STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BANKING AND ) FINANCE, OFFICE OF COMPTROLLER, )

)

Petitioner, )

)

vs. ) CASE NO. 88-4119

)

JAY H. DRIVAS and )

GOVERNMENT INVESTMENTS, )

)

Respondents. )

)

RECOMMENDED ORDER

The final hearing in this case was held on January 20, 1989, in Clearwater, Florida, before Donald D. Conn, Hearing Officer, Division of Administrative Hearings. The parties were represented as follows:

For Petitioner: Stephen Christian, Esquire

Office of Comptroller 1313 North Tampa Street Tampa, Florida 33602

For Respondent: Burton W. Wiand, Esquire

Post Office Drawer 2197

200 North Garden Avenue Clearwater, Florida 34617

The issue in this case is whether the Department of Banking and Finance, Office of Comptroller (Petitioner), should take license disciplinary action against Jay H. Drivas and Government Investments (Respondents) based upon matters alleged in a Cease and Desist Order and Amended Administrative Complaint which allege certain violations of Chapter 517, Florida Statutes. At the hearing, Petitioner called three witnesses, including Respondent, and Respondent also testified on his own behalf. Nine exhibits were introduced by the Petitioner, and eleven by the Respondent.

The transcript of the final hearing was filed on February 6, 1989, and the parties were given fifteen days thereafter to file their proposed recommended orders, including proposed findings of fact. A ruling on each timely filed proposed finding of fact is included in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. From approximately March 1986, until January 16, 1987, Respondent Jay

   H. Drivas was registered by the Petitioner as an "associated person" with Government Securities Corporation. Thereafter, his registration as an "associated person" was transferred to Investacorp, Inc., on or about January 22, 1987, and then to Titan Capital on or about February 4, 1987. Drivas'

   registration has been with the Investment Center, Inc., from June 16, 1987, to the present.

   
   

2. On February 3, 1987, the Petitioner commenced an examination of Drivas' operations which revealed that he was engaged in offering, buying, selling or otherwise dealing or trading in securities under the name of Government Investments, which he represented to customers was a full-service brokerage firm with a wide range of products, including government securities. He also represented to customers that Government Investments was a member of the National Association of Securities Dealers (NASD), and the Securities Investor Protection Corporation (SIPC). In fact, Government Investments was never registered with the Petitioner as a dealer, nor was it ever a member of NASD or SIPC. Government Investments is an unincorporated organization which is owned and controlled by Respondent Drivas.

   
   

3. Although he was informed on February 3, 1987, that he could not continue hold himself out to the public as doing business as Government Investments, Drivas continued to use letterhead and business cards showing Government Investments. He continued to fail to disclose to customers that all trades were handled by Investacorp, which cleared all transactions through a clearing dealer. Investacorp is registered with Petitioner as a dealer, and is also a member of NASD. Respondent also had business cards showing the name of Investacorp, but these were not displayed in his office, and they contained the address of his Government Investments Tarpon Springs office, rather than the address of Investacorp's corporate headquarters.

   
   

4. Between January 16 and 21, 1987, Drivas was not registered through any properly registered dealer. Nevertheless, he transacted two sales during this period in the amount of $10,000 each. He did subsequently handle, these transactions through Investacorp when his registration with Investacorp became effective on January 22, 1987. There is no evidence that Drivas misappropriated any funds from these transactions, and the transactions were effected as desired by the customers. Respondent was not licensed by Petitioner or NASD as a securities principal, or designated a principal during his employment with Investacorp.

   
   

5. Under the terms of the Temporary Agent Transfer (TAT) program established by the NASD, reaffiliation from one broker to another by an associated person may be effected by means of a telephone call to NASD, which is thereafter made permanent by the filing of a Form U-4 application in which there are no affirmative answers to license disciplinary questions.

   
   

6. On or about June 16, 1987, Drivas completed and filed a Form U-4 transferring his affiliation from Titan Capital to the Investment Center, Inc. He responded in the negative to a question of whether he was the subject, of any complaint, investigation or proceeding that could result in license disciplinary action. At hearing, Drivas testified that although he was aware of the Petitioner's examination of his business, he was not aware that a complaint, investigation or formal proceeding had been initiated. He simply thought that the examination was informational and instructive and was not aware that disciplinary action was being considered by the Petitioner.

   
   

7. In fact, examinations are routine, and do not indicate the initiation of formal proceedings or investigations. Based upon the testimony of Drivas and Jana Synatschk, financial specialist with the Petitioner who conducted the examination on February 3, 1987, it is specifically found that Respondent Drivas was not informed that he was under investigation, or that formal proceedings had

   begun, when he completed the Form U-4 on or about June 16, 1987. He reasonably believed that the Petitioner was conducting a routine examination, and therefore did not falsely answer the question on the U-4. When the Petitioner issued an Administrative Complaint against Respondents on or about July 13, 1987, Drivas amended his Form U-4 to correctly reflect the initiation of this proceeding.

   
   

8. In September 1987 and January 1988, Respondent Drivas placed newspaper advertisements which properly indicated that all transactions were through the Investment Center, Inc., a registered broker dealer, and a member of NASD and SIPC. However, these ads were misleading since they stated that U.S. Government securities were offered with no initial sales charge, and with the backing of the U.S. Government. In fact, Drivas dealt almost exclusively in mutual funds of government securities.

   
   

9. Throughout Petitioner's examination of his operations, Drivas was cooperative and concerned. His demeanor at hearing evidences a sincere desire to operate his business in accordance with all requirements of law, and rules of the Petitioner.

   
   

   CONCLUSIONS OF LAW

   
   

10. The Division of Administrative Hearings has jurisdiction over the parties, and the subject matter in this cause. Section 120.57(1), Florida Statutes. Since this is a case in which the Petitioner is seeking to discipline the Respondent's license, and could thereby adversely affect the Respondent's ability to continue to earn a livelihood through the sale of securities, Petitioner has the burden of establishing the basis for license disciplinary action by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).

    
    

11. Section 517.12(1), Florida Statutes, provides that securities may not be sold in the State of Florida, except through a dealer, associated person or issuer that is registered with the Petitioner, and Section 517.021(9)(a)1 defines any person who either directly or indirectly engages in the selling or trading of securities, as broker or principal, as a "dealer."

    
    

12. Petitioner's examination of Respondent Drivas' business operations in February 1987, revealed that he was holding himself out to the public as doing business through Government Investments, an unincorporated organization which he owned and controlled. Government Investments was not registered with the Petitioner under Chapter 517, Florida Statutes. Drivas' affiliation was with Investacorp, which is registered with Petitioner and is a member of NASD. However, he failed to disclose to the public that all transactions were handled by Investacorp through a clearing dealer, and not through Government Investments. By engaging in the sale of securities through this unregistered organization, Government Investments, Respondents have acted as dealers without being registered as such, and are, therefore, found to have violated Section 517.12(1), Florida Statutes.

    
    

13. It was also established that in January 1987, Drivas transacted two sales of securities between January 16 and 21, 1987, when he was not properly registered through any registered dealer. This constitutes further violations of Section 517.12(1).

    
    

14. Sections 517.301(1)(a) and (c), Florida Statutes, provide that it is unlawful for any person to transact the sale of securities by means of any untrue statement, or to knowingly and willfully falsify a material fact. Drivas

    falsely represented that Government Investments was a full service brokerage firm which was a member of NASD and SIPC. After having been advised on February 3, 1987, to cease doing business in this manner, he nevertheless continued to use letterhead and business cards of Government Investments reflecting these material misrepresentations. As such, Respondent Drivas has violated these additional provisions of law.

    
    

15. In pertinent part, Sections 517.311(1) and (3)(a), Florida Statutes, make it unlawful for any person selling securities to misrepresent that any investment is guaranteed, sponsored or approved by the United States Government. Although his business dealt almost exclusively at the time in mutual funds of government securities, he placed advertisements in newspapers in September 1987, and January 1988, which were misleading and falsely represented that he was offering securities backed by the U. S. Government, with no initial sales charge. In fact, the securities in which he primarily, and almost exclusively dealt, had an initial sales charge, and were not backed or guaranteed by the

    U.S. Government. See also Section 517. 301(1)(a)2., Florida Statutes.

    
    

16. Finally, it was not established that Drivas willfully concealed a material fact in completing a Form U-4 on or about June 16, 1987, transferring his affiliation from Titan Capital to the Investment Center, Inc. Under the facts of this case, he answered all questions truthfully and reasonably, based upon his knowledge at the time. He had not been informed that he was under investigation, and had every reason to believe that the Petitioner's examination of his operation was routine. When an Administrative Complaint was issued against him, Drivas promptly amended his U-4 to reflect the pendency of these disciplinary proceedings. As such, there is no basis for concluding that Respondents have violated Sections 517.161(1)(b) or 517.301(1) (c), Florida Statutes.

RECOMMENDATION

Based upon the foregoing, it is recommended that the Petitioner enter a Final Order against Respondents imposing an administrative fine in the amount of

$5,000, pursuant to Section 517.221(3), Florida Statutes.

DONE AND ENTERED this 24th day of February, 1989 in Tallahassee, Florida.

DONALD D. CONN

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

Filed with the Clerk of the Division of Administrative Hearings this 24th day of February, 1989.

APPENDIX

(DOAH Case No. 88-4119)

Rulings on the Petitioner's Proposed Findings of Fact:

1. Adopted in Findings of Fact 1 and 8.

2-3. Adopted in part in Finding of Fact 1, but otherwise rejected as not based on competent substantial evidence.

1. Adopted in Findings of Fact 1 and 4.

2. Adopted in Findings of Fact 2 - 4.

3. Rejected as not based on competent substantial evidence and otherwise as irrelevant.

4. Adopted in Finding of Fact 2.

5. Adopted in Finding of Fact 4.

6. Adopted in Finding of Fact 3.

7. Adopted in part in Findings of Fact 2 - 4, but otherwise rejected as not based on competent substantial evidence.

8. Adopted in part in Finding of Fact 4.

9. Adopted in Findings of Fact 2 and 3.

10. Adopted in Finding of Fact 3.

14-16. Adopted in Findings of Fact 1, 5 - 7.

1. Adopted in Finding of Fact 8.

2. Rejected as not based on competent substantial evidence.

3. Adopted and Rejected in Finding of Fact 8.

Rulings on Respondent's Proposed Findings of Fact:

1. Rejected as unnecessary.

2. Adopted in part in Finding of Fact 1, but otherwise rejected as irrelevant.

3. Adopted in Finding of Fact 2.

4. Adopted in Finding of Fact 1, but Rejected in Finding-of Fact 4.

5-7. Adopted in Finding of Fact 4, but otherwise rejected as irrelevant and unnecessary.

1. Adopted in Finding of Fact 1.

2. Adopted in Findings of Fact 2, 3, and 7.

10-12. Adopted in Finding of Fact 7, but Rejected in Finding of Fact 3 and otherwise as irrelevant.

13. Adopted and Rejected in Finding of Fact 3. 14-15. Adopted in Findings of Fact 6 and 7.

16-18. Adopted and Rejected in Findings of Fact 3 and 8 and otherwise rejected as irrelevant.

19. Rejected as argument on the evidence rather than a proposed finding of fact.

20-21. Rejected as irrelevant and unnecessary.

1. Rejected as argument on the evidence rather than a proposed finding of fact.

2. Adopted in Finding of Fact 1 but Rejected in Finding of Fact 4 and otherwise rejected as irrelevant and unnecessary.

3. Rejected as simply argument on the evidence.

COPIES FURNISHED:

Stephen Christian, Esquire Office of Comptroller

1313 North Tampa Street Tampa, FL 33602

Burton W. Wiand, Esquire

P. O. Drawer 2197

200 North Garden Avenue Clearwater, FL 34617

Charles L. Stutts, Esquire General Counsel

Department of Banking and Finance

The Capitol, Plaza Level Tallahassee, FL 32399-0350

Honorable Gerald Lewis Comptroller

The Capitol

Tallahassee, FL 32399-0350

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

AGENCY FINAL ORDER

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

STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE

DIVISION OF SECURITIES AND INVESTOR PROTECTION

IN RE:

JAY H. DRIVAS and

GOVERNMENT INVESTMENTS DOAH Case No. 88-4119

Administrative Proceeding

Respondents Number 700-S-3/87

/

STIPULATION, REGISTRATION AGREEMENT AND FINAL ORDER

WHEREAS, the State of Florida Department of Banking and Finance, Division of Securities and Investor Protection (the Department) issued its Cease and Desist Order and amended Administrative Complaint (the "Initial Order") against Respondents J.H. Drivas and Government Investments on March 9, 1988, alleging violations of Chapter 517, Florida Statutes and ordering the Respondents to cease and desist from such violations;

WHEREAS, pursuant to Respondent's petition, the State of Florida Division of Administrative Hearings conducted a formal hearing in this matter on January 20, 1989 and issued a Recommended Order (Division of Administrative Hearings case #88-4119), including Findings of Fact and Conclusions of Law setting forth certain violations of Chapter 517, Florida Statutes;

WHEREAS Respondents have filed certain exceptions to the Recommended Order;

and

WHEREAS the Department has determined that, it is advisable to impose certain limitations and restrictions upon the activities of Respondent Jay Drivas; and

WHEREAS, The Investment Center, Inc. desires to employ Jay H. Drivas as an associated person in Florida; and

WHEREAS, the parties have agreed to resolve this action without further litigation,

IT IS THEREFORE stipulated and agreed as follows:

1. Respondent Jay H. Drivas admits that certain violations of chapter 517, Florida Statutes have taken place essentially as found by the Division of Administrative Hearings and set forth in its Recommended Order. The Department recognizes that, to the best of its knowledge, such violations did not result in customer losses, and further recognizes that, consistent with the findings of the Hearing Officer, the evidence does not establish that such violations were intentional.

   
   

2. Respondent Drivas shall pay to the Department an Administrative penalty in the amount of two thousand five hundred dollars ($2,500.00) within thirty days of issuance of this Final Order.

   
   

3. Subject to all of the terms and conditions set forth in this paragraph and this agreement, Respondent Jay Drivas may conduct business as an associated person of The Investment Center, Inc. in this state:

   
   

   1. Jay H. Drivas agrees not to exercise discretionary authority in any customer account;

      
      

   2. Jay H. Drivas agrees that all new accounts he accepts or handles will be approved by the branch manager or a principal of The Investment Center, Inc. prior to Jay H. Drivas or Investment Center, Inc. accepting any such account;

      
      

   3. Jay H. Drivas agrees to receive strict supervision in his capacity as an associated person from a principal physically present in the office of employment of Jay Drivas, including a principal duly registered or otherwise qualifying pursuant to paragraph 1784 11(1)(d)(i) of the manual of the National Association of Securities Dealers, Inc.;

      
      

   4. Jay H. Drivas agrees that he will not act in any principal, supervisory, or managerial capacity while employed by The Investment Center, Inc. and subject to these restrictions;

      
      

   5. Jay H. Drivas agrees to immediately report to the Department any complaint or action filed against him or against The Investment Center Inc. which directly or indirectly involves Jay H. Drivas's activities in or affiliation with the securities industry. "Immediately report" as used herein shall mean no later than thirty (30) days from Jay H. Drivas's receipt or notice of the complaint;

      
      

   6. Jay H. Drivas agrees that he shall not engage in any prohibited business practice as that term is defined in Rule 3E-600.013, Florida Administrative Code; and

   7. Jay H. Drivas and The Investment Center, Inc. agree to comply with and abide by all conditions imposed in this Agreement, all state and federal securities law, all rules lawfully promulgated thereunder, and all applicable rules of the National Association of Securities Dealers;

      
      

   8. The restrictions and conditions set forth in this paragraph shall remain in force and effect for the period of one year from issuance of this Final Order and shall be of no force or effect after that period unless the Department finds Respondent Drivas in material violation of this agreement, applicable state or federal law, or rules duly promulgated thereunder, or the rules of the National Association of Securities Dealers.

      
      

4. To assure compliance with the foregoing terms of Jay H. Drivas's registration, The Investment Center, Inc., as Jay H. Drivas's employer, agrees:

   
   

   1. To immediately report to the Department any violation of any of the above conditions placed upon Jay H. Drivas's registration;

      
      

   2. To immediately report to the Department any and all complaints or actions filed against Jay H. Drivas which directly or indirectly involve Jay H. Drivas's activities in the securities industry;

      
      

   3. That it will only permit Jay H. Drivas to conduct any business requiring registration with the Department at its lawfully registered branch office, 150 2nd Avenue North, St. Petersburg, FL 33701.

      
      

   4. That it will require Sherman Seaborn (CRD No. 1064980) to strictly supervise Jay H. Drivas as required above;

      
      

   5. That any change to the information reported in conditions 3c. or 3d. hereof will be reported to the Department in writing within fifteen (15) calendar days of the change.

      
      

5. Jay H. Drivas and The Investment Center, Inc., each acknowledge that upon execution of this Registration Agreement, this Agreement and the Final Order shall constitute a valid written agreement and a valid Order. Jay H. Drivas and The Investment Center, Inc. separately and jointly waive any right to separately stated findings of fact and conclusions of law and further waive any right to administrative or judicial review hereof, agreeing that the Final Order constitutes final agency action, enforcement of which may be sought pursuant to the provisions of Chapters 120 and 517, Florida Statutes.

   
   

6. Jay H. Drivas and The Investment Center, Inc. each furthermore stipulate, recite, acknowledge and agree that material failure to comply with any provision of this Agreement shall constitute demonstration of unworthiness by Jay H. Drivas to transact the business of broker/dealer, investment adviser, and/or associated person and shall constitute violation of an agreement made with the Department, and violation of a lawful Order, under Chapter 517, Florida Statutes. Upon determination by the Department of such material noncompliance, Jay H. Drivas and The Investment Center, Inc. each consent to revocation of any registration granted to Jay H. Drivas by the Department. Such revocation shall commence on a date certain which shall be no less than ten (10) days after receiving notice of the Department's intent to revoke. Such revocation may be stayed by the Department if compliance with this Agreement is assured to the Department's satisfaction within the period between notice and the intended date of revocation. Nothing herein shall be construed, however, as limiting the right of Jay H. Drivas or The Investment Center, Inc. to contest determination

   of noncompliance with this Agreement in a prompt hearing. Regardless of the outcome of any such hearing, Jay H. Drivas and The Investment Center, Inc. jointly and severally hereby release the Florida Department of Banking and Finance from liability for attorneys' fees or liability arising from any cause of action, including negligence, provided the revocation order was entered based upon this Registration Agreement. The Department agrees to accept this release without acknowledging, and expressly denies, that any such cause of action may exist.

   
   

7. Except where provided otherwise within this Agreement, relief from any provision of this Agreement may be sought by either Jay H. Drivas or by The Investment Center, Inc. by petition in writing to the Department.

   
   

8. Respondents Jay Drivas and Government Investments waive, release and forever discharge the Department and its agents, representatives and employees from any and all causes of action in law or equity which Respondents may have, including but not limited to libel, slander, violation of a constitutionally protected right, interference with contractual relationships, and any other claim arising from the Department's examination of the Respondents, issuance of the Initial Order, and all other acts related to the prosecution, litigation, and settlement thereof. The Department accepts this release and waiver by Respondents without admitting that any such cause of action does or may exist, and the Department expressly denies the existence of any such valid right or cause of action.

IN WITNESS WHEREOF, the parties have signed this document on the dates indicated below.

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

BY:

Don B. Saxon, Director

DATE: 5/22/89

CONSENT FINAL ORDER

The parties signing the foregoing Stipulation and Registration Agreement have consented to this Final Order, and the foregoing agreement is hereby ratified and adopted as the Findings of Fact and Conclusions of Law for this Order. The Recommended Order of Hearing Officer Donald D. Conn of the Division of Administrative Hearings (case number 88-4119) is attached hereto, and the findings of fact and conclusions of law set forth in the Recommended Order are hereby incorporated by reference and adopted as additional Findings of Fact and Conclusions of Law for this Order.

IT IS THEREFORE ORDERED:

1. Respondent Jay H. Drivas shall pay an administrative penalty of two thousand five hundred dollars ($2,500.00) as set forth in the foregoing Agreement for deposit to the Anti-Fraud Trust Fund or otherwise as prescribed by law.

   
   

2. Respondent Jay H. Drivas and Investment Center, Inc. as a party to the foregoing agreement, shall fully comply with the terms and conditions set forth therein.

   
   

3. The registration of Respondent Jay H. Drivas as a securities associated person shall continue in effect according to the terms and conditions set forth in the foregoing stipulation.

DONE AND ORDERED this 26th day of May, 1989, at Tallahassee, Florida.

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

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a copy of the foregoing was provided this 26th day of May, 1989 by mail to Burton W. Wiand, Esq., attorney for Jay Drivas, 601 Cleveland Street, Suite 800, Clearwater, FL 34617.

COPIES FURNISHED:

Don B. Saxon, Director

Division of Securities and Investor Protection Steven Christian, Assistant General Counsel Lawrence S. Krieger, Assistant General Counsel Dennis Farrar, Area Financial Manager

Donald D. Conn, Hearing Officer, Division of Administrative Hearings

Docket for Case No: 88-004119

Orders for Case No: 88-004119