← Broker database 2022-12-27
John Underation Suspended Six Months for Failing to Disclose Felony Charges
According to FINRA, John Matthew Underation was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for six months for willfully failing to timely amend his Form U4 to disclose felony charges and a guilty plea.
Underation was indicted by a grand jury for aggravated vehicular assault, vehicular assault, and failure to stop after an accident. Further, Underation pled guilty to a felony charge for attempted vehicular assault, which rendered him statutorily disqualified from associating with a member firm. Underation ultimately amended his Form U4 to disclose the felony charges and felony guilty plea approximately 10 months after the deadline for disclosing the felony guilty plea and well over a year after the deadline for disclosing the felony charges.
The suspension is in effect from January 3, 2023, through July 2, 2023.
Form U4 is the Uniform Application for Securities Industry Registration that all registered representatives must file and maintain. The form requires disclosure of various background information, including criminal charges and convictions. Representatives have an ongoing obligation to amend their Form U4 within 30 days when information on the form becomes inaccurate or incomplete.
The disclosure requirements for criminal matters are strict and serve important investor protection purposes. The securities industry is built on trust, and customers entrust their financial assets to representatives and firms. Information about criminal conduct, particularly felonies, is material to a customer's decision about whether to work with a representative and to a firm's decision about whether to employ or continue employing a representative.
The charges against Underation were serious: aggravated vehicular assault, vehicular assault, and failure to stop after an accident. These charges suggest conduct involving a vehicle accident that caused injury and then leaving the scene. His guilty plea to attempted vehicular assault confirms criminal wrongdoing.
A felony conviction creates a statutory disqualification, meaning the individual is disqualified from associating with a member firm unless they obtain approval from FINRA through a process that involves demonstrating they do not pose an unreasonable risk to investors. Underation's failure to disclose the felony charges and guilty plea meant he continued working in the securities industry while statutorily disqualified and without obtaining the required approval.
The delays in disclosure were substantial: approximately 10 months after the deadline for disclosing the guilty plea and over a year after the deadline for disclosing the charges. This was not a brief oversight but rather an extended period during which Underation's Form U4 was inaccurate, his firm was unaware of the criminal charges and conviction, and customers had no access to this material information.
The characterization of the failure as "willful" is significant. In securities regulation, willfulness does not require proof of evil intent—it simply means the representative knew what he was doing. Here, Underation was charged with felonies, went through criminal proceedings, and pled guilty to a felony. He certainly knew about these events but chose not to disclose them on his Form U4 as required.
The six-month suspension and $5,000 fine reflect the seriousness of the willful failure to disclose statutory disqualification events. During the period Underation failed to disclose, he was working in the securities industry in violation of the statutory disqualification provisions, and customers and his firm were unaware of his criminal conviction.
For investors, this case underscores the importance of checking your broker's background using FINRA's BrokerCheck system, which compiles information from Forms U4. BrokerCheck discloses criminal charges, convictions, customer complaints, regulatory actions, and employment history. However, BrokerCheck can only disclose information that representatives have accurately reported on their Forms U4. When representatives fail to disclose required information, as Underation did, investors are deprived of material information they need to make informed decisions.
Always review your broker's BrokerCheck report and be alert to any criminal disclosures, particularly felonies. While not all criminal conduct is necessarily disqualifying, serious charges like vehicular assault raise questions about judgment and character that are relevant to trustworthiness in handling customer investments.