Findings Of Fact Based on the stipulations and admissions of the parties, on the exhibits received in evidence, and on the testimony of the witnesses at hearing, I make the following findings of fact. The Petitioner, Christopher James Arenal, filed a Form U-4 application seeking registration as an associated person with Rocky Mountain Securities & Investments, Inc., located at 1600 Stout Street, Suite 920, Denver, Colorado 80202. Said application was received by the Respondent on April 24, 1986. By letter dated June 17, 1986, the Respondent advised the Petitioner that it intended to deny his application for registration for the reasons set forth at length in the letter. (At the hearing the Respondent stipulated that the allegations of the top paragraph on the second page of the denial letter of June 17, 1986, should be deleted.) Thereafter, the Petitioner filed a timely request for hearing. Except for the reasons stated in the Respondent's denial letter dated June 17, 1986, the Petitioner is otherwise eligible for the registration he seeks. On October 26, 1982, the State of Tennessee issued a Complaint and Notice in the matter of First Colorado Investments and Securities, Inc., Mr. Arenal, and others, alleging the sale of securities while not being properly registered. On February 7, 1983, Mr. Arenal entered into a Findings and Consent Order which found that Mr. Arenal and others had engaged in securities transactions involving Tennessee residents at a time when Mr. Arenal and others were not registered in the State of Tennessee. Mr. Arenal and others were ordered to cease and desist from acting as agents in the State of Tennessee without being lawfully registered to do so. The transactions in question took place during 1981. The evidence does not show how many of those transactions involved Mr. Arenal. On April 28, 1983, the State of Wisconsin entered into a Stipulation and Consent Order of Prohibition with Mr. Arenal in which Mr. Arenal agreed to the entry of an Order of Prohibition. On June 2, 1983, a Consent Order of Prohibition was entered into in which Mr. Arenal was prohibited from transacting business as a securities agent in Wisconsin without lawful registration in that state. That order had as its genesis the fact that during 1981 Mr. Arenal had engaged in nine securities transactions for a Wisconsin resident who had previously been a client of Mr. Arenal when the client resided in New York. On January 11, 1984, the State of Iowa issued a Summary Order Denying Application For Securities Agent License on an application filed by Mr. Arenal. The findings of fact in that order included findings that Mr. Arenal had "engaged in securities transactions on behalf of an Iowa resident in March, 1981, while unlicensed as a securities agent," and, with regard to an affidavit filed with the Iowa Division of Securities, that "Mr. Arenal's filed and notarized statement is a false statement." Since the issuance of the January 11, 1984, order, the State of-Iowa has approved Mr. Arenal's application to be registered as a securities agent and he is presently registered in that state. On November 5, 1984, the State of Utah entered an Order Summarily Denying Application For Registration as an Agent on an application filed by Mr. Arenal. The denial was based on Mr. Arenal's prior disciplinary history. Since the issuance of the November 5, 1984, order, the State of Utah has approved Mr. Arenal's application to be registered as a securities agent and he is presently registered in that state. The State of Oregon, by letter dated November 1, 1985, denied Mr. Arenal's application for registration in that state. The Oregon denial letter does not set forth a factual basis for the denial. On September 6, 1984, the State of Nebraska issued an Order Denying Agent Registration on an application filed by Mr. Arenal. The denial was based on his prior disciplinary history. Mr. Arenal was again denied registration in the State of Nebraska on February 20, 1986. During 1985, the staff of the Respondent's Division of Securities was almost tripled in size. Shortly after the increase in staff size, a Task Force recommended that the Division of Securities devote more time and energy to the review of applicants with disciplinary history in order to more carefully screen such applicants. As a result of the increase in staff size and the increased emphasis on review of applicants with disciplinary history, the Respondent is now rejecting applications that previously might have gotten through a cursory review. All of the adverse actions taken against Mr. Arenal by the states of Tennessee and Wisconsin were based on events that occurred in 1981, at one firm, First Colorado Investments and Securities, Inc. Mr. Arenal's supervisors at that firm advised him that it was permissible for him to sell certain securities in states where he was not registered. Since those improper sales in 1981, Mr. Arenal has not engaged in any subsequent transactions in states where he was not registered. During his approximately eleven years of professional experience in the securities field, there have never been any client complaints against Mr. Arenal. Mr. Arenal has been previously registered as an associated person in the State of Florida. He was last registered in Florida from approximately February of 1985 until December of 1985. His prior registrations were processed prior to the changes in policy and procedure described in paragraph B, above.
Recommendation Based on all of the foregoing, I recommend the entry of a Final Order granting Mr. Arenal's application for registration as an associated person. DONE AND ENTERED this 9th day of June, 1987, at Tallahassee, Florida. MICHAEL M. PARRISH, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1987. COPIES FURNISHED: H. Richard Bisbee, Esquire Assistant General Counsel Office of the Comptroller Suite 1302, The Capitol Tallahassee, Florida 32399-0350 Mr. Christopher James Arenal 1600 Stout Street Suite 920 Denver, Colorado 80202 The Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 =================================================================
The Issue Whether Respondent committed the offenses alleged in the Administrative Complaint and the penalties, if any, that should be imposed.
Findings Of Fact Petitioner is an agency of the State of Florida charged with the responsibility and duty to administer Chapter 517, Florida Statutes, which is known as the Florida Securities and Investor Protection Act. On August 15, 1997 and September 9, 1997, Petitioner conducted an audit of the branch office of Merit Capital Associates, Inc., located in Boca Raton, Florida, and known as the H. K. Laurence Branch (the branch office). The branch office was an office of supervisory jurisdiction that required the presence of a branch manager. On April 28, 1997, Merit Capital executed a form entitled "Branch Registration Form" that registered the branch office with Petitioner and designated Respondent as the branch manager. Respondent accepted that designation on April 29, 1997. On April 30, 1997, the form was filed with Petitioner. In August and September 1997, Petitioner conducted an examination of the branch office. Michael Ward, whose job title is Senior Financial Investigator, was in charge of the examination. Annette Beresford, whose job title is Financial Specialist, assisted Mr. Ward. Both Mr. Ward and Ms. Beresford are full-time employees of Petitioner with appropriate training and experience. Respondent failed to properly register with the National Association of Securities Dealers (NASD) to act as a branch manager. Respondent was required by NASD rules to register as a principal because he had supervisory responsibilities. His only registration was as a salesperson. NASD Conduct Rule 3010, a rule adopted by NASD, sets forth standards for the supervision of branch offices. Pursuant to Rule 3E-600.013, Florida Administrative Code, Respondent, as the designated branch manager, was required to comply with the minimum supervisory standards set forth in NASD Conduct Rule 3010. Respondent did not meet those minimum supervisory standards while serving as the manager of the branch office. The following establish Respondent’s failure to supervise. Respondent did not provide NASD manuals to the registered representatives (salespersons) at the branch, he did not maintain Merit Capital's supervisory manuals at the branch, and he did not require that salespersons comply with Merit Capital's written policies and procedures. Respondent failed to maintain NASD and Florida registrations of salespersons at his branch. During the period April 29 through July 9, 1997, representatives of Merit Capital under Respondent's supervision at the branch office sold to members of the public shares of stock in a company known as Certified Diabetic Services, Inc., and shares of stock in a company known as Arcoplate Corporation. Respondent had supervisory responsibility for these transactions involving the sale of these two stocks. At the times pertinent to this proceeding, the stock of Certified Diabetic Services, Inc., and the stock of Arcoplate Corporation were not registered as required by Section 517.07(1), Florida Statutes, and they were not exempt from registration. Respondent should not have permitted the salespersons under his supervisory jurisdiction to sell unregistered stock During the period March 11 through July 9, 1997, Respondent was personally responsible for three transactions involving the sale of stock in Certified Diabetic Services, Inc., at a time when the stock was not registered as required by Section 517.07(1), Florida Statutes, and was not exempt from registration.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order finding Respondent guilty of failing to supervise the branch office and of selling unregistered securities. The final order should revoke Respondent’s registration under Section 517.12, Florida Statutes, and order him to cease and desist violations of Chapter 517, and the rules promulgated thereunder. The final order should also impose an Administrative Fine against Respondent in the amount of $5,000 for the failure to supervise. The final order should also impose an Administrative Fine against Respondent in the amount of $1,500 for the three transactions involving the sale of shares of unregistered stock. DONE AND ORDERED this 22nd day of January, 2002, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of January, 2002.
Findings Of Fact Petitioner and Respondent stipulated at formal hearing to Paragraphs 1- 6 of the Administrative Complaint, (TR-5-6) and it is accordingly found that: Petitioner seeks to suspend, revoke or take other disciplinary action against Respondent as licensee and against his license to practice the real estate brokerage business under the laws of the State of Florida. Respondent is now and was at all times alleged in the administrative complaint a licensed real estate broker having been issued license number 0191613. The last license issued was as a broker c/o Cluett Realty, Inc., 4720 Palm Beach Boulevard, Fort Myers, Florida 33905. On about July 14, 1983, Respondent received a check in the amount of $400.00 from Mary Snodgrass, a salesman, who at the time was associated with Respondent. Snodgrass had received the money from Robert James. James had submitted four contracts which were accepted for purchase of four duplexes listed with Respondent. The $400.00 represented a deposit of $100.00 on each of the four contracts. When the check was entrusted to Respondent, Snodgrass stated that the buyer had requested the check be held a couple of days before depositing into escrow to insure it would clear. Respondent indicated this was wrong and the check should be deposited immediately. 1/ The check was not deposited into Respondent's escrow account, but, was held by Respondent until September 15, 1983, two months after initial receipt of the check. The check presented by Mr. James (buyer) to Mrs. Snodgrass (saleswoman) was drawn on the Fort Myers Barnett Bank and on its face represents it is drawn on an account in the name "Clara A. James For: Caj-Raj-Casa De Chihuahua's." There is no indicator on the check itself that Robert A. James is an appropriate signatory on this account. At hearing, Mr. James represented that he was a proper signatory on the account because Clara A. James is his wife. Mrs. Snodgrass represented that she knew Mr. James had this authority but there was no predicate laid for this knowledge on her part and there is nothing about the check itself which would convey such knowledge to someone not intimate with the James' household, nor does the check itself reveal any relationship between Mr. James and "Caj-Raj-Casa De Chihuahua' s." At the time Snodgrass submitted the check to Respondent, she informed Respondent that it was possible that the check would not clear the bank due to insufficient funds. At the time of his conversation with Mrs. Snodgrass on July 14, Respondent was aware of previous problems arising from failure of an earlier check written by Mr. James for rent to one of Respondent's other clients to clear the bank. Respondent was also aware that Mr. James had refused to vacate the premises which James, James' wife, and approximately 80 Chihuahuas occupied by rental from this other client. Respondent perceived Mr. James resented Respondent due to Respondent's involvement in getting the James entourage out of the rental properties so that Respondent's other client as seller could close sale of that property to a third party buyer. Accordingly, Respondent retained the check when it was given him by Mrs. Snodgrass for a few minutes to think about the situation. He then returned it to her and explained it was an inappropriate deposit because it did not represent cash if they knew at the time it was tendered that it might be returned for insufficient funds. He told Mrs. Snodgrass to either secure a check which would clear or to inform both potential buyer and sellers that there was no deposit placed in escrow on the four contracts. Mrs. Snodgrass denied that the check was returned to her by Respondent or that this conversation ever took place; she assumed the check would be held by Respondent until evening and in the evening she went out and got the sellers to sign the 4 contracts previously signed by James. Mrs. Snodgrass placed the signed contracts in a file drawer in Respondent's office and never again initiated any title work or any conversation with Respondent about the transaction. The testimony of Mrs. Weise and Mrs. Cluett support the material particulars of Respondent's version of this second interchange between Mrs. Snodgrass and Respondent. Mr. James testified that he did, indeed, go the following day (July 15) to the bank to transfer funds if needed, but did not then notify Mrs. Snodgrass or Respondent because the money transfer was not necessary. Upon this evidence and due to the credibility problems recited in footnote 1, supra and in Findings of Fact Paragraph 8 infra, the Respondent's version of this interchange is accepted over that of Mrs. Snodgrass and provides additional, but not contradictory, information to Finding of Fact Paragraph 1-e as stipulated by the parties. In early September, Mrs. Snodgrass secured employment with Barbara Ware Realty, a competitor of Respondent. She then turned in all of her keys, gear, and papers to Cluett Realty. Shortly thereafter, Helen Weise, secretary to Respondent, discovered the July 14, 1983, check on what had been Mrs. Snodgrass's desk. This discovery is confirmed by both Respondent and Mrs. Weise. Respondent knew Mrs. Snodgrass and Mr. James were personal friends. He telephoned Mrs. Snodgrass about the status of the James' transaction when the check was discovered. Mrs. Snodgrass admitted she thereafter called Mr. James to verify the status of the transaction and then called Respondent to tell him she thought the sale would go through, but she now denies telling Respondent that the July 14, 1983, check was good or even that Respondent mentioned the check when he called her the first time. Respondent then deposited the check into his escrow account the next day, September 15, 1983. He immediately placed the request for title search and insurance. Thereafter, two duplexes out of the four involved in the four James contracts with Cluett Realty were sold by Mrs. Snodgrass through her new employer, Barbara Ware Realty, and two were sold by Mary Cluett, Respondent's wife, through Cluett Realty. During the period from July 14, 1983, until September 15, 1983, Mr. James was apparently aware that the check submitted to Cluett Realty had never been deposited by Cluett Realty because it did not show up in monthly bank statements. After September, Mr. James clearly was further aware of what was going on because he admits to trying to get Mary Snodgrass to pursue the transaction under her new employer's auspices, despite Cluett's retaining the exclusive listing for the sellers of the properties. It was not established whether or not the sellers were misled by Respondent's failure to immediately deposit the July 14, 1983, check, but Mr. James testified that when Respondent approached him about refunding his deposit or at least a portion thereof, he, (Mr. James), told the Respondent to keep it or give it to the sellers or at least not to give it back to him due to all the inconvenience. Mr. James and Mrs. Snodgrass were friends on July 14, 1983. They became friendlier thereafter. Apparently, in early September, Mrs. Snodgrass left Respondent's employ upon very unfriendly terms. The terms may be characterized as "unfriendly" even if one accepts Mrs. Snodgrass' version that her job hunt was successful before she was fired by Respondent and therefore she should be viewed as quitting upon being asked by Respondent to resign. Respondent has previously filed an unsuccessful complaint with the Department of Professional Regulation against Mrs. Snodgrass. It was she who initiated the complaint giving rise to these instant proceedings against Respondent. Mrs. Snodgrass' resentment of Respondent's filing a complaint against her was evident in her demeanor on the stand. An attempt at formal hearing to impeach Respondent's credibility upon the basis of a supposed prior admission to Petitioner's investigator that Respondent forgot to deposit the crucial check and upon the basis of Respondent's July 13, 1984, letter to the Department of Professional Regulation (P-7) left Respondent's credibility intact. When Investigator Potter's testimony as a whole is compared with Respondent's letter as a whole in light of Potter's investigation of three separate complaints over a period of many months 2/ there is no material variation of Respondent's representations. Also, what was "forgotten" and when it was forgotten is vague and immaterial in light of consistent information supplied to the investigator by Respondent that there was a request to hold the July 14, 1983, check for a couple of days due to insufficient funds.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Florida Real Estate Commission enter a Final Order dismissing all charges against Respondent. DONE and ORDERED this 14th day of August, 1985, in Tallahassee, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of August, 1985.
Findings Of Fact Seaton made application to the Division under the provisions of Section 517.12, Florida Statutes, for registration as a salesman of securities. Subsequently, the Division issued its intent to refuse or deny license or registration along with administrative charges and complaint alleging that Seaton was unworthy to transact the business of a salesman. On February 22, 1977, the Securities Commissioner of the State of South Carolina issued his order to cease and desist directed to Seaton on the dual grounds that Seaton engaged in conduct inconsistent with just and equitable principles of trade in that he offered for sale limited partnerships constituting securities while failing to register them as required and that Seaton failed to register as a broker, dealer or agent in South Carolina. On June 7, 1977, the District Business Conduct Committee for District number 4 of the National Association of Securities Dealers, Inc., issued its complaint against Seaton for violations of Article III, Sections 1, 18 and 27 of the Rules of Fair Practice of the National Association of Securities Dealers, Inc.
Findings Of Fact The facts in this case are clear and uncontroverted. On or about February 5, 1975, Martin E. Kulok terminated his employment as a mortgage solicitor with ABC Investment Corporation. ABC Investment Corporation wrote and advised the Division of Finance on February 10, 1975, that Kulok had left his employ. On February 5, 1975, Kulok applied for licensure as a mortgage solicitor with Financial Resources Corporation On February 12, 1975, the Division of Finance cancelled Kulok's registration as a mortgage solicitor with ABC. On February 20, 1975, the Division of Finance issued Kulok's license as a mortgage solicitor with Financial Resources Corporation. On February 13, 1975, while unlicensed, Kulok sold what purports to be a first mortgage to Lincoln H. Evans in behalf of Financial Resources Corporation. Kulok has applied for licensure as a mortgage solicitor with Joseph Maddlone, and said application is at issue because the Division of Finance asserts that Kulok's sale to Evans while he was unlicensed between February 12 and February 20 "demonstrates deficiencies in qualities of experience, integrity, and competency" which are essential to the issuance of a mortgage solicitor's license. It is clear that in issuing licenses, the Division of Finance issues licenses to the broker, in this case Financial Resources, and that nothing is forwarded to the mortgage solicitor. Kulok was physically located in Miami, Florida and his broker's office was located in Fort Lauderdale, Florida. Kulok stated that he called his broker frequently to determine what the status of his license was. On February 13, 1975, some eight days after completing his application, his broker advised him that he could go out and sell. On February 13, 1975, Kulok's application was received by the Division of Finance. The apparent basis for requiring issuance of licenses to brokers and requiring brokers to delicense solicitors is that they are more responsible than solicitors. See Subsection 498.04(9)(10), F.S. It appears that in the instant case Financial Resources Corporation was not as responsible as many people, including Mr. Kulok and the Division, thought it was. Fortunately, the issue presented here is not Mr. Kulok's status when his application for licensure had been received but had not been granted by the Division. Under the procedures adopted by the Division of Finance the solicitor is dependent upon the good faith representations of his broker, to whom the Division also looks for control. By inquiring of and being told by his broker that he was able to sell, Kulok did what he could do to determine his status. Certainly he could have done more, but he had no basis to mistrust his broker. Under the facts presented here, there is no evidence that Kulok lacks the "experience, integrity, and competency" to be licensed as a mortgage solicitor, and that is the issue.
Recommendation Based upon the foregoing conclusions of law and findings of fact, the Hearing Officer recommends that Kulok's license be granted. DONE and ORDERED this 6th day of April, 1976. STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: James M. Barclay, Esquire Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32304 Martin B. Kulok 150 S.E. 25th Road, No. 14F Miami, Florida 33129 ================================================================= AGENCY FINAL ORDER =================================================================
Findings Of Fact At all times here involved Bernard L. Barker was a real estate broker registered by the Florida Real Estate Commission. The facts involved herein were undisputed. Bernard L. Barker was one of the famous, or infamous, "plumbers" involved in the break-in of the Democratic National Committee Headquarters at the Watergate Hotel in Washington, D. C. prior to the 1972 presidential election. Exhibit 1, Judgment of the U.S. District Court for the District of Columbia shows he pleaded guilty and was so adjudicated on March 23, 1973 of the offenses of conspiracy, burglary, unlawful endeavor to intercept oral and wire communications, and unlawful possession of intercepting devices. Exhibit 2, Bench Docket of the Criminal Court of Record, Dade County, shows that on November 1, 1972 Respondent was convicted of unlawful use of a notary seal and sentenced to 60 days imprisonment which was suspended upon 60 days probation. Respondent freely admitted his part in the Watergate caper and that in so doing he was working under the direction and supervision of U.S. Governmental officials. He has worked for the C.I.A. off and on for many years and was instrumental in organizing the forces involved in the Bay of Pigs invasion. During this period Barker met Howard Hunt who was his, Barker's, superior in the C.I.A. Respondent was contacted by Hunt around 1970 to organize a group for a national security mission to discover the source of leaks of classified information believed to be reaching the Soviets. When this group was organized Barker was in contact with Gordon Liddy who had an office in the White House. He met and talked to Liddy in his White House office. At the time of the Watergate break-in Respondent believed he was engaged in undercover work for the U.S. Government and he was certainly working under the direction of an employee of the U.S. Government. With respect to the deposit of checks in his escrow account that were not connected to a real estate transaction, Respondent freely admitted the deposit, not only of the $25,000 check alleged in the Information, but also four additional checks drawn on a Mexican bank with the total amount deposited amounting to $118,000. The purpose of the deposit was to "launder" the funds that were used in the break-in of the psychiatrist's office in California in the Ellsberg affair, as well as funds for the Watergate caper. It was in connection with the deposit of the $25,000 check that Respondent, after being assured by Liddy that the check was good and would be honored when presented for payment, placed the notary seal on the check. This resulted in his being convicted (Exhibit 2) of a misdemeanor in the second degree and placed on probation for 60 days. In these operations Respondent was operating under the direction and supervision of Hunt and Liddy.
The Issue The issue for consideration in this matter is whether Petitioner should be granted registration as an associated person of FISCL Securities in Florida.
Findings Of Fact At all times pertinent to the allegations herein, the Petitioner was an applicant for registration as an associated person of FISCL Securities. The Respondent, Department, was the state agency charged with the administration and enforcement of Chapter 517, FLORIDA STATUTES, the Florida Securities and Investor Protection Act, and the rules promulgated thereunder which include the registration of associated persons as securities dealers inthis state. Under the rules of the Department, anyone who seeks to represent a securities dealer in Florida is required to file an application form, (Form U- 4), with the National Association of Securities Dealers, (NASD), which, upon review, is forwarded to the state in which the applicant resides and seeks registration. If the records of the NASD disclose any disciplinary action having been taken against the applicant, it is identified to the state in which registration is sought. In Florida the Department is the appropriate agency and Department officials review the application to see if it should be approved. In this regard, all disciplinary information, the records of the NASD, is forwarded to the pertinent state for review in accordance with the rules and statutes of that state and, based on the information provided, a decision is made as to whether the application should be approved fully, approved with conditions, or denied. In Florida, all documents relating to the applicant's disciplinary history are secured and reviewed by the Department's Division of Securities prior to a recommendation being made as to approval or denial of the application for registration. In the instant case, the information submitted by NASD, pertaining to the Petitioner herein, included evidence of a prior disciplinary record. Upon receipt of the notice, Ms. Cain, the Division's Assistant Director, sent out a discrepancy letter to the Petitioner and requested copies of the disciplinary record and his form U-4 from NASD. The information submitted to the Department by Ellen J. Badler, Assistant Director, Special Registration, with NASD, dated July 18, 1990, reflected three letters of admission, waiver and consent from First Heritage Corporation, a securities dealer in Southfield Michigan, and Louis Feldman, Petitioner, a registered options principal with and president of the firm. The documents show that on the basis of periodic review of the company records in October and November, 1981, the corporation failed to obtain or maintain option account agreements for 7 of its option customers; that in 5 cases it failed to obtain or maintain sufficient background and financial information on customers approved for trading; and that it failed to show the date prospectuses were furnished to options customers. All of the above were cited as violations of Article III, Section 33, Appendix E, NASD's Rules of Fair Practice. This inquiry also indicated that the corporation and Petitioner failed to inform its customers, in writing, of the method it used to allocate exercise notices to its customers' accounts, and failed to explain the way the system operated and its consequences, in violation of Section 63, of NASD's Uniform Practice Code. Mr. Feldman, along with the company, admitted those violations in a Letter of Admission, Waiver and Consent he executed in response to NASD's District 8 Business Conduct Committee, (Committee), and they were punished with a censure to the company and a joint fine of up to $500.00 for Mr. Feldman andthe company. No further disciplinary action was taken against the Petitioner or his company by NASD, the SEC, or the state of Michigan until, in 1989, NASD entered its Decision and Order of Acceptance of Respondents' Offer of Settlement regarding three Complaints filed by the Committee in 1988 for alleged violations of rules of the Municipal Securities Rulemaking Board, (MSRB), and the Rules of Fair Practice. These complaints, filed against Petitioner, First Heritage, and as to one of the three, to a third party as well, related to: effecting the purchase and sale of municipal securities at prices in which the aggregate price at which the securities were purchased or sold were not reasonable and fair under the circumstances; placing several different advertisements which omitted material facts and were mis- leading; again, purchasing and selling municipal securities at prices which were not fair and reasonable. The Committee found that the Petitioner and the other parties involved were in violation of the rules as alleged, and fined Petitioner and First Heritage $10,000.00 jointly as to the two price allegations, and $5,000.00 as to the advertising allegation. Petitioner claims the violations were more ministerial and technical than substantive and that no customer ever complained about or was in any way injured by those actions. As to the advertisements, he claims they were not misleading. Examination of the advertisements does not necessarily support that claim, however, He also claims that the policies complained of were the same as those followed for the 13 years the company was in business and prior audits by NASD had never resulted in any noted discrepancies. The Department does not consider as pertinent the fact that injury to a consumer was not involved. By the same token, given, as here, the completed disciplinary action which has become final, it will not look behind that action and re-litigate, at a hearing such as this, the truth of the allegations. Petitioner also claims that in each case he was advised by counsel that it would be useless to fight the allegations of misconduct since it appeared the collective mind of the agency was made up to take action. Further, weighing the minimal fines sought against the extensive cost to Petitioner in attorney fees and lost commissions while litigating the allegations, he elected to take that route less expensive to him in the short run and accept punishment. This decision did not, it would appear, redound to his benefit. Petitioner also claims, and it is so found, that at no time has any disciplinary action ever been taken against him for actions in the securities business by the states of Michigan or Florida. On the basis of those actions, by letter of October 11, 1990, the Department notified the Petitioner that his application for registration was denied. The two page letterclearly indicated the Petitioner's professional history and the fact that he was the subject of "at least two regulatory actions filed by the NASD." The letter then listed the specific allegations of misconduct charged against the Petitioner in each of the two actions and noted the agency action taken in each case. The Department's letter also cited the pertinent statute which authorizes it to deny an application for registration and the bases therefor, and noted the reasons for its action. Petitioner was also notified of his right to and the procedure for contesting the Department's action.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is therefore recommended that a Final Order be entered denyingPetitioner, Louis Feldman's application for registration as an associated person of FISCL Securities in Florida. RECOMMENDED in Tallahassee, Florida this 17th day of September, 1991. ARNOLD H. POLLOCK 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 17th day of September, 1991. COPIES FURNISHED: Gregory G. Schultz, Esquire Schultz & Associates, P.A. 26750 U.S. Highway 19 N. Suite 310-A Clearwater, Florida 34621 Margaret S. Karniewicz, Esquire Department of Banking and Finance Suite 1302, The Capitol Tallahassee, Florida 32399-0350 Gerald Lewis Comptroller The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves General Counsel Department of Banking and Finance The Capitol, Plaza Level, Room 1302 Tallahassee, Florida 32399-0350
Findings Of Fact In 1981, Barry Kandel, an employee of Allied Publishing Group, Inc., solicited Petitioners to purchase stock in Allied, a Florida Corporation. On May 1, 1981, Petitioners purchased one share of stock in Allied for $13,500. By mid-1982, Allied had gone out of business. Petitioners made unsuccessful demands for the return of their money on Brian E. Walker, the Secretary of Allied; on Thomas W. Kuncl, the President of Allied; and on Kandel. On November 19, 1984, Petitioners filed suit against Kandel, Kuncl, Walker, and Allied. The Civil Complaint filed in Case No. 84-6932 in the Circuit Court of the Fifteenth Judicial Circuit of Florida, in and for Palm Beach County, contained general allegations of fraud. On February 20, 1985, Petitioners obtained a default judgment against Allied only. No evidence was offered in this cause regarding the disposition of the litigation as to the individual defendants. The default judgment contains no factual determinations and does not specify a violation of either section 517.07 or section 517.301, Florida Statutes. Kandel currently resides in Fort Lauderdale, Florida, and Kuncl currently resides in the Gainesville, Florida, area. Kuncl was the last known person to have custody of and control over Allied's books and records. Petitioners filed a claim with Respondent, seeking reimbursement for $10,000 from the Securities Guaranty Fund, pursuant to sections 517.131 and 517.141, Florida Statutes. Their claim was denied by letter dated July 8, 1987, for failure to meet the statutory conditions. Neither Allied nor any individual associated with Allied who dealt with Petitioners was registered or licensed by the State of Florida pursuant to chapter 517, Florida Statutes, in any capacity. Petitioners did not cause a writ of execution to be issued against Allied nor the individuals associated with Allied. Petitioners did not attempt a reasonable search as to whether Allied possessed real or personal property or other assets which may be set off against a proposed claim to the Securities Guarantee Fund. Don Saxon, Director of the Division of Securities and Former Assistant Director, has been the only individual responsible for administering the Securities Guaranty Fund since 1983. The Department's interpretation of section 517.131(2), Florida Statutes, is that it requires a claimant to demonstrate findings of a violation of section 517.07 and/or section 517.301, Florida Statutes, by a licensed dealer, a licensed investment adviser or a licensed associated person. The Department's interpretation of section 517.131(3)(a), Florida Statutes, is that it requires a claimant to provide the Department with a certified copy of a judgment demonstrating a violation of section 517.07 and/or section 517.301, Florida Statutes. The Department's interpretation of section 517.131(3)(b), Florida Statutes, is that it requires a claimant to submit a copy of the writ of execution to the Department. During Saxon's tenure in administering the Securities Guaranty Fund, the Department has not waived any of the statutory requirements for claiming monies from the Fund. Section 517.131 and section 517.141, Florida Statutes, were enacted in 1978 and have remained virtually intact. The legislature did substitute the term "associated person" in place of the term "salesman" in section 517.131(2), Florida Statutes, without comment, although the order of licensed entities in that section was altered. The legislative intent behind the establishment of section 517.131, Florida Statutes, was to eliminate the bonding requirement for "individuals registered to be broker/dealers or investment advisers ... substituting therefor, a 'Security Guaranty Fund' to be funded through an assessment imposed upon them." The legislative intent behind section 517.141, Florida Statutes, was that disbursement from the Securities Guaranty Fund would be made to any person suffering monetary damages as a result of "some violation by a registrant."
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that a Final Order be entered denying Petitioners' claim for payment from the Securities Guaranty Fund. DONE and RECOMMENDED this 25th day of April, 1988, at Tallahassee, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of April, 1988. COPIES FURNISHED: Gerald Lewis, Comptroller Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350 Charles E. Scarlett, Esquire Office of the Comptroller Suite 1302, The Capitol Tallahassee, Florida 32399-0350 Richard O. Breithart, Esquire 818 U.S. Highway One, Suite 8 North Palm Beach, Florida 33408 Charles L. Stutts, Esquire Office of the Comptroller Department of Banking and Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350
