[ by Howard Haykin ]

FINRA filed a lawsuit in California federal court on 8/28/12 alleging that employees of an exam-preparation firm sat for securities licensing exams with the intent of sharing the questions with its customers. 

President Mom and Her Three Children. Named in FINRA's lawsuit were Training Consultants LLC, its president, Christina Leahy, and Ms. Leahy's three children - Donald Leahy, Elizabeth Leahy, and Samuel Leahy. 

It's alleged that the 4 Leahys took (i.e., sat for) securities licensing exams 64 times between from 2001 through August of 2012.  All told, the Leahys failed 52 times, a highly unusual 81% failure rate.  That, of course, was irrelevant, since none of the Leahys had any plans to enter the securities indusry or to use the licenses. 

FINRA claims that the Leahys "each took, and plan in the future to take, the FINRA secure tests with the intent not to pass the exams but to memorize and improperly use the multiple-choice questions, as well as to retain the ability to take the exams additional times." 

In a statement, Christina Leahy expressed shock at FINRA's actions, and said that the Leahys will vigorously defend themselves and look forward to clearing their good name.

FINRA says its copyrighted exams "are unpublished, secure examinations, and the questions (sometimes referred to as 'items') are not intended to be made available to the public. Unauthorized disclosure of secure test items compromises FINRA's examinations and undermines FINRA's qualification assessment process."

Training Consultants LLC. FINRA says the Leahy family owns and operates Training Consultants LLC, which, according to its website, "advertises and sells both online and in-person preparatory courses, as well as textbooks, for FINRA's examinations, including the FINRA secure tests." 

FINRA further notes that "Christina Leahy has been associated with FINRA member firms going back to 1977. Christina Leahy was also a member of the Series 7 exam committee between approximately 1985 and 2006. The Series 7 exam committee is composed of FINRA staff and industry volunteers who write, review and validate ... test questions for the Series 7 exam."

FINRA further alleges the following:

"Prior to taking each FINRA standardized examination, including the FINRA secure tests, defendants Christina Leahy, Donald Leahy, Samuel Leahy and Elizabeth Leahy agreed to the Rules of Conduct and expressly agreed 'to maintain the confidentiality of the materials, including the questions and my answers to them'."

"One [or] more of the defendants have copied multiple-choice questions from the FINRA secure tests, and/or created derivatives of the FINRA secure tests and/or FINRA's proprietary questions, and have distributed to others multiple-choice questions that were the same of substantially similar to the FINRA secure tests and/or actual multiple-choice questions in the FINRA secure tests, and used them for training Training Consultants' customers to take the FINRA secure tests, including for practice exams."

Actions such as those allegedly taken by the Leahys would violate copyright laws.  FINRA seeks an injunction, destruction of offending materials, and punitive damages for trademark infringement, misappropriation of trade secrets, breach of contract and violations of the California Business and Professions Code.

A hearing on the request is set for 9/17/12. FINRA is represented by Carla Oakley, with the SF office of Morgan, Lewis and Bockius.

[Reuters, 9/6/12] and [Courthouse News Service, 8/30/12]