STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
PATRICK YOUNG, ) CASE NO. 86-1847
)
Petitioner, )
and )
)
DOROTHY WISE YOUNG, ) CASE NO. 86-1848
)
Petitioner, )
and )
)
DAVID RANDALL PHILLIPS, ) CASE NO. 86-1887
)
Petitioner, )
and )
)
ALBERT EARL WISE, III, ) CASE NO. 86-1888
)
Petitioner, )
and )
)
WILLIAM FREDRICK MANN, ) CASE NO. 86-2160
)
Petitioner, )
and )
)
ALBERT EARL WISE, ) CASE NO. 86-2161
)
Petitioner, )
)
vs. )
)
DEPARTMENT OF BANKING AND ) FINANCE, DIVISION OF SECURITIES, )
)
Respondent. )
)
RECOMMENDED ORDER
For Petitioner: Michael J. Echevarria, Esquire Tampa, Florida
For Respondent: Charles E Scarlett, Esquire
Tallahassee, Florida
Gerald Lewis, as Comptroller of the State of Florida and Head of the Department of Banking and Financing, Division of Securities, gave notice of intent to deny the applications of each of the petitioners in this case for registration as an associated person with Certified Capital Corporation on the ground that, while associated persons with G.I.C. Government Securities, Inc., they were guilty of violations of Chapter 517, Florida Statutes (1985),
including sale of unregistered securities, sale of securities without being registered as an associated person with a registered securities dealer, and failure to account for and deliver securities purchased from them. Through prehearing discovery and procedures, petitioners largely admitted the facts but allege that they did not know they were violating the registration requirements and that they did all they reasonably could, and more than they legally were obliged to do, to account for and deliver the securities. They further maintain that they meet the requirements for, and are entitled to, registration as associated persons with Certified Capital Corporation.
A formal administrative hearing on the issues remaining between the parties was held in Tampa on February 19, 1987. Respondent ordered the preparation of a transcript of the final hearing, and the parties asked for 15 days from the filing of the transcript to file proposed recommended orders The transcript was filed on March 23, 1987, making proposed recommended orders due on April 7, 1987.
FINDINGS OF FACT
Albert Earl Wise, II, (Al,II) (Case No. 86-2161) began work as a securities salesman in Memphis, Tennessee, approximately November 15, 1982. He was a plumber when an old friend recruited him to be come a salesman with G.I.C. Government Securities, Inc., which was registered with the Department of Banking and Finance, Division of Securities (Department), from June 8, 1982, until October 1, 1985.
In February, 1983, Al,II, was transferred to Tampa to work in the branch office being opened there by an office manager named Lonnie Kilpatrick. Kilpatrick had been a government trader with the firm in Memphis.
In approximately July, 1984, Al,II, became the Tampa branch manager.
As the firm's Florida business expanded, Kilpatrick took over sole ownership and named Al,II, general manager over all the offices in Florida. Al,II, also became vice-president, comptroller and member of the board of directors of
G.I.C. Government Securities, Inc.
As general manager, Al,II, was responsible for the day-to-day operations of the company. A more accurate description of his duties is that of sales manager as he was primarily responsible for promoting sales and motivating the account executives/sales persons.
Al,II's, duties did not include registration of securities, as he possessed no training in that area, nor deciding what products G.I.C.. Government Securities would sell. Notwithstanding having been named comptroller and vice- president, Al,II, was not allowed by Kilpatrick, despite request, to audit or examine the company's books and records. Lonnie Kilpatrick decided what securities the entity would offer, as well as who, if anyone, would have access to the corporate records.
Dorothy (also known as D'Oresa) Wise Young (Case No. 86-1848) was employed by G.I.C. Government Securities, Inc., as an associated person from September, 1983, through April, 1985, and as Sarasota branch manager from January through April, 1985. She is Al,II,'s daughter.
Albert Earl Wise, III, (Al,III) (Case No. 86-1888) was employed by
G.I.C. Government Securities, Inc., as an account executive from February, 1983, through April, 1985, became Boca Raton and Orlando branch manager, and was a member of the board of directors of G.I.C. Government Securities, Inc. Al,III, is Al,II,'s son.
Glenn Patrick Young (Case No. 86-1847) was employed by G.I.C. Government Securities, Inc., as an associated person from January through April, 1985. He is Dorothy's husband.
David Randall Phillips (Case No. 86-1887) was employed by G.I.C. Government Securities, Inc., as an associated person or agent from August, 1984, to May, 1985. He is a long-time, close friend of Al,III.
William Fredrick Mann (Case No. 86-2160) was employed by G.I.C. Government Securities, Inc., as an associated person or agent from February to April, 1985. He is Al,III,'s father-in-law.
Al,II, was employed as a general manager of G.I.C. Securities Corporation from at least January 27, 1985 to March 5, 1985 and supervised the sale of securities by unregistered agents of G.I.C. Securities Corporation to following investors located outside the State of Florida:
Fred E Martin or Matalie L. Martin $85,000 Post Office Box 449
West Upton, Massachusetts 01587
Gregory E Westerman $50,000
2034 Strathmoor Boulevard
Louisville, Kentucky 40205
Karen E Prevett $70,000
72 Old Farm Road
Mansfield, Massachusetts 02048
Harvey Notis or Marion Notis $50,000
R. D. 3 Box 1248
Great Harrington, Massachusetts 01230
C. T. George $155,000
Living Revocable Trust Trust Dated 01/31/83
20 Palmer Drive
Canton, Massachusetts 02021
Geoffrey P. Pollitt $25,000
313 Simon Willard Road Concord, Massachusetts 01742
Walter Kossman or Virginia Kossman $25,000 1594 S. Circle View
Seven Hills, Ohio 44131
Robert Anandale Trustee $30,000 Dated 02/28/84 F.B.O. Robert Allandale
c/o Central National Bank 6690 McKenzie Road
North Olmstead, Ohio 44070
William P. Giblin $25,000
6433 Beverly Drive
Parma Heights, Ohio 44129
Walter Kossman or Virginia Kossman $25,000 1594 South Circle View
Seven Hills, Ohio 44131
Dorothy L. Bayman or Dale L. Bayman $85,000
150 Belleair Avenue Dayton, Ohio 45420
Dorothy Wise Young was employed by G.I.C. Securities Corporation as an account executive although not registered with Respondent in any capacity at anytime concerning said employment. Young also sold securities on behalf of
G.I.C. Securities Corporation to the following investors despite not being properly registered with Respondent:
Albin W. Johnson Box 333 Randolph, Massachusetts | 02368 | $75,000 |
T. W. Wenzlick or Viola 421 Jeffrey Drive | R. Wenzlick | $25,000 |
New Washington, Ohio 44854
Harvey Notis or Marion Notis $50,000
R. D. 3, Box 142C
Great Barrington, Massachusetts 01230
Al,III, was employed by G.I.C. Securities Corporation as an account executive from January to April, 1985, and admitted engaging in the sale of one or more securities while employed by said firm. Al,III, also admitted to not being properly registered in the State of Florida with G.I.C. Securities Corporation.
G.I.C. Securities Corporation was denied a license by Order of the Department dated April 16, 1984, in part for material false statements in the application and demonstration of the applicant's unworthiness to transact the business of a broker/dealer. G.I.C. Securities Corporation subsequently filed a petition for formal hearing regarding the Department's denial of registration. On August 30, 1984, G.I.C. Securities Corporation entered into a stipulation, consent agreement and final order with the Department. This written agreement provided that the firm would not apply to the Department for registration under Section 517.12(1), Florida Statutes, for a period of twelve months from August 30, 1984, and that it would fully and faithfully comply with all of the provisions of Chapter 517, Florida Statutes, and the rules of the Department.
On the basis of these findings of fact, on April 9, 1985, the Department ordered the firm to cease and desist from violating Chapter 517, Florida Statutes, and more specifically from selling unregistered securities and from selling securities without being lawfully registered to do so.
Al,II, also sold unregistered Government National mortgage Association GNMA/U.S. Treasury Trust Note securities, to the following individuals in the following amounts:
Joseph or Bernice Metcalf 4299-14th Street N.E. St. Petersburg, Fl 33703 | $25,000 | |
Bruce or Diane J. Fenton 2435 Post Road Sarasota, Fl 33581 | $5,000 | |
Betsy O. Lester 1200 Capri Circle S. Apt. 29 Treasure Island, Fl 33706 | $10,000 | |
Ernest L. Miller Post Office Box 458 Lake Hamilton, Fl 33851 | $7,000 | |
John and Louise Magill 4260 S.E. 20th Place Apt. Cape Coral, Fl 33904 | 208 | $10,000 |
Mrs. Lina Anker-Simmons Post Office Box 353 Boca Grande, Fl 33921 | $10,000 | |
Charles W. Wood or Babetta 211 W. Emily Tampa, Fl 33603 | Edmunds | $10,000 |
Margaret McMenamy 1225 N.W. 16th Street Pembroke Pine, Fl 33026 | $20,000 | |
Suzanne J. Lewis 4703 Brookwood Drive Tampa, Fl 33629 | $10,000 | |
Raymond or Suzanne Lewis 4703 Brookwood Drive Tampa, Fl 33629 | $10,000 | |
Deno or Barbara Kazanis 2310 Southern Lights Lutz, Fl 33549 | $5,000 | |
William K. Mall, IV 9500 82nd Avenue N. Seminole, Fl 33543 | $20,000 |
Carl E. or Minnie E. Gustafson $10,000 Post Office Box 451
Matlacha, Fl 33909
John A. or Louis Gress $22,000 Post Office Box 1555
Palm Harbor, Fl 33563
Marguerite Gould or Marguerite Robertson $10,000 16183 Dublin Circle
Casa Bella Bldg. A-Apt. 103 Ft. Myers, Fl 33908
Robert J. Evans $7,000
Rt. 2, Box 12-B
Moore Haven, Fl 33471
Virginia H. or Robert E Bartlett $10,000 4703 Baycrest Drive
Tampa, Fl 33615
Robert S. or Helen M. Gerard $5,000 or Frances C. Rafter JT
WROS, 4521 W. Rogers Avenue Tampa, Fl 33611
Jacinto R. or Palmira M. Fernandez $10,000 8436 Nebraska Avenue
Tampa, Fl 33604
Paul E. or Elizabeth A. Cleveland $10,000
306 Kllburn Road Holiday, Fl 33590
William F. Price $30,000
custodian for Gary Cotton Dan Cook
9105 Tudor Dr #F102 Tampa, Fl 33615
Ruth T. Penner or Laura B. Wood $5,000 1204 W. Risk-Apt. G
Plant City, Fl 33566
Edward G. or Eleanor G. Daniels $20,000 4630 B.E. 20th Place
Cape Coral, Fl 33904
Frederick S. Crysler $5,000
1200 Johnston Road Unite B-24
Dade City, Fl 33525
Hazel H. Aspinwall or Frederick F. Smith $30,000
69 Arrowhead Drive
St. Augustine, Fl 32086
Jay E or Betty A. Yager $20,000 or Martha Dean
Post Office Box 465 Astatula, Fl 32705
Katherine B. Wolf $10,000
1850 Palmcrest Lane
Clearwater, Fl 33546
Howard J. or Margaret M. Williams $10,000 8290 Oakhurst Road
Seminole, Fl 33542
Roy or Dorothy Schreiner $15,000 4112 Robin Way
Valrico, Fl 33594
Alfred or Frances Richter $13,000 7248 Antigua Place
Sarasota, Fl 33581
Kaye Reid Wainwright $50,000 10671 William Tell Drive
Orlando, Fl 32821
Charles A. Kottmeier $25,000 1200 Druid Road S. #7
Clearwater, Fl 33516
Bernie or Sylvia Albert or $10,000 Sharon Terry Albert
10642 Watertown Court
Orlando, Fl 32809
Arnold or Gloria Barr $10,000 7503 Willow Court
Tampa, Fl 33614
Edward Daniels Development Company $35,000 4630 S.E. 20th Place
Cape Coral, Fl 33904
John W. DuBrian $30,900
2912 Tiburon Drive
New Port Richey, Fl 33553
Arthur and Ruth P. Hiller $10,000 10702 Westbrook Dr
Orlando, Fl 32821
Charles A. Kottmeir $40,000
200 Druid Road S. #7 Clearwater, Fl 33516
Kenneth S. | Preston | $12,000 |
11839 U.S. | Hwy 41 S. | |
Gibsonton, William E. | Fl 33534 Morris | $11,000 |
271-B Deming Avenue North Port, Fl 33596
Walter Leena M. Fennander $7,000 1727 Bayshore Boulevard
Dunedin, Fl 33528
Thomas B. or Charlene M. Austin $10,000
309 15th Avenue
Indian Rocks Beach, Fl 33535
Katherine Wolf $10,000
1850 Palmcrest Lane
Clearwater, Fl 33546
Dorothy Wise Young sold unregistered Government National Mortgage Association GNMA/U.S. Treasury Trust Note securities, to the following individuals in the following amounts:
George W. Arnold $8,000
618 4th Avenue S.
St. Petersburg, Fl 33701
W. R. Bauman or Barbara Nagle $10,000 Post Office Box 16
Yankeetown, Fl 32698
George W. or Marjorie E. Border $10,000 860 N. Lake Avenue
Avon Park, Fl 33825
Joan or Jerome Brenan 0005 Granite Lane Orlando, Fl 32821 | $10,000 |
Freida Blockner 14623 Bonaire #607 Delray Beach, Fl 33446 | $5,000 |
John or Elizabeth Grabowski 2308 Castilla Isle Fort Lauderdale, Fl 33301 | $10,000 |
Louis or Mary Hoffman 3512 Spring Valley Drive New Port Richey, Fl 33552 | $10,000 |
Raymond F. Joyce custodian for Salvatore Leone 267 S. Ocean Boulevard #212 C Pompano Beach, Fl 33062 | $5,000 |
John or Caroline Susanec $10,000
215 Stafford Avenue Brooksville, Fl 33512
Stephen Karakay $10,000
Box 3344
Sarasota, Fl 33578
Mrs. Floyd A. Flowers or James A. Monroe $5,000 Route 2, Box 330H
Crestview, Fl 32536
Fannie Felicia Caliuzzi $5,000 2742 C. Sherbrook Lane
Palm Harbor, Fl 33563
Emma Carolyn Hammond $95,000
130 Devon Drive Clearwater, Fl 33515
A. E. or Joyce LaBeau $12,000 1801 Marine Park Way #106
New Port Richey, Fl 33552
A. E. or Joyce LaBeau $13,000 1801 Marine Park Way #106
New Port Richey, Fl 33552
A. E. or Joyce LaBeau $7,000 1801 Marine Park Way #106
New Port Richey, Fl 33552
Oscar Ritter $5,000
952 N.E. 199th Street #415
N. Miami Beach, Fl 33179
Murial or Sherry Stearns 580 Rio Vista Avenue | $9,000 | |
Daytona Beach, Fl 32014 | ||
F. William or Frances C. Van 219 87th Street Stone Harbor, N.J. 08247 | Ness | $6,000 |
Kaye Reid Wainwright 10671 William Tell Drive Orlando, Fl 32821 | $50,000 | |
Adele Althouse 400 Freedom Square U.S.A. Apt. J 619 Seminole, Fl 33542 | $5,000 | |
Murial or Sherry Stearns 580 Rio Vista Avenue Daytona Beach, Fl 32014 | $10,000 |
F. William or Frances C. Van 112 S.W. 1st Avenue Seller Apt. | Ness | $10,000 |
Delray Beach, Fl 33444 | ||
McKinely or Grace Anderson 12408 Oakleaf Avenue Tampa, Fl 33612 | $10,000 | |
Mrs. Eileen Coutts 190 S.W. 72nd Terrace Margate, Fl 33068 | $18,000 | |
John C. Bertram 1416 Lake Marion Drive Apopka, Fl 32703 | $8,000 | |
Luther or Alena D. Ellis Rt. 2, Box 72 Wauchula, Fl 33873 | $20,000 |
F. H. or H. Elizabeth Groezinger $15,000 2308 Crescent Ridge Road
Daytona Beach, Fl 32018
Luther or Alena D. Ellis $30,000 Rt. 2, Box 72
Wauchula, Fl 33873
Mrs Isabelia K. Berg $6,000
5421 B Lakefront Blvd. Delray Beach, Fl 33445
Al,III, sold unregistered Government National Mortgage Association GNMA/U.S. Treasury Trust Note securities, to the following individuals in the following amounts:
Charles S. Ammerman or Florence F. Ammerman $6,500 710 Lake Hiawassee
Orlando, Fl 32811
Eva Wilson $15,000
409 S.E. 2nd Court Deerfield Beach, Fl 33441
Frank or Jean Arnold $18,000 6020 Shakerwood Circle, #G-108
Tamara, Fl 33319
Virginia Cummins or J. H. Cromer $15,000
311 S. Dean Street Westport, Indiana 47283
Morris or Sylvia Erlbaum $10,000 6795 Huntington Lane
Bld. #14, Apt. #207
Delray Beach, Fl 33446
Lois G. Crosley $41,000
1626 Silversmith Place Orlando, Fl 32818 Sandy
Garrison or Mary M. Boitnott $15,000 3104 Harrison Ave., #C-18
Orlando, Fl 32804
William or Rose Herzog $25,000 Custodian for Ronald Coyne
258-A Hibiscus Drive, M.F.L. Leesburg, Fl 32788
Helen Klein or Shari Weitzner $5,000 3205 Portofina #C-4
Coconut Greek, Fl 33066
Mattye Oliver or Eileen Johnson $3,000
147 W. State Street Kennett Square, PA 19348
Alma Pagliaro or Nancy De Marco $10,000 or Godfrey D. De Marco
9925-B Papaya Tree Trail Boynton Beach, Fl 33436
Gai S. Verner I.T.F. Bill Trilsch $25,000 901 N.W. 31st Avenue Box 13
Pompano Beach, Fl 33069
Harry or Anita Cope $5,000
417 Piedmont I
Delray Beach, Fl 33445
Al Rappaport or Ellen Rappaport $15,000 2780 Pine Allen Rd. N.
Sunrise, Fl 33329
Godfrey D. De Maro or Nancy De Marco $5,000 9925-B Papaya Tree Trail
Boynton Beach, Fl 33436
Morris Erlbaum or Sylvia Erlbaum $10,000 6795 Huntington Lane
Delray Beach, Fl 33446
A. Froid or Gertrude Froid $10,000 in trust for Roy Lee Froid
2600 S.W. 18th Terrace Ft. Lauderdale, Fl 33315
Max Pendergrast or Carol Pendergrast $20,000 custodian for Eric & Kurt Pendergrast
1611 S.W. 26th Street Ft. Lauderdale, Fl 33315
Glenn Patrick Young sold unregistered Government National Mortgage Association GNMA/U.S. Treasury Trust Note and GNMA/Mortgage Backed Collateral Note securities, to the following individuals in the following amounts:
Wanda G. Baugh $10,500
Trustee for Buford Sitzlar Post Office Box 1523 Bonita Springs, Fl 33923
Wanda Baugh $5,000
Trustee for Buford Sitzlar Post Office Box 1523 Bonita Springs, Fl 33923
Norman R. or Margaret 3442 Gerhardt Street | A. Keyes | $25,000 |
Sarasota, Fl 33577 | ||
Norman R. or Margaret 3442 Gerhardt Street Sarasota, Fl 33577 | A. Keyes | $25,000 |
Howard W. or Hazel M. 3300 26th Avenue East Apt. 17-A Bradenton, Fl 33508 | Kerr | $10,000 |
David Randall Phillips sold unregistered Government National Mortgage Association GNMA/U.S. Treasury Trust Note securities, to the following individuals in the following amounts:
Frank G. and Mildred W. Reynolds $2,500 JTWROS
400 S. Orlando #305 Maitland, Fl 32751
Vivian W. McCann or Marilyn Culpepper $10,000 JTWROS
2211 Beatrice Drive
Orlando, Fl 32810
Stanislaw Szamrej or Stanislawa Szamrej $10,000 or Zdzislaw Szamrej
JTWROS
2204 Stanley Street
Orlando, Fl 32803
Paul Gheorghiu or Martha Gheorghiu $2,500 JTWROS
6565 Carder Drive
Orlando, Fl 32818
Marjorie R. Romano or Michael Romano $40,000 11508 Benbow Court
Orlando, Fl 32821
William Fredrick Mann sold unregistered Government National Mortgage Association GNMA/U.S. Treasury Trust Note securities to Mark Fulkerson or Bea Kuykendall, 7900 Montezuma Trail, Orlando, Fl, in the amount of $41,000.
On April 9, 1985, the Department issued an Administrative Charges and Complaint against G.I.C. Government Securities, Inc., alleging among other things the sale of unregistered securities. On June 27, 1985, the Department entered into a Stipulation and Consent Order whereby G.I.C., its officers and directors and other persons acting in cooperation or concert with them or at their direction were permanently enjoined in part from selling unregistered securities and from obtaining money or property by means of untrue or misleading statements.
Despite their positions with Kilpatrick's firms, the petitioners were not told, and did not know, that G.I.C. Securities Corporation was not registered with the Department. Al,III, and Dorothy Wise Young were registered in the states of Ohio (Al,III, only), Delaware and Massachusetts, and Kilpatrick, who had the benefit of legal counsel, had told them that it was legal for them to sell from their Florida offices to customers in those states.
Likewise, Kilpatrick and the company's legal counsel, Tony Todd, told Al,II, Al,III, and Dorothy in late 1984 that the Government National Mortgage Association GNMA/U.S. Treasury Trust Notes and GNMA/Mortgage Backed Collateral Notes issued by Southern Bond Clearing were exempt from registration. Following Kilpatrick's instructions, they had their salesmen, including Glenn Patrick Young, Phillips and Mann, sell the securities. Despite their respective positions with G.I.C. Government Securities, Inc., and despite their representation on their U-4 Form applications to be associated persons with the firm that they were familiar with Florida's securities laws, none of the petitioners knew that those securities were unregistered securities for which there was no exemption.
In March, 1985, Al,II, was in Memphis interviewing with the securities broker Turner & Sellhorn, Inc., about possible employment. At the time, although earning income well into six figures, Al,II, was dissatisfied with the way Kilpatrick was keeping him in the dark about some aspects of the companies' operations and finances. While in Memphis, Al,II, called in to his Tampa office and was told that the Department was engaged in some kind of audit. After he returned to the office, on April 4, 1985, he confronted Kilpatrick and demanded to know what the audit was about. Kilpatrick told him for the first time that violations had been committed by selling unregistered securities and selling for
G.I.C. Securities Corporation, which had not been registered. Although Al,II, and Al,III, technically were members of the board of directors of G.I.C. Government Securities, Inc., there were no meetings of the board during their tenure, and Kilpatrick did not fully disclose the details of the firm's operations and finances to them. The Wises also were not made privy to the operations of related firms, such as Southern Bond Clearing. Dissatisfied with the position in which Kilpatrick had placed him and Al,III, Al,II, decided to resign despite Kilpatrick's offer of concessions and an expenses-paid trip to Europe as enticement to Al,II, stay on with the company. Al,II, resigned the next day, effective April 15, 1985. Al,III, resigned as a director on April 17, 1985.
When Al,II, resigned, the other petitioners--family and friends whom Al,II, had brought to the company--began discussing plans to leave. On April 9, 1985, Gerald Lewis, as Comptroller, entered the cease and desist orders enjoining G.I.C. Securities Corporation from selling any securities while still
unregistered and enjoining both G.I.C. Government Securities, Inc., and G.I.C. Securities Corporation from sales of unregistered securities. But the orders did not otherwise enjoin G.I.C. Government Securities, Inc., from conducting business. When Dorothy Wise Young inquired of a Department employee, the violations were characterized as "technical." The petitioners then decided that, to be able to have uninterrupted income, the others would stay at the company until Al,II, secured employment at Turner & Sellhorn and could hire the others on at Turner & Sellhorn. But on April 30, 1985, Kilpatrick required all employees to sign a new employment contract which provided, among other things, for 90 days notice before an employee could terminate employment. At that point, the petitioners still at the company (i.e., all but Al,II) refused to sign the new contract and resigned from employment.
Up to the departure of the petitioners from Kilpatrick's companies, none of them had any reason to think that securities they sold would not be delivered in due course of time to the customers who purchased them. Securities always had been delivered properly during the term of their employment with the companies. The petitioners, like the Department's employees, were not privy to the companies' finances and had no reason to believe the companies would not, or would not be able to, deliver securities that had been purchased.
It is not a customary practice in the industry for securities salesmen associated with a broker/dealer to remain responsible for insuring delivery of securities after termination of employment with the broker/dealer. To the contrary, it is customary for the salesman to rely on the broker/dealer to follow through on delivery of securities.
On or about July 22, 1985, the petitioners' U-4 Form applications to be associated persons with Turner & Sellhorn, Inc., were granted, and they began employment at Turner & Sellhorn. They mailed notices to their former customers to advise the customers of their new place of employment.
Later in the summer of 1985, some of the petitioners were told by former customers both that G.I.C. Government Securities, Inc., had begun selling short-term zero coupon repurchase agreements and that some former customers had not yet received possession of securities purchased from some of the petitioners on or before April 30, 1985, an extraordinary delay. After discussing these developments with Mr. Turner, the petitioners concluded that Kilpatrick's companies might be having financial difficulties and that the former customers might be at risk. The petitioners began to try to contact all of their former customers to caution them about the "zero repos" and to be sure they had received possession of their securities. This was not easy since many of the petitioners' former customers already had left for summer residences up north, some without leaving a forwarding address or telephone number. Glenn Patrick Young sent letters to the U.S. Postal Service and paid its service fee to obtain a good address or telephone number at which to contact six of his former customers
If former customers the petitioners were able to contact had not yet received their securities, petitioners advised them to contact G.I.C. Government Securities, Inc., immediately and demand satisfaction--either possession of their securities or return of their investment. They further advised the customers that, if the company did not satisfy them within a week to ten days, they should contact the Department.
Thanks to petitioners' efforts, several of their former customers recovered either their security or investment. For example, Al,III, was able to
contact former customer Bryant on August 20, 1985, on Bryant's return to Florida and was told that Bryant still had not received the GNMA certificate he had bought on March 26, 1985. Following Al,III,'s advice, Bryant got his certificate on September 6, 1985. Glenn Patrick Young was contacted by former customer Bough about a "zero repo." He advised her not to invest and to contact the Department. Young also called former customers Neukom and Horowitz and, by his advice, helped Neukom get her $23,000 investment returned around September 25, 1985, and helped Horowitz get his $66,000 GNMA certificate on September 6, 1985, after a six month delay. David Randall Phillips helped former customers, including Mrs. Moffat, who called Phillips at his home for help in August, 1985, because she still had not received the security she had purchased in April, 1985. Phillips advised Moffat to write a letter to the Department, and she got her security within five days.
Unfortunately, not all of petitioners' former customers had gotten satisfaction--either the security they had purchased or the return of their investment--by the time G.I.C. Government Securities, Inc., went bankrupt on or about October 1, 1985. Some, including Lillian Nelson and Raymond Dennis (customers of Phillips), did not listen to petitioners' advice and counsel. One couple, the Bakers of Ft. Myers, were contacted by Glenn Patrick Young but misinformed him that they had received possession of their security when in fact they had not. Others could not be contacted because petitioners were unable to get a good address or telephone number for them during the summer and early autumn, 1985.
Dr. Stanley Pollock of 332 Fifth Avenue, Suite 213, McKeesport, Pennsylvania, purchased three GNMA certificates in the amount of $195,131 from Dorothy Wise Young near the end of her employment at G.I.C. Government Securities. Young tried to telephone Pollock but had a bad telephone connection. She tried to leave a message for Pollock to call her if he had not yet received his securities and, when Pollock did not call her, she assumed that he had received them. In fact, Pollock never got the message because of the bad connection. As a result, Dr. Pollock did not receive or obtain registered ownership of the securities which he had purchased. He currently has a claim pending in the United States Bankruptcy Court for the Middle District of Florida for the purchase price of the certificates.
At the direction of Richard Johnson of Tampa, Richard J. Hansen, IRA Plans Administrator, Retirement Accounts, Inc., Post Office Box 3017, Winter Park, Florida, purchased two GNMA certificates from Al,III, on behalf of Johnson in the amount of $18,470.37. Mr. Johnson did not receive the certificates. He moved to Wisconsin June through October, 1985, and gave Al,III, no forwarding address or telephone number (although Al,III, could have made contact with Mr. Johnson through Mr. Hansen.)
James and Katheryn Putnal of Route 1, Box 14, Myakka City, Florida, purchased an $85,000 GNMA certificate from Glenn Patrick Young on April 12, 1985. In addition, M. Reed and Edna M. Veazey of 2141 Third Street East, Bradenton, Florida purchased a $50,000 Federal Home Loan Mortgage Corporation (FHLMC) certificate from him on February 11, 1985. Both couples moved from Florida (the Putnals from May 8 through August, 1985, and the Veazeys until October, 1985), and neither gave Young a forwarding address or telephone number. Young unsuccessfully tried to locate them through the U.S. Postal Service and then gave up. Before they left to go up north, the Putnals did receive Young's announcement that he had left G.I.C. and was starting employment with Turner & Sellhorn. But when they returned they called G.I.C., not Young, to inquire about delivery of their certificate and were told it was coming, give it time.
The Veazeys also contacted G.I.C., not Young, after Young switched to Turner & Sellhorn and, in fact, bought two more GNMA certificates from G.I.C. after Young had left (although they still had not received the security they had purchased from Young on or about February 19, 1985.) Both the Putnals and the Veazeys have had to make claims in the United States Bankruptcy Court for the Middle District of Florida for the purchase price of the certificates.
While employed by G.I.C. Government Securities, William Fredrick Mann sold GNMA certificates to the following individuals in the following amounts:
Louis M. Totka or Marguerite A. Totka 117 Pine Circle Drive | $25,000 |
Lake Mary, Fl 32746 | |
Mignon Weinstein or Philip Weinstein 2910 Plaza Terrace Drive Orlando, Fl 32803 | $40,000 |
Philip Weinstein or Mignon Weinstein 2910 Plaza Terrace Drive Orlando, Fl 32803 | $55,000 |
Although Mann was able to contact these former | customers in late July or in |
August, 1985, and advise and counsel them how to get satisfaction (i.e., either possession of the securities they had purchased or return of their investments, for some reason the Totkas and the Weinsteins did not get satisfaction before the G.I.C. bankruptcy.
Despite their association with Kilpatrick's G.I.C. companies, the petitioners have been able to maintain a good reputation for competence, honesty and trustworthiness in their business dealings. Testimony of this kind came from Mr. Turner and Mr. Sellhorn of Turner & Sellhorn, Inc., and several of petitioners' former customers--four customers of Al,II; one of Dorothy; four of Al,III; three of Glenn Patrick Young; and three of Phillips. More than being responsible for the violations in which they have participated, petitioners have been fellow victims of Kilpatrick's violations. The most serious of the violations--failure to account for and deliver securities-- occurred after the petitioners left G.I.C. and through no doing of their own.
CONCLUSIONS OF LAW
Section 517.12, Florida Statutes (Supp. 1986), provides in pertinent part:
No dealer, associated person, or issuer of securities shall sell or offer for sale any securities in or from offices in this state, or sell securities in this state to persons of this state from offices outside this state, by mail or otherwise, unless the person has been registered with the department pursuant to the provisions of this section.
* * *
(11) If the department finds that
the applicant is of good repute and character and has complied with the provisions of this section and the rules made pursuant hereto, it shall register the applicant.
Meanwhile, Section 517.161, Florida Statutes (Supp. 1986), provides in pertinent part:
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 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;
* * *
Has failed to account to persons interested for all money and property received;
Has not delivered, after a reasonable time, to persons entitled thereto securities held or agreed to be delivered by the dealer, broker, or investment adviser, as and when
paid for, and due to be delivered . . (Emphasis added.)
Read together, the pertinent provisions of Sections 517.12 and 517.161 indicate that 517.161 violations may form the basis for denial of a license application if the violations are such as would seriously call into question the applicant's "good repute and character."
Section 517.07, Florida Statutes (Supp. 1986), provides in pertinent part:
No securities except of a class exempt under any of the provisions of s. 517.051 or unless sold in any transaction exempt under any of the provisions of s. 517.061 shall be sold or offered for sale within this state unless such securities have been registered,
as hereinafter defined, and unless prior to each sale the purchaser is furnished with a prospectus meeting the requirements of rules adopted by the department. The department shall issue a permit when such
registration has been granted by the department.
The evidence is clear that all of the petitioners violated Section
517.07 by selling unregistered securities. Scienter, or guilty knowledge or intent, is not a necessary element of a 517.07 violation. State v. Houghtaling,
181 So.2d 636 (Fla. 1966). These are violations on the basis of which Gerald Lewis, as Comptroller, may deny an application for registration under 517.161(1)(a) if the violations prevent the applicant from proving his "good repute and character."
Three of the applicants--Al,II, Al,III, and Dorothy Wise Young--sold securities as employees of G.I.C. Securities Corporation, which was not registered with the Department. Those sales violated Section 517.12(1). As with 517.07, scienter is not an element of a violation of 517.12(1). Id. And as with 517.07, violations of 517.12(1) come within the ambit of 517.161(1)(a).
The other three petitioners--Glenn Patrick Young, David Randall Phillips and William Fredrick Mann--technically may have been employed by G.I.C. Securities Corporation but did not sell or offer to sell securities for that corporation and, by the terms of 517.12(1), did not violate that statute.
Section 517.301(1)(a), Florida Statutes (Supp. 1986), provides:
It is unlawful and a violation of the provisions of this chapter for for a person:
In connection with the offer, sale, or purchase of any investment or security, including any security exempted under the provisions of
517.051 and including any security sold in a transaction exempted under the provisions of s. 517.061, directly or indirectly:
To employ any device, scheme, or artifice to defraud;
To obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under
which they were made, not misleading; or
To engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon a person.
The opinion in Merrill Lynch, Pierce, Fenner & Smith v. Byrne, 320 So.2d 436 (Fla. 3d DCA 1975), contains dicta on the question whether scienter is an
element of an offense under this statute. The dicta suggests that scienter is not an element of the offense, and the federal court in Silverberg v. Paine, Webber, Jackson & Curtis, Inc., 710 F.2d 678 (11th Cir. 1983), followed the Third District's dicta. But both opinions specifically address only the second of the three offenses specified in 517.301(1)(a). See Merrill Lynch v. Byrne,
320 So.2d at 440, fn.2; Silverberg v. Paine, Webber, 710 F.2d at 681 (citing Section 517.301(1)(b), now codified as Section 517.301(1)(a)2., Florida Statutes (Supp. 1986)). Pertinent to the first and third offenses, the Third District points out: "Scienter may well be an essential element in statutes where fraud and deceit are made the essence of an action." Merrill Lynch v. Byrne, 320 So.2d at 440. Indeed, it is difficult to imagine how scienter could not be an element of fraud and deceit, such as described in the offenses specified in Section 517.301(1)(a)1 and 3.
On the facts of this case, the petitioners violated Section 517.301(1)(a)2, Florida Statutes (Supp. 1986). They obtained money from customers, omitting to state to the customers that the securities they were selling variously were not registered, were sold by persons not registered and, in some cases, would not be delivered. But the facts show that the petitioners had no guilty knowledge or intent.
But, because there was no scienter, the petitioners were not guilty of violating Section 517.301(1)(a)1 or 3 or Section 517.161(1)(c), Florida Statutes (Supp. 1986), all of which make fraud and deceit the essence of the violation.
As to Section 517.161(1)(e) and (f), Florida Statutes (Supp. 1986), making it an offense to fail to account for and deliver securities, Kilpatrick's companies, G.I.C. Government Securities, Inc., and G.I.C. Securities Corporation, not the petitioners, were the entities guilty of violating those provisions. They, not the petitioners, had the responsibility to account for and deliver the customers' securities. The petitioners had terminated their employment with the Kilpatrick companies before the occurrence of the facts giving rise to the need for an accounting and before there was any reason for petitioners to believe that their former customers' securities would not be delivered.
Despite the violations of Sections 517.07, 517.12(1), and 517.301(1)(a)2, Florida Statutes (Supp. 1986), the petitioners were able to prove that they are "of good repute and character," so as to entitle them to registration as associated persons with Certified Capital Corporation.
Based on the foregoing Findings Of Fact and Conclusions Of Law, it is recommended that a final order be entered in these cases granting the applications of all of the petitioners for registration as associated persons with Certified Capital Corporation.
RECOMMENDED this 29th day of April, 1987 in Tallahassee, Florida.
J. LAWRENCE JOHNSTON Hearing Officer
Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32399-1550
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 29th day of April, 1987.
APPENDIX TO RECOMMENDED ORDER, CASE NOS. 86-1847, 86-1848, 86-1887,
86-1888, 86-2160 and 86-2161
To comply with Section 120.59(2), Florida Statutes (1985), the following rulings are made on proposed findings of fact. Respondent's proposed findings of fact were organized and filed separately by petitioner. Petitioners' proposed findings of fact were not timely filed and do not require explicit rulings (although they have been considered, as reflected in the Findings Of Fact.)
Respondent's Proposed Findings Of Fact As To Glenn Patrick Young (Case No. 86-1847).
1.-5. Accepted and incorporated, along with additional findings.
Respondent's Proposed Findings Of Fact As To Dorothy Wise Young (Case No. 86-1848).
1.-8. Accepted and incorporated, along with additional findings.
9. Rejected as contrary to facts found that Dr. Pollock had no contact with Young; in part, subordinate; otherwise, accepted and incorporated, along with additional findings.
Respondent's Proposed Findings Of Fact As To David Randall Phillips (Case No. 86-1887).
1.-5. Accepted and incorporated, along with additional findings.
6. Subordinate to facts found.
Respondent's Proposed Findings Of Fact As To Albert Earl Wise, III (Case No. 86-1888).
1.-8. Accepted and incorporated, along with additional findings.
Respondent's Proposed Findings Of Fact As To
William Fredrick Mann (Case No. 86-2160).
1.-6. Accepted and incorporated, along with additional findings.
Respondent's Proposed Findings Of Fact As To Albert Earl Wise (Case No. 86-2161).
1.-7. Accepted and incorporated, along with additional findings.
COPIES FURNISHED:
Michael J. Echevarria, Esquire ECHEVARRIA & BENCHIMOL, P.A.
Suite 3016, First Florida Tower
111 East Madison Street Tampa, Fl 33602
Charles E. Scarlett, Esquire Assistant General Counsel Office of the Comptroller Suite 1302, The Capitol Tallahassee, Fl 32399-0305
Gerald Lewis
Comptroller, State of Florida The Capitol
Tallahassee, Fl 32399-0305
Charles Stutts General Counsel Plaza Level
The Capitol
Tallahassee, Fl 32399-0305
=================================================================
AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE
DIVISION OF SECURITIES AND INVESTOR PROTECTION
IN THE MATTER OF:
Applications for Registration under Section 517.12, Florida statutes, of:
GLENN PATRICK YOUNG, Administrative Proceeding No. 86-37-DOS
and DOAH CASE NO. 86-1847
DOROTHY WISE YOUNG, Administrative Proceeding No. 86-35-DOS
and DOAH CASE NO. 86-1848
DAVID RANDALL PHILLIPS, Administrative Proceeding No. 86-41-DOS
and DOAH CASE NO. 86-1887
ALBERT EARL WISE, III, Administrative Proceeding No. 86-36-DOS
and DOAH CASE NO. 86-1888
WILLIAM FREDRICK MANN, Administrative Proceeding No. 585-S-5/86
and DOAH CASE NO. 86-2160
ALBERT EARL WISE. Administrative Proceeding No. 584-5-5/86
DOAH CASE NO. 86-2161
/
CONSOLIDATED FINAL ORDER DENYING REGISTRATION UNDER SECTION 517.12, FLORIDA STATUTES
The Comptroller of the State of Florida, GERALD LEWIS, as administrative head of the Florida Department of Banking and Finance (hereinafter "the Department"), being authorized and directed to administer the provisions of Chapter 517, Florida Statutes, the Florida Securities and Investor Protection Act, after due consideration and review of the complete record of these proceedings hereby denies the applications of GLENN PATRICK YOUNG, DOROTHY WISE YOUNG, DAVID RANDALL PHILLIPS, ALBERT EARL WISE, III, WILLIAM FREDRICK MANN and
ALBERT EARL WISE (hereinafter "Applicants") for registration as associated persons of a securities dealer under Section 517.12, Florida Statutes. The grounds for issuance of this Order are:
FINDINGS OF FACT
In January and February of 1986, the Department's Division of Securities and Investor Protection received applications through the Central Registration Depository system of the National Association of Securities Dealers for registration under Section 517.12, Florida Statutes, of each of the Applicants as associated persons of Certified Capital Corporation, of St. Petersburg, Florida, a registered securities dealer.
The Department gave timely notice of intent to deny registration to each of the Applicants based on violations of Chapter 517, Florida Statutes, by the Applicants while they were associated persons of GIC Securities Corporation or GIC Government Securities, Inc. Notice of rights to an administrative hearing was provided to each of the Applicants and a consolidated formal hearing was conducted in Tampa, Florida on February 19, 1987, by the Florida Division of Administrative Hearings (DOAH) under the captioned DOAH Case Numbers.
On April 29, 1987, Mr. J. Lawrence Johnston, the DOAH Hearing Officer, issued a Recommended Order based on the hearing of February 19, 1987. The Findings of Fact of Mr. Johnston's Recommended Order are adopted by the Department and are incorporated herein. The Department, however, partially
rejects and hereinafter modifies the Conclusions of Law contained in the Recommended Order. Accordingly, the Department is unable to accept the Hearing Officer's recommendation that the Applicants each be granted registration to engage in sales of securities in Florida.
The Department has undertaken a careful review of the complete record in these proceedings and finds that registration should be denied to each of the Applicants for reasons stated with particularity as follows:
GLENN PATRICK YOUNG sold unregistered securities and obtained money by means of untrue statements of material fact or omissions to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading as established by Responses 164 through 167 of the Department's Second Request for Admissions (2RFA) and Finding No. 16 of the Hearing Officer.
DOROTHY WISE YOUNG sold securities without being properly registered with the Department, sold unregistered securities and obtained money by means of untrue statements of material fact or omissions to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading as established by Responses 171 and
202 through 231 of 2RFA, Responses 58 through 60 of the Department's First Requests for Admissions (1RFA) and Findings Nos. 10 and 14 of the Hearing Officer.
DAVID RANDALL PHILLIPS sold unregistered securities and obtained money by means of untrue statements of material fact or omissions to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading as established by Responses 238 through 242 of 2RFA and Finding No. 17 of the Hearing Officer.
ALBERT EARL WISE, III sold securities without being properly registered with the Department, sold unregistered securities and obtained money by means of untrue statements of material fact or ommissions to state material facts necessary in order to make the statements made, inlight of the circumstances under which they were made, not misleading as established by Responses 33 and 52 of 1RFA and Responses 108 through 126 and 145 of 2RFA and Findings Nos. 11 and
15 of the Hearing Office.
WILLIAM FREDRICK MANN sold unregistered securities and obtained money by means of untrue statements of material fact or omissions to state material facts necessary in order to make statements made, in light of the circumstances under which they were made, not misleading as established by Responses 1, 5 through 7 and 15 through 20 of 2RFA and Findings Nos. 18 and 34 of the Hearing Officer.
ALBERT EARL WISE sold securities without being properly registered with the Department, sold unregistered securities and obtained money by means of untrue statements of material fact or omissions to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading as established by Responses 12 through 22 of the Department's Third Request for Admissions, Responses 64 through 106 of 2RFA and Findings Nos. 9 and 13 of the Hearing Officer.
CONCLUSIONS OF LAW
The Department adopts the Hearing Officer's Conclusions of Law numbered 1, 2, 4, 6 and 9. The Department also adopts the first two sentences of the Hearing Officer's Conclusion No. 5. The remaining Conclusions of Law contained in the Hearing Officer's Recommended Order of April 29, 1987, are rejected or modified.
The Department is unable to adopt the Hearing Officer's interpretation of Section 517.161, Florida Statutes (1986 Supp.), as requiring that before registration under Section 517.12 can be denied for past violations of Florida's securities laws, the Department must determine that the violations "are such as would seriously call into question the applicant's `good repute and character.' " Recommended Order at Page 21. The Hearing Officer has concluded that "[t]he evidence is clear that all of the petitioners violated Section 517.07 by selling unregistered securities." Id. Moreover, the Hearing Officer determined that each of the Applicants violated Section 517.301(1)(a)2., Florida Statutes (1986 Sup.), an anti-fraud provision of Chapter 517, stating in Conclusion No. 9. that "[t]hey obtained money from customers, omitting to state to the customers that the securities they were selling variously were not registered, were sold by persons not registered and, in some case, would not be delivered." Recommended Order at Page 23. In addition, the Hearing Officer concluded that the three applicants actively employed by GIC Securities Corporation, DOROTHY WISE YOUNG, ALBERT EARL WISE, III, AND ALBERT EARL WISE, violated Section 517.12(1), Florida Statutes, by selling securities without being registered with the Department. Even if the Hearing Officer's interpretation of the denial statute were correct, it is difficult to conclude that persons determined to have committed such serious violations of the law -- violations shown by the record to have involved investments in excess of $2 million -- could be of "good repute and character." This issue, however, need not be considered. Section 517.161(1)(a) is perfectly clear in specifying that if an applicant is determined to have violated Chapter 517, the Department may deny registration under Section 517.12 to that applicant. Such denial is obviously not mandatory; yet it cannot be argued that since the Department has discretion to grant registration to violators, the Hearing Officer's judgment can be substituted for that of Department about when such discretion should be used. See, Fraser v. Lewis, 360 So.2d 1116 (Fla. 1st DCA 1978).
To the extent that policy considerations are involved in the Department's rejection of Conclusions of Law in the Recommended Order, the following explanation of the Department's policy and disposition of countervailing policy arguments is provided. It is well-established as a matter of law and is recognized by the Hearing Officer that the provisions of Chapter
517 determined to have been violated by the Applicants are strict liability offenses. The Hearing Officer found various of the Applicants to have lacked training in the registration of securities, to have not known whether their employer was a registered securities dealer, and to have relied on representations of their supervisors. The Hearing Officer also found the Applicants to be honest and credited their efforts with preventing losses to some of their customers. The Applicants were found to be "fellow victims" with the investors who lost their savings to GIC Securities Corporation and GIC Government Securities, Inc. The Department will not argue that these findings are not supported by the record. Nevertheless, the Department concludes as a matter of law as well as a matter of agency policy that the Florida Legislature had mandated a stricter standard for professionals in the securities industry than that advocated by Applicants' counsel and recommended by the Hearing Officer. In 1935 the Florida Legislature amended Florida's Blue Sky Law, the
precursor of the present Chapter 517, to remove the defense of "good faith" in securities law violations. The legislative history of this amendment was used by the Florida Supreme Court in State v. Houghtaling, 181 So.2d 636 (Fla. 1966), to conclude that lack of knowledge is not a defense in prosecution for the sale of unregistered securities. In 1986 the Legislature enacted the Florida Securities Industry standards Act, Chapter 86-85, Laws of Florida (1986), amending several sections of Chapter 517, including Section 517.161. That enactment was based on recommendations of the Comptroller's Task Force on Securities Regulation, which was convened in response to persistent fraud in Florida's securities industry. The Task Force's Report of March 1986 specifically discussed GIC Government Securities, Inc. and in the context of that discussion recommended that the Comptroller be given greater discretion to deny applications for registration under Section 517.12. The Report states at Page 40, "The Task Force has concluded that the public interest requires significant tightening of standards for registration of securities dealers in Florida." It is the Department's legal conclusion that the legislative history of Chapter 517 requires rejection of a construction of Sections 517.161(1)(a) and 517.12(11) to require registration of securities law violators where the record shows that the violators are nevertheless honest. Moreover, the articulated policy of the Department has been to follow the Task Force recommendations, especially those intended to enhance investor protection by raising industry standards. The policy urged by the Recommended Order would actually lower accepted professional standards in place since at least 1935.
Applicants' counsel suggested at Page 156 of the Hearing Transcript that an alternative policy might consist of approval of registration with mandated "additional training or supervision" where applicants are found unqualified "due to educational reasons and not because of any moral turpitude that they have inherent in their personalities." This suggestion is rejected, first, because the statute plainly contemplates denial of registration for much less than "inherent moral turpitude" of applicants. Authorization of rejection for "educational reasons" is obviously shown by the requirement of a written examination. More importantly, this proposal ignores the public benefit achieved by strict professional standards that deter securities law violations and avoid an incentive for sellers of securities to keep themselves ignorant of the legality of their conduct. Finally, the promotion of public confidence in registered securities professionals which serves both the securities industry and economic development of the state, requires stricter standards of conduct for such registrants than for employees in most other businesses. Regardless of their intentions, persons whose past conduct has caused financial loss to those who trusted in their competence and fitness do not belong in the securities industry. Applicants' counsel acknowledged at Page 152 of the Hearing Transcript that violations of state securities laws by these applicants occurred and that "[a]ll of these violations caused people to lose money." The damage to public confidence in the financial services industry is not lessened if "educational reasons" rather than "moral turpitude" caused those losses. Sound public policy as well as fairness to qualified registrants in the industry prevents the Applicants from resuming sales of securities in Florida even under conditions of "additional training or supervision."
The Department concludes as a matter of law, based on the record of these proceedings, that the violations of Section 517.07, Florida Statutes, by each of the Applicants and the violations of Section 517.12(1), Florida Statutes, by DOROTHY WISE YOUNG, ALBERT EARL WISE, III, and ALBERT EARL WISE, constitute grounds under Section 517.161(1)(a), Florida Statutes, for which the Department may deny their applications for registration under 517.12, Florida Statutes. The Department, furthermore, concludes that violations by each of the Applicants of Section 517.301(1)(a)2., Florida Statutes, established by the
record, provide grounds for such action under both 517.161(1)(a) and 517.161(1)(c), Florida Statutes. The Conclusions of Law of the Recommended Order are modified to this extent. The Conclusions numbered 7, 10, and 11 are rejected as unnecessary for determination of this matter. The Conclusions numbered 3 and 12 are rejected as erroneous and those numbered 5 and 8 are modified in accordance herewith. See, Siess v. Dept. of H.R.S., 468 So.2d 478 (2nd DCA 1985); Microfile, Inc. v. Williams, 425 So.2d 1218 (Fla. 2nd DCA 1983); and Alles v. Dept. of Professional Regulation, 423 So.2d 624 (Fla. 5th DCA 1982).
FINAL ORDER
Based on the foregoing Findings of Fact and Conclusions of Law the applications for registration as associated persons of a securities dealer under Section 517.12, Florida Statutes, of the captioned Applicants are hereby DENIED.
DONE and ORDERED in Tallahassee, Leon County, Florida, this 19th day of June, 1987.
GERALD LEWIS, Comptroller
of the State of Florida and Head of the Department of Banking and Finance
NOTICE OF RIGHT TO JUDICIAL REVIEW
NOTICE IS HEREBY PROVIDED that a party adversely affected by this final order may obtain judicial review of final agency action in accordance with Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure and may be commenced by filing one copy of a Notice of Appeal with the Clerk of the Department of Banking and Finance, Room 1302, The Capitol, Tallahassee, Florida 32399-0350, and a second copy, accompanied by prescribed filing fees, with the District Court of Appeal, First District of Florida, or with the District Court of Appeal in the appellate district in which the party resides. Such Notice of Appeal must be filed within
30 days of rendition of the order to be reviewed in order to be timely. NOTICE IS FURTHER PROVIDED that Section 120.57(1)(b)10., Florida Statutes, authorizes the award of costs and reasonable attorneys' fees to the Department if the reviewing court finds the appeal to be "frivolous, meritless, or an abuse of the appellate process."
R. MICHAEL UNDERWOOD Office of the Comptroller The Capitol, Suite 1302
Tallahassee, FL 32399-0350
(904) 488-9896
COPIES FURNISHED:
J. Lawrence Johnston, Hearing Officer Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32399-1550
Don B. Saxon, Director
Division of Securities and Investor Protection
Department of Banking and Finance Tallahassee, Florida 32399-0350
Charles L. Stutts, General Counsel
R. Michael Underwood and Charles E. Scarlett Assistants General Counsel Office of the Comptroller The Capitol, Suite 1302
Tallahassee, Florida 32399-0350
H. Richard Benchimol, Esquire Campbell, Schutz & Benchimol, P.A. Suite 2470, One Tampa City Center Tampa, Florida 33602
| Issue Date | Proceedings |
|---|---|
| Apr. 29, 1987 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Jun. 19, 1987 | Agency Final Order | |
| Apr. 29, 1987 | Recommended Order | Sale of nonexempt unregistered securities, some by unregistered persons. No scienter fraud by salesmen. Company responsible for failure to deliver |
DEPARTMENT OF BANKING AND FINANCE vs. WILLIAM J. BEISWANGER, 86-001847 (1986)
DEPARTMENT OF BANKING AND FINANCE vs ALL STATES MORTGAGE AND INVESTMENT CORP., 86-001847 (1986)
DEPARTMENT OF BANKING AND FINANCE vs. VINCENT R. CAVALLO, 86-001847 (1986)
DEPARTMENT OF FINANCIAL SERVICES vs LATESIA LASHONDA CHAVIS, 86-001847 (1986)
