STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BANKING )

AND FINANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 92-6251

)

KENNETH MILNER, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted in this case on March 18, 1993, in West Palm Beach, Florida, before Stuart M. Lerner, a duly designated Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Bridget L. Ryan, Esquire

Assistant General Counsel Department of Banking and Finance The Capitol, Suite 1302 Tallahassee, Florida 32399-0350

For Respondent: Rick M. Rogers, Esquire

Riverside National Bank Building 8000 South U.S. Highway 1 Suite 303 Port St. Lucie, Florida 34952

STATEMENT OF THE ISSUES

1. Whether Respondent committed the violations alleged in Administrative Complaint?

   
   

2. If so, what action should be taken against him?

PRELIMINARY STATEMENT

On or about September 25, 1992, the Department of Banking and Finance, Division of Securities and Investor Protection (hereinafter referred to as the "Department") issued an Administrative Complaint alleging that Respondent had violated Section 517.12(1), Florida Statutes, by executing approximately 17 securities trades between August 28, 1988, and December 16, 1988, while employed by Marina Securities, Inc., (hereinafter referred to as "Marina"), without being registered with the Department as an associated person of Marina. Respondent denied the allegations of wrongdoing advanced in the Administrative Complaint and requested a formal hearing. On October 19, 1992, the Department referred the matter to the Division of Administrative Hearings for the assignment of a Hearing Officer to conduct the formal hearing Respondent had requested.

On March 16, 1993, the Department filed a motion requesting "that the Hearing Officer enter an order deeming the matters contained in the Department's Request for Admissions admitted in view of Respondent's failure to serve a timely answer or objection to the Request for Admissions. The motion was heard at the outset of the final hearing on March 18, 1993, at which time Respondent announced that he did not oppose the motion. Accordingly, the Hearing Officer granted the motion.

Two witnesses, Respondent and Department employee Michael Shepard, testified at the final hearing. In addition to the testimony of these two witnesses, three exhibits (Petitioner's Exhibits 1 through 3) were offered and received into evidence.

At the conclusion of the evidentiary portion of the hearing, the Hearing Officer, on the record, advised the parties of their right to file post-hearing submittals and established a deadline for the filing of such submittals. The Department timely filed its post-hearing submittal on April 1, 1993. Respondent filed its post-hearing submittal on April 8, 1993. In its post-hearing submittal, Respondent concedes that he violated Section 517.12(1), Florida Statutes, as alleged in the Administrative Complaint, but he argues that "the nature of the misconduct and the circumstances surrounding same do not justify the imposition of any fines, costs, or other penalties against [him]."

The Department's post-hearing submittal contains what are labelled as "proposed findings of fact." Portions of Respondent's post-hearing submittal, specifically the second and third paragraphs thereof, contain assertions that, although not specifically labelled as such, are in the nature of proposed findings of fact. These findings of fact proposed by the parties have been carefully considered and are specifically addressed in the Appendix to this Recommended Order.

FINDINGS OF FACT

Based upon the evidence adduced at hearing, and the record as a whole, including the admissions made by Respondent, the following Findings of Fact are made:

1. Respondent is now, and has been since November 7, 1991, registered with the Department as an associated person of H.D. Vest Investment Securities, Inc.

   
   

2. He has previously been registered with the Department as an associated person of Schlitt Investor Services, Inc. (from January 1, 1989, to November 5, 1991), Stifel, Nicolaus & Company, Inc. (from December 11, 1987, to August 31, 1988), Shearson Lehman Brothers, Inc. (from May 11, 1987, to December 7, 1987), and Marina (from March 27, 1986, to April 29, 1987).

   
   

3. After leaving Marina in 1987 and working for two other firms, in or about late July of 1988, Respondent returned to the employ of Marina. Upon being rehired, he was given a Uniform Application for Securities Industry Registration or Transfer Form (hereinafter referred to as the "Form" or "U-4 Form") to fill out and sign.

   
   

4. Respondent did as he was told and returned the Form to Marina. 1/ He was led to believe that Marina would take care of the rest, including completing certain items on the U-4 Form and mailing the completed Form to the Department,

   and that there was nothing more that he needed to do, other than wait, to become registered with the Department as an associated person of Marina.

   
   

5. Several days later, Marina gave Respondent the go-ahead to start selling securities. Respondent assumed, erroneously, that the Department had granted his application for registration as an associated person of Marina. He did nothing to verify his assumption was correct.

   
   

6. At no time subsequent to April 29, 1987, has Respondent been registered with the Department as an associated person of Marina, although he was registered with the National Association of Securities Dealers as a representative of Marina from August 8, 1988, to December 19, 1988.

   
   

7. Between the dates of August 8, 1988, and December 16, 1988, Respondent, as an employee of Marina, 2/ offered for sale and sold securities to Florida residents. He executed 17 such securities trades, as a result of which he received $8,251.46 in commissions.

   
   

8. At no time during this period did Respondent realize that he was not registered with the Department as an associated person of Marina. He continued to assume that he was so registered, without seeking to verify the correctness of his assumption.

   
   

   CONCLUSIONS OF LAW

   
   

9. At all times material to the instant case, Section 517.12(1), Florida Statutes, has provided that "[n]o . . . associated person . . . shall sell or offer for sale any securities in or from offices in this state, or sell securities to persons in this state from offices outside this state, by mail or otherwise, unless the person has been registered with the [D]epartment."

   
   

10. "[S]ection 517.12 does not contain the element of scienter, and thus [a person's] asserted good faith belief that he was registered [at the time of the subject transaction] is irrelevant" to his guilt or innocence and does "not provide him with a defense to [a charge that he violated S]ection 517.12." Santacroce v. Department of Banking and Finance, 608 So.2d 134, 136 (Fla. 4th DCA 1992).

    
    

11. At all times material to the instant case, Sections 517.161 and 517.221, Florida Statutes, collectively, have authorized the Department to take the following action against those who violate Section 517.12(1), Florida Statutes: deny them registration; revoke, restrict or suspend any registration they have been granted; and impose upon them an administrative fine not exceeding $5,000.00 for each violation.

    
    

12. In those cases where the penalty adversely impacts upon a previously granted registration, the person's guilt must be established by clear and convincing evidence. See Ferris v. Turlington, 510 So.2d 292 (Fla. 1987); Pic N' Save v. Department of Business Regulation, 601 So.2d 245 (Fla. 1st DCA 1992); Munch v. Department of Professional Regulation, 592 So.2d 1136 (Fla. 1st DCA 1992); Newberry v. Florida Department of Law Enforcement, 585 So.2d 500 (Fla. 3d DCA 1991); Pascale v. Department of Insurance, 525 So.2d 922 (Fla. 3d DCA 1988). "The evidence must be of such weight that it produces in the mind of the trier of fact a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established." Slomowitz v. Walker, 429 So.2d 797, 800 (Fla. 4th DCA 1983).

13. Where the penalty does not affect a previously granted registration, the violation need be established by only a preponderance of the evidence. See Allen v. School Board of Dade County, 571 So.2d 568, 569 (Fla. 3d DCA 1990).

    
    

14. Regardless of the penalty imposed, it may be based only upon the violations specifically alleged in the administrative complaint. See Kinney v. Department of State, 501 So.2d 129, 133 (Fla. 5th DCA 1987); Hunter v. Department of Professional Regulation, 458 So.2d 842, 844 (Fla. 2d DCA 1984).

    
    

15. The instant Administrative Complaint alleges that Respondent violated Section 517.12(1), Florida Statutes, on 17 separate occasions during the period from August 8, 1988, to December 16, 1988, when, as an employee of Marina, he offered for sale and sold securities in Florida, without being registered with the Department as an associated person authorized to engage in such activity for Marina.

    
    

16. The record in the instant case clearly and convincingly establishes that Respondent committed these 17 alleged violations of Section 517.12(1), Florida Statutes.

    
    

17. The appropriate penalty to impose upon Respondent for having committed these violations is that suggested by the Department in its proposed recommended order: an administrative fine of $8,251.46, which represents the commissions Respondent received as a result of his unlawful conduct.3 See Santacroce v. Department of Banking and Finance, 608 So.2d at 137.

    
    

    RECOMMENDATION

    
    

    Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby

    
    

    RECOMMENDED that the Department enter a final order finding Respondent guilty of the violations of Section 517.12(1), Florida Statutes, alleged in the instant Administrative Complaint and imposing upon him an administrative fine of

    $8,251.46 for having committed these violations.

    
    

    DONE AND ENTERED in Tallahassee, Leon County, Florida, this 26th day of April, 1993.

    
    

    
    

    STUART M. LERNER

    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 26th day of April, 1993.

    ENDNOTES

    
    

    1/ Paragraphs 1 and 2 of the certificate that Respondent signed on page 4 of the U-4 Form provided in part as follows:

    
    

    1. I swear or affirm that I have read and understand the items and instructions on this form and that my answers (including attachments) are true and complete to the best of my knowledge. I understand that I am subject to administrative, civil or criminal penalties if I give false or misleading answers.

    2. I hereby apply for registration with the organizations and states indicated in Item 10 as may be amended from time to time . . . .

In accordance with the instructions he had received, Respondent left Item 10 of the U-4 Form blank, anticipating that it would be properly completed by Marina.

2/ At the time, Marina's offices were located in Vero Beach, Florida.

3/ While it is not a defense to the charges against him, Respondent's good faith belief, at the time that he engaged in such conduct, that he was properly registered with the Department and therefore permitted to offer for sale and sell securities in Florida as an associated person of Marina is a factor that militates against the imposition of a harsher penalty than that recommended by the Hearing Officer. See Santacroce v. Department of Banking and Finance, 608 So.2d at 137.

APPENDIX TO RECOMMENDED ORDER IN CASE NO. 92-6251

The following are the Hearing Officer's specific rulings on the proposed findings of fact set forth in the parties' post-hearing submittals:

The Department's Proposed Findings of Fact

1-17. Accepted and incorporated in substance, although not necessarily repeated verbatim, in this Recommended Order.

18-26. Rejected because they would add only unnecessary detail to the factual findings made by the Hearing Officer in the instant case.

27-30. Accepted and incorporated in substance.

Respondent's Proposed Findings of Fact

Assertion in second paragraph of post-hearing submittal that "Respondent during the period of August 8, 1988 through December 19, 1988, executed securities trades without complying with the registration requirements of the Department of Banking and Finance, while in the employ of Marina Securities, Inc.:" Accepted and incorporated in substance.

Assertion in third paragraph of post-hearing submittal that "the misconduct of the Respondent was unintentional:" Accepted and incorporated in substance.

Assertion in third paragraph of post-hearing submittal that "no damages resulted to any of the Respondent's clients or customers:" Rejected because it is not supported by persuasive competent substantial evidence.

COPIES FURNISHED:

Bridget L. Ryan, Esquire Assistant General Counsel Department of Banking and

Finance

The Capitol, Suite 1302 Tallahassee, Florida 32399-0350

Rick M. Rogers, Esquire Riverside National Bank Building 8000 South U.S. Highway 1

Suite 303

Port St. Lucie, Florida 34952

Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350

William G. Reeves, Esquire General Counsel

Department of Banking and Finance

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 of time 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.

Docket for Case No: 92-006251

Orders for Case No: 92-006251