STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CAROL W. ELDRED, )

)

Petitioner, )

)

vs. ) CASE NO. 88-0531

) DEPARTMENT OF BANKING AND FINANCE, ) OFFICE OF THE COMPTROLLER, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a final hearing in the above-styled matter was held on May 17, 1988 in Fort Lauderdale, Florida, before Joyous Parrish, a duly designated Hearing Officer of the Division of Administrative Hearings. The parties were represented at the hearing as follows:

APPEARANCES

For Petitioner: Michael Cohen, Esquire

517 Southwest First Avenue

Fort Lauderdale, Florida 33301

For Respondent: Charles E. Scarlett, Esquire

Office of Comptroller

Department of Banking and Finance Legal Section, The Capitol Tallahassee, Florida 32399

BACKGROUND AND PROCEDURAL MATTERS

This case began on December 11, 1987, when the Department of Banking and Finance, Office of the Comptroller, Division of Securities and Investor Protection (Department) issued a letter to Petitioner informing her that the application for registration as an associated person of Sheffield Securities was denied. The denial was predicated upon the Department's determination that Petitioner's disciplinary history within the securities industry constitutes prima facie evidence of Petitioner's unworthiness to transact the business of associated person. Petitioner's request for a formal hearing was forwarded to the Division of Administrative Hearings for formal proceedings on February 1, 1988. On May 11, 1988, the Department requested that the undersigned take official recognition of provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such motion was granted May 17, 1988.

At the hearing, Petitioner presented the testimony of Dennis Dioxin and testified on her own behalf. The Department presented the testimony of Don Saxon. The Department's exhibits numbered 1-4 were admitted into evidence.

A transcript of the proceedings was filed on June 17, 1988, and the parties were given ten days from the filing within which to file proposed findings of fact and conclusions of law.

After the hearing, Petitioner filed a proposed recommended order. It has been carefully considered in the preparation of this Recommended Order and specific rulings on the proposed findings of fact are included in the attached Appendix. The Department did not file a proposal.

ISSUE

The central issue in this case is whether Petitioner is entitled to be registered as an associated person.

FINDINGS OF FACT

1. Petitioner filed an uniform application for securities registration with the Department. This application sought registration as a general securities representative (5-7) and named Sheffield Securities, Inc. as the firm for whom she intended to work.

   
   

2. The application sought information regarding Petitioner's past work experience and specifically inquired as to whether the U.S. Securities and Exchange Commission (SEC) had ever found her to have been involved in a violation of investment-related regulations or statutes. The application also asked Petitioner to disclose whether the SEC had entered an order denying, suspending or revoking her registration or disciplined here by restricting her activities. To both of these questions Petitioner answered "yes."

   
   

3. Petitioner's association with the securities industry began in 1972 when she was employed as a secretary for a securities firm. Her work prior to that had been as a bookkeeper. Petitioner obtained her registration and purchased a securities business, Adams & Whitney Securities Corp., in late 1973 or early 1974.

   
   

4. Adams & Whitney was registered with the SEC and operated as a broker/dealer buying and selling interests for itself and others. Petitioner was the president and sole principal for Adams & Whitney.

   
   

5. On February 9, 1976, the SEC issued a released which claimed Adams & Whitney and Petitioner had wilfully violated and wilfully aided and abetted violations of the anti-fraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities EXCHANGE ACT of 1934, and Rule lOb-5 in connection with an offer to purchase, and sale of ITS securities and manipulation of the price of the security. The release also alleged Petitioner had violated Section 15(c)(2) of the securities EXCHANGE ACT of 1934 and Rule 15c 2-7 by submitting quotations for ITS securities to a interdealer quotation system without notification to the system of arrangements with other brokers and guarantees of profits.

   
   

6. Without admitting or denying the allegations against her, Petitioner submitted an offer of settlement regarding the ITS charges which the SEC determined to accept. As a result, the registration as a broker-dealer of Adams & Whitney was suspended for a period of four months. Also, Petitioner was suspended from association with any broker-dealer for a period of four months.

7. On June 27, 2977, the SEC issued a release which charged that Petitioner had wilfully violated and wilfully aided and abetted violations of the registration provisions of the Securities Act of 1933, and had willfully violated an wilfully aided and abetted violations of the anti-fraud provisions of the Securities Act of 1933 and the Securities EXCHANGE Act of 1934 in connection with the offer and sale of the common stock of Tucker Drilling Company, Inc.

   
   

8. Without admitting or denying the allegations against her, Petitioner submitted an offer of settlement regarding the Tucker Drilling charges which the SEC decided to accept. As a result, the SEC found that Petitioner wilfully violated and wilfully aided and abetted violations of Sections 5(a) and 5(c) of the Securities Act of 1933. Further, it was found Petitioner willfully violated and willfully aided and abetted violations of Section 10(b) of the EXCHANGE act and Rule 10b-6. Based on its findings the SEC suspended Petitioner from association with any brokers, dealer or investment company for a period of twelve months and barred her from association with any broker, dealer or investment company in a supervisory or proprietary capacity.

   
   

9. Prior to the entry of the administrative penalties imposed against Petitioner in connection with the Tucker Drilling charges, the SEC had obtained a civil injunction against Petitioner which permanently enjoined her from violating the federal securities laws in connection with the offer and sale of Tucker securities or any other securities.

   
   

10. Petitioner maintained at hearing that the submitted of settlement were offered as an expedient means of resolving the charges since she did not have the financial resources needed to oppose the allegations.

    
    

11. In connection with the ITS charges, Petitioner stated she did not improperly scheme to manipulate the stock prices, that she neither bought nor sold shares of ITS, and that she was charged with other broker-dealers who had "made a market" for ITS simply because of her association with them. Further, Petitioner denied she had ever received compensation for deals made with the ITS sales

    
    

12. In connection with the Tucker Drilling charges, Petitioner admitted she actively participated in the purchase and sale of the Tucker stock but that she had not known of the improprieties of others involved in the trading. Petitioner denied she had knowingly violated the laws and alleged that by the time she determined something was improper, the investigations had begun. Petitioner found the Tucker incident a "stupid mistake.

    
    

13. In 1976, Adams & Whitney went out of business. Petitioner subsequently devoted her energy to her own and family health problems and became a housewife. In 1985, Petitioner's family moved to Florida and she worked as a secretary for a brokerage firm called Brown & Hawk, Inc. From September, 1986 until the time of her application, Petitioner worked as a secretary for Sheffield Securities, Inc.

    
    

14. During her employment with Sheffield, Petitioner studied for an successfully passed the examination for S-7 registration.

    
    

15. According to Dennis Dixon, who was a financial principal and general securities associated person at Sheffield Securities, Petitioner is a very trustworthy person who is also very capable.

16. According to Don Saxon, the determination that Petitioner had violated the anti-fraud provisions was a great concern to the Department since those violations are the most serious types perpetrated by an individual in the industry.

    
    

    CONCLUSIONS OF LAW

    
    

17. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of these proceedings.

    
    

18. Section 517.161(1)(h), Florida Statutes provides:

    
    

    1. Registration under s. 517.12 may be denied or any registration granted may be revoked, restricted, or suspended by the department if the department determines that such applicant or registrant:

       * * * Has demonstrated his

       unworthiness to transact the business of dealer, investment adviser, or associated person.

       
       

19. Rule 3E-600.011, Florida Administrative Code provides, in pertinent part:

    
    

    Prima Facie evidence of unworthiness to transact the business of a dealer, investment adviser, principal, or agent in the State of Florida shall include, but shall not be limited to:

    * * *

    (2) Any injunction suspension prohibition, revocation, denial or administrative order by any state or federal agency, national securities exchange, or national securities association, involving a violation of any federal or state securities law or any rule or regulation promulgated thereunder, and any injunction or adverse administrative order by a state or federal agency regulating banking, insurance, finance or small loan companies, real estate, mortgage brokers, or other related or similar industries, or any court of competent jurisdiction.

    
    

20. In the case at issue the Department has established sanctions which serve as evidence of Petitioner's unworthiness to be registered as an associated person. However, Petitioner has proved that she should be given an opportunity to be registered with appropriate limitations. The testimony of Petitioner's

co-worker supported her claim of trustworthiness. Further, Petitioner showed

sincere remorse that she had made such a mistake in judgment. The time elapsed since the incidents occurred would suggest Petitioner has spent sufficient time away from the industry. At age 54 Petitioner is hopefully now mature enough to avoid the associations and errors of her past. More important, with appropriate restrictions, public interests are not likely to be in jeopardy.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED:

Department of Banking and Finance, Office of the Comptroller, Division of Securities and Investor Protection enter a Final Order approving Petitioner's application for registration with restrictions as may be deemed appropriate by the Department.

DONE and RECOMMENDED this 25th day of July, 1988, in Tallahassee, Florida.

JOYOUS D. PARRISH

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 25th day of July, 1988.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-0531

Rulings on Petitioner's proposed Findings of Fact:

1. Paragraph 1 is accepted.

2. Paragraph 2 is accepted.

3. Paragraph 3 is rejected as argument.

4. Paragraph 4 is rejected as argument or unsupported by the evidence. To the extent relevant see findings made in paragraphs 11 & 12.

5. Paragraph 5 is rejected as argument.

6. Paragraph 6 is accepted to the extent addressed in findings made in paragraphs 10, 11, 12 otherwise rejected as argument unsupported by the record, or irrelevant.

7. The first sentence in paragraph 7 is accepted. The balance of paragraph 7 is rejected as argument.

8. Paragraph 8 is accepted.

9. Paragraph 9 is rejected as argument.

10. The first 4 sentences of paragraph 10 are accepted. The balance of paragraph 10 is rejected as argument.

11. Paragraph 11 is rejected as argument.

COPIES FURNISHED:

Charles E. Scarlett Assistant General Counsel Office of the Comptroller Suite 1302, The Capitol Tallahassee, Florida 32399

Michael J. Cohen, Esquire

517 S. W. First Avenue

Fort Lauderdale, Florida 33301

Honorable Gerald Lewis Comptroller, State of Florida The Capitol

Tallahassee, Florida 32399-0350

Docket for Case No: 88-000531

Orders for Case No: 88-000531