STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CHRISTOPHER JAMES ARENAL, )

)

Petitioner, )

)

vs. ) CASE NO. 86-2903

)

OFFICE OF THE COMPTROLLER, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice a formal hearing was conducted in this case in Tallahassee, Florida, on May 1, 1987, before Michael M. Parrish, a duly designated Hearing Officer of the Division of Administrative Hearings. The parties were represented at the hearing as follows:

FOR PETITIONER: Mr. Christopher James Arenal

1600 Stout Street, Suite 920

Denver, Colorado 80202

FOR RESPONDENT: H. Richard Bisbee, Esquire

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

Tallahassee, Florida 32399-0350 ISSUES AND INTRODUCTION

The basic issue in this case is whether the Petitioner's application for registration as an associated person in the State of Florida with Rocky Mountain Securities & Investments, Inc., should be granted or denied. The Respondent proposes to deny the application on the basis of Section 517.161(1)(h) , Florida Statutes, contending that the Petitioner has demonstrated his unworthiness to transact the business of an associated person. The Petitioner has little, if any, dispute with the facts relied upon by the Respondent, but offered additional facts in mitigation and asserts that when all of the facts are considered, he is entitled to the registration he seeks.

Subsequent to the hearing in this case, a transcript of the hearing was filed on May 11, 1987, and, pursuant to ruling at the close of the hearing, the parties were allowed until May 21, 1987, within which to file proposed recommended orders or other post-hearing submissions to the Hearing Officer.

The Petitioner filed a post-hearing letter with copies of several documents as attachments. I have treated the Petitioner's post-hearing letter as a proposed recommended order, but I have not based any findings or conclusions on the documents attached to that letter because none of those documents were offered in evidence at the time of the hearing. The Respondent filed a proposed recommended order. The substance of all proposed findings of fact submitted by both parties has been included in the findings of fact which follow.

FINDINGS OF FACT

Based on the stipulations and admissions of the parties, on the exhibits received in evidence, and on the testimony of the witnesses at hearing, I make the following findings of fact.

1. The Petitioner, Christopher James Arenal, filed a Form U-4 application seeking registration as an associated person with Rocky Mountain Securities & Investments, Inc., located at 1600 Stout Street, Suite 920, Denver, Colorado 80202. Said application was received by the Respondent on April 24, 1986. By letter dated June 17, 1986, the Respondent advised the Petitioner that it intended to deny his application for registration for the reasons set forth at length in the letter. (At the hearing the Respondent stipulated that the allegations of the top paragraph on the second page of the denial letter of June 17, 1986, should be deleted.) Thereafter, the Petitioner filed a timely request for hearing. Except for the reasons stated in the Respondent's denial letter dated June 17, 1986, the Petitioner is otherwise eligible for the registration he seeks.

   
   

2. On October 26, 1982, the State of Tennessee issued a Complaint and Notice in the matter of First Colorado Investments and Securities, Inc., Mr. Arenal, and others, alleging the sale of securities while not being properly registered. On February 7, 1983, Mr. Arenal entered into a Findings and Consent Order which found that Mr. Arenal and others had engaged in securities transactions involving Tennessee residents at a time when Mr. Arenal and others were not registered in the State of Tennessee. Mr. Arenal and others were ordered to cease and desist from acting as agents in the State of Tennessee without being lawfully registered to do so. The transactions in question took place during 1981. The evidence does not show how many of those transactions involved Mr. Arenal.

   
   

3. On April 28, 1983, the State of Wisconsin entered into a Stipulation and Consent Order of Prohibition with Mr. Arenal in which Mr. Arenal agreed to the entry of an Order of Prohibition. On June 2, 1983, a Consent Order of Prohibition was entered into in which Mr. Arenal was prohibited from transacting business as a securities agent in Wisconsin without lawful registration in that state. That order had as its genesis the fact that during 1981 Mr. Arenal had engaged in nine securities transactions for a Wisconsin resident who had previously been a client of Mr. Arenal when the client resided in New York.

   
   

4. On January 11, 1984, the State of Iowa issued a Summary Order Denying Application For Securities Agent License on an application filed by Mr. Arenal. The findings of fact in that order included findings that Mr. Arenal had "engaged in securities transactions on behalf of an Iowa resident in March, 1981, while unlicensed as a securities agent," and, with regard to an affidavit filed with the Iowa Division of Securities, that "Mr. Arenal's filed and notarized statement is a false statement." Since the issuance of the January 11, 1984, order, the State of-Iowa has approved Mr. Arenal's application to be registered as a securities agent and he is presently registered in that state.

   
   

5. On November 5, 1984, the State of Utah entered an Order Summarily Denying Application For Registration as an Agent on an application filed by Mr. Arenal. The denial was based on Mr. Arenal's prior disciplinary history. Since the issuance of the November 5, 1984, order, the State of Utah has approved Mr. Arenal's application to be registered as a securities agent and he is presently registered in that state.

6. The State of Oregon, by letter dated November 1, 1985, denied Mr. Arenal's application for registration in that state. The Oregon denial letter does not set forth a factual basis for the denial.

   
   

7. On September 6, 1984, the State of Nebraska issued an Order Denying Agent Registration on an application filed by Mr. Arenal. The denial was based on his prior disciplinary history. Mr. Arenal was again denied registration in the State of Nebraska on February 20, 1986.

   
   

8. During 1985, the staff of the Respondent's Division of Securities was almost tripled in size. Shortly after the increase in staff size, a Task Force recommended that the Division of Securities devote more time and energy to the review of applicants with disciplinary history in order to more carefully screen such applicants. As a result of the increase in staff size and the increased emphasis on review of applicants with disciplinary history, the Respondent is now rejecting applications that previously might have gotten through a cursory review.

   
   

9. All of the adverse actions taken against Mr. Arenal by the states of Tennessee and Wisconsin were based on events that occurred in 1981, at one firm, First Colorado Investments and Securities, Inc. Mr. Arenal's supervisors at that firm advised him that it was permissible for him to sell certain securities in states where he was not registered. Since those improper sales in 1981, Mr. Arenal has not engaged in any subsequent transactions in states where he was not registered.

   
   

10. During his approximately eleven years of professional experience in the securities field, there have never been any client complaints against Mr. Arenal. Mr. Arenal has been previously registered as an associated person in the State of Florida. He was last registered in Florida from approximately February of 1985 until December of 1985. His prior registrations were processed prior to the changes in policy and procedure described in paragraph B, above.

    
    

    CONCLUSIONS OF LAW

    
    

    Based on the foregoing findings of fact and on the applicable legal principles, I make the following conclusions of law.

    
    

11. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. Sec. 120.57, Fla. Stat.

    
    

12. Section 517.161, Florida Statutes, provides in pertinent part:

    
    

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

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

13. In Rule 3E-600.11, Florida Administrative Code, the Respondent has determined "prima facie evidence of unworthiness" to be as follows:

    
    

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

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

    
    

14. Mr. Arenal argues in support of his eligibility for the registration he seeks that he has been registered in numerous other states since the imposition of the disciplinary action on which the Respondent bases its proposed denial, including registration in two states which had previously denied him registration. In response, the Respondent argues that the fact that other states have granted registration to Mr. Arenal is irrelevant because different states have different standards for registration which may or may not be the same as Florida's standards. With the exceptions discussed below, there is merit to the Respondent's irrelevancy argument. Due to the different standards, approvals of registration in other states are, without more, irrelevant to whether an applicant is eligible for registration in Florida. But for the same reason--the difference in standards--denials of registration in other states, without more, are also irrelevant to whether an applicant is eligible for registration in Florida. This is especially the case when the denial in another state is based solely on the applicant's prior disciplinary history in other jurisdictions. Just as an applicant's disciplinary history is not made better when another state approves his registration, his disciplinary history is not made worse when another state denies his application on the basis of that history.

    
    

15. In view of the foregoing, the facts regarding the actions of the states of Utah, Oregon, and Nebraska are irrelevant to the disposition of this case. And for different reasons, the facts regarding the State of Iowa also appear to be irrelevant. Although the 1984 Iowa order denying Mr. Arenal's application for registration states that he engaged in securities transactions on behalf of an Iowa resident in March, 1981, while unlicensed as a securities agent" and also states that "Mr. Arenal's filed and notarized statement is a false statement," the significance of the two quoted statements must be considered in light of the following. First, although both of the quoted acts are stated to be violations of law, there is no evidence that the State of Iowa ever took any administrative disciplinary action against Mr. Arenal. Second, at a later date the State of Iowa. approved the registration application of Mr. Arenal and he is currently registered in that state. Implicit in the absence of disciplinary action and in the later approval of Mr. Arenal's registration is a conclusion on the part of Iowa officials that either the "facts" quoted above

    were without foundation, were mitigated by other facts, or were not deemed to involve matters of serious substance. The lack of disciplinary action and the later approval of a registration application have the effect of neutralizing any negative inference which might otherwise be drawn from the Iowa order of January 11, 1984, denying Mr. Arenal's application.

    
    

16. In view of the foregoing, the only disciplinary history relevant to the disposition of this case is Mr. Arenal's disciplinary history in the states of Tennessee and Wisconsin and the issue to be resolved is whether his disciplinary history in those two states is a sufficient factual basis for a conclusion that Mr. Arenal is unworthy to transact the business of an associated person. The evidence in this case regarding Mr. Arenal's disciplinary history in Tennessee does not contain much in the way of details beyond the facts that during 1981, at a time when neither the company nor Mr. Arenal were registered in Tennessee, the company by whom Mr. Arenal was employed engaged in 92 securities transactions involving Tennessee residents, and Mr. Arenal made "some" of those transactions. The record does not reveal how many Tennessee transactions involved Mr. Arenal. The evidence in this case regarding Mr. Arenal's disciplinary history in Wisconsin indicates that the disciplinary action there was based on Mr. Arenal having engaged in nine transactions for one resident of Wisconsin, which resident had previously been a client when he was a resident of New York.

    
    

17. The definition of the term "prima facie evidence of unworthiness" in Rule 3E-600.11, Florida Administrative Code, is broad enough to encompass the Tennessee and Wisconsin disciplinary actions described above. But when the nature of those offenses is considered along with the facts that the offenses occurred six years ago, that Mr. Arenal has not had any more recent disciplinary actions, and that Mr. Arenal has never had a client complaint during his career in the securities field, I am persuaded that the prima facie evidence has been overcome by other evidence of Mr. Arenal's worthiness to transact the business of an associated person. The Respondent has argued as a basis for denial in this case the recommended order in H. A. Kenning Investments, Inc., and H. A. Kenning, Jr. vs. Office of Comptroller, Department of Banking and Finance, Division of Securities, DOAH Case No. 86-3569. Kenning is distinguishable from the instant case in part because some of the offenses there were more recent than the offenses here, in part because the offenses there showed a pattern of similar behavior and there is no pattern here, and primarily because the offenses there were more serious than the offenses here because they involved the mishandling of accounts.

RECOMMENDATION

Based on all of the foregoing, I recommend the entry of a Final Order granting Mr. Arenal's application for registration as an associated person.

DONE AND ENTERED this 9th day of June, 1987, at Tallahassee, Florida.

MICHAEL M. PARRISH,

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 9th day of June, 1987.

COPIES FURNISHED:

H. Richard Bisbee, Esquire Assistant General Counsel Office of the Comptroller Suite 1302, The Capitol

Tallahassee, Florida 32399-0350

Mr. Christopher James Arenal 1600 Stout Street

Suite 920

Denver, Colorado 80202

The Honorable Gerald Lewis Comptroller, State of Florida The Capitol

Tallahassee, Florida 32399-0350

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AGENCY FINAL ORDER

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

STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE

DIVISION OF SECURITIES AND INVESTOR PROTECTION

CHRISTOPHER JAMES ARENAL,

Petitioner,

1. CASE NO. 86-2903

   
   

   OFFICE OF THE COMPTROLLER

   
   

   Respondent.

   /

   
   

   FINDINGS OF FACT, CONCLUSIONS OF LAW AND FINAL ORDER

   
   

   The Comptroller of the State of Florida, GERALD LEWIS, as administrative head of the Florida Department of Banking and Finance (hereinafter "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 approves the application of CHRISTOPHER JAMES ARENAL (hereinafter "Arenal") for registration as an associated person under Section 517.12, Florida Statutes. The grounds for issuance of this Order are:

   
   

   FINDINGS OF FACT

   
   

   1. This matter arose upon issuance by the Department of an order dated June 17, 1986, denying Arenal's application to be registered as an associated person in the State of Florida with Rocky Mountain Securities and Investments, Inc., pursuant to Section 517.12, Florida Statutes. Arenal timely filed a petition for hearing, which was held on May 1, 1987, before Michael M. Parrish, Hearing Officer. On June 9, 1987, the Hearing Officer issued an Order in this cause recommending that the application for license be approved and the license issued. The Findings of Fact of Mr. Parrish's Recommended Order are adopted by the Department and incorporated herein.

      
      

      CONCLUSIONS OF LAW

      
      

   2. The Department adopts the Hearing Officer's Conclusions of Law numbered 1, 2, 3, and 7. The Department further adopts the first three sentences of the Hearing Officer's Conclusion No. 4, the second through seventh sentences of Conclusion No. 5, and the second through fourth sentences of Conclusion No. 6. The remaining Conclusions of Law contained in the Hearing Officer's Recommended Order of June 9, 1987, are rejected or modified.

      
      

   3. The Department is unable to adopt the Hearing Officer's interpretation in Conclusion No. 4, that denials of registration in other states, without more, are irrelevant as to whether an applicant is eligible for registration in the State of Florida (Emp. Supp.). Rule 3E-600.11, (2), Florida Administrative Code, regarding prima facie evidence of unworthiness, clearly contemplates denial actions by other states which are based upon violations of that state's securities laws. Consequently, any and all denial orders entered by other states including those in the instant case regarding the states of Utah, Oregon and Nebraska, are relevant to a determination of an applicant's "worthiness" and hence his qualifications for licensure. The Conclusions of Law numbered 4, 5, and 6 are modified to this extent. (See Siess v. Dept. of H.R.S., 468 So.2d 478 (2d DCA 1985)).

FINAL ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, the application of Christopher James Arenal for registration as an associated person is hereby GRANTED.

DONE AND ORDERED in Tallahassee, Leon County, Florida this 24th day of July, 1987.

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

COPIES FURNISHED:

Michael Parrish, Hearing Officer Christopher James Arenal

Charles Scarlett Don Saxon

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 where the party resides. Such Notice of Appeal must be filed within thirty (30) days of rendition of the order to be reviewed.

Charles E. Scarlett Assistant General Counsel Office of Comptroller

The Capitol, Suite 1302 Tallahassee, Florida 32399

(904) 488-9896

Docket for Case No: 86-002903

Orders for Case No: 86-002903