John Thomas Lynch, Junior, of Scottsdale, Arizona, a stockbroker formerly registered with Lawson Financial Corporation, was fined $22,338.00 and subject of cease and desist sanctions imposed by the Securities and Exchange Commission (SEC) pursuant to an Order Instituting Administrative Cease and Desist Proceedings Pursuant to Securities Act of 1933 Section 8A, Securities Act of 1934 Sections 15B(c)(4), 4C and 21C, wherein the Order contained findings that Lynch participated in a fraudulent municipal debt offering. In the Matter of John T. Lynch, Jr., File No. 3-17902 (Apr. 5, 2017).
According to the Order, between June of 2010 and December of 2013, while Lynch served as Lawson Financial Corporation’s investment banking representative and counsel for the firm’s underwriting services, he took part in a fraudulent scheme pertaining to Brogdon Bond Offerings, in which millions of investor dollars were accumulated to pursue a facility’s acquisition and construction. Apparently, Brogdon controlled the borrower that received investor funds, and the borrower was tasked with disclosing required financial information in reference to the borrower’s business affairs.
Apparently, financial disclosures were not made by Brogdon within the Electronic Municipal Market Access system of the Municipal Securities Rulemaking Board, despite Brogdon having falsely represented that the borrower complied with required disclosures. The Order revealed that misleading representations were made to investors in the offering as there was no mention of the borrowers’ ongoing compliance violations. Investors were apparently unable to analyze the borrowers’ future compliance issues as a result.
The Order stated that Lynch did not adequately conduct due diligence into the offerings, despite his cognizance of concerns relating to the financing. The SEC indicated that investors were not able to properly evaluate the offering’s risks, which empowered Brogdon to continue engaging in fraudulent activities. Further, in April of 2013, Lynch reportedly failed to retrieve confirmation from Brogdon in reference to Brogdon’s obligation to provide ongoing disclosures pursuant to Securities and Exchange Act of 1934 Rule 15c2-12(b)(5)(i).
Moreover, the Order stated that Lynch was compensated for his counsel in the underwriting of the bond offerings; however, his activities in this regard were not authorized since Lynch was not licensed as an attorney. Consequently, the SEC found that Lynch’s conduct was violative of Securities and Exchange Act Section 10(b), SEC Rule 10b-5, and Securities Act of 1933 Sections 17(a)(2) and 17(a)(3).
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