On November 24, 2025, the Financial Industry Regulatory Authority (“FINRA”) Department of Enforcement filed an enforcement action or complaint against Spartan Capital Securities, LLC along with its Chief Executive Officer, John Lowry, and its Chief Compliance Officer Kim Monchik, Spartan’s CCO. Department of Enforcement v. Spartan Capital Securities, LLC, et. al., Disciplinary Proceeding No. 2021069218305 (November 24, 2025).
The Department of Enforcement alleges that between March 2021 and October 2021 Spartan Capital Securities, LLC made 346 recommendations of securities that had a total principal value of over $24 million to 191 customers, the majority of whom were retail customers, through 16 private placement offerings. Spartan lacked a reasonable basis to believe these recommendations were suitable or in the best interest of its customers because it failed to conduct reasonable due diligence on the Offerings. Spartan generated over $2.4 million in placement fees from these unsuitable recommendations. By failing to have a reasonable basis to recommend these investments, Spartan willfully violated Regulation Best Interest’s (“BI”) Care Obligation under Rule 15l-1(a)(1) of the Securities Exchange Act of 1934 (“Exchange Act”), and it violated FINRA Rules 2111 and 2010..
Also according to the complaint, Respondent John Lowry, Spartan’s CEO and owner, was the sole owner and control person of the issuers of these Offerings, which were three unregistered, private investment funds (collectively, the “Atlas Funds”).
Lowry also was the sole owner and control person of the entity that managed the Atlas Funds. Lowry approved and managed the Offerings on behalf of Atlas Funds, and he determined that Spartan would serve as the exclusive placement agent for the Offerings and retain a 10 percent placement fee. According to the Enforcement Action, Kim Monchik, Spartan’s CCO during the relevant period, assisted the Atlas Funds and Lowry with managing the Offerings, and she was responsible for, among other things, Spartan’s due diligence on the Offerings.
According to the FINRA enforcement action, the Offerings had a complex investment structure that was designed to give investors an opportunity to invest indirectly into companies that planned to conduct initial public offerings, otherwise known as “pre-IPO companies.” Specifically, investors, all of whom were Spartan customers, invested in a separate series of one of the Atlas Funds. In return, the Atlas Funds issued investors a membership interest in that series of the fund. Atlas Funds then used those investor funds to purchase membership interests in another private investment fund that purported to own shares in pre-IPO companies (“pre-IPO shares”).
According to the FINRA enforcement action, in connection with the offer and sale of membership interests in Atlas Funds, Respondents recklessly or, at minimum, negligently disseminated, or caused the dissemination of, false and misleading information to Atlas Funds’ investors which violated FINRA Rule 2010, both independently and by virtue of acting in contravention of Sections 17(a)(2) and (3) of the Securities Act of 1933 Respondents disseminated, or caused the dissemination of, false and misleading information to investors by repeatedly sending, or causing others to send, investors private placement memoranda (“PPMs”) and supplements to those PPMs (“Supplements”) that contained material misrepresentations about the markups charged to customers, the price the Atlas Funds paid to obtain membership interests in the private investment funds that purportedly held pre-IPO shares, and how Atlas Funds obtained membership interests in pre-IPO shares.
Specifically, according to the FINRA enforcement action,the PPMs misrepresented that the Atlas Funds would not share in any profit on markups that may be charged by a third-party affiliate in the Offerings. Similarly,the Supplements falsely stated that Atlas Funds would purchase interests in the pre-IPO shares from a third-party affiliate, Iapetus, LLC (“Iapetus”), at a price that was higher than Iapetus paid for those interests (i.e., at a markup).
But the Atlas Funds did not purchase interests in pre-IPO shares from Iapetus, nor did the Atlas Funds purchase the interests in the pre-IPO shares by paying the markup stated in the Supplements. Rather, the Atlas Funds purchased the interests directly from the issuer of those interests, and then the Atlas Funds—not Iapetus—charged a markup on the interests before selling them to investors in the Offerings. In total, the Atlas Funds and its manager, at Lowry’s direction, charged customers $3.25 million in markups, which directly benefitted Lowry who owned and controlled those entities.
FINRA alleges that investor purchases during this period exceeded $24 million, and that the firm allegedly earned more than $2.4 million in fees.
However, notwithstanding the FINRA Enforcement action, and potential securities arbitration and other claims from investors which could exceed $24 million as of December 2024, Spartan Capital reports less than $6 million in net capital.
Private placements such as the Atlas Funds are often high-risk, illiquid, and unsuitable for many retail investors. When conflicts of interest, fees, and risks are not fully disclosed, investors cannot make informed decisions regarding their portfolios and may suffer losses as a result.
Investors who purchased the Atlas Funds and sustained losses may be entitled to pursue recovery through FINRA arbitration if the investments were unsuitable, improperly disclosed, or recommended despite conflicts of interest.
If you purchased the Atlas Funds through Spartan Capital Securities and suffered losses, you should contact a securities attorney to determine your rights and obligations.
The Guiliano Law Group, P.C.
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