Judges: JOSE DIEZ-ARGUELLAS
Agency: Department of Financial Services
Latest Update: Jan. 18, 1989
Summary: Should Petitioner's application for registration as an associated person be approved?Application for registration as associated person denied. Applicant previously violated NSE rules in prior transactions.
88-1466.PDFSTATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
JOHN D. HICKS, )
)
Petitioner, )
)
vs. ) CASE NO. 88-1466
)
OFFICE OF COMPTROLLER, ) DEPARTMENT OF BANKING AND FINANCE, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, a hearing was held in this case is Tallahassee, Florida, on October 3, 1988, before Jose A. Diez-Arguelles, a hearing officer with the Division of Administrative Hearings.
APPEARANCES
FOR PETITIONER: John D. Hicks, pro se
3918-A Raven Street
Panama City, Florida 32312
FOR RESPONDENT: Reginald R. Garcia, Esquire
Assistant General Counsel Department of Banking and Finance The Capitol, Suite 1302 Tallahassee, Florida 32399-1302
BACKGROUND
This case deals with the proposed denial by Respondent, Department of Banking and Finance, of Petitioner's, John W. Hicks', application for registration as an associated person of Travelers Equities Sales, Inc.
Sometime in June or July, 1987, Petitioner filed a Form U-4, on application for registration as an associated person with the Respondent. After an investigation, and based on the information available at the time, Respondent determined that the application should be denied. By letter dated February 23, 1988, Respondent notified Petitioner of the denial. On March 18, 988, Petitioner filed a Petition for Formal Proceeding with the Respondent. The Respondent then forwarded the case to the Division of Administrative Hearings and requested the appointment of a hearing officer to conduct the hearing.
At the hearing, Petitioner testified on his own behalf, presented the testimony of Mr. David Hunter, and offered four exhibits which were received into evidence. Respondent presented the testimony of Ms. Tamara Cain, Mr.
Conway Brock, Jr., Mr. Brian G. Cavelle and Mr. James Bryant Durham, Jr., and offered seven exhibits which were received into evidence.
Petitioner requested and received an extension of time in which to file a Proposed Recommended Order until December 19, 1988. The proposed findings of fact contained in the Proposed Recommended Orders are addressed in the Appendix which is attached to this Recommended Order.
FINDINGS OF FACT
From April, 1985 to August 1986, Petitioner was employed as a registered associated person of Dean Witter Reynolds in Tallahassee, Florida.
The Reebok Trade
On March 11, 1986, Petitioner was instructed by one of his customers to sell 200 shares of stock in Reebok International, Ltd. (Reebok). By mistake, Petitioner executed an order to sell 500 shares of Reebok on behalf of the client.
On March 17, 1986, the client came to Petitioner's office and while reviewing the client's account, Petitioner discovered the error he had made on March 11, 1986.
Petitioner told his supervisor, Mr. Brock, of the mistake. The supervisor told Petitioner that he should "bust" the trade. This meant reversing the transaction and purchasing 300 shares of Reebok. It is Dean Witter's policy that whenever an error is discovered, it should be covered immediately.
Petitioner, however, did not cover the error. From March 11, 1986 to March 17, 1986, the price of Reebok stock had increased. Petitioner decided to wait and see if the price would come down.
Sometime after March 17, 1986, Mr. Brock left the firm and a new supervisor, Mr. Cavelle, took his place.
On April 30, 1986, Mr. Cavelle noticed the Reebok error in the error account and executed an order to cover the error by purchasing 300 shares of Reebok stock.
From March 11, 1986 to April 30, 1986, the price of Reebok stock increased substantially, and the error in the Reebok trade resulted in a loss of
$9,225.00 to Petitioner's client.
The client was reimbursed by Dean Witter.
Petitioner received a written reprimand from Dean Witter and agreed to pay Dean Witter the amount of the loss.
While Petitioner remained employed with Dean Witter, $400.00 were deducted from his monthly pay check to pay off the loss. After Petitioner was fired from Dean Witter in early August, 1986, he has only been able to make sporadic payments, totalling approximately $600.00 to $700.00.
The Corpen One Transactions
Sometime in May, 1986, while Petitioner was still employed at Dean Witter, Petitioner and John Collins formed Corpen One, Inc. (Corpen). The corporation was formed to run a hot dog vending cart operation in Tallahassee,
Florida. John Collins was named president and Petitioner was the secretary and treasurer responsible for handling the corporation's finances.
In order to raise capital for the corporation, Petitioner found three other persons willing to invest in the corporation. Curtis Davis, J.B. Durham and Jeff Burkett each invested approximately $4,000.00, in return for part ownership of the corporation.
With the unused cash which the corporation had, Petitioner opened a bank account with Barnett Bank.
From May 15, 1986, to July 17, 1986, Petitioner, without the knowledge of other stockholders, wrote checks to himself from the corporate bank account totalling $3,500.00. The dates and amounts of each check were: May 15, $800; May 19, $1,200; May 27, $800; June 26, $100; July 17, $600.
These amounts were used by Petitioner for personal expenses. He treated them as loans from the corporation. Eventually, he repaid the loans with interest equal to what would have been earned had the money been invested in a Dean Witter money market account.
Sometime in early July, 1986, Petitioner determined that it would be a good idea to open up a Dean Witter money market account for the funds which the corporation had in the bank account.
On July 9, 1986, Petitioner, in his capacity as a Dean Witter employee, assigned a Dean Witter new account number, number 531015757, to the corporation. He did this by personally writing the name Corpen One, Inc. in the Dean Witter "New Account Number Assignment" log. This procedure was contrary to Dean Witter's policy which required that the new accounts clerk assign the new account number. In the clerk's absence, a person other than a broker or salesperson should assign the number.
When Petitioner returned to his desk to complete the paperwork necessary to open a new account, he discovered that he needed to have a Federal Tax Identification Number for Corpen in order to open the account. Since Corpen did not yet have such a number, Petitioner never opened the account.
During the period of time he borrowed money from the corporation, Petitioner filled out Dean Witter receipts which showed Dean Witter as having received $3,300 from Corpen to be invested in a money market account. The dates and amounts of the receipts were: May 15, $800; May 19, $1,200; May 27, $800; July 17, $500.
The receipts were filled out completely and included the account number which Petitioner had assigned to Corpen One for the account which was never opened.
Sometime in July or early August, 1986, Mr. Durham and other shareholders of Corpen became concerned with the operation of the corporation. Sales were not as high as expected and the corporation was not doing well.
Also, Petitioner wanted to be relieved of his duties, because the time needed to run Corpen was interfering with his duties at Dean Witter. The more Mr. Durham checked into the operation of the corporation, he became convinced that improprieties were taking place.
After several meetings took place, Petitioner handed over to Mr. Durham the corporate records in his position. These records included the cancelled checks Petitioner had written to himself and the Dean Witter receipts.
When Mr. Durham saw the Dean Witter receipts, he asked Petitioner about them. When he did not receive a satisfactory answer, he took the receipts to Dean Witter and met with Mr. Cavelle, the branch manager. Mr. Cavelle tried to look the account up on his computer and discovered there was no account. He then checked the new account log book and discovered that Petitioner had personally assigned the account number.
When Mr. Cavelle asked Petitioner to explain what had happened, he received what he considered a "hazy" explanation, and fired Mr. Hicks. Mr. Cavelle's main concern was that the receipts made Dean Witter potentially liable for the amounts shown in each receipt.
After being fired, Petitioner was unemployed for four to five months.
From February, 1987 to May 1988, Petitioner worked for Corporate Risk Management, a company managing self-insurance funds for employees.
Petitioner is now the manager of the Melting Pot restaurant in Panama City Beach, Florida.
For 1987, Petitioner earned approximately $13,000. His current salary is $1,200 per month.
ISSUE
Should Petitioner's application for registration as an associated person be approved?
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter of, and the parties to, this proceeding. Section 120.57, Florida Statutes.
Section 517.12, Florida Statutes, sets forth the grounds for which registration as an associated person may be denied. Relevant to this case are paragraphs (1)(a), (c), (d) and (h) of Section 517.161, Florida Statutes, which set forth the grounds upon which the Respondent based its preliminary decision to deny. These paragraphs state:
517.161 Revocation, denial or suspension of registration of dealer, investment adviser, associated person or branch office.--
(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:
(a) Has violated any provision of this chapter or any rule or order made under this chapter;
* * *
(c) Has been guilty of a fraudulent act in connection with any sale or securities, has been or is engaged or is about to engage in making fictitious or pretended sales or purchases of any such securities, or has been or is engaged or is about to engage in any practice or sale of securities which is fraudulent or in violation of the law;
* * *
(h) Has demonstrated his unworthiness to transact the business of dealer, investment adviser, or associated person;
The evidence presented in this case shows that Petitioner is guilty of violating paragraphs (a) and (h), quoted above.
Petitioner is guilty of violating (a) because he made a "false writing or document," in violation of Section 517.301(1)(c), Florida Statutes, when he completed the Dean Witter receipts. Petitioner testified that he used the Dean Witter receipts solely to keep track of the money he borrowed from Corpen, and that he did not use them for any other purpose. This explanation, however, is not convincing in view of the fact that the receipts were filled out completely, and included a Dean Witter account number which was placed on three of the receipts at a time other than the date shown on the receipts. In any event, the act of completing the receipts made Dean Witter potentially liable for the amounts shown on the receipts and the statute proscribes the making of the false receipts, regardless of what they are used for.
Petitioner is guilty of violating paragraph (h) because of his delay in correcting the error he made in the sale of the Reebok stock. Rule 3E- 600.013, Florida Administrative Code, sets forth a number of practices which are deemed to be demonstrative of unworthiness under paragraph (h). One of these is "violating any rule of a national securities exchange or national securities association . . . with respect to any customer, transaction or business in this state.." Rule 3E-500.013(1)(p), Florida Administrative Code. Article III, Section 19 of the National Association of Securities Dealers states that "no member or persons associated with a member shall make improper use of a customer's securities or fund." By failing to correct the Reebok trade error after being instructed to do so, Petitioner made improper use of a customer's fund. Instead of correcting the trade, Petitioner decided to wait and see if the price of the stock would drop. In effect, he speculated with the customer's account. This speculation ended up costing the customer, and therefore Dean Witter, $9,225.00, of which Petitioner has only repair approximately $1,700.00.
RECOMMENDATION
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent issue a Final Order denying Petitioner's
application for registration as an associated person.
DONE and ORDERED this 19th day of January, 1989, in Tallahasee, Florida.
JOSE A. DIEZ-ARGUELLES
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 19th day of January, 1989.
APPENDIX
The parties submitted proposed findings of fact which are addressed below.
Paragraph numbers in the Recommended Order are referred to as "RO ." Petitioner's Proposed Findings of Fact
Proposed Finding Ruling and RO Paragraph of Fact Number
Second sentence accepted. Rest of paragraph is rejected as irrelevant or argument.
Rejected as irrelevant.
First three sentences rejected as argument. Fourth and fifth sentences accepted.
Supported by the evidence but unnecessary to the decision reached.
The implication in the first sentence that the delay was someone else's fault or that the stock market is to blame is rejected. Petitioner has only himself to blame for the delay. Third sentence is rejected as argument. Fourth sentence accepted. Last three unnumbered paragraphs are argument
Respondent's Proposed Findings of Fact
Proposed Finding Ruling and RO Paragraph of Fact Number
Not a finding of fact.
Accepted. See Background section of RO.
3.-4. Not a finding of fact. See Background section of this RO.
Accepted. See Background.
Not a finding of fact. See Background.
Accepted RO1.
Accepted RO12.
Rejected as recitation of testimony. Also, as to the first sentence, Mr. Durham's testimony on direct was weakened by the cross- examination where his memory of events was tested. As to the second, third and fourth sentences, Mr. Hicks executed the receipts, and borrowed money from Corpen One. However, the evidence fails to establish that Mr. Hicks "converted" to his own use money which was to be invested in the money market account.
Rejected as recitation of testimony. But see RO18.
Accepted. RO20, 21.
Rejected as not supported by the evidence.
Rejected as recitation of testimony.
Rejected as recitation of testimony except fourth and ninth sentences.
,16.,17. Rejected as not a finding of fact.
Rejected as irrelevant.
Accepted. RO2.-4.
Rejected as recitation of testimony. But see RO6.
,22. Rejected as recitation of testimony. But see RO5.-10.
23. Rejected not as a finding of fact.
24.-28. Rejected as recitation of testimony.
COPIES FURNISHED:
John D. Hicks
3918-A Raven Street
Panama City, Florida 32312
Reginald R. Garcia, Esquire Assistant General Counsel Department of Banking and Finance The Capitol, Suite 1302 Tallahassee, Florida 32399-1302
Honorable Gerald Lewis Comptroller, State of Florida The Capitol
Tallahassee, Florida 32399-0350
Charles L. Stutts General Counsel
Department of Banking and Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350
=================================================================
AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE
DIVISION OF SECURITIES AND INVESTOR PROTECTION
JOHN D. HICKS, )
)
Petitioner, ) Administrative Proceedings
) No.: 837-S-2/88
vs. )
) DOAH Case No.: 88-1466 OFFICE OF THE COMPTROLLER, )
DEPARTMENT OF BANKING AND ) FINANCE, )
)
Respondent. )
)
FINDINGS OF FACT, CONCLUSION OF LAW AND FINAL ORDER DENYING PETITIONER'S APPLICATION
FOR REGISTRATION AS A SECURITIES ASSOCIATED PERSON 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, Division of Securities and Investor Protection, (hereinafter "the Department"), being authorized and directed to administer the provisions of Chapter 517, Florida Statutes, the Florida Securities and Investor Protection Act, and the duly promulgated rules thereunder, after due consideration and review of the complete record of this proceeding hereby denies Petitioner's application for registration as a securities associated person under Section 517.12, Florida Statutes (1987). In accordance with Section 120.59(1), Florida Statutes, and Rule 28-5.405, Florida Administrative Code, the grounds for the issuance of the Final Order are as follows:
Findings of Fact
On February 23, 1988, the Department issued a letter denying Petitioner's application for registration as an associated person of Travelers Equities Sales, Inc. The denial was based on alleged violations of Chapter 517, The Florida Securities and Investor Protection Act.
Petitioner requested a formal administrative proceeding, which was held on October 3, 1988, in Tallahassee, Florida before Hearing Officer Jose Diez- Arguelles. Subsequent to the hearing, both parties submitted proposed recommended orders to the Hearing officer for his review and consideration. On January 19, 1989, Hearing Officer Diez-Arguelles issued his Recommended Order to the Department containing his recommended findings of fact, conclusions of law and penalty. The Recommended Order, which is attached hereto and incorporated herein, included most of the Respondent's proposed findings of fact and conclusions of law and penalty. The Recommended Order stated that the Petitioner's application should be denied. Neither party submitted written exceptions to the Recommended Order.
The Department hereby adopts in this Order all of the findings of fact contained in the Hearing Officer's Recommended Order as detailed in paragraphs 1-29 thereof.
CONCLUSIONS OF LAW
The Department hereby adopts in this Order all of the Conclusions of Law contained in the Hearing Officer's Recommended Order as detailed on pages 7-
9 thereof.
PENALTY
The Department hereby adopts in the Order the recommended penalty to deny Petitioner's application as detailed on page 9 thereof.
FINAL ORDER
Based upon the foregoing findings of fact and conclusions of law, it is hereby ORDERED that the application of Hicks for registration as an associated person of Travelers Equities Sales, Inc., is hereby DENIED. As such, Hicks is prohibited from engaging in any securities activities or transactions that require registration pursuant to Chapter 517, Florida Statutes.
DONE and ORDERED in Tallahasee, Leon County, Florida, this 12th day of April, 1989.
GERALD LEWIS, as Comptroller and Head of the Department of Banking and Finance, Division of Securities and Investor Protection
COPIES FURNISHED:
Don B. Saxon, Director, Division of Securities Reginald R. Garcia, Esquire, Assistant General Counsel
NOTICE OF RIGHT TO JUDICIAL REVIEW
NOTICE IS HEREBY PROVIDED that a party who is adversely affected by this Final Order may obtain judicial review of foregoing final agency 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 (1) copy of a Notice of Appeal with the Clerk of the Department of Banking and Finance, The Capitol, Legal Section, Tallahassee, Florida 32399-0350 and a second copy, accompanied by prescribed filing fees, with the District Court of Appeal, First District, Martin Luther King Jr. Boulevard at Pensacola and West Jefferson Streets, Tallahassee, Florida 32301 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 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."
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that true and correct copies of the foregoing have been served by U. S. Mail to John D. Hicks, 1506 N. Meridian Road, Tallahasee, Florida 32313; Jose Diez-Arguelles, Hearing Officer, Division of Administrative Hearings, 1230 Apalachee Parkway, The DeSoto Building, Tallahasee, Florida 32399-1550 this 12th day of April, 1989.
R. MICHAEL UNDERWOOD Deputy General Counsel Office of the Comptroller
Department of Banking and Finance Legal Section, The Capitol Tallahassee, FL 32399-0350
(904)488-9896
Docket for Case No: 88-001466
Orders for Case No: 88-001466
| Issue Date |
Document |
Summary |
|
Apr. 12, 1989 |
Agency Final Order
|
|
|
Jan. 18, 1989 |
Recommended Order
|
Application for registration as associated person denied. Applicant previously violated NSE rules in prior transactions.
|
