STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 76-1556

)

DAVID R. EDSTROM, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held in the above-captioned matter, after due notice, on October 4, 1976, at Ft. Lauderdale, Florida, before the undersigned Hearing Officer.

APPEARANCES

For Petitioner: Richard Gentry, Esquire

Division of Securities

Department of Banking and Finance

239 Carlton Building Tallahassee, Florida 32304

For Respondent: None

ISSUE PRESENTED

Whether Respondent's license as a registered securities salesman/agent should be suspended or revoked for alleged violations of Sections 517.07 and 517.16(1)(a), Florida Statutes, as set forth in the Administrative Complaint.

At the commencement of the hearing, it was noted that the Notice of Hearing was styled incorrectly in showing David R. Edstrom as Petitioner rather than Respondent. This clerical error was harmless in view of the language contained in the body of the notice which identified the word "Respondent" as being a registered securities salesman/agent.

Notice of Hearing was issued on September 15, 1976, by the Hearing Officer.

Neither the Respondent nor any representative in his behalf-appeared at the hearing. Accordingly, the matter was heard as an uncontested proceeding, pursuant to Rule 28-5.25(5), Florida Administrative Code. On October 6, 1976, Respondent informed the Hearing Officer that he had forgotten the hearing and inquired as to the possibility of another hearing. (Supp. Exhibit 1).

By letter of October 12, 1976, counsel for Petitioner objected to Respondent's request, citing the trouble and expense of preparing for and attending the hearing, together with the difficulty encountered in securing

witnesses. (Supp. Exhibit 2) On October 14th, Respondent renewed his request, and in the alternative, requested that his license be suspended temporarily until the outcome of an appeal of a criminal conviction. (Supp. Exhibit 3) Rule 28-5.25(9), F.A.C., provides that a hearing officer shall not grant a Motion for re-hearing or reconsideration. Although this Rule admits of no exception, it does not necessarily preclude the agency involved from authorizing a new proceeding in the interests of substantial justice, upon good cause shown. In this instance, Respondent's absence admittedly was due solely to his own negligence and therefore he is not entitled to the requested relief. It is noteworthy that the Notice of Hearing included the following sentence:

"The right is reserved to take such action as the law permits if either party fails to appear at the time and place set for their hearing."

FINDINGS OF FACT

1. Respondent is a registered securities salesman/agent under license issued on October 3, 1972, by the Petitioner. (Admin. Complaint).

   
   

2. Respondent was president of S.E.I., Inc., Miami, Florida at the time of the alleged statutory violations. (Testimony of Campbell, Exhibit 3).

   
   

3. In the summer of 1973, Carl Eigner of Boynton Beach, Florida, having seen newspaper advertisements of Hartwell and Associates, Inc., concerning investments in promissory notes, contacted the firm and met one of its salesman, Bill Taylor. Taylor in formed Eigner that investments in promissory notes issued-by the 2609 corporation, a real estate developer, were safe and that the value of land covered by mortgages which secured the promissory notes, by law, had to be worth twice the cost of any investment. He further stated that the directors of S.E.I., Inc. investigated developers and if found to be in sound condition, recommended sale of their notes. Taylor also told him that he would receive a "valid registered mortgage" in Polk County. Eigner thereupon withdrew money to purchase a $10,000 promissory note issued by the 2609 Corporation, secured by a mortgage deed on 4 lots. Eigner paid $9,850.00 for the note by check to Taylor. The difference of $150.00 represented interest that Eigner otherwise would have received if he had left his funds on deposit. At the time of purchase, Taylor told Eigner that he had nothing to worry about because the land value had been checked by S.E.I., Inc. At no time did Taylor advise him that the note or mortgage was registered with or exempt from registration with the State Division of Securities. The promissory note provided for monthly interest payments at the rate of 12 percent per annum, commencing December 1, 1973. It also provided that the note or any payments thereunder could not be transferred by the holder to anyone who is not a bona fide resident of Florida without the prior consent of S.E.I., Inc. The note further provided. that it would be valid only upon approval by S.E.I., Inc., as sales/agent for the 2609 Corporation. In addition to the signature of the President of 2609 Corporation on the face of the note, it also contained the following: "Sale approved: S.E.I., Inc. by David R. Edstrom, President." This block showed the signature of Respondent. (Testimony of Eigner, Exhibit 3)

   
   

4. The securities of 2609 Corporation have never been registered with the Petitioner pursuant to Chapter 517, Florida Statutes. (Exhibit 4)

   
   

5. Petitioner submitted in evidence certified copies of an Information and verdicts in criminal proceedings in Palm Beach County, Florida against Respondent, Case No. 75-1242-CF. These proceedings resulted in the conviction

   of Respondent for the sale of unregistered securities to Carl Eigner and/or Edith Eigner, Robert S. Cox and/or David F. Cox, and Michael J. Leonardi and/or Diana Leonardi, and others in violation of Sections 517.07 and 517.302, Florida Statutes. The conviction is presently on appeal. Although received in evidence, the evidence of criminal convictions is not competent evidence to establish the facts upon which they were rendered and therefore cannot be used as a basis for a finding of fact in these proceedings. (See Boshnack v. World Wide Rent-A-Car, Inc., 195 So.2d 216 (Fla., 1967).

   
   

   CONCLUSIONS OF LAW

   
   

6. Petitioner seeks to suspend or revoke Respondent's license as a registered security salesman/agent under Section 517.16(1)(a), F.S., which authorizes such action if it is determined that a registrant:

   
   

   "(a) has violated any provision of this chapter or any regulation made hereunder;"

   
   

   Petitioner asserts that Respondent violated Section 517.07, which provides pertinently that:

   
   

   "517.07 Registration of Securities. - No securities except of a class exempt under any of the provisions of Section 517.05 or unless sold in any transaction exempt under

   any of the provisions of Section 517.06 shall be sold within this state unless such securities shall have been registered as hereinafter defined

   
   

7. Section 517.02(1) defines the term "Security" to include any note or evidence of indebtedness. Section 517.02(3), defines "Sale" or "sell" as including "every disposition or attempt to dispose of a security or interest in a security for value." It is therefore evident that a promissory note is encompassed within the meaning of the word "Security". That Respondent engaged in the "sale" of such a security is evidenced by the note itself which shows S.E.I., Inc. as sales agent for the 2609 Corporation. Further, Respondent's signature appears on the face of the note as approving the sale. Since evidence was presented to establish that notes or other securities of 2609 Corporation had not been registered with Petitioner, it is conluded that Respondent violated Section 517.07 by the sale of an unregistered security to Carl Eigner and that suspension or revocation of his registration is authorized and warranted under Section 517.16(1)(a)

   
   

8. No competent evidence was adduced as to the alleged sales to Cox and Leonardi, and therefore, the alleged violations of Chapter 517 in those respects have not been established.

RECOMMENDATION

That the registration of Respondent, David R. Edstrom as a registered securities salesman/agent be revoked for violation of Section 517.07, Florida Statutes, as authorized by Section 517.16(1)(a), Florida Statutes.

DONE and ENTERED this day of October, 1976, in Tallahassee, Florida.

THOMAS C. OLDHAM

Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

Richard Gentry, Esquire Division of Securities

Department of Banking and Finance

239 Carlton Building Tallahassee, Florida 32304

Mr. David R. Edstrom

5748 Northeast 16th Avenue

Ft. Lauderdale, Florida 33334

Docket for Case No: 76-001556

Orders for Case No: 76-001556