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.

David Gustav Much
AWC/2007008935001

Much 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. 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. Much did not understand the potential risks inherent in the strategy and therefore did not have a reasonable basis for his recommendations.

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. 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 still continued to recommend transactions in the program while the firm was reviewing his participation. The firm’s sales practice unit told Much that he was not allowed to recommend Stock to Cash transactions.

David Gustav Much: FIned $25,000; Suspended 5 months