Raymond L. Grenier, Jr. (Order Approving Application for Relief from a Statutory Disqualification)

Securities Exchange Act Release No. 50489 / October 5, 2004

In the Matter of the Application of

NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC.

For an Order Granting the Approval of

Raymond L. Grenier, Jr.

In a Supervisory Capacity
with
Delta Equity Services Corporation

Securities Exchange Act of 1934
Section 15A(g)(2)

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ORDER APPROVING APPLICATION FOR RELIEF FROM A STATUTORY DISQUALIFICATION

Raymond L. Grenier, Jr. is subject to a statutory disqualification as the result of an Order Instituting Proceedings, Making Findings and Imposing Remedial Sanctions ("Bar Order") dated February 21, 2002, in which Mr. Grenier was barred from being associated with any broker-dealer in a supervisory capacity, with the proviso that, after 15 months, he could reapply for association with the appropriate self-regulatory organization.1 Mr. Grenier was also required to pay a $15,000 fine. The Bar Order also found that Mr. Grenier's firm, Delta Equity Services Corporation ("Delta" or "Firm") failed to establish written supervisory procedures, or a system for implementing such procedures, that were reasonably designed to prevent or detect violations of the federal securities laws, in willful violation of Section 17(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 17a-3 and 17a-4 thereunder.

The Bar Order arose from the failure of Delta and Mr. Grenier to supervise registered representatives reasonably in the Firm's Maryland and Ohio offices. These registered representatives offered and sold over $6.4 million in unregistered securities without Delta's approval in violation of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder. The registered representatives misappropriated most of the funds raised from the sale of the unregistered securities and converted a substantial portion of those funds for their own benefit. In addition, the registered representatives used these funds to make principal and interest payments to other investors who had invested in the securities at earlier points in time, as well as to investors who had lost money in prior investments with the registered representatives.

The Bar Order allowed Mr. Grenier to continue to be associated with Delta as a supervised registered representative.

National Association of Securities Dealers ("NASD") now proposes to allow Mr. Grenier to become employed as Delta's President and Chief Executive Officer. In this employment, Mr. Grenier will not directly supervise any of Delta's registered representatives. Instead, Mr. Grenier will be involved in hiring decisions and will be responsible for setting company strategy and policy.

NASD has filed an application pursuant to Rule 19h-1 under the Exchange Act on behalf of Mr. Grenier seeking an order declaring that, notwithstanding the statutory disqualification, the Commission:

(1) Will not institute proceedings pursuant to Sections 15(b)(4), 15(b)(6), 19(h)(2), or 19(h)(3) of the Exchange Act solely on the basis of Mr. Grenier's position in a supervisory capacity at Delta; and

(2) Will not direct NASD to bar the proposed association, as provided in Section 15A(g)(2) of the Exchange Act.

In its application, NASD (along with Delta) made numerous representations regarding Mr. Grenier's proposed association, including the following:

(1) Mr. Grenier has been in compliance with the terms of the Bar Order since it was entered.

(2) Delta became a member of NASD in February 1985. Delta employs 18 registered principals and 53 registered representatives, and has 24 branch offices. Delta sells corporate debt securities, corporate equity securities, mutual funds, tax shelters, and limited partnerships in primary distributions. Delta also sells variable life insurance and annuities. In addition, Delta acts as a government securities dealer, a government securities broker, and a put-and-call broker/dealer/option writer. Delta's main office is in Bolton, Massachusetts.

(3) Delta proposes to employ Mr. Grenier as its President and Chief Executive Officer. In this capacity, Mr. Grenier will not directly supervise any of Delta's registered representatives. Instead, Mr. Grenier will be involved in hiring decisions and will be responsible for setting company strategy and policy. Mr. Grenier is the sole owner of Delta.

(4) Mr. Grenier has been in the securities industry since 1986. He has been registered as a general securities representative since 1986, a general securities principal since 1991, and a financial & operations principal since 1991. Currently, Mr. Grenier is associated with Delta as a general securities representative.

(5) Mr. Gerald Powers will be the primary, responsible supervisor for Mr. Grenier. Mr. Powers has been in the securities industry for more than 30 years and is currently registered as a Series 4, 7, 24, 27, 53, 55, and 63. In addition, Mr. Powers served for six years (1986-1992) on NASD's District Business Conduct Committee for District 11. Currently, Mr. Powers is Delta's Chief Compliance Officer.

(6) Mr. Grenier will not be assigned to act as a direct supervisor for any registered representatives.

(7) Mr. Grenier will not serve as Chief Compliance Officer of Delta.

(8) Delta will rewrite its supervisory procedures to establish clearly that Mr. Powers will be Mr. Grenier's primary, responsible supervisor.

(9) Mr. Powers will conduct meetings with Mr. Grenier on a monthly basis to review Mr. Grenier's role in compliance and supervisory matters at Delta. Mr. Powers will maintain a written record of these meetings and document all matters addressed.

(10) Mr. Grenier and Delta will establish a committee that will be responsible for a quarterly review of certain of Delta's policies and procedures in areas identified in the Bar Order and listed below. The committee shall initially be composed of the Chief Operating Officer, Chief Financial Officer, and General Counsel. The committee will maintain and preserve a written record of its review and, as necessary, make recommendations to Mr. Grenier and Mr. Powers to ensure that Mr. Grenier and Delta maintain adequate policies and procedures in the following areas: (a) Procedures regarding Delta's investigation of the character, qualifications, and experience of registered representatives seeking affiliation with Delta; (b) Procedures and documentation requirements concerning the on-site inspections of Delta's offices of supervisory jurisdiction, branch offices, and non-branch offices; (c) Procedures and their implementation with respect to review and approval or disapproval of outside business activities by Delta's registered representatives; (d) Procedures concerning obtaining and reviewing correspondence of Delta's registered representatives; (e) Procedures concerning Delta's review of and response to customer complaints; and (f) Procedures for maintaining a complete blotter of sales of mutual funds and direct participation programs.

(11) Mr. Powers shall meet with the committee on a quarterly basis to discuss his efforts to supervise Mr. Grenier.

(12) As necessary, Mr. Powers shall seek the advice and counsel of the committee on any material issues or matters concerning compliance and supervision of which Mr. Powers and Mr. Grenier do not agree. If requested by Mr. Powers, the committee will offer written advice or recommendations to him and Mr. Grenier on such issues or matters.

(13) The committee will conduct an annual review of Delta's Written Supervisory Procedures Manual and Compliance Manual and, as necessary, provide updates or written comments on such manuals.

(14) No member of the committee shall have been the subject of a disciplinary action by the Commission or NASD within the past 10 years.

(15) Committee members may only be replaced, terminated, or sanctioned by the majority vote of Mr. Grenier, Mr. Powers, and Delta's Director of Supervision. The majority vote of these individuals shall also be required to replace a member of the committee or fill a vacancy on the committee. If there is a change in the membership of the committee, notification of such change shall be provided to NASD's Member Regulation not later than 10 business days after such change.

(16) David Ham is Delta's Director of Supervision. Mr. Ham has been registered as a general securities principal since 2001. Mr. Ham has no disciplinary history.

(17) Delta must obtain prior approval from NASD's Member Regulation if Delta wishes to replace its Director of Supervision. No person serving as Delta's Director of Supervision shall have been the subject of a disciplinary action by the SEC or NASD within the past 10 years.

(18) Mr. Grenier will continue to serve in his capacity as a supervised general securities representative. Delta's Director of Supervision, currently Mr. Ham, shall supervise Mr. Grenier with regard to his activities as a general securities representative.

(19) Mr. Powers will review and have the power to veto any of Mr. Grenier's decisions to hire or fire employees with supervisory responsibility and registered representatives.

(20) Delta must obtain prior approval from NASD's Member Regulation if it wishes to change Mr. Grenier's primary, responsible supervisor from Mr. Powers to another person.

(21) Delta must retain an independent consultant acceptable to NASD's Member Regulation for a period of two years to certify on an annual basis that Delta is in compliance with the preceding plan of supervision.

(22) Mr. Grenier meets all applicable requirements for the proposed employment.

The Commission staff, in the exercise of its delegated authority (17 CFR 200.30-3(a)(4)), has reviewed the instant application and the record before NASD and, relying on the representations made by NASD and Delta with respect to the supervision of Mr. Grenier and the conditions placed on his employment,2 has concluded that it is appropriate for the Commission to approve the application for Mr. Grenier's association with Delta in a supervisory capacity.

Accordingly, IT IS ORDERED that said application by NASD on behalf of Mr. Grenier be, and hereby is, approved.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.

Jonathan G. Katz
Secretary

Endnotes

1  See Rel. No. 34-45465 (Feb. 21, 2002).

2  All of those representations and terms and conditions of employment not specifically listed are incorporated herein by reference.