The ink pen malfunction defense fell flat for Thomas Lykos Jr., a former Securities and Exchange Commission enforcement attorney and general counsel and chief compliance officer for a Texas financial services firm who was allegedly busted cheating on a competency exam.

While retaking the general security principal qualification exam after failing his first try, Lykos scribbled notes on his fingers, forearms, driver's license and possibly a business card that he obtained during an unscheduled break, according to a decision from a Financial Industry Regulatory Authority Office hearing panel. 

Lykos passed the exam and was heading for the exit when the proctor stopped him and asked to photograph his hands—she'd noticed the alleged crib notes while walking around the testing room. 

First, Lykos denied that he had ink on his hands. Then he said his pen must have leaked.  

But the proctor wasn't buying it. 

"When he failed to persuade the proctor not to photograph his hands, Lykos began licking and rubbing his hands and fingers, and stopped only when she [the proctor] reminded him that he was being recorded," the FINRA decision states. 

Lykos, who needed to pass the exam to keep his chief compliance officer job for Houston-based Sanders Morris Harris, later argued during his FINRA hearing that his unusual behavior—the bulk of which was captured on a video surveillance camera mounted above his exam workstation—was the product of his pens being dry and not having a fine tip. 

"As a result, he testified, it was easier for him to write on his driver's license and hands after he had moistened them with perspiration by licking them," according to the hearing panel's decision. 

Lykos, a graduate of Harvard College and the University of Texas School of Law, also asserted that he was writing letters on his body and driver's license to eliminate wrong answers to multiple-choice questions on the exam. 

The hearing panel shot down Lykos' defense, noting that he was given two pens but didn't try to use the second pen before writing on his driver's license. He also didn't tell the proctor that he was having pen trouble. 

Photos of Lykos' hands after the exam showed that the "smeared writing on his fingers was clearly more than just A, B, or C," according to the decision. The panel also found that Lykos "demonstrated consciousness of guilt" during the exam by trying to conceal his notes when people approached his work station. 

The panel added, "He wrote on the sides of the fingers of his left hand, and then kept his left hand inside his pocket during the check-out process." 

Concluding that "he cheated," the panel barred Lykos from associating with any FINRA member firm and ordered him to pay $5,110 in costs.

Lykos' attorney, Larry Rothenberg of Houston, said in an interview Wednesday that the FINRA decision is "unjust" and based on a "bunch of conjecture and speculation about circumstantial evidence."  He said Lykos plans to appeal the decision to the National Adjudicatory Council, SEC and, if necessary, federal court. 

"That's where you're going to get a fair hearing and a real judge," Rothenberg said.  "In order to believe the results in this case you have to believe that someone changed a 40-year history of their character and went from a pillar of integrity to a cheater. There's just no evidence of that in this case." 

Rothenberg acknowledged that Lykos "did act strangely" during the exam: "Yes, his methods and what he did during the test was a little bit odd. But everything he did was out of his brain," he said, referring to the notes in question. 

Sanders Morris Harris chairman George Ball declined an interview request Wednesday. Lykos no longer works for the firm and has been unable to find full-time employment, according to Rothenberg. 

"He's picking up odd jobs, but he can't get a job because of this," he said.   

The FINRA panel also found "compelling circumstantial evidence that Lykos received assistance on the exam," based on his actions after leaving the exam room for an unscheduled break. Lykos testified that he walked out because he was experiencing side effects from pain medication he'd taken for a recent dental surgery. 

Lykos testified at his hearing that during his break he visited a bank teller he knows who worked in the same building where the exam was being given. After resting in her office for 15 minutes and taking another painkiller, Lykos said he headed back to the test center, picking up a business card from a leasing agent for the building along the way. 

During his hearing, Lykos denied writing on the card. But during his earlier on-the-record interview with FINRA, he testified that he "may have made notes on a business card" that were related to subjects on the exam, according to the decision.

Asked at the hearing to explain his inconsistent testimony, Lykos testified, "The more I think about it, the more I think I did not sit down and make notes at that point in time." But the FINRA panel noted that Lykos never attempted to correct his earlier testimony before the hearing. 

When Lykos returned to the exam room, the proctor noticed a business card protruding from his front jacket pocket and told him to throw it away, which he did. The card was never retrieved, and it remains unclear what, if anything, was written on it. 

Lykos spent the next 14 minutes reviewing his exam answers and changed his responses to two questions: He corrected one wrong answer and changed one incorrect answer for another incorrect answer.