NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.

Ryan Jeffrey Kirkpatrick
2006004666601

Kirkpatrick sold millions of unregistered shares of stock for accounts opened at his member firm on his customers’ behalf, realizing approximately $9.3 million in proceeds for the customers without taking the necessary steps to determine whether his customers’ 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 entity’s stock sales from the customers’ accounts; the circumstances surrounding the entity’s stock and the firm’s customers presented numerous red flags of a possible unlawful stock distribution.

The sales through one of the customers’ accounts at Kirkpatrick’s 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 customers’ entity shares, or if there was an applicable exception; instead he relied on the issuer’s transfer agent to determine if the entity stock the customers deposited could be sold.

Kirkpatrick did not review the customers’ 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 customers’ 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

Tags: Due Diligence  Unregistered Securities