According to FINRA, Stephen M. Polak was assessed a deferred fine of $15,000 and suspended from association with any FINRA member in all capacities for five months on July 31, 2024, for failing to provide prior written notice to his member firm of his role in an outside business activity and for participating in private securities transactions without disclosure or approval.

Polak served as a board member, an officer and director of a corporation that grew and sold hemp related products. Polak had signatory authority over the corporation's bank accounts, and primary responsibility for its accounting and bookkeeping, including maintaining the corporation's ledger of transactions for its unregistered offering, and receiving payments from shareholders. Despite affirming in firm annual compliance certifications that he understood his obligation to comply with regulatory requirements and the firm's written supervisory procedures about outside business activities, Polak did not provide written notice to his firm.

The firm learned about Polak's outside business activity from his state Department of Financial Regulation and questioned him about it. Polak orally acknowledged the activity but did not provide written notice to his firm until 10 months later. Additionally, Polak participated in private securities transactions by receiving 3.25 million shares of the corporation's common stock as compensation for his work as an officer and director without disclosing to, seeking or receiving his firm's written approval to participate in the transaction.

FINRA Rules 3270 and 3280 require registered representatives to provide prior written notice to their firms before engaging in outside business activities and private securities transactions. These requirements exist to allow firms to supervise such activities, evaluate conflicts of interest, and ensure compliance with securities regulations.

The five-month suspension, in effect from August 5, 2024, through January 4, 2025, reflects the serious nature of these violations, particularly given the substantial role Polak played in the corporation and the significant compensation he received.