FINRA files complaint against John Dennis Lowry of Spartan Capital Securities alleging $3.25 million in undisclosed markups on private placements

If you invested in a private placement offered through Spartan Capital Securities and were told the offering would not generate profits for the fund manager, what FINRA has alleged may be worth knowing. FINRA filed a complaint on November 24, 2025, naming John Dennis Lowry (CRD# 4336146), associated with Spartan Capital Securities, LLC (CRD# 146251), as a respondent.

Issuance of a disciplinary complaint represents FINRA’s initiation of a formal proceeding, not a decision as to any of the allegations contained in the complaint.

The complaint filed by FINRA alleges that Lowry, alongside Spartan Capital Securities and Kim Marie Monchik (CRD# 2528972), engaged in a scheme involving private placement offerings that generated over $24 million in principal value to 191 customers through 16 different offerings, and charged customers $3.25 million in markups, which directly benefitted Lowry.

The Complaint: Private Placement Scheme and Concealed Compensation

According to the FINRA complaint (Case #2021069218305), the allegations include several categories of misconduct centered on Lowry’s control of the investment vehicles and his concealment of financial conflicts of interest.

Unsuitable Recommendations and Lack of Due Diligence: The complaint alleges that the firm willfully violated the Care Obligation under Regulation Best Interest (Reg BI) by failing to have a reasonable basis to recommend investments in 16 private placement offerings that totaled over $24 million in principal to 191 customers, the majority of whom were retail investors. According to the complaint, the firm, through Monchik, lacked a reasonable basis to believe these recommendations were suitable or in customers’ best interest because it failed to conduct reasonable due diligence on the offerings themselves. FINRA alleges that the firm generated over $2.4 million in placement fees from these recommendations.

False and Misleading Offering Documents: The complaint further alleges that in connection with the offer and sale of membership interests in three unregistered private investment funds (collectively referred to as the Atlas Funds), Lowry, Spartan Capital Securities, and Monchik recklessly or negligently disseminated, or caused the dissemination of, false and misleading information to Atlas Funds investors. According to the complaint, the offering documents, including private placement memoranda (PPMs) and supplements to those PPMs, misrepresented that the Atlas Funds would not profit from any markup charged to customers in connection with their investments in the offerings. The complaint also alleges that supplements to the PPMs misrepresented the price at which the Atlas Funds purchased membership interests in pre-IPO shares and from which entity those interests were acquired.

Concealed Markup and Personal Compensation: The complaint alleges that the Atlas Funds, at Lowry’s direction, charged customers $3.25 million in markups that directly benefitted Lowry, who owned and controlled those entities. According to FINRA’s allegations, Lowry concealed his additional compensation and the full extent of his economic self-interest in the offerings from investors. According to the complaint, this markup scheme represented a material conflict of interest that was not disclosed in the offering documents.

Failure to Disclose Conflicts of Interest: The complaint alleges that the firm willfully violated its disclosure obligations under Reg BI by failing to fully and fairly disclose in writing conflicts of interest associated with its recommendations of investments in the offerings. According to the complaint, the offering documents did not fully and fairly disclose material facts related to Lowry’s ownership and control of the Atlas Funds and his economic incentive to have firm representatives recommend the private placements, nor did they disclose Monchik’s role managing the Atlas entities and performing due diligence on the offerings on behalf of both the firm and the Atlas entities.

Inadequate Supervisory System: The complaint alleges that the firm, along with Monchik, failed to establish a supervisory system, including Written Supervisory Procedures (WSPs), reasonably designed to achieve compliance with the Care Obligation of Reg BI as it relates to private placement offerings. FINRA further alleges that the firm and Monchik failed to reasonably supervise the private placement offerings, including by failing to conduct reasonable due diligence, failing to maintain any records reflecting due diligence that was completed, and failing to reasonably respond to red flags concerning the private investment funds’ ownership of pre-IPO shares. The complaint also alleges that the firm and Monchik, who was responsible for maintaining and updating WSPs, failed to establish, maintain, and enforce written conflict of interest procedures. According to the allegations, the firm had no written policies or procedures addressing the identification, disclosure, or mitigation of conflicts of interest, including conflicts arising from the firm’s sale of private placement offerings issued by affiliated entities, Lowry’s ownership and control of the firm and the Atlas entities, and Monchik’s dual responsibility for managing the Atlas Funds while also conducting due diligence on the offerings.

It is important to note that, as of the time of this report, the complaint is still pending. No findings of wrongdoing have been made.

Understanding Private Placement Offerings and Affiliate Conflicts

Private placement offerings represent a significant investment category, particularly for affluent retail investors seeking higher-yield alternatives to publicly traded securities. Unlike registered securities, private placements are sold through private offerings and are exempt from full SEC registration requirements. This exemption creates material information asymmetries between issuers and investors: without a standardized prospectus or mandatory SEC oversight, investors depend entirely on the offering documents and their broker’s due diligence to understand risk, fee structures, and conflicts of interest.

The allegations in this case center on a particularly acute conflict: when a broker personally owns and profits from the underlying investment vehicles while simultaneously recommending them to customers. This creates a perverse incentive structure. The broker profits not only from placement fees (standard in the industry) but also from markups charged directly to customers’ investments. When these personal profits are not fully disclosed, investors cannot make informed decisions about whether the recommendation is truly in their best interest or whether the broker’s financial incentive has compromised the recommendation.

FINRA’s Regulation Best Interest (Reg BI), which took effect in June 2020, requires brokers to have a reasonable basis to believe that recommendations are in customers’ best interest. This includes conducting adequate due diligence on securities being recommended and fully disclosing all material conflicts of interest. When brokers own the underlying investment vehicles and collect markups from customer investments, Reg BI requires explicit, written disclosure of those conflicts before the sale occurs.

FINRA’s Regulatory Framework: Care Obligation and Supervisory Duties

The allegations in this complaint implicate several fundamental FINRA rules and SEC regulations that govern broker conduct and firm supervision:

Regulation Best Interest (Reg BI), 17 C.F.R. § 240.15l-1: Under Reg BI, brokers must have a reasonable basis to recommend a security, which requires reasonable investigation into the issuer, the security, and the investor’s circumstances. Brokers must also make recommendations in the customer’s best interest and must fully disclose all material facts about conflicts of interest. The allegations suggest that Lowry and the firm failed on all three fronts: insufficient due diligence on the private placements, recommendations that lacked a reasonable basis, and non-disclosure of Lowry’s ownership interest in and profits from the offerings.

FINRA Rule 3110 (Supervisory Systems): FINRA Rule 3110 requires that each firm establish and maintain a supervisory system, including Written Supervisory Procedures (WSPs), reasonably designed to achieve compliance with applicable securities laws and FINRA rules. The complaint alleges that the firm failed to establish WSPs addressing private placement due diligence and conflict of interest identification and disclosure. This supervisory failure is particularly serious because it allowed non-compliant conduct to persist across 16 offerings and 191 customer accounts.

FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade): This foundational rule requires that brokers observe high standards of commercial honor and just and equitable principles of trade. The concealment of a material conflict of interest through false statements in offering documents violates this principle.

Securities Act of 1933, Sections 17(a)(2) and 17(a)(3): These sections prohibit fraudulent or deceptive conduct in connection with the offer or sale of securities. The complaint alleges that the misrepresentations in the PPMs and their supplements concerning markups and the source of pre-IPO share purchases violated these provisions.

What Investors Can Do

If the allegations in this FINRA complaint are established, investors who relied on the offering documents and purchased membership interests in the Atlas Funds may have options for recovery. Securities laws provide several avenues for relief:

FINRA Arbitration: Customers of Spartan Capital Securities who believe they were harmed by unsuitable recommendations or misrepresentations in connection with the Atlas Funds offerings may have the right to bring a claim in FINRA arbitration. In arbitration, a neutral panel of arbitrators hears evidence and determines liability and damages. Damages in cases involving unsuitable recommendations and misrepresentation can include recovery of out-of-pocket losses (the difference between what an investor paid and what the investment was actually worth) and, in appropriate cases, punitive damages for fraud.

Disgorgement and Restitution: If FINRA’s complaint succeeds and findings of violation are made, FINRA may order the respondents to disgorge ill-gotten gains. In this case, that could include the $3.25 million in markups Lowry collected from customers, which could be returned to harmed investors.

Steps to take right now

1. Gather your account statements, trade confirmations, and any correspondence with your broker or firm, including emails, texts, and written materials about the investments.
2. Look up your broker on FINRA BrokerCheck at brokercheck.finra.org to review their full disclosure record.
3. Contact a securities arbitration attorney for a consultation to evaluate your options.

Rosenberger + Kawabata represents retail investors in FINRA arbitration proceedings involving unsuitable private placement recommendations, conflicts of interest, and misrepresented offering documents. Contact Rosenberger + Kawabata online for a free and confidential consultation, or call (310) 894-6921.

The information in this post comes from FINRA’s public records. You can view John Dennis Lowry’s detailed BrokerCheck report here, and FINRA Case #2021069218305 directly in FINRA’s disciplinary actions database.

You can view the full January 2026 FINRA disciplinary actions report here.