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Aug. 11 — Former Barclays PLC trader Thomas C. Gonnella now faces a permanent bar from the securities industry over his role in a “parking” scheme involving the temporary placement of securities in another trader's book ( In re Gonnella, SEC, Admin. Proc. File No. 3-15737, 8/11/16 ).
The Securities and Exchange Commission slammed Gonnella Aug. 10 with a harsher punishment than an in-house judge had given him (221 SLD, 11/17/14), over the dissent of one commissioner who disagreed with the sterner sanction.
Barclays had an “aged inventory” policy designed to encourage turnover of trading positions by penalizing traders for holding securities for too long. Under the policy, after Gonnella held a position for three months, his trading book's profits began to accrue a monthly charge of .5 percent of the security's market value. Gonnella's 2011 bonus—the bulk of his compensation—was based in part on his trading book's profitability, the SEC said.
Gonnella allegedly solicited Gleacher & Co. trader Ryan King to help him sidestep the policy by arranging for King to buy several securities, which Gonnella later would repurchase at a profit for King's firm.
The transactions caused Barclays to lose approximately $174,000, the commission said. Both men eventually were fired for their misconduct.
King agreed to pay $24,110.46 to settle the allegations. He also agreed to be barred from the securities industry with the right to apply for re-entry after three years.
Administrative Law Judge James E. Grimes suspended Gonnella from the industry for a year and ordered him to pay an $82,500 civil monetary penalty.
On appeal, the commission barred Gonnella from the securities industry with the ability to apply for reinstatement after five years. It also upheld the monetary penalty.
Commissioner Michael Piwowar disagreed with the decision to increase the length of Gonnella's bar. "I have serious concerns, on due process and other grounds, about the commission imposing sanctions that are neither requested by the division nor found by the administrative law judge to be appropriate," he said.
Piwowar has been vocal about opposing punitive sanctions that go beyond the enforcement division's request. Several days earlier, he disagreed with a commission decision to bar two KPMG LLP executives from practicing accounting before the agency (153 SLD, 8/9/16).
Gonnella was represented by Andrew J. Frisch and Jeremy B. Sporn of Law Offices of Andrew J. Frisch, New York. His attorneys didn't immediately respond to a telephone call for comment.
To contact the reporter on this story: Cameron Finch in Washington at firstname.lastname@example.org.
To contact the editor responsible for this story: Phyllis Diamond at email@example.com.
To view the opinion, visit: https://www.sec.gov/litigation/opinions/2016/33-10119.pdf.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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