The Financial Industry Regulatory Authority on Thursday provided yet another reminder of the perils of cheating on an industry exam, filing a complaint against a former Houlihan Lokey financial analyst who the regulator said was caught cheating while taking the Series 79 Investment Banking Representative Exam.
FINRA’s Department of Enforcement sought a disciplinary proceeding by the FINRA Office of Hearing Officers to consider sanctions against Travis Scott Hughes, who started working in Houlihan Lokey’s financial restructuring group in June 2019, according to the complaint.
Hughes’ offer of employment required him to pass the Series 79 exam within four months of his start date, FINRA noted. On July 3, 2019, Hughes submitted a Form U4 to become registered through the firm, according to FINRA.
However, “Hughes took but did not pass the Series 79 exam in August and September 2019, each time receiving a score of 61,” according to the complaint.
So he scheduled an appointment to take the exam a third time at a test center in Houston on Oct. 11, 2019. On the day of the exam , “prior to arriving at the test center, Hughes hid personal notes in his shorts,” FINRA claimed, adding: “During the exam, Hughes removed the notes and repeatedly reviewed them” despite the fact that he had agreed to follow FINRA’s Qualification Examinations Rules of Conduct for the exam, which “prominently forbade possessing or using notes and study materials” while taking the qualification exam.
“Shortly after beginning the exam, Hughes removed two sheets of paper — one from each leg of his shorts — and hid them under the dry-erase boards on his desk,” FINRA alleged in the complaint,” adding: “One sheet contained handwritten notes of formulas, valuation metrics, and ratios. The other sheet was a printed ‘cheat-sheet’ or ‘quick reference guide’ of SEC rules and regulations. Both contained information that was relevant to the Series 79 exam. For approximately the first 50 minutes of the exam, Hughes repeatedly reviewed both sheets of paper.”
However, about one hour into the exam, a test center administrator “seized Hughes’s handwritten notes from beneath a dry-erase board at Hughes’s test station and directed Hughes to speak with her in the reception area of the test center,” the complaint alleged.
According to the complaint: “Hughes did not reveal that he had a second sheet under his other dry-erase board. Instead, before leaving his test station, he quickly removed the second sheet and concealed it in his shorts. After a brief discussion with the test administrator outside the testing area — during which Hughes asked not to be reported — Hughes was allowed to resume the exam.”
However, Hughes was not done cheating, FINRA said in the complaint: “About one hour later, Hughes took an unscheduled break. Before re-entering the test area, Hughes had another discussion with test center administrators and then surrendered the second sheet of paper from his shorts. Hughes was allowed to complete the exam but narrowly missed passing, receiving a score of 72.”
Therefore, Hughes allegedly flunked the exam a third time despite cheating. “By cheating on, and by possessing prohibited notes during the exam, Hughes violated” FINRA Rules 1210.05 and 2010, according to the complaint.
Houlihan Lokey terminated Hughes on Nov. 1, 2019, according to FINRA. No reason was cited and, because he had yet to become registered with FINRA through the firm, there is no listing for him on FINRA’s BrokerCheck website. The firm did not immediately respond to a request for comment on Friday.
— Check out FINRA Moves Ahead on New Exam Cheating Rules on ThinkAdvisor.