For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, James (‘Jeb") Edward Barram submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of James ("Jeb") Edward Barram,Respondent (AWC 20110283273, July 12, 2012).
In 2002, Barram entered the securities industry in a non-registered capacity and, thereafter, returned to the industry in 2005 as a registered representative trainee with FINRA member firm State Farm VP Management Corp. ("State Farm"),where he became registered in February 2008 until June 17, 2011.
Sometime around November 2006, Barram sustained a significant neck injury during an athletic event, and a doctor prescribed a long-term regimen of prescription pain medication.
On or about April 9, 2010, Barram was arrested in Marion County, OR for forging prescriptions for prescription medications on two occasions on March 4, 2010. On April 29, 2010, Barram was arraigned and charged with one misdemeanor count each ofAcquiring a Controlled Substance by Fraud and Forgery in the Second Degree.
On June 6, 2010, the misdemeanor counts were amended to two felony counts of Tampering with Drug Records, which involves "false or forged" prescription or written orders. On same day of the amended counts, Barram pled guilty to two reduced misdemeanor counts of Tampering with Drug Records.
On or about January 18, 2006, Barram signed and submitted an initial Form U4 for registration with State Farm, to which the following questions were answered "NO" (which, at that time, were correct responses)L
- Question 14A(l)(b): "Have you ever been charged with any felony?"
- Question 14B(l)(a): "Have you ever been convicted of or pled guilty or nolo contendere ("no contest")…to amisdemeanor involving…any fraud, false statements or omissions, wrongful taking of property, bribery, perjury, forgery, counterfeiting, extortion, or a conspiracy to commit any of these offenses?"
- Question 14B(l)(b): "Have you ever been charged with amisdemeanor specified in [question] I4B(l)(a)?"
Form U4 contains the following attestation paragraph:
I understand and certify that the representations in this form apply to all employers with whom I seek registration as indicated in Items 4 and 10 of this form. I agree to update this form by causing an amendment to be filed on a timely basis whenever changes occur to answers previously reported. Further, I represent that, to the extent any information previously submitted is not amended, the information provided in this form is currently accurate and complete.
SIDE BAR: FINRA has several rules that set forth the obligations of registered persons to timely update their Form U4:
Article V, Section 2 of the FINRA By-Lawsrequires applicants to disclose certain information and to keep their application current through the timely filing of amendments. Pointedly, applicants are required to file an application amendment within 30 days of learning of facts that are required to be disclosed. If such amendment involves a statutory disqualification, such amendment shall be filed not later than ten days after such disqualification occurs.
FINRA Rule 1122 prohibits a member firm or an associated person from filing with FINRA information with respect to membership or registration which is incomplete or inaccurate so as to be misleading, or which could in any way tend to mislead, or fail to correct such filing after notice.
FINRA Rule 2010 requires that a member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade. This rule has been applied to associated persons as well.
The AWC alleged that between April 29, 2010, and June 17, 2011, Barram failed to report his misdemeanor fraud and forgery charges to State Farm and failed to amend his Form U4 to include an affirmative response to Question 14B(I)(b) to reflect his April 29, 2010 misdemeanor fraud and forgery charges.
Moreover, the AWC alleged that between June 6, 2010 and June 17, 2011, Barram failed to:
- report his felony charges of Tampering with Drug Records to State Farm; and
- report his guilty plea to two misdemeanor counts of Tampering with Drug Records; and
- amend his Form U4 to include an affirmative response to:
- Question 14A(l)(b) to reflect his June 6, 2010 felony charges for Tampering with Drug Records; and
- Question 14B(l)(a) to reflect his June 6, 2010 guilty plea to two misdemeanor counts of Tampering with Drug Records, but failed to do so.
For the reasons cited above an in accordance with the terms of the AWC, FINRA imposed upon Barram a $2,500 fine and a three-month suspension from association with any FINRA member in any capacity.
"Street Sweeper" has regularly covered these FINRA U4 criminal disclosure cases. They do not discriminate between large firms and indie/regionals. Folks at Merrill Lynch, Morgan Stanley, JP Morgan, Wells Fargo, Citigroup, and other major organizations are just as apt to fall victim to the intricacies of what needs to be disclosed and when as their counterparts at smaller shops. For more background, read these columns: