NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.

Paul Michael Rodak (Principal)
AWC/2007008935003

Rodak assisted customers in participating 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. Customers that Rodak assisted took out stocks to cash loans totaling more than $7.8 million.

As part of the process of obtaining a loan through the Stock to Cash loan program, customers were required to provide documentation setting forth the intended use of proceeds in order to ensure compliance with Federal Reserve Board regulations restricting the extension of margin credit. In order to avoid violation of Regulation U, borrowers who pledge marginable securities must complete a Federal Reserve Form G-3, also referred to as a Purpose Statement, which requires them to certify whether they will be using the loan proceeds to buy margin securities and, if not, to describe the specific purpose of the credit; the Form G-3 includes a warning that the falsification of the purpose of the credit by a borrower on the form violates the margin rules.

Rodak completed the Purpose Statement for the customers, indicating that they would be using the proceeds for real estate, but at the time Rodak completed these forms, he did not know how the customers would be using the proceeds, or whether the customers had already decided to use the proceeds to buy insurance products; as a result, Rodak caused numerous Purpose Statements to be inaccurate, and a copy of the completed statement for each customer was subsequently provided to the promoter of the program.

Paul Michael Rodak (Principal): Fined $15,000; Suspended 60 days

Tags: Reg U  Stock To Cash