Initiated By
FINRA
Allegations
SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934, SEC RULES 10B-5, 17A-3, 17A-4, ARTICLES III, SECTION 4(F) AND ARTICLE V, SECTION 2(C) OF FINRA'S BY-LAWS, NASD RULES 2110, 2120, 3050(C), 3110, INTERPRETATIVE MATERIAL 1000-1 -JERRY BURCH RECOMMENDED THE PURCHASE OF A COMMON STOCK WITHOUT DISCLOSING HIS MATERIAL ADVERSE INTEREST - A RELATIVE'S CORPORATION HAD OPENED A SECURITIES ACCOUNT AT ANOTHER BROKER-DEALER AND HAD DEPOSITED A BLOCK OF STOCK WHICH IT HAD BEGUN TO SELL IN THE MARKET AND BURCH ACTIVELY RECOMMENDED THE STOCK WITHOUT DISCLOSING MATERIAL FACTS; DIRECTLY OR INDIRECTLY, BY USE OF MEANS OR INSTRUMENTALITIES OF INTERSTATE COMMERCE, INTENTIONALLY OR RECKLESSLY EMPLOYED A DEVICE, SCHEME OR ARTIFICE TO DEFRAUD OR ENGAGED IN AN ACT, PRACTICE OR COURSE OF BUSINESS WHICH OPERATED OR WOULD OPERATE AS A FRAUD OR DECEIT IN CONNECTION WITH THE PURCHASE OR SALE OF A SECURITY. BURCH FAILED TO NOTIFY HIS MEMBER FIRM, IN WRITING, OF THE EXISTENCE OF AN ACCOUNT IN WHICH HE HAD A FINANCIAL INTEREST AND FAILED TO NOTIFY ANOTHER MEMBER FIRM, IN WRITING, OF HIS ASSOCIATION WITH A MEMBER FIRM. BURCH FALSELY TOLD HIS MEMBER FIRM THAT CUSTOMER PURCHASES OF THE STOCK WERE UNSOLICITED OR OTHERWISE FAILED TO DISCLOSE THAT HE SOLICITED HIS CUSTOMERS' PURCHASE OF THE STOCK; AND CREATED FALSE, INACCURATE OR MISLEADING FIRM RECORDS THAT HIS CUSTOMERS' PURCHASES OF THE STOCK WERE UNSOLICITED WHEN, IN FACT, HE HAD SOLICITED CUSTOMERS. BURCH WILLFULLY FAILED TO UPDATE HIS FORM U4 WITH A MATERIAL FACT.
Resolution
Decision
Bar
Bar (Permanent)
Registration Capacities Affected
All Capacities
Duration
Indefinite
Start Date
7/28/2011
Regulator Statement
HEARING PANEL DECISION RENDERED JUNE 2, 2009 WHEREIN BURCH IS BARRED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY FOR MAKING RECOMMENDATIONS TO CUSTOMERS TO PURCHASE STOCK WITHOUT DISCLOSING THAT HIS RELATIVE'S ACCOUNT WAS SELLING THE SAME STOCK, IN VIOLATION OF SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934, RULE 10B-5 THEREUNDER AND NASD RULES 2120 AND 2110; FAILING TO NOTIFY HIS FIRM OF HIS RELATIVE'S OUTSIDE ACCOUNT, IN VIOLATION OF NASD RULES 3050(C) AND 2110; AND FALSELY REPRESENTING TO HIS FIRM THAT CUSTOMER PURCHASES WERE UNSOLICITED RESULTING IN FALSE FIRM RECORDS, IN VIOLATION OF NASD RULES 3110 AND 2110 AND SEC RULES 17A-3 AND 17A-4. IN ADDITION, BURCH IS FINED $28,000 FOR VIOLATING SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 10B-5 THEREUNDER AND NASD RULES 2120 AND 2110. IN LIGHT OF THE BARS, NO SANCTIONS WERE IMPOSED FOR FAILURE TO UPDATE HIS FORM U4, IN VIOLATION OF INTERPRETATIVE MATERIAL 1000-1, NASD RULE 2110 AND ARTICLE III, SECTION 4(F) AND ARTICLE V, SECTION 2(C) OF THE BY-LAWS. ON JUNE 26, 2009, BURCH APPEALED THE HEARING PANEL DECISION TO THE NATIONAL ADJUDICATORY COUNCIL (NAC). NAC DECISION RENDERED JULY 28, 2011 WHEREIN THE NAC AFFIRMED THE HEARING PANEL'S FINDINGS THAT BURCH MADE MATERIAL OMISSIONS, CAUSED HIS FIRM'S INACCURATE BOOKS AND RECORDS, AND FAILED TO AMEND HIS FORM U4. ACCORDINGLY, THE NAC BARS BURCH FOR THE FRAUD VIOLATION AND IMPOSES A SEPARATE BAR FOR CAUSING HIS FIRM'S BOOKS AND RECORDS TO BE INACCURATE. IN LIGHT OF THE BARS IMPOSED, THE NAC DID NOT IMPOSE A SUSPENSION FOR FAILURE TO AMEND HIS FORM U4. THE NAC DISMISSED THE FINDING THAT BURCH VIOLATED ARTICLE III, SECTION 4(F) OF THE BY-LAWS AND THE FINDINGS OF VIOLATION OF NASD RULE 3050. THE NAC DISMISSED THE $28,000 FINE IMPOSED BY THE HEARING PANEL. THE BAR IS EFFECTIVE JULY 28, 2011. THE DECISION IS FINAL AUGUST 30, 2011.
Broker Comment
HEARING PANEL DECISION RENDERED JUNE 2, 2009 WHEREIN BURCH IS BARRED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY FOR MAKING RECOMMENDATIONS TO CUSTOMERS WITHOUT DISCLOSING HIS WIFE'S ACCOUNT WAS SELLING THE SAME STOCK; FAILING TO NOTIFY HIS FIRM OF HIS WIFE'S OUTSIDE ACCOUNT; AND FALSELY REPRESENTING TO HIS FIRM THAT CUSTOMER PURCHASES WERE UNSOLICITED RESULTING IN FALSE FIRM RECORDS. BURCH WAS FINED $28,000 FOR VIOLATING SECTION 10(B) OF THE SECURITIES EXCHANGE ACT, SEC RULE 10B-5 AND NASD RULES 2120 AND 2110. IN LIGHT OF THE BARS, NO SANCTIONS WERE IMPOSED FOR FAILURE TO UPDATE HIS FORM U4. APPEALED TO THE NAC ON JUNE 26, 2009. DECISION UPHELD BY THE NAC ON 7/28/11 AND WILL BE APPEALED TO THE SEC WITHIN 30 DAYS. REP'S WIFE AND A CASUAL BUSINESS ASSOCIATE SET UP A JOINT ACCOUNT FOR THE PURPOSE OF FUNDING/PRODUCING PET CARE PRODUCT LINES AND PET BEAUTY CONTESTS. AT ASSOCIATE'S DIRECTION, A BUSINESS ACCOUNT WAS ESTABLISHED. ASSOCIATE LATER DEPOSITED PERSONAL SHARES OF BED-N-BISCUIT INTO THE ACCOUNT. ASSOCIATE TESTIFIED THAT SHE HAD DONE THIS ON FOUR SEPARATE OCCASIONS WITH OTHER INDIVIDUALS BESIDES REP'S WIFE. WITHOUT THE KNOWLEDGE OF THE ASSOCIATE'S DEPOSIT OF SHARES AND LATER SALE OF SOME OF THOSE SHARES, REP BOUGHT BED-N-BISCUIT FOR HIMSELF, FAMILY MEMBERS AND FOUR CLIENTS. REP STATES THAT HE DID NOT FALSIFY FIRM RECORDS AS TO THE SOLICITATION OF THE SHARES PURCHASED AND THAT HE NOTIFIED HIS FIRM OF THE REQUEST FOR AN UPDATED U-4, AND THE FIRM MADE AN ERROR IN NOT COMPLETING THE UPDATE IN A TIMELY MANNER. REP ADDS THAT AS SOON AS THESE FACTS AND ERRORS WERE BROUGHT TO HIS ATTENTION, HE NOTIFIED THE FIRM IMMEDIATELY, AND CONCLUDES THAT THE ABOVE FACTS WERE TESTIFIED TO BY HIM, HIS WIFE, HIS WIFE'S BUSINESS ASSOCIATE, AND HIS FIRM.
