Kirkpatrick sold millions of unregistered shares of stock for accounts opened at his member firm on his customersí behalf, realizing approximately $9.3 million in proceeds for the customers without taking the necessary steps to determine whether his customersí unregistered shares could be sold in compliance with Section 5 of the Securities Act of 1933.
Kirkpatrick signed new account forms for the customers, did not review them in depth, neither met nor spoke with the customers, and communicated with them solely via email and instant message. Kirkpatrick failed to conduct the necessary due diligence prior to the entityís stock sales from the customersí accounts; the circumstances surrounding the entityís stock and the firmís customers presented numerous red flags of a possible unlawful stock distribution.
The sales through one of the customersí accounts at Kirkpatrickís firm realized approximately $5.8 million in proceeds for the customer, and another customer realized approximately $3.5 million in proceeds; the total commissions generated for these sales were $481,398 of which Kirkpatrick received commissions totaling $91,466.
Kirkpatrick admitted that he did not determine if a registration statement was in effect with respect to the customersí entity shares, or if there was an applicable exception; instead he relied on the issuerís transfer agent to determine if the entity stock the customers deposited could be sold.
Kirkpatrick did not review the customersí incoming stock questionnaires, nor did he request or review the stock certificates, which indicated information about how and from whom the shares were purchased, whether the customer was affiliated with the issuer and whether the stock was restricted. In addition, Kirkpatrick noticed that the accounts seemed to have the same trading pattern, yet he failed to investigate and failed to make any effort to determine the source of the customersí shares.
Ryan Jeffrey Kirkpatrick: Fined $25,000; Suspended 6 months; Ordered to disgorge $91,466, which represents the commissions earned on the sales of unregistered securities