STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BANKING AND ) FINANCE, DIVISION OF SECURITIES ) AND INVESTOR PROTECTION, )

)

Petitioner, )

)

vs. ) CASE NO. 89-2214

)

TIMOTHY GIBBONS, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Jane Hayman, held a formal hearing in the above- styled case on August 8, 1989, in West Palm Beach, Florida.

APPEARANCES

For Petitioner: Eric Mendelshon, Esquire

Office of Comptroller

111 Georgia Avenue, Suite 201 West Palm Beach, Florida 33401

For Respondent: Timothy Gibbons, pro se

Number 5 Par Drive Maumelle, Arkansas 72118

STATEMENT OF THE ISSUES

Whether the Respondent is guilty of the violations alleged in the Notice of Cease and Desist Order dated March 13, 1989; and, if so, what penalty should be imposed.

PRELIMINARY STATEMENT

By Notice of Cease and Desist Order dated March 13, 1989, petitioner sought to revoke respondent's registration as an associated person under the Florida Securities and Investor Protection Act and to impose against respondent an administrative fine not to exceed $5,000. The essence of the charges is that respondent engaged in the unauthorized purchase and sale of securities without the approval of his client in violation of Section 517.301(1)(a)(3), Florida Statues and that such unauthorized transactions were prohibited business practices as defined by Rule 3E-600.013(2)(g), Florida Administrative Code.

At the hearing, petitioner presented the testimony of two witnesses by deposition, which were received into evidence. Respondent testified on his own behalf, presented the testimony of one witness and his five exhibits were received into evidence.

A transcript of the proceeding was not ordered, and the parties were granted leave until August 18, 1989, to file proposed findings of fact.

Petitioner timely filed proposed findings of fact and conclusions of law. A ruling on each of petitioner's proposed findings of fact has been made and is reflected in the Appendix to this recommended order. Respondent filed a letter which is deemed to be respondent's proposed findings of fact; however, his submission was untimely.

FINDINGS OF FACT

1. At all times material hereto, Respondent, Timothy Gibbons, was an associated person and employed by J.B. Hanauer as a sales representative in institutional sales. Each of the subject transactions at issue in this case constituted a purchase and sale of securities.

   
   

2. In the summer of 1988, Mr. Gibbons subscribed the City of Daytona Beach, Florida, as a client. Mr. Mike Robertson, as Deputy Finance Director for the City, was charged with investing the City's funds. The subscription was consummated by a written agreement between the City and J.B. Hanauer establishing a non-discretionary account on behalf of the City. Both Mr. Gibbons and Mr. Robertson were designated in the agreement as authorized representatives of their respective employers for the purpose of conducting transactions between the City and J.B. Hanauer.

   
   

3. Mr. Gibbons contacted Mr. Robertson on an almost daily basis with numbers for proposed deals at different market levels. In these conversations, Mr. Robertson would give Mr. Gibbons the authority to enter the market for the City when the market reached certain, agreed market levels. The direction to initiate a trade at a certain previously approved market level was the sole "discretion" granted to Mr. Gibbons. Mr. Robertson retained and required the non-discretionary authority to approve all transactions. Mr. Gibbons did not at any time have the authority to encumber the City's funds without the prior approval of Mr. Robertson. Mr. Robertson further limited Mr. Gibbons by placing a $1,000,000 cap on the amount of the City's funds he would risk per trade. Mr. Robertson told Mr. Gibbons about the $1,000,000 trading practice and each of the approved trades was limited to the $1,000,000 amount. Their first trade was executed on August 25, 1988.

   
   

4. Then, on August 31, 1988, without the knowledge or consent of the City, Mr. Gibbons executed several trades in the name of the City. Most of the subject trades were in excess of $1,000,000. In fact, they encumbered increments of $5,000,000 and $6,000,000.

   
   

5. When these trades were settled, the City's account owed J.B. Hanauer in excess of $29,000. On September 1, 1988, Mr. Gibbons left the employment of

   J.B. Hanauer, and subsequently, J.B. Hanauer absorbed the City's loss as a result of the subject trades.

   
   

6. By trading without the authorization of his client, the City, the respondent misrepresented his authorization to purchase and sell securities for the City and demonstrated his unworthiness to transact the business of an associated person.

   CONCLUSIONS OF LAW

   
   

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

   
   

8. Pertinent to this case, section 517.161(1), Florida Statutes, provides:

   
   

   1. Registration under Section 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:

      (a) Has violated any provision of

      this chapter or any rule or order made under this chapter;

      * * *

      (c) Has been guilty of a fraudulent act in connection with any sale of

      securities, has been or is engaged or is about to engage in making fictitious or pretended sales or purchases of any such securities, or has been or is engaged or is about to engage in any practice or sale of securities which is fraudulent or in violation of the law.

      (h) Has demonstrated his unworthiness to transact the business of dealer, investment advisor, or associated person.

      
      

9. Rule 3E-600.013, Florida Administrative Code provides:

   
   

   1. The following are deemed demonstrations of unworthiness by a dealer under Section 517.161(1)(h), Florida Statutes, without limiting that term to the practices specified herein:

      (d) Executing a transaction on behalf of a customer without authority to do so;

      * * *

   2. The following are deemed demonstrations of unworthiness by an agent under Section 617.161(1)(h), Florida Statutes, without limiting that term to the practices specified herein:

      * * *

      (g) engaging in any of the practices specified in subsections

      * * * (q), (s), or (t).

      
      

10. Section 517.301(1)(a)3, Florida Statutes provides:

    
    

    1. It is unlawful and a violation of the provisions of this chapter for a

       person:

       1. In connection with the offer, sale, or purchase of any investment or security, ... directly or indirectly:

          * * *

          3. To engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon a person.

          
          

11. Section 517.221(3), Florida Statutes provides:

    
    

    (3) The department may impose and collect an administrative fine against any person found to have violated any provision of this chapter, any rule or order promulgated by the department, or any written agreement entered into with the department in an amount not to exceed $5,000 for each such violation. All fines collected hereunder shall be deposited as received in the Anti-Fraud Trust Fund.

    
    

12. Here, the proof is clear and convincing that respondent violated the provisions of Section 517.161(1)(a) and (h), Florida Statutes, for violation of Section 517.301(1)(a)(3) and Section 517.301(1)(3), Florida Statutes, and for the violation of Rule 3E-600.013, Florida Administrative Code. As to Section 517.161(1)(c) and Section 517.301(1)(3), Florida Statutes, the proof further established that respondent violated said provisions in that the respondent's actions in regard to the subject transactions on August 31, 1988 were fraudulent. See Messer v. E.F. Hutton & Co., 833 F2d 909, 919-9Q (11th Cir. 1987), Alna Capital Associates, et.al. v. Wagner, 758 F2d 562 (11th Cir. 1985), Cf. Hudak v. Economic Research Analyst, 499 F2d 996 (5th Cir. 1974)

    
    

13. Further, respondent is subject to an administrative fine of $5,000 pursuant to Section 517.221(3).

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED that the Department of Banking and Finance issue a Final Order:

1. Revoking any and all registrations of Timothy Gibbons under Chapter 517, Florida Statutes; and

   
   

2. Assessing against Timothy Gibbons an administrative fine of $5,000.

DONE AND ENTERED in Tallahassee, Leon County, Florida, this 7th of September 1989.

JANE C. HAYMAN

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 7th day of September 1989.

APPENDIX TO RECOMMENDED ORDER IN CASE NO. 89-2214

Petitioner's proposed findings of fact are addressed as follows:

1. Addressed in paragraph 1.

2. Addressed in paragraphs 2 through 4.

3. Addressed in paragraphs 3, 4 and 5.

4. Addressed in paragraph 4.

5. Addressed in paragraph 5, and subordinate to paragraph 5.

6. Subordinate to paragraphs 4 and 5.

COPIES FURNISHED:

Eric Mendelshon, Esquire Office of Comptroller

111 Georgia Avenue, Suite 201 West Palm Beach, Florida 33401

Charles L. Stutts General Counsel

Department of Banking and Finance The Capitol

Plaza Level, Room 1302 Tallahassee, Florida 32399-0350

Honorable Gerald Lewis Comptroller, State of Florida The Capitol

Tallahassee, Florida 32399-0350

Timothy Gibbons Number 5 Par Drive

Maumelle, Arkansas 72118

Docket for Case No: 89-002214

Orders for Case No: 89-002214