HIS ACCOUNT, WHICH AT TIMES MAINTAINED A BALANCE BELOW $60,000 AND ON ONE OCCASION, HAD A NEGATIVE BALANCE. SMITH COMMINGLED THE INVESTORS' FUNDS IN HIS BUSINESS BANK ACCOUNT WITH OTHER FUNDS AND CONVERTED THE INVESTORS' FUNDS TO HIS OWN USE AND BENEFIT. SMITH SETTLED WITH THE INVESTORS, PAYING A TOTAL OF $161,250; EACH INVESTOR RECEIVED AT LEAST THE PRINCIPAL INVESTED AND ONE INVESTOR RECEIVED MORE THAN HIS ORIGINAL INVESTMENT. EACH CUSTOMER EXECUTED A SETTLEMENT AGREEMENT/GENERAL RELEASE WITH SMITH. SMITH DID NOT ADVISE HIS FIRM OF TWO OF THE SETTLEMENTS UNTIL AFTER THEY WERE COMPLETED AND SETTLED WITH EACH OF THE INVESTORS, WITHOUT THE FIRM'S APPROVAL OR AUTHORIZATION. SMITH WILLFULLY FAILED TO AMEND HIS FORM U4 WITH MATERIAL INFORMATION REGARDING TAX LIENS.
Resolution
Acceptance, Waiver & Consent(AWC)
Bar
Bar (Permanent)
Registration Capacities Affected
All Capacities
Duration
Indefinite
Start Date
7/24/2012
Regulator Statement
WITHOUT ADMITTING OR DENYING THE FINDINGS, SMITH CONSENTED TO THE DESCRIBED SANCTION AND TO THE ENTRY OF FINDINGS; THEREFORE, HE IS BARRED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY. THIS SETTLEMENT INCLUDES A FINDING THAT SMITH WILLFULLY OMITTED TO STATE A MATERIAL FACT ON A FORM U4 AND THAT UNDER SECTION 3(A)(39)(F) OF THE SECURITIES EXCHANGE ACT OF 1934 AND ARTICLE III, SECTION 4 OF FINRA'S BY-LAWS, THIS OMISSION MAKES HIM SUBJECT TO A STATUTORY DISQUALIFICATION WITH RESPECT TO ASSOCIATION WITH A MEMBER.