South Florida Arbitration & Litigation Lawyer Blog
Broker/Dealer and Investment Advisor Fraud, Mismanagement and Misrepresentation Lawyer, Russell L. Forkey, Esq.
December, 2010:
David Gustav Much (CRD #4095088, Registered Rep., Los Angeles, California) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $25,000 and suspended from association with any FINRA member in any capacity for five months. The fine must be paid either immediately upon Much’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Much consented to the described sanctions and to the entry of findings that he recommended that his customers participate in a “Stock to Cash” program under which customers would pledge stock to obtain loans, the proceeds of which were, in many cases, used to purchase non-securities insurance products; and some of Much’s customers participated in that strategy at his recommendation, obtaining loans of more than $4.2 million. The findings stated that Much failed to conduct adequate due diligence concerning the operations or financial stability of the Stock to Cash program lender, and failed to take sufficient action to determine whether his clients’ ownership interest in the pledged securities was adequately protected. The findings also stated that Much did not understand the potential risks inherent in the strategy and therefore did not have a reasonable basis for his recommendations. The findings also included that Much engaged in private securities transactions through his marketing of the program, and he failed to notify or seek his member firm’s approval before engaging in these transactions. FINRA found that Much’s supervisor directed him to disclose his participation in the program to the firm, and despite this direction, Much failed to provide notification until the day that his supervisor’s annual branch examination began, and Much continued to recommend transactions in the program while the firm was reviewing his participation. FINRA also found that the firm’s sales practice unit told Much that he was not allowed to recommend Stock to Cash transactions.
The suspension is in effect from November 15, 2010, through April 14, 2011. (FINRA Case #2007008935001).