Richard Paul Lynch (CRD # 1938604, Registered Principal, Chicago, Illinois) and George Ernest Reilly (CRD # 1523041, Registered Principal, Fox Lake, Illinois) submitted a Letter of Acceptance, Waiver and Consent in which the firm, Lynch and Reilly were censured; the firm was fined $75,000, $15,000 of which was jointly and severally with Lynch and $20,000 was jointly and severally with Reilly. Reilly must requalify by examination as a general securities principal, and the firm is required to retain an independent consultant to conduct a comprehensive review of the adequacy of its policies, systems, procedures (written and otherwise) and training related to supervising individuals with a disciplinary history, preserving electronic communications and conducting due diligence in its participation in private placement offerings.
Without admitting or denying the findings, the firm, Lynch and Reilly consented to the described sanctions and to the entry of findings that the firm, acting through Lynch, sold shares of a private placement offering pursuant to a private placement memorandum that contained negligent material misrepresentation or omissions. The findings stated that the firm failed to timely report settlements and failed to report a $20 million arbitration award for a registered representative who was subject to a special supervisory plan. The findings also stated that the firm failed to keep the registered representative’s Uniform Application for Securities Industry Registration or Transfer (Form U4) current by disclosing the arbitration award, and failed to register representatives as principals based upon the activities in which each was engaged. The findings also included that the firm, acting through Reilly, failed to establish, maintain and enforce an adequate supervisory system and procedures regarding the activities of a registered representative under a special supervisory plan. FINRA found that the firm failed to ensure that email correspondence a registered representative sent and received under a special supervisory plan was maintained in a non-rewritable, non-erasable format, and failed to implement and enforce an adequate supervisory system and procedures to ensure compliance with SEC and FINRA recordkeeping requirements. (FINRA Case # E8A2005004601)
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