I’m not a big fan of these SEC cases involving compliance officers. But if the compliance officer is conducting misdeeds, he or she is going to be subject to discipline. It’s not like the compliance officer was doing compliance and missed something. Last week I had the two cases of compliance officers who faked paperwork and tried to pass it off to SEC exam staff. The latest is a CCO who may have cheated on his licensing exam.
Thomas Lykos was hired by Sanders Morris Harris LLC, a dually registered broker dealer and RIA firm, as chief compliance officer. FINRA rules required Mr. Lykos to pass the Series 24 General Securities Principal Qualification Exam to remain in the CCO position. He took the test in April 2018, but failed. The firm temporarily removed Mr. Lykos as CCO. Clearly he felt some pressure to pass the test on his second attempt.
According to the SEC ruling, Mr. Lykos engaged in some fishy behavior during the exam. He wrote on his arms and exited the exam for an unscheduled break. The exam proctor noted the violations and reported them. This led to a bar being imposed by FINRA. Mr. Lykos appealed the FINRA bar to the Securities and Exchange Commission.
The SEC ruling stops short of stating that Mr. Lykos received outside assistance on the exam. The ruling does sustain FINRA’s finding that Mr. Lykos failed to observe “high standards of commercial honor and just and equitable principles of trade.”
The SEC overruled FINRA’s finding that Mr. Lykos cheated and lifted the bar that had been place in 2021. Needless to say, he didn’t keep the job as CCO.
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