UNITED STATES OF AMERICA
|In the Matter of
Cheryl A. Rodgers,
|ORDER INSTITUTING PUBLIC
MAKING FINDINGS, IMPOSING
REMEDIAL SANCTIONS AND
The Securities and Exchange Commission ("Commission") deems it appropriate in the public interest and for the protection of investors that public administrative and cease-and-desist proceedings be, and hereby are, instituted against Respondent Cheryl A. Rodgers ("Respondent" or "Rodgers") pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act").
In anticipation of the institution of these proceedings, Rodgers has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, and without admitting or denying the Commission's findings contained herein, except that she admits the findings contained in paragraphs II.A and the jurisdiction of the Commission over her and the subject matter of these proceedings, Rodgers consents to the issuance of this Order Instituting Public Administrative and Cease-and-Desist Proceedings, Making Findings, Imposing Remedial Sanctions and Imposing Cease-and-Desist Order, and the entry of findings and the imposition of the sanctions set forth below.
On the basis of this Order and the Offer submitted by Respondent, the Commission finds that:
A. Respondent Cheryl A. Rodgers, 41, of Dallas, Texas, was employed by Addison Securities, Inc. ("Addison") as a registered representative from May 1991 through August 1996. At all relevant times, Addison was a broker-dealer registered with the Commission (File No. 8-28164).
B. Rodgers engaged in a series of sales practices abuses with respect to ten of her customers from April 1994 through August 1996. As more fully discussed below, Rodgers' misconduct included the misappropriation of customer funds and unauthorized transactions.
C. The most egregious of Rodgers' sales practice abuses involved the misappropriation of customer funds. In two instances in 1996, Rodgers misappropriated funds from customers and caused the funds to be deposited in a personal brokerage account she controlled and maintained away from Addison. In the first instance, Rodgers used a forged letter of authorization to make an unauthorized transfer of $26,000 from the account of a customer to a brokerage account under her control.
D. In the second instance, Rodgers misappropriated a $100,000 check from the profit sharing plan of a municipal utility district (the "Plan"). Specifically, in July 1996, Rodgers and the Plan's trustees agreed that the Plan would purchase certain securities, and the Plan mailed a $100,000 check with which to make the purchases. Rodgers intercepted the check, typed on it the account number of the brokerage account she controlled away from Addison, deposited the check into that account and thereafter lost the $100,000 in, among other things, a series of unprofitable index options transactions.
E. Rodgers continued to perpetrate her scheme against the Plan, even after Addison terminated her in August 1996. After leaving Addison, Rodgers sent the Plan trustees a fictitious statement showing that the Plan still held assets worth $589,000. In reality, Rodgers had almost completely exhausted the assets of the Plan through various unsuitable investments, including options index purchases. Believing, however, that the Plan still held substantial assets, the Plan trustees authorized the transfer of the Plan's remaining assets at Addison, with a value of $70,000, to Rodgers' new employer, another registered broker-dealer. Shortly thereafter, however, the trustees learned that, without their authorization, Rodgers had liquidated the assets and purchased more options. After the trustees complained, Rodgers' new brokerage firm reversed the options purchases and fired her.
F. Rodgers also engaged in several unauthorized transactions. In January 1996, Rodgers lost $9,300 in unauthorized options transactions in a customer's account. According to this customer, Rodgers falsely claimed the trades were mistakenly charged to his account and that he would be reimbursed.
G. Also in January 1996, Rodgers made an unauthorized stock purchase in the amount of $23,000 in another customer account. When the customer questioned Rodgers about the transaction, she concealed her misconduct for several months by secretly sending the customer letters on Addison letterhead falsely stating that the trade was a "back office error," which Addison would reverse. Thereafter, the stock declined precipitously in value.
H. In May 1996, Rodgers lost $30,000 in unauthorized options trades in yet another customer account.
I. Based on the above-described conduct, Rodgers willfully violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
J. In June 1999, Rodgers pled guilty to four indictments obtained by the District Attorney of Dallas County, Texas, in Cause Nos. 98-02981, 98-02982, 98-02983, and 98-02984. The indictments arose from the matters set forth above and alleged that Rodgers had committed third degree felonies of money laundering and misapplication of fiduciary property. Rodgers agreed to a deferred adjudication order under which she was placed on probation for ten years and ordered to pay restitution of $30,000.
K. Rodgers has submitted a sworn financial statement and other evidence and has asserted her financial inability to pay disgorgement of $96,795 plus prejudgment interest or a civil penalty. The Commission has reviewed the sworn financial statement and other evidence provided by Rodgers and has determined that she does not have the financial ability to pay disgorgement plus prejudgment interest or a civil penalty.
Based on the foregoing, the Commission deems it appropriate in the public interest and for the protection of investors to accept Rodger's Offer of Settlement and to impose the remedial sanctions which are set forth in the Offer.
Accordingly IT IS HEREBY ORDERED, that:
A. Effective immediately, Rodgers be, and hereby is, barred from association with any broker or dealer.
B. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, Rodgers shall cease and desist from committing or causing any violation and any future violation of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
C. Rodgers shall pay disgorgement of $96,795 plus prejudgment interest, but that payment of such amount and prejudgment interest be waived, and a civil penalty not be imposed, based upon Rodgers' demonstrated financial inability to pay.
D. the Commission's Division of Enforcement ("Division") may, at any time following the entry of the Order, petition the Commission to: (1) reopen this matter to consider whether Rodgers provided accurate and complete financial information at the time such representations were made; (2) determine the amount of the civil penalty to be imposed; and (3) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Rodgers' offer of settlement had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Rodgers was fraudulent, misleading, inaccurate or incomplete in any material respect, the amount of the civil penalty to be imposed and whether any additional remedies should be imposed. Rodgers may not, by way of defense to any such petition, contest the findings in the Order or the Commission's authority to impose any additional remedies that were available in the original proceeding.
By the Commission
Jonathan G. Katz
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