STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LEO GOVONI, )

)

Petitioner, )

)

vs. ) CASE NO. 91-1406

)

DEPARTMENT OF BANKING AND )

FINANCE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a formal hearing in this case on May 28, 29 and 30, 1991, in Tampa, Florida.

APPEARANCES

For Petitioner: John R. Kiefner, Jr., Esquire

and Clifford J. Hunt, Esquire RIDEN EARLE & KIEFNER, P.A.

Fourth Floor - North Tower

100 Second Avenue South

St. Petersburg, Florida 33702

For Respondent: Margaret S. Karniewicz, Esquire

and H. Richard Bisbee, Esquire Department of Banking & Finance Suite 1302 - The Capitol Tallahassee, Florida 32399

STATEMENT OF THE ISSUES

Whether or not Petitioner's application for registration as an associated person of Brauer & Associates, Inc., and as an investment adviser of G.G. Brauer & Associates, Inc. should be approved.

PRELIMINARY STATEMENT

By letter dated January 25, 1991, Respondent, Department of Banking and Finance, advised Petitioner, Leo J. Govoni, that his application for registration as an associated person of Brauer & Associates, Inc., and as an investment adviser with G.G. Brauer, Inc., was being denied pursuant to Sections 517.161(1)(a), (b) and (h), Florida Statutes, based upon Respondent's determination that Petitioner violated the Florida Securities and Investor Protection Act, Chapter 517, Florida Statutes; that his application contained material misstatements and that he had demonstrated prima facie evidence of unworthiness to transact the business of an associated person.

Specifically, Respondent alleged that between December 1987 and July 1990, Petitioner engaged in approximately fifty-one (51) unauthorized transactions totaling approximately $253,572.23 in at least seven (7) customer accounts; that the unauthorized transactions constituted a violation of Section 517.301(1)(a), Florida Statutes; that his application contained material false statements by failing to disclose five (5) of the eight (8) customer complaints filed against him and that he engaged in the following prohibited business practices which are deemed to be demonstrations of unworthiness as defined by Rule 3E-600.013, Florida Administrative Code:

1. Executing transactions on behalf of a customer without authority to do so in violation of Rule 3E-600.013(1)(d) and (2)(g), F.A.C.;

   
   

2. Exercising discretionary power in a customer account without first obtaining written discretionary authority in violation of Rule 3E-600.013(1)(e) and (2)(g), F.A.C.;

   
   

3. Executing a transaction in a margin account without obtaining from the customer a written margin agreement prior to settlement date for the initial transaction in the account in violation of Rule

   3E-600.013(1)(g) and (2)(g), F.A.C.;

   
   

4. Violating Article III, Section 1 and Article III, Section 19(a) of the Rules of Fair Practice of the National Association of Securities Dealers, Inc. ("NASD"), in violation of Rule 3E-600.013(1)(p) and (2)(g), F.A.C.

Petitioner timely filed a Petition for Formal Hearing and on February 28, 1991, this matter was referred to the Division of Administrative Hearings for the assignment of a Hearing Officer to conduct a formal hearing. Following responses from the parties, on March 15, 1991, this matter was scheduled for hearing for May 28, 29 and 30, 1991, and was heard as scheduled.

At final hearing, Respondent introduced exhibits 1-19 which were received in evidence at the hearing. Respondent's Exhibits 7, 8, 9, 10, 11, 12, 13A, 13B and 13C were admitted for the limited purpose of showing that customer complaints had been filed against Petitioner. Respondent presented the testimony of Wayne Schmidt, Don Saxon, director of the Division of Securities and Investor Protection, Dennis Farrar, area financial manager for Respondent's Tampa office, and investor/complainants Michael Russo, Dorothy Juranko and Mark Madison.

Petitioner introduced exhibits 6, 8, 9, 10, 11, 34, 35, 36-E, 36-W, 33-D,

33-I, 40, 41 42, 43, 44, 45 and 53, which were received in evidence. Respondent's Exhibits 46-52 were admitted for the limited purpose of showing that Smith Barney responded to customer complaints filed against Petitioner. Petitioner testified on his own behalf and presented the testimony of Jerry Brauer and Lynn Hippner.

Official recognition was taken of Sections 517.161 and 517.301, Florida Statutes and Rule 3E-600.013, Florida Administrative Code and Article III, 1,

2 and 19 of the NASD Rules of Fair Practice.

The parties filed proposed recommended orders on July 5, 1991, which were considered in preparation of this Recommended Order. Proposed findings of fact which are not incorporated herein are the subject of specific rulings in an Appendix.

Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received, and the entire record compiled herein, I hereby make the following

relevant factual findings:

FINDINGS OF FACT

1. Respondent, Department of Banking and Finance, is the state agency charged with the administration and enforcement of Chapter 517, Florida Statutes, The Florida Securities and Investor Protection Act and the administrative rules promulgated thereunder.

   
   

2. On or about October 30, 1990, Petitioner submitted a Form U-4, Uniform Application for Securities Industry Registration or Transfer, seeking transfer as an associated person of Brauer & Associates, Inc., and as an investment adviser of G.G. Brauer, Inc.

   
   

3. On or about January 25, 1991, Respondent denied Petitioner's application for registration based upon its determination that Petitioner had filed a form U-4, which contained material misstatements and had demonstrated prima facie evidence of unworthiness by engaging in prohibited business practices.

   
   

4. Petitioner was previously registered as an associated person with the St. Petersburg, Florida branch office of Smith Barney from March 1987 until July 25, 1990, when he was permitted to resign from the firm for ordering securities from the "over the counter" desk without prior client orders. Petitioner was also registered with the NASD and is charged with knowledge of their Rules of Fair Practice.

   
   

5. On or about May 9 1990, Ronald Padgett filed a written complaint with Respondent alleging that Petitioner was engaging in unauthorized trading in his account and that the account was trading on margin without a signed margin agreement. Mr. Padgett also alleged that the signed margin agreement on file with Smith Barney was a forgery.

   
   

6. After receiving Mr. Padgett's complaint, Respondent commenced its investigation in Petitioner's activities and requested that Smith Barney provide it with information regarding Padgett's complaint. Respondent also requested and was provided with copies of all other customer complaints that had been filed against Petitioner with Smith Barney.

   
   

7. Smith Barney provided Respondent with copies of customer complaints that had been filed against Petitioner by Dorothy Juranko, Wayne Schmidt, Mark Madison, Michael Russo, Gloria Fallon, Patricia Schoenberg and William & Verna Bankhead. All of these individuals were investor clients of Petitioner.

8. Prior to his employment with Smith Barney, Petitioner had not been the subject of a customer complaint or industry disciplinary proceeding or licensure revocation, suspension, or denial.

   
   

9. Wayne Schmidt Sr. the owner of Suncoast Chrysler-Plymouth (Suncoast) opened his account at Smith Barney in 1985. Initially, the account executive assigned to Schmidt's account at Smith Barney was Steve Ellis. Schmidt maintained two accounts with Smith Barney and Steve Ellis, namely, a profit- sharing account for Suncoast Chrysler-Plymouth and a joint account with his wife.

   
   

10. Schmidt exercised no control of the Suncoast account, but rather allowed his associate, Gloria Fallon to initially monitor the transactions in that account. Afterwards, Schmidt started overseeing the trading activities in the Suncoast account. Schmidt had no knowledge of any unauthorized transactions in the Suncoast account after he began monitoring it. Gloria Fallon did not testify at the proceeding.

    
    

11. In connection with the maintenance of his joint account at Smith Barney, Schmidt executed a "Securities Account Agreement." During the time Schmidt maintained his account at Smith Barney, the Securities Account Agreement was utilized by Smith Barney as a margin contract.

    
    

12. The Securities Account Agreement qualifies as a margin account agreement/margin contract as to form, and is consistent with industry standards, custom and usage. Although Florida Statutes proscribes certain procedures relative to margin agreements, neither the Florida Securities Act nor the rules promulgated thereunder require a broker/dealer to characterize a margin contract as a "margin agreement." The gravamen of Schmidt's complaint against Petitioner was that certain shares of stock were not liquidated from the joint account maintained by him in contravention of his directions to Petitioner. There was no proof submitted to support any conclusion that Petitioner failed to place an order for the liquidation of such securities for Schmidt's account. Likewise, there was no evidence of any unauthorized trading in the Schmidt's joint account.

    
    

13. While Petitioner was assigned as account executive to the Schmidts joint account, a profit of approximately $10,000.00 was generated for that account in 1988 and in 1989, a net gain of approximately $15,000.00 was generated. Schmidt conceded at hearing that Petitioner probably did a better job handling his account than his prior broker, Steve Ellis.

    
    

14. During the year 1988, Smith Barney generated and sent to Schmidt, monthly statements and confirmation statements regarding every transaction in his joint account. The monthly statements sent to Schmidt for the joint account contained entries regarding margin interest being charged to the account.

    
    

15. For the year 1989, Smith Barney also generated and sent to Schmidt, monthly statements and confirms regarding every transaction in his joint account. The 1989 monthly statements sent to Schmidt also showed margin interest.

    
    

16. For the years 1988 and 1989, Schmidt deducted from his individual tax returns, the margin interest charged to his account. Also, during 1988 and 1989, Schmidt did not complain to Petitioner or Smith Barney that the use of margin account was unauthorized.

17. During his tenure at Smith Barney, Petitioner was the account executive assigned to the account of Michael Russo (Russo). Petitioner was assigned to the Russo account in approximately May of 1990, an account which was formerly serviced by an account executive whose last name is Dudenhaver.

    
    

18. Michael Russo matriculated at City College of New York where he received a Bachelor of Business Administration degree and was a certified public accountant for approximately 30 years. Russo has been in the accounting business for approximately 40 years and during this time period, he operated his own accounting practice. Russo maintained three (3) accounts at Smith Barney which included an account with his wife, an individual account and an IRA account.

    
    

19. Russo opened his first brokerage account in the early 1980s with Merrill Lynch, Pierce, Fenner & Smith. Russo has a history is investing in real estate and by mid 1990, he had accumulated a net worth of approximately

    $750,000.00.

    
    

20. On or about July 13, 1990, Russo presented Petitioner a check in the amount of $26,000.00 which was to be deposited into Russo's accounts. The

    $26,000.00 check was deposited by Petitioner into Russo's accounts but were returned for non-sufficient funds (NSF). Russo then replaced the NSF check with a $22,000.00 check. The funds derived from the $26,000.00 of Russo originated from an interest-bearing money market account from the Fidelity- Spartan Mutual Funds Family.

    
    

21. During the period July 13-20, 1990, Russo was on vacation and was away from his home visiting relatives in the Melbourne, Florida area. During that week, Russo spoke by telephone with Petitioner regarding his account on more than one occasion. Russo specifically recalls speaking with Petitioner on July 15, 1990, regarding his account. During that week, Russo spoke with Respondent about selling certain shares of stock in his account and his specific recall is that one of those conversations occurred on July 15, 1990. The shares were to be sold "at market."

    
    

22. Russo again spoke with Petitioner on July 21, 1990, regarding transactions in his account. On July 24, 1990, Russo told Larry Youhn, the branch manager at Smith Barney, that he was very happy with Petitioner as his broker.

    
    

23. The July 1990 month-end statement for the Russo account indicate that funds were deposited into the Russo accounts in an amount sufficient to satisfy security purchases made in his account during July 1990. Although these transactions appear at month-end in a type-2 margin account, a review of such statements indicate that the transactions initially occurred in a cash account and were mistakenly journaled to the margin account by Smith Barney as a result of an NSF check presented by Russo as payment for the purchase transactions.

    
    

24. The individual account of Russo reflects the purchase of 500 shares of Wiley Laboratories on July 16, 1990, for $7,702.00. On that same day,

    $10,500.00 from the $26,000.00 NSF check was received into the account. The July 1990 monthly statement for Russo's individual account reflected that there would have been a $2,800.00 net credit in the account if Russo had not presented the NSF check.

25. During his tenure at Smith Barney, Petitioner also served as the registered representative for an account maintained by Nicholas and Dorothy Juranko (Juranko). The Jurankos have a substantial history of business experience, having currently owned a service station in the Ohio area and Mrs. Juranko currently owns her own drapery shop and manages eight (8) apartment/rental units that they jointly own.

    
    

26. The Jurankos opened their first securities brokerage account in approximately 1962. They have held accounts at several brokerage firms including Merrill Lynch, Blinder-Robinson and First Jersey Securities prior to opening their account at Smith Barney.

    
    

27. At Blinder-Robinson, the Jurankos engaged in the purchase of several "Penny" stocks and fully realized that they were speculating. The Blinder- Robinson account was opened by the Jurankos so that Mr. Juranko would "have something to do."

    
    

28. The Jurankos maintained a securities brokerage account at First Jersey Securities prior to Petitioner's employment with First Jersey. Petitioner was assigned as account executive for the Juranko account at First Jersey in approximately 1985.

    
    

29. When the Jurankos opened their account at Smith Barney, their net worth was approximately $220,250.00.

    
    

30. Although Mrs. Juranko maintains that unauthorized trades occurred in her account during the month of December 1987, when asked to identify which trade which unauthorized, she could not do so. This was so, despite an effort to refresh her recollection by presenting her the December 1987 monthly account statement which depicted all securities holdings and transactions generated in their account.

    
    

31. Mrs. Juranko also alleged that she was losing money and did not want to deposit any additional funds into her account. However, Mrs. Juranko wanted to have profits generated from the funds that were then existing into her account as of year-end December, 1987.

    
    

32. Respecting the December 1987 trades, the Jurankos received confirms for every transaction that occurred during the month. Through December 1987, while Petitioner was assigned to manage the Juranko account, the account generated a net profit.

    
    

33. Also, continuing through January 1988, Petitioner had effected trades which produced a net profit for the Juranko account. As testified by Mrs. Juranko, "All I could see...greed, all I could see was $14,200.00 some dollars and $9,900.00 some dollars, and I thought, wow... I thought "wow", he's making me money." Although Mrs. Juranko complained that she was losing money, an analysis of the account revealed that during the two years that Petitioner was assigned her account, it made a net profit. Notwithstanding the documentary evidence to the contrary, Mrs. Juranko admitted that she was upset and complained to Smith Barney's compliance officer, a Mr. Singer, because of her unfounded belief that she had lost money.

    
    

34. Mrs. Juranko identified anger as the basis for her inability to understand a letter which was sent by Larry Youhn, Smith Barney's branch manager, which show the activity that had been generated into her account. Notwithstanding the clear language of that letter, Mrs. Juranko maintained that

    she did not understand it. This is so, despite the fact that Mrs. Juranko did not telephone Smith Barney to complain because she "didn't want to get [Petitioner] in trouble." 1/

    
    

35. The use of margin in the Jurankos account was discussed because Mrs. Juranko believed the account was losing money; she wanted to do whatever was necessary over a period of time to make up for the losses and she refused to deposit additional funds into the account to generate profits in trading the account.

    
    

36. In connection with the maintenance of the Juranko account at Smith Barney, Petitioner instructed his sales assistant to send a margin agreement to Mr. and Mrs. Juranko for execution. The use of margin was discussed with the Jurankos in approximately November 1987. Petitioner relied upon the Smith Barney infrastructure to maintain the necessary paperwork for margin accounts, including the Jurankos. This is a customary practice in the securities industry and is utilized by most large brokerage houses.

    
    

37. Juranko first complained to Petitioner about the use of margin in January 1988, when she received her monthly account statement which contained an entry for margin interest. Mrs. Juranko explained that she thought the margin charges were too much and that she wanted to reduce the margin charges by liquidating securities from the account. Mrs. Juranko thereafter became uncooperative and it became difficult for Petitioner to transact business in the account consistent with Mrs. Juranko's desired objectives. As a result, in March 1988, Petitioner determined that the only thing he could do for the account was to liquidate positions at or near break-even points. Thereafter, Petitioner never made any other purchase recommendations to the Jurankos.

    
    

38. Petitioner also serviced the account of Mark D. Madison while employed at Smith Barney. Madison is a marketing, advertising and management consultant who owns his own business. Madison maintained two (2) accounts at Smith Barney's St. Petersburg branch office, including an individual account and an account in the name of his mother, Mary Jean Madison. Mark Madison was a fiduciary for and conducted all transactions in his mother's account.

    
    

39. Prior to Petitioner's assignment as broker to Madison's fiduciary account, it was assigned to broker Steve Ellis. The fiduciary account was maintained as a margin account since its opening in 1984.

    
    

40. Commencing on February 13, 1986, broker Ellis and Madison executed several margin transactions in the fiduciary account. Through the period ending October 31, 1987, roughly 95% of the transactions in the fiduciary account were executed on margin.

    
    

41. As of year-end 1987, the Madison fiduciary account and Mark Madison's personal account historically traded over-the-counter securities. During this period while Ellis was the broker, margin transactions were executed in both Madison accounts.

    
    

42. During this period, broker Ellis actively traded both accounts and generated both profits and losses in the accounts. Mark Madison was familiar with the active trading in both accounts as well as the profit/loss picture.

    
    

43. Madison estimated losses in the fiduciary account to be over

    $20,000.00 while the account was handled by Ellis. These losses all occurred

    while he was the fiduciary on the account and was in charge of approving trading in the account.

    
    

44. When the fiduciary account was transferred from Ellis to Petitioner, Madison expressed his concern about the losses that his mother's fiduciary account had sustained as well as his responsibility for such losses.

    
    

45. During his initial conversations with Petitioner, Madison explained his mother's displeasure at the approximately $30,000.00 in losses that had been generated while Ellis was assigned as broker. Madison also explained to Petitioner that his brother had made references to conversations with his mother about suing him as the fiduciary because of the losses generated.

    
    

46. During the time that the fiduciary account was handled by Ellis, there were differences in the execution prices of transactions in the same securities which occurred in both the fiduciary account and his (Mark Madison's) personal account. When Petitioner was assigned the account, it became apparent to him that Madison consistently obtained higher prices on liquidating transactions than his mother was obtaining in the fiduciary account for the same securities.

    
    

47. Petitioner was concerned with the type of trading in which Madison wanted to engage in for the fiduciary account and brought this trading strategy to the attention of branch manager, Youhn, who explained to Petitioner that it was the fiduciary who had ultimate responsibility for trading the account.

    
    

48. In addition to discussing the trading strategy with Youhn, a review of the account history was conducted by Petitioner. Petitioner's review revealed that the account had lost approximately 40% in equity during the time it was handled by account executive Ellis and Mark Madison as fiduciary.

    
    

49. As a result of the losses generated, Madison expressed his desire to Petitioner to recoup losses in the account by taking advantage of 2-3 point swings in certain over-the-counter securities.

    
    

50. During the months of January through March 1988, Madison, despite his allegations to the contrary, authorized the purchase of a specified number of shares of certain securities and later maintained that certain additional shares of those securities were purchased without his authorization. Throughout this period, Madison maintained continuous telephone conversations with Petitioner regarding such securities. Throughout the period, Madison did not instruct Petitioner to cancel the trades, but rather instructed him that he wanted out of those positions as near as possible to "break even."

    
    

51. The Department conducted an investigation of the allegations made by Petitioner's former clients in connection with the denial of his registrations as an associated person an investment advisor. In connection with the investigation, the Department, through its investigative employee, Carol Irizarry (Irizarry), spoke with individuals who had submitted written complaints against Petitioner. In furtherance of her investigation, Irizarry visited the office of William Lyman, Esquire, who represented several of the former customer/complainants, and reviewed the information that Lyman had relative to such complaints. Ms. Irizarry did not testify during the formal hearing herein.

    
    

52. Dennis Farrar (Farrar), area financial manager, Division of Securities, Department of Banking and Finance, supervised the writing of the report completed by Irizarry. Farrar's first direct contact with the

    investors/complainants in this case occurred approximately one (1) week prior to the commencement of the hearing herein.

    
    

53. Following Ellis' separation from employment with Smith Barney, several Smith Barney brokers and clients of Petitioner advised him that broker Ellis was out to get him and urged them to file complaints against Petitioner. Specifically, Petitioner received a telephone call from Gloria Fallon, an associate of Wayne Schmidt, who warned Petitioner that Ellis was "trying to stir up trouble for him."

    
    

54. In connection with the initial customer complaint received by the Department, a request for information responsive to the complaint was sent to Smith Barney. Among the documents received by the Department was a securities account agreement which contained language normally contained in a margin contract.

    
    

55. The securities account agreement is the document utilized by Smith Barney as its margin contract at all time material hereto.

    
    

56. A Form U-4, Uniform Application for Securities Industry Registration for Transfer, is a document generated by the National Association of Securities Dealers (NASD) and the North American Securities Administrators Association (NASAA). The Form U-5, Uniform Termination Notice, also is generated by the above entities.

    
    

57. The disclosure section of a Form U-4 requires an applicant to respond to the best of his ability. An intentional falsification of information on a Form U-4 will give rise to a violation of Section 517.161, Florida Statutes. It is customary in the securities industry for a registered representative to rely upon his current broker/dealer employer to determine which complaints, if any, are disclosable on the Form U-4.

    
    

58. It is customary in the industry for a representative to rely on the Form U-5, termination notice for completion of his U-4 and usually the information on both forms track each other. Also, the prospective applicant filling out his U-4 usually consults with the firm that he separated from to ensure that both Forms U-4 and U-5 are consistent.

    
    

59. Petitioner's completion of the Form U-4 on August 30, 1990 in connection with his employment at Brauer & Associates contained a disclosure of customer complaints consistent with the disclosures made by Smith Barney on its amended Form U-5 Termination Notice dated August 17, 1990. Petitioner's reliance on the information contained in his files and that provided by his employers was reasonable and there was no evidence that Petitioner intentionally falsified his Form U-4 application.

    
    

    CONCLUSIONS OF LAW

    
    

60. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this action pursuant to Section 120.57(1), Florida Statutes.

    
    

61. The parties were duly noticed pursuant to Chapter 120, Florida Statutes.

    
    

62. The authority of the Respondent is derived from Chapter 517, Florida Statutes and rules and regulations promulgated thereunder.

63. Respondent failed to established that Petitioner engaged in unauthorized trades, traded on margin in customer accounts without first obtaining from the customer the signed margin agreement(s) and submitted an application for registration which contained material misstatements. Specifically, with the exception of one erroneous recordation transaction in the Russo accounts, all order tickets completed regarding transactions in the Russo accounts were entered on a cash account basis. The single erroneous journal entry was prompted by Russo tendering a nonsufficient funds check for certain security purchases which in turn caused his employer, Smith Barney, to handle the transaction as a margin account transaction on its books.

    
    

64. The Jurankos and Schmidts failed to identify one transaction which was unauthorized and Petitioner's handling of the Juranko and Schmidt accounts were in substantial compliance with the standards enunciated in Chapter 517, Florida Statutes. Also, a review of the trading activity in the Madison fiduciary account indicates that Petitioner's handling of that account was consistent with transactions executed prior to Petitioner's assignment as account executive. Because Madison did not order cancellation of the alleged unauthorized transactions in the fiduciary account, waiting instead to see how the securities would perform is suspect and does not provide sufficient basis to conclude that such transactions were, in fact, unauthorized.

    
    

65. Insufficient evidence was offered to establish that Petitioner violated Section 517.161(1)(b), Florida Statutes, in connection with his completion of the Form U-4, dated August 30, 1990. There was insufficient proof upon which it can be concluded that, of the customer complaints omitted, such complaints were intentionally omitted from the Form U-4 or that Petitioner otherwise falsified his application for registration.

    
    

66. Petitioner presented prima facie evidence of worthiness to transact the business of an associated person and an investment adviser.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that Respondent enter a Final Order granting Petitioner's application for registrations as an associated person or broker/dealer of Brauer & Associates, Inc. and investment adviser to G.G. Brauer, Inc.

RECOMMENDED this 13TH day of August, 1991, in Tallahassee, Leon County, Florida.

JAMES E. BRADWELL

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 13th day of August, 1991.

ENDNOTES

1/ Based on Mrs. Juranko's inconsistent testimony, it is not believed to the extent that it is contradictory to Petitioner's testimony.

COPIES FURNISHED:

John R. Kiefner, Jr., Esquire and Clifford J. Hunt, Esquire RIDEN EARLE & KIEFNER, P.A.

Fourth Floor - North Tower

100 Second Avenue South

St. Petersburg, Florida 33702

Margaret S. Karniewicz, Esquire and H. Richard Bisbee, Esquire Department of Banking & Finance Suite 1302 - The Capitol Tallahassee, Florida 32399

Honorable Gerald Lewis Comptroller of Florida The Capitol, Plaza Level

Tallahassee, Florida 32399-0350

William G. Reeves, Esquire General Counsel

Office of Comptroller The Capitol, Suite 1302

Tallahassee, Florida 32399-0350

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS:

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

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

AGENCY FINAL ORDER

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

STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE

DIVISION OF SECURITIES AND INVESTOR PROTECTION

LEO GOVONI, DBF #1450-5-1/91

DOAH CASE NO. 91-1406

Petitioner,

vs.

DEPARTMENT OF BANKING AND FINANCE,

Respondent.

/

FINAL ORDER

This matter has come before the undersigned as head of the Department of Banking and Finance, ("Department"), for the entry of a Final Order in this proceeding. On August 13, 1991, a hearing officer from the Division of Administrative Hearings submitted his Recommended Order in this proceeding, a copy of which is attached hereto. On July 5, 1991, the Department filed its exceptions to the Recommended Order, a copy of which is attached hereto.

This matter arose when the Department advised the Petitioner, Leo J. Govoni, ("Govoni"), that his application for registration as an associated person of Brauer and Associates, Inc., and as an investment adviser with

1. Brauer, Inc. was being denied pursuant to Sections 517.161(1) (a), (b); and (h), Florida Statutes, based upon the Department's determination that Govoni had violated the Florida Securities and Investor Protection Act, Chapter 517, Florida Statutes; that his application had contained material misstatements; and that he had demonstrated prima facie evidence of unworthiness to transact the business of an associated person.

   
   

   Govoni timely filed a Petition for Formal Hearing and on February 28, 1991, the matter was referred to the Division of Administrative Hearings for the assignment of a hearing officer to conduct a formal hearing. The hearing was held on May 28, 29, and 30, 1991.

   
   

   The hearing officer recommended that the Department enter a final order granting Govoni's application for registration as an associated person or broker/dealer of Brauer and Associates, Inc., and investment adviser to G.G. Brauer, Inc.

   RULINGS ON EXCEPTIONS FILED BY THE DEPARTMENT

   
   

   The Department has filed forty-five exceptions to the Recommended Order of the hearing officer. The exceptions are ruled upon below in paragraphs which correspond to the numbered exceptions filed by the Department.

   
   

   1. The Department made an exception to the second and third sentences of Finding of Fact No.9 on the grounds that the name of the broker who handled Mr. Schmidt's accounts prior to Govoni was irrelevant to the issue presented in the hearing. This exception is well taken and therefore the Department rejects the findings made by the hearing officer as to the individual who handled Mr. Schmidt's accounts prior to Mr. Govoni as being irrelevant.

      
      

   2. The Department made an exception to the second sentence of Finding of Fact No.11 on the grounds that there was no competent, substantial evidence in the record to support the finding of the hearing officer. The exception is rejected. Although the Department may disagree with the findings of fact determined by the hearing officer, under Heifitz v. Department of Business Regulation. 475 So.2d 1277 (Fla. 1st DCA 1985), the Department cannot alter the hearing officer's finding of fact. Therefore, this exception is rejected.

      
      

   3. The Department made exception to the first and second sentences in Findings of Fact No.12 on the grounds that it was not supported by competent, substantial evidence. In that finding of fact, the hearing officer found that the Securities Account Agreement qualified as a Margin Account Agreement/Margin Contract as to form, and was consistent with industry standards, custom and usage. Additionally, he found neither the Florida Securities Act nor the Rules promulgated thereunder required a broker/dealer to characterize a margin contract as a "margin agreement." This exception is rejected. Although the Department may disagree with the finding of fact of the hearing officer, under Heifitz, supra, the Department is not at

      liberty to alter the hearing officer's finding of fact.

      
      

   4. The Department made an exception to the third and fourth sentences of Finding of Fact No.12 on the grounds that it was not supported by competent, substantial evidence. This exception is rejected. Although the Department may disagree with the Findings of Fact of the hearing officer, under Heifitz, supra, the Department is not at liberty to alter the hearing officer's findings of fact. 5. The Department made an exception to the last sentence in Finding of Fact No.12 on the grounds that it was not supported by competent, substantial evidence. Again, counsel for the Department has disagreed with the findings of fact of the hearing officer. While the Department may disagree with the findings of fact of the hearing officer, under Heifitz, supra, the Department is not at liberty to alter the hearing officer's findings of fact. Therefore this exception is rejected.

1. The Department made an exception to Finding of Fact No.13 on the grounds that the prior trading history of Mr. Schmidt and any profits or losses generated in his account were irrelevant to the issues presented at the proceeding. Additionally, whether the unauthorized trade resulted in a profit or loss to the customer was irrelevant. Also the Department made an exception to the hearing officer's finding that the Petitioner, Govoni, did a better job of handling Schmidt's account than his prior broker on the grounds that it was irrelevant. This exception is well taken and therefore these findings of fact by the hearing officer are rejected as being irrelevant to the question of whether or not Govoni made unauthorized trades.

2. The Department made an exception to the first sentence of Finding of Fact No.l6 on the grounds that the deduction of margin interest charged to the client's account is not relevant to the issues presented in the proceeding. There were two separate issues to be decided. First, whether or not Govoni was trading on Mr. Schmidt's account on margin without a signed margin agreement on file as required by Rule 3E-600.013(1)(g), F.A.C. As to this issue, the Department is correct in that the finding of fact contained in the first sentence of No.16 is not relevant to the issues presented in the proceeding. But, there was an additional question presented and that was whether or not the use of the margin account was unauthorized. The hearing officer's finding that Schmidt deducted from his individual tax returns the margin interest charged to his account is relevant to this question. Therefore, this exception is rejected.

   
   

3. The Department has filed an exception to the second sentence of Finding of Fact No.l6 on the grounds that it failed to address the evidence presented regarding the fact that while Mr. Schmidt did not complain to Smith Barney about the margin interest being charged to his account, he did complain about the unauthorized trades Petitioner effected in his account. This exception is rejected under the provision of Heifitz, supra, in that the Department is not at liberty to alter the hearing officer's findings of fact.

   
   

4. The Department made an exception to the second sentence of Finding of Fact No.17 with respect to the name of Mr. Russo's previous brokers on the grounds that it is irrelevant to the issues presented in the proceeding. This exception is well taken and therefore the finding of fact contained in the second sentence of the hearing officer's Finding of Fact No.l7 is rejected.

   
   

5. The Department has made an exception to the Finding of Fact No.19 on the grounds that the prior trading history and net worth of Mr. Russo were irrelevant to the issues presented in the proceeding. That exception is well taken and therefore the hearing officer's Finding of Fact No.19 is rejected.

   
   

6. The Department made an exception to Finding of Fact No.21 on the grounds that the hearing officer ignored competent, substantial evidence provided by the Department and did not address the issue of unauthorized trading which took place in Mr. Russo's account. While the hearing officer did not specifically find that no unauthorized trades had taken place in Mr. Russo's account, the hearing officer did indirectly reject the testimony of Mr. Russo. The finding of fact in the hearing officer's Recommended Order (No.22) was that Russo told Larry Youhn, the Branch Manager at Smith Barney, that he was very happy with Govoni as his broker. Therefore, it is clear that the hearing officer did reject the testimony of Russo as to unauthorized trading.

   Therefore, this exception filed by the Department is rejected. Under Heifitz, supra, the Department is not at liberty to alter the hearing officer's findings of fact.

   
   

7. The Department made an exception to Finding of Fact No.22 on the grounds that the hearing officer ignored competent, substantial evidence presented by the Department and failed to address the issue of the unauthorized trading which took place in Mr. Russo's account. Again, under Heifitz, supra, the Department is not at liberty to alter the hearing officer's findings of fact even though the Department may disagree with those findings of fact. Therefore, this exception is rejected.

   
   

8. The Department made an exception to the second sentence of Finding of Fact No.23 on the grounds that there was no competent, substantial evidence in

   the record to support the hearing officer's finding. The Department acknowledged that there was some evidence, although it characterized the evidence as "self-serving testimony" of Govoni. The Department, under Heifitz, supra, is not at liberty to. alter the hearing officer's findings of fact, if that finding of fact is based upon what the hearing officer decides is substantial, competent evidence. Therefore, even though the Department may disagree with the hearing officer, the Department cannot substitute its own findings of fact for that of the hearing officer. This exception is therefore rejected.

   
   

9. The Department made an exception to Finding of Fact No.24 on the grounds that it was not supported by competent, substantial evidence. Again the Department has disagreed with the findings of fact of the hearing officer.

   Under Heifitz, supra, the Department is not at liberty to alter the hearing officer's findings of fact. This exception is therefore rejected.

   
   

10. The Department made an exception to the second sentence of Finding of Fact No.25 on the grounds that it was irrelevant to the issues presented in the proceeding. Spe ifically, the hearing officer found that the Jurankos had a substantial history of business experience, having currently owned a service station in the Ohio area and that Mrs. Juranko currently

    owned her own drapery shop and managed eight apartment/rental units that were jointly owned by the Jurankos. This exceptio;n is well taken and therefore that finding of fact by the hearing officer is rejected.

    
    

11. The Department made an exception to Finding of Fact No.26 on the grounds that it was irrelevant to the issues presented to the proceeding. That finding of fact by the hearing officer outlined the previous investment history of the Jurankos. This exception is well taken because that information is not relevant to the issues in this administrative proceeding. Therefore, that finding of fact by the hearing officer is rejected.

    
    

12. The Department made an exception to Finding of Fact No.27 on the grounds that it was irrelevant to the issues presented in the proceeding. In that finding of fact, the hearing officer outlined the Jurankos' trading history at Blinder/Robinson, a penny stock broker. This exception is well taken in that the information contained in that finding of fact is not relevant to the issues in this administrative proceeding. Therefore, that finding of fact by the hearing officer is rejected.

    
    

13. The Department made an exception to Finding of Fact No.28 on the grounds that it is irrelevant to the issues presented in the proceeding. In that finding of fact, the hearing officer discussed the prior securities investing experience of the Jurankos at First Jersey Securities, another securities broker/dealer. This exception is well taken in that the information is irrelevant to this proceeding. Therefore, Finding of Fact No.28 by the hearing officer is rejected.

    
    

14. The Department made an exception to Finding of Fact No.29 on the grounds that it was irrelevant to the issues presented in the proceeding. In that finding of fact, the hearing officer found that the net worth of the Jurankos,at the time they opened their account at Smith Barney, was approximately $220,250.00. This exception is well taken in that the information is not relevant to this proceeding. Therefore, Finding of Fact No.29 by-the hearing officer is rejected.

15. The Department made an exception to Finding of Fact No. 30 on the grounds that it was not supported by competent, substantial evidence. Again, this is an area in which the Department has disagreed with the findings of fact by the hearing officer. Under the provisions of Heifitz, supra, the Department is not at liberty to alter the hearing officer's findings of fact. Therefore, this exception is rejected.

    
    

16. The Department made an exception to the second sentence of Finding of Fact No.32 on the grounds that it was irrelevant to the issues presented in the proceeding. That finding of fact was that while the Petitioner, Govoni, was assigned to manage the Juranko account, that account generated a net profit. This exception is well taken in that that finding of fact is not relevant to the issues presented in the administrative

    proceeding. Therefore, that finding of fact by the hearing officer is rejected.

    
    

17. The Department made an exception to Finding of Fact No.33 in that it was irrelevant to the issues presented in the proceeding. This finding of fact was that although Mrs. Juranko complained that she was losing money, an analysis of the account revealed that while the Petitioner was assigned her account, it made a net profit. In that the hearing officer later found that Mrs. Juranko's testimony was inconsistent and therefore he was rejecting part of that testimony, this information in Finding of Fact No.33 is important to

    the issue of which witness to believe. Therefore, this exception by the Department is rejected.

    
    

18. The Departmeht made an exception to Finding of Fact No. 35 on the grounds that it was not supported by competent, substantial evidence and that it ignored competent, substantial evidence presented by the Department. In that finding of fact, the hearing officer found that the use of margin in the Jurankos' account was discussed with the Jurankos by Govoni. This finding of fact must be taken in conjunction with Finding of Fact No.36 where the hearing officer found that a Margin Agreement was sent to Mr. & Mrs. Juranko for their signature. The hearing officer went on to find that the Petitioner Govoni was not responsible for getting a signed Margin Agreement from the Jurankos because he relied on the company to do so, which the hearing officer found was a customary practice in the securities industry and utilized by most brokerage houses. While the Department may disagree with this finding of fact by the hearing officer, under Heif itz, supra, the Department is not at liberty to alter the hearing officer's findings of fact. Therefore, this exception by the Department is rejected.

    
    

19. The Department made an exception to Finding of Fact No.36 on the grounds that it was not supported by competent, substantial evidence and that it ignored competent, substantial evidence presented by the Department. For the reasons presented above in paragraph 23, this exception is rejected.

    
    

20. The Department made an exception to the first sentence of Finding of Fact No.39 on the grounds that it was irrelevant to the issues presented in the proceeding. In that finding of fact, the hearing officer found that prior to the Petitioner's assignment as a broker to the Madisons' Fiduciary Account, it was assigned to Broker Steve Ellis. The Department is correct in that this finding of fact is irrelevant to the issues presented in this case and therefore, that finding of fact by the hearing officer is rejected.

    
    

21. The Department made an exception to the second sentence of Finding of Fact No.39 on the grounds that it was not supported by competent, substantial evidence. Again, this is an instance where the Department has disagreed with

    the finding of fact of the hearing officer. Under the provisions of Heifitz, supra, the Department cannot alter the hearing officer's findings of fact. Therefore, this exception by the Department is rejected.

    
    

22. The Department made an exception to the Finding of Fact No.40 on the grounds that it was irrelevant to the issues presented in the proceeding. In that finding of fact, the hearing officer found that prior to October 31, 1987, roughly 95% of the transactions in the Madison Fiduciary Account were executed on margin. That finding of fact was necessary by the hearing officer in that it contradicts testimony of Madison, and shows a reason for the hearing officer to reject testimony of Madison. Again, while the Department may disagree with the findings of fact of the hearing officer, under the provision of Heif itz. supra, the Department is not at liberty to alter the hearing- officer's findings of fact. Therefore, this exception filed by the Department is rejected.

    
    

23. The Department made an exception to Finding of Fact No.41 on the grounds that it was irrelevant to the issues presented in the proceeding and was not supported by competent, substantial evidence. In this finding of fact, the hearing officer found that while under the control of another broker, prior to Govoni taking over the account, margin transactions were executed in both Madison accounts. This evidence goes to show that margin trading

    was authorized in the account and therefore is relevant to this proceeding. Therefore, the Department's exception is rejected.

    
    

24. The Department made an exception to Finding of Fact No. 42 on the grounds that it was irrelevant to the issues presented in the proceeding. The hearing offiicer found that during a period prior to the time Govoni handled the account, that another broker actively traded in both accounts and generated both profits and losses in the accounts. The Department's exception in this matter is well taken. The information found by the hearing officer to be true is irrelevant to the issue in this proceeding. Therefore the hearing officer's Finding of Fact No.42 is rejected.

    
    

25. The Department made an exception to Finding of Fact No.43 on the grounds that it was irrelevant to the issues presented in this proceeding. In that finding of fact, the hearing officer found that losses in the Madison Fiduciary Account were over $20,000.00 while handled by another broker. The Department's exception is well taken in that this finding of fact is not material to the issues presented in the case. Therefore, this finding of fact by the hearing officer is rejected.

    
    

26. The Department made an exception to the second sentence of Finding of Fact No.45 on the grounds that it was not supported by competent, substantial evidence. This is again an instance where the Department disagrees with the hearing officer's findings of fact. Although the Department may disagree, under Heifitz. supra, the Department is not at liberty to alter the hearing officer's findings of fact. The hearing officer did have some testimony, which is acknowledged by the Department, on which to base his decision. Therefore, this exception filed by the Department is rejected.

    
    

27. The Department made an exception to Finding of Fact No.46 on the grounds that it was irrelevant to the issues presented in the proceeding. There, the hearing officer found that during the time the Madison Fiduciary Account was handled by another broker, there were differences in the execution prices of transactions in the same securities which occurred in both the fiduciary account and Madison's personal account. Additionally, he found that Madison

    consistently obtained higher prices on liquidating transactions than his mother's fiduciary account was obtaining in the same securities. The Department's exception here is well taken in that this finding of fact is not relevant to the case. Therefore, the hearing officer's Finding of Fact No.46 is rejected.

    
    

28. The Department made an exception to Finding of Fact No.47 on the grounds that it was irrelevant to the issues presented in the proceeding and was not supported by competent, substantial evidence. There, the hearing officer found that Govoni was concerned with the type of trading in which Madison wanted to engage in for the fiduciary account and that he brought the trading strategy to the attention of the branch manager, who explained to the Petitioner, Govoni, that it was the fiduciary (Madison) who had the ultimate responsibility for trading the account. The Department acknowledges in its exception that this finding of fact was based upon some testimony at the hearing, although the Department describes it as self-serving and hearsay testimony. Again, under the provisions of Heifitz, supra, the Department is

    not at liberty to alter the hearing officer's finding of fact. Additionally, because the testimony has some bearing on the credibility of witnesses and which witness the hearing officer believed, the finding of fact is relevant. Therefore, this exception by the Department is rejected.

    
    

29. The Departmeht made an exception to Finding of Fact No.48 on the grounds that it was irrelevant to the issues presented in the proceeding. In that finding of fact, the hearing officer found that in addition to discussing the trading strategy with the branch manager, a review of the fiduciary account history was conducted by Govoni. His review revealed that the account had lost approximately 40% in equity during the time it was handled by a prior account executive. This information is not relevant to the case and is not necessary to reach a determination in this case. Therefore, the hearing officer's Finding of Fact No.48 is rejected as being irrelevant.

    
    

30. The Department made an exception to Finding of Fact No.50 on the grounds that it was not supported by competent, substantial evidence. Here, the hearing officer considered the conflicting testimony of Madison and Govoni and found that Govoni's testimony was true. The hearing officer rejected the testimony of Madison as being untrue. Here, although the Department may disagree with the findings of fact of the hearing officer, under Heifitz, supra, the Department is not at liberty to alter the hearing off icer's finding of fact. . Therefore, this exception filed by the Department is rejected.

    
    

31. The Department made an exception to the third sentence of Finding of Fact No.51 on the grounds that it was irrelevant to the issues presented in the proceeding. In that finding of fact, the hearing officer found that the Department's examiner visited the office of William Lyman, an attorney who represented several of the customers/complainants, and reviewed the information that Lyman had relevant to such complaints. The Department is correct in that this information is irrelevant to the issues presented in thee proceeding. Therefore, the hearing officer's finding of fact on this issue is rejected.

    
    

32. The Department made an exception to the second sentence of Finding of Fact No.52 on the grounds that it was irrelevant to the issues presented in the proceeding. There, the hearing officer found that the

    Department's Area Financial Manager of the Division of Securities made his first direct contact with the investors/complainants in the case approximately one week prior to the commencement of the administrative hearing. The Department is correct in that this information is irrelevant to the issues presented in the

    proceeding. Therefore, the hearing officer's finding of fact on this issue is rejected.

    
    

33. The Department made an exception to Finding of Fact No.53 on the grounds that it was irrelevant to the issues presented in the proceeding and was not supported by competent, substantial evidence. There, the hearing officer found that several Smith Barney brokers and clients of Govoni had advised him that another broker was out to get him and urged them to file complaints against the Petitioner. That finding of fact was based upon Govoni's testimony at the hearing and provides at least an explanation as to why various individuals filed complaints against Govoni. Although the Department may disagree with this finding of fact, under Heifitz. supra, the Department is not at liberty to alter the hearing officer's finding of fact. That finding of fact is relevant in that it explains the possible motivation of investors/complainants. Therefore, this exception by the Department is rejected.

    
    

34. The Department made an exception to the second sentence of Finding of Fact No.54 on the grounds that it was not supported by competent, substantial evidence. In that finding of fact, the hearing officer found that the Securities Account Agreement received by the Department and used by Smith Barney contained language normally contained in a margin contract. The Department, in its exception, acknowledges that this finding was based upon the testimony of Ms. Hippner. Although the Department may disagree with the finding of fact of the hearing officer, under the provisions of Heifitz, supra, the Department is not at liberty to alter the hearing officer's findings of fact. Therefore, the exception filed by the Department is rejected.

    
    

35. The Department made exception to Finding of Fact No. 55 on the grounds it is not supported by competent, substantial evidence. Here, the hearing officer found that the Securities Account Agreement was a document utilized by Smith Barney as its margin contract at all times material. Again, the Department has disagreed with the findings of fact of the hearing officer, but under Heifitz, supra, the Department is not at liberty to alter the hearing officer's findings of fact. Therefore, this exception is rejected.

    
    

36. The Department made an exception to Finding of Fact No.59 on the grounds that it was not supported by competent, substantial evidence. In this exception, the Department outlined substantial evidence that was either ignored or rejected by the hearing officer which supports a contrary finding of fact. But, under Heifitz, supra, the Department is not allowed to substitute its findings of fact for that of the hearing officer. Therefore, this exception is rejected.

    
    

37. The Department made an exception to Conclusion of Law No.4 on the grounds that it was not supported by competent, substantial evidence, and is a misinterpretation and misapplication of Chapter 517, Florida Statutes, and the Rules promulgated thereunder. There, the hearing officer found that the Department had failed to establish that Govoni,had engaged in unauthorized trades, traded on margin in customer accounts without first obtaining from the customer the signed Margin Agreements, and submitted the application for registration which contained material misstatements. The hearing officer in that paragraph goes on to state reasons for this conclusion. This conclusion of law is based on the prior findings of fact in the Recommended Order of the hearing officer. As outlined above, the Department has disagreed throughout with the findings of fact of the hearing officer. But, because of Heifitz, supra, the Department is not at liberty to alter the hearing officer's findings

    of fact. Because this conclusion of law is based upon the hearing officer's findings of fact above, the Department's exception to this conclusion of law is rejected.

    
    

38. The Department made an exception to Conclusion of Law No.5 on the grounds that it was not supported by competent, substantial evidence, and was a misinterpretation and misapplication of the provisions of Chapter 517, Florida Statutes, and the Rules promulgated thereunder. In that conclusion of law, the hearing officer found that the Jurankos and Schmidts failed to identify one transaction which was unauthorized, and the Petitioner's handling of the Juranko and Schmidt accounts was in substantial compliance with the standards enunciated in Chapter 517, Florida Statutes. Additionally, he found that a review of the trading activity in the Madison Fiduciary Account indicates that Govoni's handling of that account was consistent with transactions executed prior to the Petitioner's assignment as an account executive. Additionally, he found that because Madison did not order cancellation of the alleged unauthorized transactions in the fiduciary account, waiting instead to see how the securities would perform, is suspect and does not provide sufficient basis to conclude that the transactions were, in fact, unauthorized. Here, the hearing officer has applied the law to his findings of fact. Because the Department has differed with these findings of fact, their legal conclusions would be different. But, because under Heifitz, supra, the Department is not at liberty to alter the hearing officer's findings of fact, it cannot reach a different conclusion of law. Therefore, the Department's exception to this conclusion of law is rejected.

    
    

39. The Department made an exception to Conclusion of Law No.6 on the grounds that it was not supported by competent, substantial evidence, and was a misinterpretation and misapplication of the provisions of Chapter 517, Florida Statutes, and the Rules promulgated thereunder. There, the hearing officer found that there was insufficient evidence offered to establish that Govoni violated Section 517.161(1)(b), Florida, Statutes, in connection with the completion of the Form U-4, dated August 30, 1990. Additionally, he found that there was insufficient proof upon which it can be concluded that, of the customer complaints omitted, such complaints were intentionally omitted from the Form U-4 or that Petitioner otherwise falsified his application for registration. This conclusion of law is based upon the hearing officer's previous findings of fact, which the Department has noted its exceptions. Again, although the Department may disagree with the findings of fact of the hearing officer, under Heifitz, supra, the Department cannot substitute its findings of fact for those of the hearing officer. Therefore, this exception of the Department is rejected.

    
    

40. The Department made an exception to Conclusion of Law No.7 on the grounds that it was not supported by competent, substantial evidence, and was a misinterpretation and misapplication of the provisions of Chapters 120 and 517, Florida Statutes, and the Rules promulgated thereunder. Here, the hearing officer found that Govoni had presented prima facie evidence of worthiness to transact the business of an associated person and an investment adviser. This is another way of saying that the Department failed to present prima facie evidence of unworthiness to transact the business of an associated person or an investment adviser. Therefore, although not perhaps worded correctly, the meaning of the hearing officer in this conclusion of law is obvious. Therefore, this exception filed by the Department is rejected.

CONCLUSION

Having ruled on the exceptions filed by the Department to the Recommended Order, it is hereby ORDERED:

1. Counsel for the Department of Banking and Finance, Division of Securities and Investor Protection was of the opinion that there was ample, substantial and competent evidence presented to substantiate the allegations in the Administrative Complaint. But the hearing officer elected to adopt findings of fact based upon the testimony submitted by the Petitioner Govoni. Under Heifitz v. Department of Business Regulation, 475 So.2d 1277 (Fla. 1st DCA 1985), Forehand v. School Board of Washington County, 481 So.2d 953 (Fla. 1st DCA 1986), and Inverness Convalescent Center v. Department of Health and Rehabilitative Services, 512 So.2d 1011 (Fla. 1st DCA 1987), the Department cannot alter the hearing officer's findings of fact when they are based on competent, substantial evidence. Therefore, the Department adopts the hearing officer's Recommended Order issued August 13, 1991, except where the Department has specifically rejected the findings of fact by the hearing officer above.

   
   

2. The Department of Banking and Finance, Division of Securities and Investor Protection, shall grant the Petitioner Govoni's application for registration as an associated person or broker/dealer of Brauer & Associates, Inc., and an investment adviser to G.G. Brauer, Inc.

DONE AND ORDERED this 27 day of September, 1991 in Tallahassee, Leon County, Florida.

GERALD LEWIS, as Comptroller and Head of the Department of Banking and Finance, Division of Securities and Investor Protection

Copies furnished to:

Don Saxon, Director Division of Securities and

Investor Protection Office of the Comptroller The Capitol

Tallahassee, Florida 32399-0350

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

Tallahassee, Florida 32399-0350

H. Richard Bisbee Deputy General Counsel

Office of the Comptroller The Capitol, Suite 1302

Tallahassee, Florida 32399-0350

James E. Bradwell, Hearing Officer Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

John R. Kiefner, Jr.

Clifford J. Hunt,

Riden, Earle & Kiefner, P.A. 4th Floor, North Tower

100-2nd Avenue South

St. Petersburg, Florida 33702

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DEPARTMENT OF BANKING AND FINANCE AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN THIRTY (30) DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

CERTIFICATE OF SERVICE

I hereby certify that a true copy of the foregoing Final Order has been sent by regular U.S. mail to John R. Kiefner, Jr., Esquire, and Clifford J. Hunt, Esquire, Riden, Earle & Kiefner, P.A., 4th Floor, North Tower, 100-2nd Avenue South, St. Petersburg, Florida 33702, on this 2 day of September, 1991.

ROBERT K. GOOD for

Chief Trial Counsel Office of the Comptroller

Hurston South Tower, -#5225

400 West Robinson Street Orlando, Florida 32801 (407) 423-6115

Florida Bar No. 0180739

Docket for Case No: 91-001406

Orders for Case No: 91-001406