According to FINRA, Thomas Anthony Rapp of Mendham, New Jersey was assessed a deferred fine of $20,000 and suspended from association with any FINRA member in all capacities for 21 months for engaging in undisclosed outside business activities and private securities transactions.

Rapp co-founded a private equity fund and served as its CEO and managing partner without providing prior written notice to his member firm. His responsibilities included answering investment inquiries, participating in the private offering of limited partnership interests, and overseeing management of the fund's portfolio companies.

The fund raised more than $11 million from approximately 15 investors through a Regulation D offering. Several of these investors were also Rapp's customers at his brokerage firm. While Rapp did not earn commissions in connection with the offering, he expected future compensation.

FINRA rules require registered persons to provide written notice before engaging in outside business activities and participating in private securities transactions. These requirements exist because outside activities can create conflicts of interest, distract from responsibilities to the firm and its customers, and may involve securities activity that should be supervised.

When a broker's customers invest in an outside venture controlled by the broker, the potential for conflicts is particularly acute. The broker may have incentives to recommend the investment for personal gain rather than because it's appropriate for the customer. Without firm oversight, there's no independent review of whether such recommendations are suitable.

The 21-month suspension—one of the longer suspensions among this month's actions—reflects the seriousness of conducting undisclosed outside securities activities.

The suspension is in effect from April 21, 2025, through January 20, 2027.

Investors who invested in Rapp's fund should review whether the investment was appropriate for their circumstances.