Who could ever forget THOMAS MARTIN PRYBYLO and how he fit into the New Tel / Ray Dirks scam. Tom also plunked many of his clients into New Tel.
N E W Y O R K S T O C K E X C H A N G E, I N C.
EXCHANGE HEARING PANEL DECISION 01-139 November 9, 2001
THOMAS MARTIN PRYBYLO
FORMER REGISTERED REPRESENTATIVE
* * *
Used for his own benefit funds of a customer deposited in his account
without the customer’s knowledge or authorization which he should have
known did not belong to him – Censure and four-month bar.
Appearances:
For the Division of Enforcement For the Respondent
Steven F. Korostoff, Esq. William B. Gibson, Esq.
Howard L. Kneller, Esq.
Neil T. O’Donnell, Esq.
* * *
An Exchange Hearing Panel conducted a hearing on charges brought by the Exchange’s Division
of Enforcement against Thomas Martin Prybylo, a former registered representative with Scott &
Stringfellow Inc. (the “Firm”). Mr. Prybylo was charged with having:
I. Engaged in conduct inconsistent with just and equitable principles of trade by
misappropriating funds belonging to a customer of his member firm employer.
II. Engaged in conduct inconsistent with just and equitable principles of trade by using
for his own benefit funds of a customer which were deposited in his account at his
member firm employer without the customer’s knowledge or authorization, and
which he knew, or should have known, did not belong to him.
III. Engaged in conduct inconsistent with just and equitable principles of trade by using
for his own benefit funds deposited to his account at his member firm employer
which he knew, or should have known, did not belong to him.
Mr. Prybylo, through his counsel, submitted an Answer to the Charge Memorandum which
admitted certain of the facts alleged and denied others. He denied each of the charges. After
receiving evidence, the Hearing Panel found as follows:
Background and Jurisdiction
1. Prybylo was born in January 1950. He entered the securities industry in April 1976
when he obtained employment at Firm A. In August 1976, Prybylo was approved by
the Exchange as a registered representative (“RR”). In July of 1977, Prybylo left
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Firm A and was employed as an RR as follows: Firm B (July 1977 through May
1988); Firm C (May 1988 through February 1992); and Firm D (February 1992
through September 1996).
2. In September 1996, Prybylo joined the Firm where he worked until November 1998.
3. In April 1999, Prybylo became employed by a non-member broker-dealer, where he
is currently employed.
4. On or about December 7, 1998, the Exchange received from the Firm a Form U-5
(Uniform Termination Notice for Securities Industry Registration) reporting that
Prybylo had been terminated on November 5, 1998.
5. By letter dated December 14, 1998, which Prybylo received, Enforcement notified
Prybylo of its investigation into certain matters which occurred prior to the
termination of Prybylo’s employment with the Firm.
6. Thereafter, Prybylo appeared and, represented by counsel, testified in connection with
the Exchange’s investigation.
Violative Conduct
7. On or about September 1996, JF opened accounts as a customer of the Firm, for
which Prybylo was her RR. Prybylo had previously serviced JF’s accounts at Firm D
while he was an RR with that firm.
8. JF, however, rarely dealt with Prybylo but instead communicated with SA who was
her step-daughter and had been Prybylo’s sales assistant since approximately 1990.
9. At all times relevant herein, JF maintained an annuity account with the XYZ Life
Insurance and Annuity Company (the “XYZ Annuity Account”). This account was
not reflected on the Firm’s monthly account statement but on a statement from XYZ.
The office copies of these statements were maintained by SA.
10. JF spoke to SA about borrowing or withdrawing money so that she could make
repairs or improvements to her house. SA explained to her that she could get the
necessary funds from the XYZ Annuity Account. SA handled the paperwork for JF
to obtain the money. JF obtained approximately $25,000 from that account in July
1997.
11. In November and December 1997 and January, February, April, June, July and
August 1998 additional withdrawals were made from the account. All of these
withdrawals were made without the knowledge or authorization of JF. The evidence
before the Hearing Panel indicates that these unapproved withdrawals were made by
SA for her own benefit.
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12. JF was not an experienced investor. Prior to her husband’s death, he managed the
family investments. JF noticed the withdrawals on the XYZ statements and asked SA
about them. SA explained to her that the funds were being rolled over into other
investments. JF did not really understand the explanation but she trusted SA and
accepted it.
13. In or about December 1997, without JF’s knowledge or authorization, approximately
$45,000 was withdrawn from the customer’s XYZ Annuity Account and deposited
into Prybylo’s personal account at the Firm.
14. In or about December 1997, a $45,000 check was issued against JF’s XYZ Annuity
Account for the benefit of JF, care of Thomas Prybylo, and mailed to the Firm. The
$45,000 check was deposited into Prybylo’s account at the Firm, without JF’s
knowledge or approval.
15. Prybylo trusted SA and depended on her to assist him in his work and to maintain his
personal financial records. She also kept his personal checkbooks on her desk and
paid his bills. He did not even read his own bank statements.
16. Many of his personal financial records and statements were mailed directly to his
office. So were the statements for a brokerage account that he maintained at his
previous employer. The account remained there, with his Firm’s knowledge because
of problems in transferring a security position. He did not read this statement but
relied on SA to inform him about the account.
17. Evidence before the Hearing Panel leads to the conclusion that SA changed the
address on certain records to a post office box to which she had access.
18. Prybylo did not know that the $45,000 deposited into his account came from JF’s
account. Nor did he investigate the actual source of the money, instead he relied on
SA.
19. The $45,000 that was deposited into Prybylo’s account was used to eliminate the
debit balance in the account. Thereafter checks were written on the account to pay
certain of Prybylo’s bills.
20. In or about October 1998, JF complained to the Firm. In or about January 1999, the
Firm reimbursed JF for in excess of $170,000.
DECISION
The Hearing Panel, by unanimous vote, found Mr. Prybylo guilty of Charge II only to the extent
that he should have known. In view of the determination on Charge II, the Hearing Panel, by
unanimous vote, dismissed Charge III as duplicative. The Hearing Panel also, by unanimous
vote, found Mr. Prybylo not guilty of Charge I in that the Division of Enforcement failed to meet
their burden of proof.
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Mr. Prybylo failed to pay attention and that resulted in financial loss and suffering for his
customer, JF, and for himself and his family. If he had paid the appropriate attention to JF’s
account and to his own financial records and statements SA would have been stopped much
sooner. He should have known, he had the ability to know, but he did not know. There is no
evidence that indicates that Prybylo intended to or did misappropriate JF’s funds. He was
careless and inattentive, but he did not engage in intentional misconduct.
PENALTY
In view of the above findings, the Hearing Panel, by unanimous vote, determined that
Mr. Prybylo be censured and barred for four months from membership, allied membership,
approved person status, and from employment or association in any capacity with any member or
member organization.
For the Hearing Panel
Vincent F. Murphy
Hearing Officer |
