The Securities and Exchange Commission has barred Gregg Z. Schonhorn of Short Hills, N.J., and Deborah Kelley of Piedmont, Calif., for their role in a "pay-to-play" arrangement involving the New York State Common Retirement Fund that netted the registered representatives millions of dollars in trading commissions.
Mr. Schonhorn was employed by FTN Securities until December 2016, when he resigned before being terminated for cause. This occurred after FTN learned that Mr. Schonhorn had pleaded guilty to a six-count charge that included conspiracy to commit securities fraud, securities fraud, bank fraud and conspiracy to obstruct justice by providing "improper and undisclosed benefits, entertainment and travel" to a portfolio manager of the pension fund for directing trades to FTN.
In its 2016 charges, the SEC said Mr. Schonhorn provided the equivalent of at least $160,000 to the pension fund manager, Navnoor Kang.
Ms. Kelley, who had been barred by the Financial Industry Regulatory Authority Inc. in March 2017, also was charged by the SEC in late 2016 with conspiracy to commit securities fraud and other charges. In August 2016, she was terminated by Stifel, Nicolaus, which had acquired her employer, Sterne Agee, for misrepresenting the nature of expenses she submitted for reimbursement. At the time she was barred by Finra, she was employed by Seaport Global Securities.
In May 2017, Ms. Kelley pled guilty to one count of conspiracy to commit securities fraud.
In September 2017, U.S. District Judge Paul Oetken gave Ms. Kelley three years' probation, with the first six months to be spent confined to her home. She also was also ordered to perform 1,000 hours of community service and pay a $50,000 fine. Prosecutors had sought a five-year prison sentence.
Mr. Schonhorn faces as much as 30 years in prison when he is sentenced, which is expected later this year.