SEC Scales Back FINRA Ban For Ex-CCO Found Writing on Himself During Exam

The Securities and Exchange Commission partially overturned a FINRA disciplinary action against Thomas J. Lykos, Jr., former general counsel and chief compliance officer at Sanders Morris Harris LLC, a privately owned, dually registered broker-dealer and RIA firm.

Lykos had been banned from the securities industry after a bizarre series of exam-day antics during his 2018 attempt to pass the Series 24 General Securities Principal Qualification Exam.

According to the SEC, Sanders Morris Harris LLC hired Lykos, an attorney with over 20 years of experience in the securities industry, to serve as the firm’s general counsel and chief compliance officer in February 2018. Although Lykos was registered as a general securities representative at the time, FINRA rules required Lykos to pass the Series 24 exam to remain in the CCO position. Lykos took the exam for the first time in April 2018 and failed.

In July 2018, Lykos retook the exam. As part of the check-in process, Lykos received a calculator, two dry erase boards, and two dry erase pens. He entered the exam room with only those materials and his driver’s license. Once at his workstation, Lykos agreed to the Rules of Conduct, which included, among other things, that he understood that unscheduled breaks were only for restroom use, he would not leave the building during the exam, and that he would not remove any materials from the test center.

The SEC reported that video footage shows Lykos writing on his driver’s license, his fingers, and even his forearm with a dry erase marker during the exam. Lykos claimed that this was because the pens were too dry to write on the boards, but the SEC noted that he never requested new pens.

He also reportedly left the test center for an unscheduled 24-minute break, during which time Lykos stated he went to a bank in the same building as the test center to rest and recover from side effects of a recent dental surgery. He returned with a business card later discarded in front of proctors. The SEC reported that there was no evidence of what Lykos did at the bank.

At the conclusion of the test, while checking out, Lykos allegedly licked his fingers to rub off the ink when confronted by staff, even asking them not to report the incident, claiming his job “depended on this.” He ultimately passed the exam, but a report of his conduct was made.

FINRA originally barred him from the industry in May 2020, alleging he had received outside assistance during his break, a ruling that was affirmed by the FINRA National Adjudicatory Council in December 2021.

Lykos appealed, and the SEC found no clear evidence he actually cheated. Instead, the SEC ruled that Lykos had violated multiple conduct rules and behaved deceptively but did not receive external help.

The SEC concluded that his behavior represented “serious breaches” and that it reflected “a disregard of the ethical standards to which members of this industry must adhere,” but reduced the lifetime bar to a suspension, ending as of the ruling date. Commissioner Caroline Crenshaw dissented, favoring the original harsher sanction.

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