STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

INVESTMENT PROTECTION, )

)

Petitioner, )

)

vs. ) CASE NO. 93-0982

) BROOKS & WILT AND WAYNE E. WILT, )

)

Respondents, )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Claude B. Arrington, held a formal hearing in the above-styled case on June 17, 1993, in Fort Lauderdale, Florida.

APPEARANCES

For Petitioner: Leslie A. Meek, Esquire

Deborah Guller, Esquire Assistant General Counsels

Department of Banking and Finance

401 North West 2nd Avenue, Suite N-708 Miami, Florida 33128

For Respondent: David H. Reimer, Esquire

Becker & Poliakoff, P.A. Post Office Box 9057

Fort Lauderdale, Florida 33310-9057 STATEMENT OF THE ISSUES

Whether Respondent Brooks & Wilt, through its principle, Respondent Wayne

E. Wilt, held itself out to the public as an investment adviser and rendered investment advice to Florida residents while not lawfully registered nor lawfully exempt from registration as alleged in the Administrative Complaint and the penalties, if any, that should be imposed.

PRELIMINARY STATEMENT

Petitioner filed an Administrative Complaint against Respondent alleging that Respondent violated certain rules and statutes pertaining to the registration of investment advisers in the State of Florida. Respondent denied the material factual allegations of the Administrative Complaint and requested a formal administrative hearing. This proceeding followed.

At the formal hearing, Petitioner called Tamara Cain as its only witness and offered seven exhibits, each of which was accepted into evidence. At the time of the formal hearing, Ms. Cain was the Assistant Director of the Department of Banking and Finance, Division of Securities and Investor Protection. One of Petitioner's exhibits was the deposition of Respondent, Wayne E. Wilt. Mr. Wilt testified on his own behalf, but presented no other witnesses and no exhibit.

At the beginning of the formal hearing, Petitioner's Motion for Official Recognition filed June 14, 1993, was granted, and official recognition was taken of Chapter 517, Florida Statutes, Chapter 3E, Florida Administrative Code, and the definition of the term "hold out" contained in Webster's Ninth New Collegiate Dictionary (1991) and the definition of the term "public" contained in Black's Law Dictionary, respectively. In addition, Petitioner's Motion to Amend by Interlineation filed June 15, 1993, which was filed to correct a typographical error, was granted. There was no objection to either motion.

A transcript of the proceedings has been filed. At the request of the parties, the time for filing post-hearing submissions was set for more than ten days following the filing of the transcript. Consequently, the parties waived the requirement that a recommended order be rendered within thirty days after the transcript is filed. Rule 60Q-2.031, Florida Administrative Code. Rulings on the parties' proposed findings of fact may be found in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Brooks and Wilt is a fictitious name for a general partnership established by Mr. Wilt and his wife in either late 1989 or early 1990. Brooks and Wilt evolved as a part-time enterprise as a result of Mr. Wilt's relationship with various individuals who requested that Mr. Wilt assist them in preparing tax returns or maintaining bookkeeping records for their businesses. The activities of Mr. Wilt's wife were not at issue in this proceeding. At no time has Brooks and Wilt or Wayne E. Wilt been registered with the Petitioner as an investment adviser.

   
   

2. For the three years preceding the formal hearing, Mr. Wilt was a full time employee of James Hartley, an architect with offices in Hollywood, Florida. Mr. Wilt's duties for Mr. Hartley include bookkeeping and accounting.

   
   

3. When Brooks and Wilt was formed, Mr. Wilt was providing strictly bookkeeping, accounting, and tax work for his clients.

   
   

4. In August 1991, Mr. Wilt completed a two-year correspondence course from the College of Financial Planning and was awarded a certificate of completion.

   
   

5. On March 30, 1992, Mr. Wilt applied for registration as a financial adviser with the United States Securities and Exchange Commission (SEC). Mr. Wilt received notification dated April 22, 1992, from the SEC that he had been approved for registration. An applicant for registration as an investment adviser in the State of Florida must first be registered with the SEC.

   
   

6. At the time Mr. Wilt applied for registration with the SEC, he called the SEC to inquire about registration with the State of Florida. Mr. Wilt was told in response to his inquiry that the SEC would notify the State of Florida upon his becoming registered with the SEC.

7. The Petitioner receives quarterly reports from the SEC which list each person who resides in Florida and is registered with the SEC as an investor adviser.

   
   

8. Petitioner received notification of Mr. Wilt's registration with the SEC and sent to Mr. Wilt a letter dated June 22, 1992, which informed him of the information it had received from the SEC, specifically advised him that Florida law required registration, and inquired as to his intentions to register with the State of Florida as an investment adviser. This letter also elicited certain information from Respondents.

   
   

9. Mr. Wilt considered the letter from Petitioner to be part of the registration process and responded to the questions accordingly. Mr. Wilt did not realize that the letter was part of an investigation into suspected violation of the Florida Securities and Investor Protection Act, which generally requires registration with Petitioner of all persons who engage in the business of investment adviser in the State of Florida.

   
   

10. In his response to the Petitioner's letter dated June 22, 1993, Mr. Wilt sent a letter that was received by the Petitioner on July 13, 1992. This July letter responded to the questions raised by Petitioner's June letter. The last paragraph of Mr. Wilt's July letter provided as follows: "I will wait to hear from the appropriate office as to how to complete the registration process."

    
    

11. Petitioner's June letter asked for the following information: Provide a list of 'all' services offered or rendered to the general public by the firm. Mr. Wilt's July letter responded with the following list of services:

    
    

    1. Bookkeeping/Accounting

    2. Tax Return Preparation

    3. Financial Planning

    4. Money Management

       
       

12. Petitioner's June letter asked for the following information: Has the firm or its associated persons provided investment advisory services for compensation from offices in this state or with persons of this state? Mr. Wilt's July letter responded with the following: "Services for compensation? YES".

    
    

13. Petitioner's June letter asked for the following information: Has the firm or its associated persons held themselves out to the general public as an investment adviser? Mr. Wilt's July letter responded with the following: "Hold out to public? YES".

    
    

14. Petitioner's June letter asked for the following information: "If the firm has provided investment adviser business from offices in this state or with persons of this state, provide all methods in which the firm holds itself out to the general public and provide documentation representing all methods and forms utilized. Methods used to hold oneself out include, but are not limited to

    document letterhead, business cards, advertising, transcripts, telephone and business directory listings, building directories, etc." Mr. Wilt's July letter responded with the following:

    
    

    "Methods (copies enclosed):

    1. Business Cards

    2. Brochures"

       
       

       Mr. Wilt enclosed a copy of his brochure and a copy of his business card.

       
       

15. Petitioner's June letter asked for the following information: "If the firm has conducted investment adviser business from offices in this state or with persons of this state, provide the total number of clients (accounts) in this state in which those services have been rendered within the last twelve

    (12) months." Mr. Wilt's July letter responded with the following: "This state accounts: Six (6)".

    
    

16. Petitioner's June letter asked for the following information: "If the firm claims it is exempt from registration as an investment adviser with the Department, indicate which exemption(s) to registration the firm is claiming and provide proof to the Department that the firm met or is meeting the requirements of the exemption(s) claimed." Mr. Wilt's July letter responded with the following: "No Exemption Claimed".

    
    

17. Petitioner's June letter asked for the names, addresses, and fees charged to each client to whom Brooks and Wilt had provided investment adviser services. Mr. Wilt's July letter responded with the following names: Elsa Johnson, Joanne Boren, Frank Kostek, Abe Oquendo, Karen Hartley, and James Hartley. The response also reflected that Mr. Oquendo had been paid a fee of

    $100.00 and that Mr. Hartley had paid a fee of $1,026.50.

    
    

18. The business card that was enclosed with Mr. Wilt's July letter was printed in March 1992. This card identified Mr. Wilt as being a registered investment adviser. Mr. Wilt testified that he had ordered these cards in anticipation of being registered and that the only one of these cards he had given to anyone was the one he enclosed with his July letter to Petitioner. It is found that Mr. Wilt did not distribute any of these business cards to the public at any time pertinent to this proceeding.

    
    

19. In addition to the business cards, Brooks and Wilt had a brochure prepared in August or September of 1991. This brochure represented that Brooks and Wilt offered "customized financial planning" and contained the following statement: "We specialize in asset allocation among a broad spectrum of investment vehicles, including all types of mutual funds. Millions of dollars under current management."

    
    

20. Mr. Wilt testified at the formal hearing he did not hire anyone to distribute his brochure and that he undertook to distribute the brochure as follows: "Only to people that I knew, my friends, my coworkers, family, . . . an occasional tax client. If they had a bookkeeping need . . . it would come up in discussion and I would hand them this (the brochure) . . . in the privacy of my house, my home office." Based on Mr. Wilt's testimony, it is found that Respondents' distribution of the brochures was limited and was not made to the general public.

21. Since 1988, Mr. Wilt has discussed mutual funds and retirement planning with six individuals. Each of these individuals was either a coworker, a relative of a coworker, or a friend.

    
    

22. Elsa Johnson was a coworker of Mr. Wilt's, who in 1988, asked Mr. Wilt some questions about how mutual funds worked and whether investing in mutual funds was a good idea. Mr. Wilt calculated the amount of income Ms. Johnson would require to maintain the retirement life-style she wanted. He also calculated the amount of the investment she would have to make to attain that retirement income. Mr. Wilt recommended several different mutual funds to Ms. Johnson as possible investments. Mr. Wilt answered Ms. Johnson's questions, but he did not charge her a fee for that information.

    
    

23. Joanne Boren is a coworker of Mr. Wilt's wife, and a family friend, who in mid 1991 was dissatisfied with the mutual fund in which she had invested. Mr. Wilt recommended to her several mutual funds as possible investments. Mr. Wilt answered Ms. Boren's questions, but he did not charge her a fee for that information.

    
    

24. Frank Kostek is a longtime friend of Mr. Wilt's who asked how mutual funds worked and whether investing in mutual funds was a good idea. Mr. Wilt answered Mr. Kostek's questions and recommended several mutual funds as possible investments, but he did not charge him a fee for that information.

    
    

25. Abe Oquendo is a coworker and a friend of Mr. Wilt's who asked Mr. Wilt about mutual funds and whether they would be an appropriate investment. On November 1, 1991, Mr. Wilt answered the questions Mr. Oquendo had posed and helped Mr. Oquendo complete an application to purchase mutual funds that Mr. Oquendo had selected. It was not established that Mr. Wilt advised Mr. Oquendo as to the mutual funds to purchase or the amounts that he should purchase. For explaining mutual funds to him and helping complete the application, Mr. Oquendo paid Mr. Wilt the sum of $100.

    
    

26. Karen Hartley is the daughter of Mr. Wilt's employer, James Hartley. On one occasion, Ms. Hartley asked Mr. Wilt general questions by telephone about mutual funds. Mr. Wilt answered Ms. Hartley's questions, but he did not charge her a fee for that information.

    
    

27. In 1989, Mr. Wilt explained how mutual funds worked to his employer, James Hartley, and he recommended several mutual funds as possible investments. Following his discussions with Mr. Wilt, Mr. Hartley invested a large sum of money in mutual funds. That money had previously been invested by Hartley in certificates of deposit. Mr. Hartley also hired Brooks and Wilt to monitor his mutual fund portfolio. That monitoring consisted of tracking the value of the various mutual fund investments Mr. Hartley had made. For work performed in monitoring Mr. Hartley's mutual fund portfolio in 1992, Brooks and Wilt was paid the sum of 1,026.50. For work performed in monitoring Mr. Hartley's mutual fund portfolio in 1993, Brooks and Wilt was paid the sum of 1,095.00.

    
    

28. Mr. Wilt testified that he would give general financial advice to these six individuals if he were asked to do so.

    
    

    CONCLUSIONS OF LAW

    
    

29. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding. Section 120.57(1), Florida Statutes.

30. Section 517.12(4), Florida Statutes, provides, in pertinent part, as follows:

    
    

    (4) No investment adviser or associated person of an investment adviser shall engage in business from offices in this state, or render investment advice to persons of this state, by mail or otherwise, unless the investment adviser and associated persons have been registered with the department pursuant to this section. A dealer or associated person who is registered pursuant to this section may render investment advice

    upon notification to and approval of the department.

    
    

31. Section 517.021(10), Florida Statutes, provides, in pertinent part, as follows:

    
    

    (10)(a) "Investment adviser" includes any person who for compensation engages for all or part of his time, directly or indirectly, or through publications or writings, in the business of advising others as to the value of securities or as to the advisability of investments in, purchasing of, or selling of securities, except a dealer whose performance of these services is solely incidental to the conduct of his business as a dealer and who

    receives no special compensation for such services.

    (b) The term "investment adviser" does not include the following:

    * * *

    6. Any person who does not hold himself to the general public as an investment adviser and has no more than 15 clients within 12 consecutive months in this state.

    
    

32. Section 517.221, Florida Statutes, provides, in pertinent part, as follows:

    
    

    (1) The department may issue and serve upon a person a cease and desist order whenever the department has reason to believe that such person is violating, has violated, or is about to violate any provision of this chapter, any rule or order promulgated by the department, or any written agreement entered into with the department.

    * * *

    (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. ...

33. Petitioner has the burden of proving by clear and convincing evidence the allegations against Respondents. See Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987); Evans Packing Co. v. Department of Agriculture and Consumer Services, 550 So.2d 112 (Fla. 1st DCA 1989). Evans Packing, supra, 550 So. 2d 112, 116, fn. 5, provides the following pertinent to the clear and convincing evidence standard:

    
    

    That standard has been described as follows:

    [C]lear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the evidence must be precise and explicit and the witnesses must be lacking in confusion as to the facts in issue. The evidence must be of such weight that it produces in the mind of the trier of fact the firm belief of (sic) conviction, without hesitancy, as to the truth of the allegations sought to be established. Slomowitz v. Walker, 429 So.2d 797, 800 (Fla. 4th DCA 1983).

    
    

34. In this proceeding, Petitioner established that Respondents performed investment adviser services for Mr. Oquendo on November 1, 1991, and was paid the sum of $100.00 for those services. The fees paid by Mr. Hartley were for the monitoring of his mutual portfolio, a process that merely required basic mathematical calculations. It was not established that any part of the fee paid by Mr. Hartley was for investment advice.

    
    

35. The responses given by Mr. Wilt to the Petitioner's inquiries reasonably led Petitioner to conclude that Respondents were engaged in providing investment adviser services without being registered as required by law. The responses given by Mr. Wilt to the Petitioner's inquiries reasonably led Petitioner to conclude that Respondents were not seeking nor were they entitled to any exemption to registration.

    
    

36. In this proceeding, Respondents have asserted that they were, at all pertinent times, exempt from registration pursuant to Section 517.021(10(b)6, Florida Statutes. There is no contention that Respondents have waived the right to assert their entitlement to the exemption. As the party asserting the affirmative of that issue, Respondents have the burden of proof to establish their entitlement to the exemption. Rule 28-6.08(3), Florida Administrative Code.

    
    

37. Petitioner correctly argues that a party is not entitled to claim the exemption pursuant to Section 517.021(10)(b)6, Florida Statutes, if that party holds itself out to the general public as an investment adviser regardless of the number of clients it had within a consecutive twelve month period. The responses Mr. Wilt gave to the Petitioner's inquiries reasonably led Petitioner to conclude that Brooks and Wilt was holding itself out to the general public as investment advisers.

    
    

38. At the formal hearing, Mr. Wilt gave credible explanations of his answers to Petitioner's inquiries which established that Respondents did not hold themselves out to the general public as an investment adviser. There is no dispute that Respondents never had more than fifteen clients within twelve

consecutive months. Consequently, it is concluded that this proceeding should be dismissed because Respondents established at the formal hearing that they were exempt from registration at all times pertinent to this proceeding pursuant to Section 517.021(10)(b)6, Florida Statutes.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order which dismisses this

proceeding.

DONE AND ENTERED this 3rd day of November, 1993, in Tallahassee, Florida.

CLAUDE B. ARRINGTON

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 3rd day of November, 1993.

ENDNOTES

1/ When his deposition was taken on June 2, 1993, Mr. Wilt was not certain whether the brochure was printed in 1990 or 1991. At the formal hearing, Mr. Wilt testified that the brochure was printed in August or September 1991. The finding of fact is based on Mr. Wilt's testimony at the formal hearing.

2/ Mr. Wilt testified in his deposition taken June 2, 1993, as follows about the brochures: "I was giving brochures to people that I met if they were in business and wanted - and might, I thought might need an accountant or bookkeeping service." While there is arguably some discrepancy between Mr.

Wilt's testimony at deposition and his testimony at the formal hearing, he was not cross-examined as to the deposition testimony. The deposition testimony does not clearly contradict his testimony at the formal hearing and it does not establish that he was distributing the brochures to the general public.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-0982

The following rulings are made on the proposed findings of fact submitted by Petitioner.

1. The proposed findings of fact in paragraphs 1, 2, 4, 6, 9, 10, 11, 12, 13, 14, and 15 are adopted in material part by the Recommended Order.

2. The proposed findings of fact in paragraphs 3 are adopted in material part by the Recommended Order, but it is found that 1991 is the correct date.

3. The proposed findings of fact in paragraph 5 are rejected as being contrary to the greater weight of the evidence and to the findings made. Mr. Wilt's testimony at the formal hearing provides the basis for the findings made pertaining to the distribution of the brochures. See Endnote Number Two.

4. The proposed findings contained in paragraph 7 are conclusions that are discussed and rejected, in part, in the Conclusions of Law portion of the Recommended Order. The services that were performed on behalf of Mr. Hartley are set forth in the Findings of Fact portion of the Recommended Order. The findings of fact contained in paragraph are adopted to the extent they are consistent with the findings made and are rejected to the extent they are contrary to the findings made.

5. The proposed findings of fact in the first two sentences of paragraph 8 are adopted in material part by the Recommended Order. The fact that Respondents were not registered with the Petitioner is also adopted by the Recommended Order. The findings of fact contained in the last sentence of paragraph 8 that pertain to the distribution of the business cards are rejected as being contrary to the greater weight of the evidence and to the findings made. While Mr. Wilt testified at T-50 that he handed out business cards in the manner set forth in the proposed findings of fact, he later corrected that testimony at T-56. The findings of fact contained in the Recommended Order are based on the testimony found at T-56.

6. The services provided by Respondents to the six individuals involved in this proceeding are set forth in the Recommended Order. The proposed findings of fact in paragraph 16 contain conclusions that those services are "financial planning." Those conclusions are rejected to the extent they are contrary to the findings made or to the conclusions reached in the Conclusions of Law portion of the Recommended Order.

7. The proposed findings of fact in paragraph 17 are subordinate as to the findings of fact pertaining to Mr. Oquendo, but they are rejected as being contrary to the findings made as to the other individuals involved in this proceeding.

8. The proposed findings of fact in paragraph 18 are rejected as being ambiguous.

The proposed findings of fact submitted by Respondents are adopted in material part by the Recommended Order or they are subordinate to the findings made.

COPIES FURNISHED:

Leslie A. Meek, Esquire Deborah Guller, Esquire Assistant General Counsels

Department of Banking and Finance

401 North West 2nd Avenue Suite N-708 Miami, Florida 33128

David H. Reimer, Esquire Becker & Poliakoff, P.A. Post Office Box 9057

Fort Lauderdale, Florida 33310-9057

Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350

William G. Reeves, General Counsel Department of Banking and Finance The Capitol, Room 1302 Tallahassee, Florida 32399-0350

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this recommended order. All agencies allow each party at least ten days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this recommended order. Any exceptions to this recommended order should be filed with the agency that will issue the final order in this case.

================================================================= AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE

DIVISION OF SECURITIES AND INVESTOR PROTECTION

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

Administrative Proceeding

vs.

Petitioner, No. 1781-5-10/92

DOAH Case No: 93-0982

BROOKS & WILT, and WAYNE E. WILT

Respondents.

/

FINAL ORDER AND NOTICE OF RIGHTS

This matter has come before the undersigned as Head of the Department of Banking and Finance, Division of Securities and Investor Protection (Department') for the entry of a Final Order in the above-referenced proceeding. Upon a review of the entire record of this proceeding and due consideration thereof, the Recommended Order by the Hearing Officer is adopted in part, and rejected and modified in part, and Respondents Brooks & Wilt and Wayne E. Wilt are ordered to cease and desist from violating Chapter 517, Florida Statutes, as more particularly set forth hereinafter.

BACKGROUND

This matter arose when the Department issued its Administrative Complaint for Cease and Desist Order and for Imposition of Administrative Fines and Notice of Rights ("Cease and Desist Order") dated January 8, 1993. Respondents Brooks & Wilt and Wayne E. Wilt filed their Petition for Formal Hearing on February 4, 1993. Respondents' Brooks & Wilt and Wayne E. Wilt's Petition for Formal Hearing was granted, and this matter was transferred by the Department to the Division of Administrative Hearings for the assignment of a Hearing Officer to conduct the formal hearing. A formal hearing was held in Fort Lauderdale, Florida on June 17, 1993. On November 3, 1993, the Hearing Officer from the Division of Administrative Hearings submitted his Recommended Order ("Recommended Order") in this proceeding, a copy of which is attached hereto as Exhibit "A". Said Recommended Order recommended that the Department enter a Final Order dismissing the Cease and Desist Order against the Respondents.

On or about November 23, 1993, the Department filed its exceptions to the Recommended Order, a copy of which is attached hereto as Exhibit "B". No exceptions were filed by the Respondents.

RULINGS ON THE EXCEPTIONS OF THE DEPARTMENT

First Exception: The Department's exception to paragraph (18) of the Findings of Fact of the Hearing Officer's Recommended Order is hereby rejected.

It is the Hearing Officer's function to consider all of the evidence presented and reach ultimate conclusions of fact based upon competent, substantial evidence by resolving conflicts, judging the credibility of witnesses and drawing permissible inferences therefrom. If the evidence supports two inconsistent findings, it is the Hearing Officer's role to decide between them.

Heifetz v. Department of Business Regulation, 475 So.2d 1277, 1281 (Fla. 1st DCA 1985); De

Groot v. Sheffield, 95 So.2d 912, (Fla. 1957)

Since there was competent, substantial evidence in the record which the Hearing Officer relied on in reaching his finding, the Department concurs with said finding and the Department's first exception is likewise rejected.

Second Exception: The Department's exception to paragraph (20) of the Findings of Fact of the Hearing Officer's Recommended Order is hereby rejected with respect to this exception's argument as to the weight of the evidence. As previously stated, it is the Hearing Officer's, not the Agency's or the Respondents' function to evaluate the evidence in reaching ultimate findings of fact. Further, the Department specifically rejects this exception's proposition that the Department's burden of proof is by clear and convincing evidence. The nature of a cease and desist order is tantamount to a temporary injunction, and as such, the Department's burden of proof in establishing the alleged violations is only by a preponderance of the evidence.

However, the Department's exception to the Hearing Officer's determination (as stated in footnote 2 of the Recommended Order) that the discrepancy between the testimony given by Respondent at the deposition and at the formal hearing would be disregarded as the Respondent was not cross-examined as to the deposition testimony at the final administrative hearing is hereby accepted.

Respondents were not cross-examined as to this "discrepancy" in testimony. However, the deposition transcript was admitted into evidence, and as such, the statements at issue constitute admissions, as opposed to impeachment evidence. The Department also accepts this exception to the Hearing Officer's determination that the distribution of brochures was not made to the general public, as this determination by the Hearing Officer is a conclusion of law rather than a finding of fact. See Findings of Fact and Conclusions of Law, supra.

Third Exception: The Department's exception to paragraph (25) of the Findings of Fact of the Hearing Officer's Recommended Order is hereby rejected. As previously stated, it is the Hearing Officer's not the Agency's or the Respondents' function to evaluate the evidence in reaching ultimate findings of fact. However, the Department would state that the finding that "It was not established that Mr. Wilt advised Mr. Oguendo as to the mutual funds to purchase or the amounts he should purchase" is irrelevant, as the Hearing Officer did make a determination that Respondents provided investment advisory services to Mr. Abe Oguendo for compensation as provided in the Recommended Order, paragraph

1. of the Findings of Fact and paragraph (34) of the Conclusions of Law.

   
   

   Fourth Exception: The Department's exception to paragraph (34) of the Conclusions of Law of the Hearing Officer's Recommended Order is hereby accepted. The Department construes Section 517.021(10)(a), Florida Statutes as including the type of conduct engaged in by the Respondents as found by the Hearing Officer in paragraph (27) of the Findings of Fact of the Recommended Order.

   
   

   Fifth Exception: The Department's exception to paragraph (38) of the Conclusions of Law of the Hearing Officer's Recommended Order is hereby rejected with respect to its application to the weight of the evidence. As stated herein, it is the Hearing Officer's, not the Agency's or the Respondents' function to evaluate the evidence in reaching ultimate findings of fact.

   However, the Hearing Officer's determination that Respondents did not hold themselves out to the general public as an investment advisor and that this proceeding should be dismissed as Respondents established in the formal hearing that they were exempt from registration is hereby rejected, and the Department's exception to this portion of paragraph (38) of the Conclusions of Law is accordingly accepted. See Findings of Fact and Conclusions of Law supra.

   
   

   FINDINGS OF FACT

   
   

   The Hearing Officer's Findings of Fact as contained within the Recommended Order are accepted as true and correct and are adopted as the Findings of Fact of this Final Order and Notice of Rights, with the exception of the portion of paragraph (20) of the Findings of Fact wherein it states that the Respondents' distribution of the brochures "was not made to the general public", as this portion of paragraph (20) of the Findings of Fact constitutes a conclusion of law. The Department has undertaken a careful review of the complete record in this proceeding, including the entire transcript of the final hearing, and Petitioner'S Exhibits 1 through 7 introduced into evidence during the hearing (no exhibits were introduced into evidence by the Respondents), and finds that a

   Cease and Desist Order should be entered against the Respondents based on the findings of fact entered within the Hearing Officer's Recommended Order and for the following reasons:

   
   

   1. Respondents received compensation for explaining how mutual funds worked to Abe Oquendo, as reflected by Petitioner's Exhibit 1, pages 20-21 and 23-24, Petitioner's Exhibit 4, page 2, and the transcript, page 60.

      
      

   2. Respondents received compensation for the monitoring of James Hartley's mutual fund portfolio, as reflected by Petitioner's Exhibit 1, pages 22-23 and 27, Petitioner's Exhibit 4, page 2, and the transcript, pages 62-64.

      
      

   3. Respondents distributed their brochures representing that Respondents offerized financial planning to individuals who were in business (Petitioner's 1, page 32) and to coworkers, friends, family (transcript pages 44 and 55) and occasional tax clients (transcript page 44); and Petitioner's Exhibit 4, page 1 and Exhibit 6, page 1.

CONCLUSIONS OF LAW

The Hearing Officer's Conclusions of Law, paragraphs (29), (30), (31), (32), and (36) of the Recommended Order are adopted herein as the Conclusions of Law of this Final Order and Notice of Rights.

Paragraph (33) of the Hearing Officer's Conclusions of Law of the Recommended Order is hereby rejected. The Cease and Desist Order filed by the Department is tantamount to the filing of a temporary injunctive action, and as such, the burden on the Department to establish the violations as contained therein is by a preponderance of the evidence. The Department is not required to establish the allegations as contained within its Cease and Desist Order against the Respondents' by clear and convincing evidence. As the entry of this cease and desist order does not involve the loss of a license, the appropriate standard of proof is a preponderance of the evidence. Allen v. School Board of Dade County, 571 So.2d 568 (Fla. 3rd DCA 1990).

The Department accepts the first line of paragraph (34) of the Hearing Officer's Conclusion of Law, but would note that this statement constitutes a finding of fact as opposed to a conclusion of law. Similarly, the second line of paragraph (34) of the Conclusions of Law of the Hearing Officer's Recommended Order consists of a finding of fact as opposed to a conclusion of law. The Department rejects the remainder of paragraph (34) of the Conclusions of Law of the Hearing Officer's Recommended Order. Respondents' conduct in receiving compensation for the monitoring of Mr. Hartley's mutual fund portfolio constituted the receiving of compensation for indirectly advising Mr. Hartley as to the value of securities or as to the advisability of investments in, purchasing of, or selling securities pursuant to Section 517.021(10)(a), Florida Statutes.

The Department accepts paragraph (35) of the Hearing Officer's Conclusions of Law of his Recommended Order, but would note that the statements as made therein actually constitute a finding of fact.

The Department accepts paragraph (37) of the Hearing Officer's Conclusions of Law of his Recommended Order, but would note that the statement that "the responses Mr. Wilt gave to the Petitioner's inquiries reasonably led Petitioner to conclude that Brooks & Wilt was holding itself out to the general public as investment advisors" constitutes a mixed finding of fact and conclusion of law.

The Department accepts the first sentence of paragraph (38) of the Hearing Officer's Conclusions of Law of his Recommended Order. The Department would note that the first sentence as contained within this conclusion of law as to the credibility of answers does constitute a finding of fact, which the Department does not dispute. Further, the Department accepts the Hearing Officer's conclusion that "there is no dispute that Respondents never had more than fifteen clients within twelve (12) consecutive months." However, the Department rejects the remainder of paragraph (38) of the Hearing Officer's Conclusions of Law of his Recommended Order. The Hearing Officer's conclusion that this proceeding should be dismissed because Respondents established their exemption from registration at all times pertinent to this proceeding pursuant to Section 517.021(10)(b)6., Florida Statutes is specifically rejected, as well as the Hearing Officer's legal conclusion that Respondents did not hold themselves out to the general public as an investment advisor. Section 517.021(10)(a) and (b)6., Florida Statutes is a statute under the Department's jurisdiction, and as such, is entitled to deferential interpretation by the Department. Palm Harbor Special Fire Control District v. Kelley, 516 So.2d 249,

250 (Fla. 1987). Pursuant to Section 517.021(10)(a), Florida Statutes, an investment advisor includes, in pertinent part, "any person who for compensation engages for all or part of his time, directly or indirectly, in the business of advising others as to the value of securities or as to the advisability of investments in, purchasing of, or selling of securities...." The Hearing Officer determined in Finding of Fact (25) of his Recommended Order that Abe Oquendo asked Mr. Wilt about mutual funds and whether they would be an appropriate investment. "On November 1, 1991, Mr. Wilt answered the questions Mr. Oquendo had posed and helped Mr. Oquendo to complete an application to purchase mutual funds that Mr. Oquendo had selected. ... For explaining mutual funds to him and helping him complete the application, Mr. Oquendo paid Mr. Wilt the sum of

$100.00." Further, as stated by the Hearing Officer in paragraph (34) of the Conclusions of Law of his Recommended Order, the Hearing Officer found that "In this proceeding, Petitioner established that Respondents performed investment advisor services for Mr. Oquendo on November 1, 1991, and was paid the sum of

$100.00 for those services". Further, as stated herein, the Department has determined that the Respondents' conduct in monitoring the mutual fund portfolio of Mr. Hartley constituted the conducting of investment advisory services. As such, the Department has established that Respondents provided investment advisory services for compensation or gain, in accordance with Section 517.021(10)(a), Florida Statutes, and thus were required to obtain licensure.

Therefore, the burden shifted to the Respondents to establish their entitlement to exemption from registration.

Pursuant to Section 517.021(10)(b)6., Florida Statutes, the term "investment advisor" does not include "any person who does not hold himself out to the general public as an investment advisor and has no more than fifteen clients within twelve consecutive months in this state." Respondents are thus required to meet both prongs of this provision in order to establish their entitlement to said exemption. While there was no dispute that Respondents ever had more than fifteen clients within twelve consecutive months, the Respondents did not establish that they did not hold themselves out to the general public as an investment advisor. Paragraph (19) of the Findings of Fact of the Hearing Officer's Recommended Order found that the brochure prepared by the Respondents represented that the Respondents offered "customized financial planning" and contained the following statement: "We specialize in asset allocation among a broad spectrum of investment vehicles, including all types of mutual funds.

Millions of dollars under current management". Further, paragraph (20) of the Findings of Fact of the Hearing Officer's Recommended Order found that, in

pertinent part, Respondent Wilt distributed the aforestated brochure to "only to people that I knew, my friends, my coworkers, my family,.. an occasional tax client. If they had a bookkeeping need... it would come up in discussion and I would hand them this (the brochure)...in the privacy of my house, my home office." The Hearing Officer then goes on to state that "Respondents' distribution of the brochures was limited and was not made to the general public." The Department construes Section 517.021(10)(b)6., Florida Statutes' language as to "holding out to the general public" as including the type of conduct engaged in by the Respondents as specifically found by the Hearing Officer to have occurred in paragraph (20) of the Findings of Fact of his Recommended Order. Specifically, Respondent's conduct in providing this brochure to people known to the Respondents, including friends, coworkers, family, occasional tax clients, or other individuals with a bookkeeping need constituted a distribution of the brochures to the general public, regardless of the forum in which said distribution occurred. As such, Respondents have failed to establish their right to exemption from the requirements of registration as contained within Section 517.12(4), Florida Statutes. The Department therefore concludes, as a matter of law, that the Hearing Officer erred in recommending dismissal of the Cease and Desist Order against the Respondents in light of the fact that the Respondents did engage in investment advisory services without registration, and failed to establish their right to exemption from registration in accordance with Chapter 517, Florida Statutes.

CONCLUSION

Having ruled on all of the exceptions filed by the Department, and having reviewed the complete record, including the proposed Recommended Orders filed by the parties, it is accordingly ORDERED:

Respondents Brooks & Wilt and Wayne E. Wilt are ordered to cease and desist from engaging in any and all further violations of Chapter 517, Florida Statutes and the rules promulgated thereto in any future conduct.

DONE and ORDERED this 1st day of February, 1994, in Tallahassee, Leon County, Florida

COPIES FURNISHED:

Don Saxon, Director Division of Securities and Investor Protection

Leslie A. Meek

Assistant General Counsel Office of the Comptroller Miami, Florida

GERALD LEWIS, as Comptroller and Head of the Department of Banking and Finance, Division of Finance

NOTICE OF RIGHT TO JUDICIAL REVIEW

PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that true and correct copies of the foregoing Final Order with Notice of Rights was furnished by Regular U.S. Mail to David H. Reimer, Esquire, Becker and Poliakoff, P. A., Post Office Box 9057, Fort Lauderdale, Florida 33310-9057 this 1st day of February, 1994.

ELISE M. GREENBAUM

Assistant General Counsel Office of the Comptroller The Capitol, Suite 1302

Tallahassee, Florida 32399-0350

(904) 488-9896

Docket for Case No: 93-000982

Orders for Case No: 93-000982