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Regulation and Compliance > Federal Regulation > FINRA

Cheating on Exams Will Get You Barred, FINRA Warns

By Melanie Waddell

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As remote online test-taking kicks into full gear, the Financial Industry Regulatory Authority’s enforcement chief warns that cheating almost always ends with a permanent bar from the broker-dealer industry.

In a Monday blog post, Jessica Hopper, executive vice president of enforcement, notes that while the “means and methods to cheat on FINRA exams have varied greatly,” if someone is caught cheating FINRA’s enforcement division “will pursue disciplinary action against the individual and, in most instances, seek to bar them” from the broker-dealer industry.

Cheating on a qualification exam, in fact, is one of the three rule violations in FINRA’s Sanction Guidelines for which a bar is the standard sanction recommended.

Due to COVID-19, FINRA started administering remote exams July 13.

FINRA plans to issue in the coming weeks a Regulatory Notice seeking comment on a “new expedited proceeding” rule for reps and nonreps who cheat on exams.

The notice will also seek comment on FINRA Qualification Examinations Rules of Conduct as well as corresponding amendments to the registration requirements rule, Rule 1210.

Hopper notes that every year, FINRA enforcement brings disciplinary actions against individuals caught cheating on FINRA exams.

“And every year, I am taken aback by the sheer variety and creativity of the cheating attempts,” she said.

She points to a May 1 complaint the broker-dealer self-regulator filed against Thomas John Lykos Jr., a firm’s chief compliance officer who, while taking the Series 24 exam at a testing center, “was captured on video reviewing notes he had written in between his fingers. Upon completing the exam, a test center employee confronted the CCO and asked to see and photograph his hands.”

The enforcement division alleges Lykos “copied and removed examination content, received assistance while taking the exam, and improperly left the testing center for an unexcused break.”

Lykos denied cheating on the exam and requested a hearing. After considering the evidence admitted during a two-day hearing, along with post hearing briefs, the Hearing Panel concluded that Lykos violated NASD Rule 1080 and FINRA Rule 2010 and imposed a bar.

Hopper notes that besides writing on body parts, “other respondents have attempted variations on the test-cheating theme. One respondent offered to pay a test center employee $2,000 to help him pass an exam. Multiple respondents who received failing exam scores have altered their score reports to reflect passing scores and then provided the falsified score reports to their member firms.”

FINRA warns that all exams are closed book and that test-takers’ actions in the online testing environment are video- and audio-recorded. Unscheduled breaks must be reported to the test proctor first, and only restroom breaks are permitted.

— Related on ThinkAdvisor:

Melanie Waddell

@Think_MelanieW

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