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 At all times pertinent to the issues herein the Respondent, Linda H. Abraham, was licensed by the State of Florida as a real estate broker under license number 0323486. During the months of February and March 1983 Martha L. Tew owned a parcel of waterfront property located in Panama City Beach which was identified as being for sale by a sign on the property reflecting her husband's real estate company. Her husband was Ronald Eugene Tew and Mrs. Tew also held a salesman's license. Mr. Tew was contacted by Gregory A. Peaden, a contractor and developer in the Panama City Beach area on several occasions prior to March 1983 with offers to purchase the Tew property. The contacts with Mr. Peaden subsequently culminated in a contract dated March 8, 1983, between Greg Peaden, Inc., and the Tews in the amount of, initially, $180,000.00. During the negotiations for the property, Mr. Peaden had introduced the Respondent to the Tews as his broker. When, at the time of Use contract, Mr. Peaden advised the Tews he wanted Respondent to get a commission for the sale, Mr. Tew refused to pay any commission indicating that Respondent had performed no service for him; that he, Tew, was a broker himself; and that he had no intention of paying any commission to the Respondent or to anyone, for that matter. After some further negotiation, a second contract was prepared and agreed upon wherein the contract price was raised to $189,000.00 and the Respondent's commission was to be paid with the additional money from Mr. Peaden. The contract in question executed by the parties on March 8, 1983, reflected that the sum of $5,000.00 deposit was paid to Linda Abraham, Inc., by check. Mr. Tew contends that at this point he was led to believe that Respondent had the $5,000.00 check and, he contends, he would not have signed the contract if he had known that the check had not been delivered and placed in Respondent's escrow account. The actual signing of the contract took place in Respondent's office, a mobile home which she shared with Mr. Peaden's business. This trailer home was described as having Mr. Peaden's office on one end, and Respondent's on the other, with the living-kitchen area in the middle used as a reception area for both businesses. Mr. Peaden contends that once the contract was signed by the Tews, he gave a check drawn on one of his business accounts, that of Peaden and Guerino, a property management company he owned, to his secretary, Judy White, to deposit in Respondent's escrow account and thereafter promptly forgot about the matter until the date scheduled for closing, two months in the future. Ms. white, on the other hand, contends that Mr. Peaden at no time gave her a check for $5,000.00 to deposit to Respondent's escrow account. It is her contention that when she received the contract after it was signed, she, on her own, inserted the receipt portion on the bottom of the second page and signed as having received it merely to complete the contract. At the time, she contends, she did not know if the deposit was received from Peaden or not. She has never signed a contract like this before without a deposit and cannot give any other reason why she did it on this occasion. She is certain, however, that at no time did Mr. Peaden ever give her a $5,000.00 check or tell her to draw one for his signature on March 8, 1983, or, for that matter, at any time thereafter. What is more, neither Mr. Peaden nor the Respondent, at any time after the signing of the contract and prior to her departure under less than friendly circumstances approximately a week or so later, ever asked her whether she had made the escrow deposit or discussed it with her at all. Ms. white contends that she left Mr. Peaden's employ because he expected her to perform certain functions she was unwilling to do. When she left his employ, she did not feel there was any unfinished business that needed her immediate attention. To the best of her recollection, there were no sales contracts or deposits left in or on her desk - only bills. According to Respondent, the $5,000.00 deposit by Mr. Peaden was to stay in her escrow account. She understood Mr. Peaden was going to arrange with the bank to borrow the entire cash payment called for under the contract, including the deposit, and when that was done, it was her intention to give him back his $5,000.00 check. Under these circumstances, the amount in escrow would never be paid to the sellers but would be returned to Mr. Peaden and the Tews would receive the entire cash amount called for by the contract from the proceeds of the bank loan. Respondent also indicated that this procedure had been followed at least once, in a prior transaction. Under the circumstances, it is clear that no deposit was ever received from Mr. Peaden nor was it placed in Respondent's escrow account. Therefore, the contract, dated on March 8, 1983, was false in that it represented a $5,000.00 deposit had been received. The check for $5,000.00 dated March 8, 1983, payable to Linda Abraham, Inc. and drawn by Mr. Peaden on the Peaden and Guerino account with the stub admitted to show the date of issuance, does not establish that it was written on March 8, 1983, as contended. This check, number 1349, comes after two other checks, 1347 and 1348, which bear dates of April 4 and September 7, 1983 respectively. Mr. Peaden's explanation that the checks were drafted out of sequence is non-persuasive. Of greater probative value is the fact that neither Mr. Peaden nor Respondent bothered to review their bank statements on a regular basis. The check in question was drawn on an account not related to the construction and development business of Greg Peaden, Inc. Further, examination of Respondent's escrow account reflects that there were approximately eleven transactions over a three year period even though, according to her, she handled numerous other closings as well as this. Her explanation is that in most cases the attorney handling the closing served as escrow agent even though she was the sales broker. Her explanation is not credible. This appears to be a classic situation of movement of accounts to satisfy a particular end. The contract called for closing of the sale to be held on or before May 8, 1983, in the office of Panama Title Company. May 8, 1983, fell on a Sunday. As a result, the closing would not have been held that day, but it was not held the following day, Monday, May 9, 1983 either. Mr. Peaden admits that he had not checked with Panama Title prior to May 9 to see if everything was prepared for the closing. Instead, he contacted the title company for the first time at approximately noon on May 9. Apparently he received disquieting information because he thereafter called his attorney, Mr. Hutto, and asked him to check with the title company to see if and when the closing would be held. Mr. Hutto's inquiry reflected that the title insurance binder was ready but the closing statement and the package were not because the title company required a copy of the contract. At this point Mr. Peaden immediately had a copy of the contract delivered to the title company but later that day was advised that the closing still could not be held because of the failure to provide a survey. Mr. Hutto indicates that the reason given was that the release clauses called for in the contract required the survey to be furnished though he did not necessarily agree with that. In any event, closing was not held on May 9. At this time both Mr. Peaden and Respondent allegedly became concerned about the $5,000.00 deposit. Admittedly, neither had concerned themselves with it from the time of the signing of the contract. At this point, Mr. Peaden indicates that he examined his bank records which failed to show the deposit being made and his subsequent search of Ms. White's desk finally revealed the check, undeposited, still there. On May 11, 1983, a $5,000.00 deposit was made to the account on which the deposit check was drawn and on the same day, May 11, 1983 check number 1349, in the amount of $5,000.00 was presented against the account. When on May 10, 1983, Mr. Peaden and Respondent went to Mr. Hutto's office the primary reason for the visit was because Mr. Peaden had heard that the Tews were planning to sell the property in question to someone else at a price much higher than that agreed upon for the sale to Peaden. At this point Mr. Hutto indicated that if Peaden so desired, Hutto could "fix up the contract to jam up the works" until he could do something about it. His examination of the contract revealed that it was not recorded or acknowledged and under the laws of Florida, acknowledgment is required in order for a contract to be recorded. Hutto asked the Respondent if she had seen the parties sign the contract and when she said that she had, he had his secretary prepare a jurat. Unfortunately, his secretary prepared an affidavit type notary jurat rather than an acknowledgment and Hutto quickly admits that he did not look at it when it was given back to him. He says that if he had, he would have had it changed but in any event, without looking at what was given him, he gave it to the Respondent with the implication, at least, that she should notarize it and have the contract recorded. According to Hutto, Peaden, and the Respondent, the sole purpose for notarization and recordation was to preserve the status quo to protect Mr. Peaden's interest in the property so that the matter could be adjudicated in a lawsuit which was soon to be filed. Respondent contends she never intended any misconduct throughout this transaction nor did she do any of the things alleged in the Administrative Complaint. She contends she never saw the check which Mr. Peaden allegedly gave to his secretary for deposit to her escrow account. She merely assumed that it was given and never checked to insure that it had been placed in her account. She does not know why Mr. Peaden did not give her the check. When she took the contract to the Tews, she was operating under the assumption that the check had been received but did not verify this to insure that it had. She contends that since she represented the buyer, her duties were limited to insuring that he performed and this made it simple. She did not check on him because she had had so much experience with him, him being by far her largest account, if he said something, she believed him and when the contract was executed, she merely instructed the secretary, Judy White, to make the file and did not check on it again. As to the recordation and the notarization after the fact, she acted upon the advice of counsel, she states, and did what was suggested to her by Mr. Hutto. It should be noted, however, that Mr. Hutto did not represent her but instead represented Mr. Peaden and while because of her long-standing relationship with him and Mr. Hutto, she may have felt safe in relying on his advice, the fact remains that Hutto was not her attorney.
Recommendation On the basis of the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the Respondent's license as a registered real estate broker in Florida be suspended for six months and that she pay an administrative fine of $2,000.00. RECOMMENDED this 6th day of June, 1985, in Tallahassee, Florida. ARNOLD H. POLLOCK 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 6th day of June, 1985. COPIES FURNISHED: Arthur Shell, Esquire Department of Professional Regulation Division of Real Estate 400 W. Robinson Street Orlando, Florida 32801 John D. O'Brien, Esquire P. O. Box 1218 Panama City, Florida 32402 Harold Huff Executive Director Division of Real Estate P. O. Box 1900 Orlando, Florida Fred Roche Secretary Department of Professional Regulation 130 N. Monroe Street Tallahassee, Florida 32301 Salvatore A. Carpino General Counsel Department of Professional Regulation 130 N. Monroe Street Tallahassee, Florida 32301
The Issue At issue in this proceeding is whether Petitioner is entitled to registration as an associated person of Brookstone Securities, Inc. ("Brookstone"), either by virtue of the default provision of Subsection 120.60(1), Florida Statutes, or by virtue of the substantive merits of his application.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made: The Parties The Office of Financial Regulation, a part of the Financial Services Commission, is the state agency charged with regulation of the securities industry. § 20.121(3)(a)2., Fla. Stat. Chapter 517, Florida Statutes, is the "Florida Securities and Investor Protection Act." § 517.011, Fla. Stat. Pursuant to Section 517.012, Florida Statutes, OFR is responsible for the registration of persons associated with broker-dealers. Victor Alan Lessinger is 62 years old. He has been involved in the securities industry since 1976. He was registered with the State of Florida as an associated person from April 23, 1991, until October 31, 1994. He was later registered as an associated person with the State of Florida from June 5, 1997, through April 29, 2006, with the exception of the eight-day period between January 23, 2002, and February 1, 2002. This eight-day lapse was caused by Mr. Lessinger's changing jobs, which necessitated that he re-apply for registration. An associated person must be registered through the broker-dealer that employs him. From February 2005 until April 2006, Mr. Lessinger was a broker associated with Archer Alexander Securities Corporation, and was registered as such with the State of Florida. Archer Alexander went out of business in April 2006, and Mr. Lessinger accepted an offer of employment from Brookstone, a company based in Lakeland. Mr. Lessinger was to work as an associated person in Brookstone's Coral Springs branch. The Application Process and the Notice On July 5, 2007, Mr. Lessinger submitted his application for registration as an associated person with Brookstone to OFR through Web CRD, the central licensing and registration system for the U.S. securities industry operated by the Financial Industry Regulatory Authority ("FINRA").2 Mr. Lessinger's initial application for registration as an associated person with Brookstone disclosed the following disciplinary events: a 1993 Consent Order that Mr. Lessinger entered into with the relevant authorities in the State of Maine; a 1998 "Division Order" from the State of Ohio denying Mr. Lessinger's application for a securities salesman license; a 2000 letter of acceptance, waiver and consent ("AWC") issued by the National Association of Securities Dealers ("NASD"), the predecessor to FINRA; a 2002 arbitration award issued by NASD Dispute Resolution, Inc.; and two related actions taken by the Securities and Exchange Commission ("SEC") in 2005. The 2000 AWC letter, the 2002 arbitration award, and the 2005 SEC actions all related to incidents and/or transactions that occurred in 1999. By letter dated July 18, 2007, Justin Mills, a financial analyst for OFR, notified Mr. Lessinger as follows: In order for the application to be deemed complete, it will be necessary to provide this office with a complete response to the following [sic] a copy of the complete Form U-4, as amended, and all documents pertaining to disciplinary matters, whether disclosable on the U-4 or not.[3] Documentation submitted must be certified by the issuer of such documents. Additionally, explain in detail the status of each pending action, and for each final action, summarize the action and the disposition. Specifically, but not limited to the following: * Certified copies of any regulatory actions by any state or federal regulator, or any self-regulatory organization, including but not limited to, the complaint, answer or reply, and final order or sanction. Certified documentation must be certified by the appropriate agency. Also, provide a brief narrative describing the causes that lead [sic] to the actions. Pursuant to Rule 69W-301.002(3), Florida Administrative Code, additional information shall be submitted within sixty (60) days after a request has been made by the Office. Failure to provide all the information may result in the application being denied. Mr. Lessinger responded with a package of documents and a cover letter dated July 23, 2007. OFR received the package and letter from Mr. Lessinger on July 24, 2007. On October 9, 2007, Ryan Stokes, a financial analyst supervisor for OFR, sent an e-mail to David Locy, then the executive vice president and compliance officer of Brookstone. Mr. Stokes requested the following documents in order to complete Mr. Lessinger's application: Certified copies of the complaint, Lessinger's answer/reply, and resolution for the actions taken by the SEC, State of Maine, State of Pennsylvania,[4] NASD, and State of Ohio. Certified copies of the statement of claim, Lessinger's response, settlement/arbitration panel's decision, and proof of payment of any awards/settlement for the arbitrations filed by Joseph Orlando and Muriel Hecht. Certified copy of the petition for bankruptcy and a discharge of bankruptcy. If any of the documents are unavailable due to age, a statement from the appropriate regulator/court to that effect, will suffice. At the hearing, Pamela Epting, chief of OFR's regulatory review bureau, testified that an e-mail such as that sent by Mr. Stokes is not OFR's usual method of doing business. OFR typically sends only an initial deficiency letter such as that sent by Mr. Mills on July 18, 2007. Richard White, director of OFR's division of securities, described Mr. Stokes' e-mail as a "courtesy" that provided Mr. Lessinger "with a reminder and greater detail as to what had not yet been provided." Mr. Lessinger responded with a package of documents and a cover letter dated November 5, 2007, which were received by OFR on November 6, 2007. The cover letter stated as follows, in relevant part: As requested, I am enclosing certified copies of all of the following: SEC, State of Maine (with additional prior correspondence), NASD. Joseph Orlando and Muriel Hecht (there were no payments made since Orlando was dismissed in its entirety with regard to me and Hecht was absolved as a result of my bankruptcy). Certified copy of the Petition for Bankruptcy and Discharge. I believe the State of Pennsylvania will be submitting directly to your office. I have not yet received the certification from the State of Ohio yet [sic]. I have enclosed the original Division Order which is signed and sealed by the Commissioner of Securities. If needed, I will forward the certification as soon as I receive the documents. . . . OFR did not respond in writing to Mr. Lessinger's November 5, 2007, submission. At some point in December 2007 or January 2008, Ms. Epting spoke to Mr. Locy by telephone. She told Mr. Locy that the agency intended to deny Mr. Lessinger's application and offered him an opportunity to withdraw the application in lieu of outright denial. In an e-mail to Ms. Epting dated February 4, 2008, Alan Wolper, attorney for Brookstone and Mr. Lessinger, wrote that his clients had decided not to withdraw the application, "notwithstanding the fact that you have indicated OFR's intent to deny that application." Mr. Wolper requested that Ms. Epting send a written notice of intent to deny, stating the particular grounds for the denial of Mr. Lessinger's application. At some point after writing the February 4, 2008, e-mail, Mr. Wolper wrote a letter to OFR asserting that Mr. Lessinger's registration should be deemed granted by default due to CFR's failure either to notify Mr. Lessinger of the application's incompleteness within 30 days of his November 5, 2007, submission or to act upon the completed application within 90 days of the November 5, 2007, submission, as required by Subsection 120.60(1), Florida Statutes. In a letter dated April 23, 2008, OFR assistant general counsel Jennifer Hrdlicka responded to Mr. Wolper with the assertion that the statutory default provision had not been triggered because Mr. Lessinger had yet to submit a completed application: Mr. Lessinger's application is still deficient. He has not provided to the Office the information requested in its July 18, 2007, letter to him. Still missing from his application are: Certified copies of the complaint, Lessinger's answer/reply, and resolution for the actions taken by the SEC; Certified copies of the resolution for the actions taken by the State of Ohio; and Certified copies of the statement of claim, Lessinger's response, settlement/arbitration panel's decision, and proof of payment of any awards/settlement for the arbitrations filed by Joseph Orlando. Mr. Lessinger did submit a certified copy of the Notice of Intent to Deny Application for Securities Salesman License from the State of Ohio, dated July 9, 1997. However, he did not submit any document, certified or not, regarding the resolution from that Notice of Intent of July 9, 1997, such as a Final Order. * * * Mr. Lessinger was timely notified of deficiencies in his application on July 18, 2007, thirteen days after submittal of his application and well within the thirty (30) day period set by the Administrative Procedures [sic] Act and the Office's corresponding Rule [Florida Administrative Code Rule 69W-301.002]. Your interpretation of Florida's Administrative Procedure Act and the Office's Rules contemplates an additional thirty day time period from Mr. Lessinger's November 6, 2007, submittal of additional information; this is a mistaken interpretation of Florida statutes. Mr. Lessinger's application was not considered complete on December 5, 2007. In fact, he has not yet delivered to the Office all requested information and so his application is currently not considered complete. His application will not be considered complete until such time as all requested information is received by the Office. . . . (Emphasis added.) On April 30, 2008, Mr. Lessinger submitted to Ms. Epting an affidavit attesting that the additional documents requested by Mr. Stokes on October 9, 2007, had been submitted to the agency on November 6, 2007. At the hearing, OFR continued to assert that Mr. Lessinger's November 6, 2007, submission did not contain all the information requested by Mr. Stokes. OFR submitted into evidence a sheaf of documents purporting to be Mr. Lessinger's November 6, 2007, submission. The documents had been unstapled for copying and re-stapled, and bore no consistent marks of date stamping or numbering that would allow a fact finder to conclude with confidence that the documents had been maintained in the form they were submitted by Mr. Lessinger. Ms. Epting could testify only as to OFR's general practice in maintaining its files, not as to the manner in which this particular file had been maintained. At the hearing, Mr. Lessinger stated under oath that he had provided OFR with every document it had asked for with the exception of the final order in the 1998 Ohio denial of his application. Mr. Lessinger conceded that he had only provided OFR with the notice of intent to deny in that case. Ms. Epting testified that OFR obtained the final order directly from the State of Ohio some time during the Spring of 2008. The only other item that OFR asserted was missing from the November 6, 2007, submission was a certified copy of the SEC's 2005 order barring Mr. Lessinger from association in a supervisory capacity with any broker or dealer for a period of two years. Mr. Lessinger's November 6, 2007, submission contained what appeared to be a non-certified copy of the order. The faint image of a seal is visible on the last page, with Mr. Lessinger's notation: "Raised seal unable to make darker." Ms. Epting testified that Mr. Lessinger submitted a certified copy of the order some time around May 2008. It is found that Mr. Lessinger submitted a certified copy of the SEC's 2005 order with his November 6, 2007, submission. On May 5, 2008, OFR issued the Notice to Mr. Lessinger. In the Notice, OFR identified a third "completeness" issue that Ms. Epting testified she discovered only during her inquiry to the State of Ohio regarding the final order in the 1998 denial. As to this issue, the Notice recited as follows under heading, "Statement of Facts": On October 3, 2007, the State of Ohio, Department of Commerce, Division of Securities, issued a Notice of Intent to Deny Application for Securities Salesperson License for Lessinger, Order No. 07-387. On April 7, 2008, the State of Ohio, Division of Securities issued a Final Order against Lessinger Denying the Application for a Securities Salesperson License, Order No. 08-052. The Final Order states that on October 15, 2007, Lessinger requested an adjudicative hearing of the Notice of Intent to Deny; the Final Order further states that such a hearing was held on December 18, 2007, and on January 23, 2008, the Hearing Examiners Report and Recommendation was issued, upholding the Division's Notice of Intent. The Final Order states that the Division found that Lessinger was not of "good business repute" as that term is used in Ohio Revised Code 1707.19(A)(1) and Ohio Administrative Code 1301:6-3-19(D)(2),(6),(7),(9), and (D)(11) . . ." Notice was not given to the Office of these administrative actions by the State of Ohio. Lessinger did not update his Form U-4 until April 23, 2008, and subsequent to the Office's inquiry as to this matter; further, his update to his Form U-4 is misleading in that it cites that the date of initiation of this matter was April 7, 2008. Under the heading "Conclusions of Law," the Notice states that Mr. Lessinger's failure to update his Form U-4 constitutes a violation of Florida Administrative Code Rule 69W-600.002(1)(c)5 and therefore a basis for denial pursuant to Subsection 517.161(1)(a), Florida Statutes, which provides that violation of any rule promulgated pursuant to Chapter 517 constitutes grounds for denial of registration. The parties agreed that Mr. Lessinger's application file at OFR was complete at the time of the hearing. The Notice cited additional grounds for denial based on Subsections 517.161(1)(h) and (m), Florida Statutes, which provide: (1) Registration under s. 517.12 may be denied or any registration granted may be revoked, restricted, or suspended by the office if the office determines that such applicant or registrant: * * * (h) Has demonstrated unworthiness to transact the business of dealer, investment adviser, or associated person; * * * (m) Has been the subject of any decision, finding, injunction, suspension, prohibition, revocation, denial, judgment, or administrative order by any court of competent jurisdiction, administrative law judge, or by any state or federal agency, national securities, commodities, or option exchange, or national securities, commodities, or option association, involving a violation of any federal or state securities or commodities law or any rule or regulation promulgated thereunder, or any rule or regulation of any national securities, commodities, or options exchange or national securities, commodities, or options association, or has been the subject of any injunction or adverse administrative order by a state or federal agency regulating banking, insurance, finance or small loan companies, real estate, mortgage brokers or lenders, money transmitters, or other related or similar industries. For purposes of this subsection, the office may not deny registration to any applicant who has been continuously registered with the office for 5 years from the entry of such decision, finding, injunction, suspension, prohibition, revocation, denial, judgment, or administrative order provided such decision, finding, injunction, suspension, prohibition, revocation, denial, judgment, or administrative order has been timely reported to the office pursuant to the commission's rules. . . . As the basis for OFR's conclusions that Mr. Lessinger had demonstrated "unworthiness" as described in Subsection 517.161(1)(h), Florida Statutes, and that Mr. Lessinger was the subject of decisions, findings, injunctions and/or prohibitions as set forth in Subsection 517.161(1)(m), Florida Statutes, the Notice cited the 1993 Maine consent order, the 1998 Ohio final order denying Mr. Lessinger's application for a securities salesman license, the 2000 AWC letter from NASD, the 2002 arbitration award issued by NASD Dispute Resolution, Inc., the 2005 SEC actions, and the April 7, 2008, Ohio final order denying Mr. Lessinger's application for a salesperson's license. Petitioner's Disciplinary History During his career, Mr. Lessinger has been employed in various capacities: as a broker/registered representative, a supervisor, and a general securities principal. He has lived and worked in Florida since 1997. From November 1976 through October 1994, Mr. Lessinger was employed by First Investors Corporation ("First Investors") in New York, working his way up to senior vice president and director of the company. On December 20, 1993, Mr. Lessinger entered into a Consent Agreement with the Attorney General of the State of Maine, "for the sole purpose of effecting a settlement of the civil action against Lessinger," First Investors and other individual defendants commenced by the Attorney General and the Maine Securities Administrator in 1991. Mr. Lessinger did not admit or deny that his conduct violated the Revised Maine Securities Act. The Consent Agreement does not provide the details of the grounds for the civil action. Mr. Lessinger testified that First Investors sold mutual funds, one of which was a junk bond fund that lost a great deal of money for investors in the late 1980s. First Investors had an office in Maine, and the Attorney General instituted a civil action against First Investors and certain supervisory personnel, including Mr. Lessinger, for failure to disclose to investors the risk inherent in these bond funds. Mr. Lessinger had no customers in Maine and did not personally sell the junk bond fund to any of his clients. Under the Consent Agreement, Mr. Lessinger agreed not to apply for a license as a sales representative in Maine for a period of one year. Mr. Lessinger also agreed to pay the sum of $50,000 to the State of Maine; First Investors paid the money for Mr. Lessinger. He eventually reapplied and was approved as a sales representative in the State of Maine. In mid-1997, Mr. Lessinger moved from New York to Boca Raton, becoming president of Preferred Securities Group, Inc. ("Preferred"). Mr. Lessinger was obliged to seek licensure in the states in which Preferred had brokers, which included Ohio. In March 1998, the State of Ohio, Department of Commerce, Division of Securities issued a "Division Order" denying Mr. Lessinger's application for securities salesman license. The Division Order found that Mr. Lessinger was not of "good business repute" under the Ohio statutory and rule provisions named in the quotation portion of Finding of Fact 20, supra. The only factual basis stated for the Division Order's "good business repute" finding was the 1993 Consent Agreement with the State of Maine. On November 16, 2000, Mr. Lessinger entered into the NASD AWC letter along with Preferred and Kenneth Hynd, Preferred's financial operations principal ("FINOP"). The recipients of the AWC letter agreed that the letter would become part of their permanent disciplinary record and may be considered in any future actions brought by NASD against them. They also agreed to the following: We may not take any action or make or permit to be made any public statement, including in regulatory filings or otherwise, denying, directly or indirectly, any allegation in this AWC or create the impression that the AWC is without factual basis. Nothing in this provision affects our testimonial obligations or right to take legal positions in litigation in which the NASD is not a party. Only one of the allegations that prompted the AWC letter directly involved Mr. Lessinger. Without admitting or denying the alleged violation, Mr. Lessinger and Preferred consented to the entry of the following finding by NASD Regulation, Inc.: During the period from about March 22, 1999, until about April 21, 1999, Respondent [Preferred], acting through Respondent Lessinger, allowed an inactive registered representative to effect three securities transactions for customers, in violation of NASD Membership and Registration Rule 1120 and Conduct Rule 2110. Mr. Lessinger and Preferred also consented to the entry of a $3,000 fine, imposed jointly and severally. Mr. Lessinger paid the fine. Mr. Lessinger testified that the representative who effected the improper transactions was in Preferred's Pompano Beach branch office, which was open only from March to June 1999. The manager on premises had not notified Mr. Lessinger that a registered representative in the office was deemed "inactive" for failure to complete mandatory continuing education. On April 30, 2002, a NASD Dispute Resolution, Inc.6 arbitration panel issued an award against Mr. Lessinger in a case that had been filed by a former Preferred customer against Preferred, Mr. Lessinger, and three other individuals associated with the firm, including the owner, Anthony Rotonde, and two brokers. The initial statement of claim in the matter was filed in 1999. The claims included misrepresentation, unsuitability, breach of fiduciary duty, failure to supervise, violations of Section 517.301, Florida Statutes, and common law fraud and negligence. Mr. Lessinger was not the broker of record for the complaining customer and never had anything directly to do with her account. He did not know her. She had been a client of the two brokers for several years. As president of the company, Mr. Lessinger was ultimately responsible for supervision of the brokers, though he was not their direct supervisor. Preferred, Mr. Rotonde, and Mr. Lessinger were found jointly and severally liable on the claims of suitability and failure to supervise and were required to pay damages of $42,294.90, plus interest, costs, and attorneys' fees. The liability for attorneys' fees was expressly based on Sections 517.301 and 517.211, Florida Statutes. Section 517.301, Florida Statutes, generally prohibits fraud and deception in connection with the rendering of investment advice or in connection with securities transactions. Section 517.211, Florida Statutes, sets forth the remedies available for unlawful sales, including those in violation of Section 517.301, Florida Statutes. Subsection 517.211(6), Florida Statutes, provides for attorneys' fees to the prevailing party unless the court finds that the award of such fees would be unjust. After the arbitration award, Preferred went out of business. Mr. Rotonde was a non-licensed owner and simply walked away from the matter. Thus, Mr. Lessinger was left on the hook for the entire arbitration award. He was unable to pay it, and was forced to declare bankruptcy. In April 2004, Mr. Lessinger was named in a civil action filed by the SEC in the United States District Court for the Southern District of Florida. The SEC alleged that Preferred's Pompano Beach office was opened in March 1999 to operate as a boiler room for a "pump and dump" operation involving a penny stock, Orex Gold Mines Corporation ("Orex"). Orex claimed to be in the business of extracting gold from iron ore by means of an environmentally safe process. The SEC alleged that Orex was in fact a shell corporation owned by a "recidivist securities law violator and disbarred attorney." Though its promotional video, literature, and website touted Orex as an active, established company with gold mines, employees, and a revolutionary gold extraction process, Orex in fact owned no mines or mining equipment and had never commercially tested its claimed extraction process. As to Mr. Lessinger, the SEC's complaint alleged as follows: According to Preferred's written supervisory procedures, the form prohibited the solicitation of "penny stocks" as defined under Exchange Act Rule 3a51-1, and restricted the purchase of penny stocks unless it received an unsolicited letter, signed by the investor, requesting to purchase a particular penny stock. Despite the firm's prohibition against soliciting transactions in penny stocks, Lessinger authorized the Pompano Beach branch office's request to solicit transactions in Orex. Prior to authorizing the firm's solicitation of Orex, Lessinger simply reviewed the Orex brochure, the Orex private placement memo, and an Orex press release. He did not conduct any independent research or assessment regarding Orex's officers, assets, or prospects for success. Orex quickly accounted for a high percentage of the overall transactions conducted by Preferred's Pompano Beach branch. Although Lessinger retained responsibility for reviewing, authorizing, and approving customers' transactions in Orex stock, and although he was the senior official of Preferred and functioned as a compliance officer, he failed to exercise appropriate supervision and to take the necessary steps to ensure that Preferred, and the personnel operating out of Preferred's Pompano Beach branch in particular, complied with applicable procedures, securities laws and regulations in connection with transactions in Orex stock. The brokers in the Pompano Beach branch sold more than $3 million in Orex stock between March and July 1999 through fraudulent representations regarding the company, forgery of penny stock disclosure forms, bait and switch tactics, refusal to execute sell orders, or delaying sell orders until a buyer for the shares could be found. The stock ballooned to a value of $7.81 in late May 1999. By late July, it was trading for pennies per share. To his credit, Mr. Lessinger closed the Pompano Beach branch of Preferred after a site visit in June offered him a glimpse of the office's actual operations. However, had Mr. Lessinger showed more curiosity at the outset, or had he merely enforced the company policy against soliciting penny stock sales, the situation in Pompano Beach might never have developed. On September 7, 2005, the court entered final judgment as to Mr. Lessinger. He was permanently restrained and enjoined from: violating the fraud provisions of the Securities Exchange Act of 1934; violating the NASD Conduct Rule regarding supervision of the activities of registered representatives and associated persons; and participating in any offering involving penny stocks. He was also ordered to pay a civil penalty of $20,000. On September 23, 2005, the SEC also issued an Administrative Order making findings and imposing remedial sanctions in connection with the Orex matter. The order barred Mr. Lessinger from association in a supervisory capacity with any broker or dealer for two years, with a right to reapply at end of the two-year period. The SEC's Administrative Order left Mr. Lessinger free to continue to act as a registered representative. However, the two SEC actions rendered Mr. Lessinger statutorily disqualified from membership in the securities industry under FINRA rules. To remain active in the industry, Mr. Lessinger was required to go through the MC-400, or "Membership Continuance," process with FINRA. The Form MC-400 must be filed by a member firm on behalf of the disqualified person. In this case, Archer Alexander Securities, Mr. Lessinger's employer at the time of his disqualification, filed the MC-400 application on his behalf. However, Archer Alexander went out of business before the application could be considered. Mr. Lessinger was hired by Brookstone in April 2006. Brookstone filed a Form MC-400 with FINRA on Mr. Lessinger's behalf on May 15, 2006. Brookstone is owned by Antony Turbeville, a certified financial planner who has been licensed in the securities industry since 1987. Mr. Turbeville has never been the subject of disciplinary actions by the SEC, NASD, or the State of Florida. David Locy is currently the president of Brookstone. At the time Brookstone filed the MC-400 application for Mr. Lessinger, Mr. Locy was Brookstone's chief compliance officer. He has been a certified public accountant since 1974, licensed in the securities industry since 2003, and has never been the subject of regulatory or disciplinary action by any professional or licensing entity. Michael Classie is the branch manager and supervisor of Brookstone's Coral Springs office, where Mr. Lessinger works.7 He has been licensed to sell securities since 1995 and has never been the subject of disciplinary actions by the SEC, NASD, or the State of Florida. In its MC-400 application, Brookstone stated that Mr. Lessinger did not seek licensure as a supervisor or control person, and that Brookstone would not allow him to work in a supervisory capacity. Brookstone agreed that Mr. Lessinger would work only as a registered representative, and then only under highly controlled supervisory conditions. FINRA's Department of Member Regulation, which conducts the initial review of all MC-400 applications, recommended that Brookstone's application on behalf of Mr. Lessinger should be denied. By order dated December 13, 2006, following an evidentiary hearing, FINRA's National Adjudicatory Council ("NAC") disagreed with the recommendation of the Department of Member Regulation and granted the application, subject to approval by the SEC. The NAC's order provided as follows: After considering all of the facts, we approve Lessinger as a general securities representative with Brookstone, supervised by Classie and Locy, and subject to the following terms and conditions of employment: Classie and Locy will review, initial, and date all of Lessinger's order tickets on a daily basis; Classie will review all of Lessinger's incoming correspondence daily and will review all of Lessinger's outgoing correspondence prior to its being sent. Lessinger will print out a daily log of faxes from the fax machine for Classie to review; Classie and Locy will review every new account form for Lessinger and, if approved, sign such form; Classie will be in the office with Lessinger at least four times per week from 8:00 a.m. until 5:00 p.m. If Classie is not in the office, Lessinger will be prohibited from effecting trades on the computer and will, instead, call them in to Locy for approval; Locy will make random unannounced office visits to Lessinger's home office at least once during each calendar quarter; Brookstone will amend its written supervisory procedures to state that Classie is the primary responsible supervisor for Lessinger, and that Locy is the backup supervisor; Lessinger will provide a list of all sales contacts to Classie, including the nature of the contacts, on a daily basis; Classie will review Lessinger's written sales contacts and investigate any irregular activity; Locy will conduct five random telephone calls per quarter to Lessinger's customers to verify information or ascertain the customers' level of satisifaction; Lessinger will not participate in any manner, directly or indirectly, in the purchase, sale, recommendation, or solicitation of penny stocks (this is defined in the Court Judgment as "any equity security that has a price of less than five dollars, except as provided in Rule 3a5-1 under the Exchange Act [17 C.F.R. 240.3a51-1]"); Classie must certify quarterly (March 31st, June 30th, September 30th, and December 31st) to the Compliance Department that Lessinger and Classie are in compliance with all of the above conditions of heightened supervision; and For the duration of Lessinger's statutory disqualification, Brookstone must obtain prior approval from Member Regulation if it wishes to change Lessinger's responsible supervisor from Classie to another person. On June 29, 2007, the SEC issued a letter approving the NAC's decision to permit Mr. Lessinger to register with Brookstone as a registered representative under the heightened supervisory restrictions set out in the NAC's order. Brookstone and Mr. Lessinger have agreed that they will abide by the same list of heightened supervisory restrictions should the State of Florida approve the application at issue in this proceeding.8 As noted at Findings of Fact 20 and 21, supra, the Notice alleged that Mr. Lessinger failed to timely update his Form U-4 to disclose receipt of a Notice of Intent to Deny Application for Securities Salesperson from the State of Ohio, Department of Commerce, Division of Securities ("Ohio Notice") dated October 5, 2007. The Ohio Notice stated that on July 9, 2007, Mr. Lessinger had applied for a securities salesperson license via submission of his Form U-4, and that his application disclosed the September 23, 2005, SEC order, the April 2004 filing of the SEC complaint in the United States District Court for the Southern District of Florida, the 2000 NASD AWC letter, the NASD Dispute Resolution arbitration award, the 1998 Ohio application denial, and the Maine Consent Agreement. Based on these disclosures, the Ohio Division of Securities alleged that Mr. Lessinger was not of "good business repute" according to Ohio statutes and rules, and stated its intent to issue an order denying Mr. Lessinger's application for a salesperson's license. The Ohio Notice provided that Mr. Lessinger had 30 days in which to request an administrative hearing contesting the agency's intended denial of his application. Mr. Lessinger timely filed the appropriate documents contesting the Ohio Notice and requesting an evidentiary hearing. Immediately after receiving the Ohio Notice, Mr. Lessinger brought it to the attention of Mr. Locy, then Brookstone's chief compliance officer, in order to determine whether his Form U-4 should be amended. Only Brookstone, as the broker/dealer employing Mr. Lessinger, had authority to amend his Form U-4. Mr. Lessinger did not have independent access to the Web CRD database and thus had no ability to amend the document on his own. Mr. Locy considered the situation and decided that the Ohio Notice did not require an amendment to Mr. Lessinger's Form U-4. Because Mr. Lessinger had appealed the intended denial of his Ohio application, Mr. Locy concluded that that matter was not reportable until the Ohio action ripened into a final order. Mr. Lessinger deferred to Mr. Locy's greater expertise regarding compliance issues. Though Mr. Lessinger could not amend his Form U-4, there was no obstacle to Mr. Lessinger's directly informing OFR of the Ohio Notice. However, there was also no evidence that Mr. Lessinger attempted to conceal the existence of the Ohio Notice, or was anything other than forthright in his dealings with employers and regulatory authorities. The credible evidence established that he simply relied on the opinion of Mr. Locy. The State of Ohio issued a final order denying Mr. Lessinger's application on April 7, 2008. Upon receipt of the final order, Mr. Lessinger promptly notified his employer, and Brookstone updated Mr. Lessinger's Form U-4 on April 23, 2008, to reflect the actions of the Ohio regulators. At the hearing, Mr. Lessinger emphasized that he seeks only to act as a registered representative. Most of his clients are retirees invested in fixed-income mutual funds. They are conservative to moderate in their risk tolerance. Mr. Lessinger does not trade in their accounts on margin, and does not have discretion to make trades without express client authorization. Mr. Lessinger gets new customers through referrals. He makes no cold calls to prospective customers. Mr. Lessinger has never been the subject of a complaint by one of his own customers, and had never been disciplined for any actions he has taken as a registered representative. All of the disciplinary proceedings involving Mr. Lessinger concerned his actions in a supervisory capacity. Mr. Lessinger has forsworn any intention to ever again act in a supervisory capacity in the securities industry. Mr. Turbeville and Mr. Locy were emphatic that Mr. Lessinger would not be permitted to act in a supervisory capacity at Brookstone. Mr. Classie convincingly testified that he would closely monitor Mr. Lessinger's actions in accordance with the NAC order, and understood that failure to do so could place his own registration in jeopardy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Office of Financial Regulation enter a final order granting Petitioner's application for registration as an associated person with Brookstone Securities, subject to such heightened supervisory restrictions as the Office of Financial Regulation shall deem prudent. DONE AND ENTERED this 15th day of December, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON 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 15th day of December, 2008.
The Issue An Administrative Complaint and cease and desist order was filed by the Department of Banking and Finance on March 29, 1990, against Respondent and thirty-one other persons, alleging various violations of Chapter 517, F.S., the "Florida Securities and Investor Protection Act". The only allegation of wrongdoing by Robert Micalizio is that he offered or sold an unregistered security in violation of Section 517.07, F.S. He admits contacting investors, but claims those contacts were to obtain indications of interest (IOI) which are not proscribed. The issue for resolution in this proceeding is whether Respondent committed the alleged violation and if so, what discipline is appropriate.
Findings Of Fact The following facts are reflected in the parties' prehearing stipulation filed on February 11, 1991, and required no proof at hearing: Robert Micalizio was registered with the Department as an associated person of Thomas James Associates, Inc., from on or about February 1, 1987 until the termination of his registration with Thomas James Associates, Inc., on or about June 16th, 1989. During all times Robert Micalizio was registered with the Department, he was simultaneously registered with the National Association of Securities Dealers. He is currently employed as an associated person at Advantage Capital Corporation. Thomas James Associates, Inc., offered to the public, units, shares, and warrants of Electronic Assembly Services, Inc., from their offices in Florida. Electronic Assembly Services, Inc., was a "firm commitment" securities offering underwritten by Thomas James Associates, Inc. A unit of Electronic Assembly Services, Inc., consisted of four (4) shares of common stock plus two (2) common stock purchase warrants and was sold to the public for two dollars ($2.00) per unit. The units, shares, and warrants of Electronic Assembly Services, Inc., were securities as that term is defined by Section 517.021, Florida Statutes. The effective date of the offering (that is the date at which the units could first legally be sold) was July 6th, 1988. The initial public offering of Electronic Assembly Services, Inc., consisted of 1.5 million units which were offered to the public at two dollars ($2.00) per unit. The total number of units sold of Electronic Assembly Services, Inc., by Robert Micalizio was eleven thousand one hundred and fifty (11,150) for a total price to the customer of twenty two thousand three hundred dollars ($22,300.00). The commissions received by Robert Micalizio on these sales were approximately six hundred and thirty-nine dollars ($639.00). These facts are adduced from the evidence presented at hearing, including the weighing of credibility of the witnesses: Robert Micalizio is 29 years old, and his association with Thomas James was his first job in the securities field. Nonetheless, prior to obtaining his Series 7 Registration with the State of Florida and with the National Association of Securities Dealers (NASD), in order to sell stocks, bonds and mutual funds, he had to take and pass a test covering rules and regulations of the Security & Exchange Commission (SEC) and other matters. He also studied Florida laws governing the sale of securities. Rule 3E-600.005, F.A.C., in effect at the time Micalizio became registered, requires every applicant for registration to execute and submit a notarized affidavit attesting to the applicant's knowledge and review of the Florida Security Act. His training on how to handle clients and make sales was from salesmen at Thomas James. On or before June 21, 1988, Robert Micalizio contacted William Furnas about the purchase of units of Electronic Assembly Services, Inc. Furnas already had an account with Thomas James and had dealt with Micalizio before on other securities offerings. During that conversation Furnas placed an order for 750 units, at $2.00 a unit. He mailed his check for $1,500.00 on the 21st or 22nd to Thomas James Associates (check #1109, dated June 21, 1988). William Furnas does not remember whether Micalizio told him the securities were unregistered, but he was not told that he could cancel his order. Furnas' check appears on the Thomas James Associates office log as received on June 23rd. Because the Electronic Assembly Services offering was oversold, the company allotted only 575 units to William Furnas. The remainder of the $1,500.00 was used to purchase another security from Mr. Micalizio. William Furnas received his prospectus on Electronic Assembly Services sometime after July 13, 1988, when he received confirmation of his purchase. On June 21 or 22, 1988, Robert Micalizio contacted Dorothy Gerjovich, by telephone, at her home in Orlando. He asked her to purchase units of Electronic Assembly Services, telling her that it was a good company. She agreed to the purchase, and he told her how much she owed. He did not tell her she could cancel the transaction; nor did he tell her the securities were not registered. She wrote her check for $1,000.00 on June 22, 1988, and mailed it to Thomas James Associates, where it was logged as received on June 27, 1988. Sometime after mailing her check, Dorothy Gerjovich received her prospectus for Electronic Assembly Services. Although he does not acknowledge the date of sale, Robert Micalizio acknowledges selling Electronic Assembly Services units to Glen R. and Margaret Callin. A check from them in the amount of $1,200.00 dated June 24, 1988, and marked "for ELAS", was logged in at Thomas James Associates on June 27th. The check log was obtained by Donna Mezger, an examiner for the Department of Banking and Finance, Division of Securities, during her investigation of Thomas James Associates, Inc. It was given to her by a clerk at Thomas James upon her request when she first came to do her investigation. It is required to be maintained by SEC regulations and by the Division of Securities. Under normal circumstances, a security is registered with the Florida Department of Banking and Finance or the SEC, or both agencies. The agency review prior to registration is to determine whether the offering is fair, just and equitable and whether there is proper disclosure of material information in the prospectus. Unless and until the offering is registered, the statutory protection of the investor is not available. An "indication of interest" (IOI) is a process by which broker/dealers and associated persons try to determine how much interest there is in a public offering that is about to come to market. Many firms do firm commitment underwritings; that is, they agree to purchase securities from an issuer and resell them to the public. The IOI allows the broker/dealer to determine how much demand there is for the security he is getting ready to sell so that he can anticipate the risk. Generally an IOI is done by contacting customers and explaining the offering to them and sending them a preliminary prospectus for review. This prospectus is called a "red herring" because of the red language on the cover, alerting the customer that it is preliminary only. The preliminary prospectus is authorized during the waiting period between filing the registration statement and the time it is declared effective. The customer may indicate to the firm whether they are interested and how many shares they might purchase after the offering is determined effective. It is appropriate and legal for a broker or associate to take IOI's, as opposed to making an offer or sale, prior to the effective date of registration. The Department of Banking and Finance has an established policy of looking at whether the money has been accepted in determining whether there has been a "sale" of securities. There is no statutory definition of "indication of interest", but there are SEC statements of policy describing it. Robert Micalizio had a grasp of what an IOI is. At some point in the course of his employment with Thomas James he was instructed that an IOI is a firm commitment. He disagreed with this as he knew that the regulations provided that an IOI could be cancelled before a stock starts trading publicly. Robert Micalizio's statements regarding what he told his customers were contradictory and disingenuous. In a sworn affidavit given to Donna Mezger in which he was allowed to make changes, he stated that he told customers that an IOI is a firm commitment because that is what he was told to say. He also stated that he considered his customers as astute investors, and since it was not in a script anywhere, he would tell them they could cancel an IOI only if they asked. At hearing, he said that he always told clients that an IOI could be cancelled at anytime. It is clear that he did not tell William Furnas or Dorothy Gerjovich that they could cancel their June 1988 orders for Electronics Assembly Services units. It is also clear that these customers correctly assumed they were making purchases of securities, not simply indications of interest, when Micalizio contacted them prior to the effective date of registration. He knew that they were making that assumption, according to his statement to Donna Mezger. Petitioner has no written disciplinary guidelines, but in similar cases involving sales of unregistered securities has imposed a suspension, fine, and a registration agreement restricting the registrant's practice and requiring supervision by his employer.
Recommendation Based on the foregoing, it is hereby, recommended that a final order be entered finding Robert Micalizio guilty of violating Section 517.07, F.S., suspending his registration for two years and imposing an administrative fine of $639.00, the amount of commissions he earned on the unregistered sales. RECOMMENDED this 17th day of April, 1991, in Tallahassee, Leon County, Florida. MARY CLARK 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 April, 1991. APPENDIX TO RECOMMENDED ORDER, CASE NO. 90-2509 The following constitute specific rulings on the findings of fact proposed by the parties: Petitioner's Proposed Findings 1. and 2. Adopted in statement of the issues and preliminary statement. Adopted in paragraph 1. and 5. Adopted in paragraph 2. Adopted in paragraph 3. Adopted in paragraph 5. and 9. Adopted in paragraph 7. Adopted in paragraph 9. - 13. Adopted in paragraph 10. 14. and 15. Adopted in paragraph 11. Adopted in paragraph 12. and 18. Rejected as unnecessary. Adopted in paragraphs 8, 10 and 11. and 21. Adopted in paragraph 13. Rejected as immaterial. Adopted in paragraph 14. Adopted in paragraphs 15 and 16. and 26. Rejected as unnecessary. 27. - 30. Adopted in substance in paragraph 18. 31. Adopted in paragraph 19. Respondent's Proposed Findings of Fact Adopted in paragraph 1. Adopted in paragraph 16. Adopted in paragraph 14. Adopted in paragraph 15. Adopted in paragraph 6. Rejected as contrary to the weight of evidence. Rejected as unnecessary and immaterial. The manner by which Respondent designated the transaction, the notation itself, does not prove the transaction was an IOI. More credible evidence established that it was not. Adopted in paragraph 14. Rejected as unnecessary. and 11. Rejected as contrary to the weight of evidence. Rejected as unnecessary (as to not telling customers the stock was registered). The fact that he told customers that the IOI could be cancelled would tend to prove that even Respondent considered the Furnas and Gerjovich contacts as something more than an IOI, since he did not tell them the order could be cancelled. - 18. Rejected as immaterial. Adopted in paragraph 7, as to Furnas. Otherwise rejected as unsubstantiated by clear, competent evidence. Adopted in paragraph 9. Rejected as contrary to the evidence. There is no written policy, but a policy has been established through a series of cases dealing with discipline in a uniform manner. Adopted in paragraph 16. Rejected as unnecessary. There are plain definitions of "offer to sell" and "sale", and if the transactions meet those definitions, as these did, they are not mere IOIs. COPIES FURNISHED: Robert K. Good Asst. General Counsel Office of the Comptroller Hurston South Tower, #S225 400 W. Robinson Street Orlando, FL 32801 Gina Micalizio 237 Quayside Circle Maitland, FL 32751 Hon. Gerald Lewis, Comptroller Dept. of Banking and Finance The Capitol, Plaza Level Tallahassee, FL 32399-0350 William G. Reeves, General Counsel Dept. of Banking and Finance The Capitol Plaza Level, Rm. 1302 Tallahassee, FL 32399-0350
Findings Of Fact On March 19, 1985 petitioner, Michael Scott Symons, became employed as a financial manager with the brokerage firm of Easter Guthmann & Kramer Securities, Inc. (EGK) at 7200 West Camino Real Street, Suite 200, Boca Raton, Florida. In connection with his employment Symons filed an application for registration as an associated person of EGK with respondent, Department of Banking & Finance, Division of Securities (Division). The application was received by the Division on or about March 19, 1985 and was deemed to be complete on April 18, 1985. On that portion of the application entitled "Personal History" Symons gave 5700 Grillet Place, S.W., Fort Myers, Florida 33907 as his home address. He identified EGK's address as being 7200 West Camino Real, Suite 200, Boca Raton, Florida 33433. Although Symons signed the application he stated that EGK had actually submitted the application on his behalf since it was a common practice for brokerage firms to do administrative work on behalf of their employees. This is consistent with an agency rule (3E-600.02(3), F.A.C.) which requires that a securities dealer file and countersign the application for registration on behalf of an associated person. On March 24, 1985, or shortly after he began employment with EGK, Symons moved into an apartment at 6091 Boca Colony Drive, Boca Raton, Florida 33427. Approximately one month later, he began renting Post Office Box 3299 in Boca Raton. Symons did not inform the Division of these changes in address, or otherwise amend his application. On or about July 12, 1985 a Division bureau chief spoke by telephone with the chief financial officer of EGK and asked if EGK would voluntarily withdraw Symons' application. Later that same day, an EGK vice-president telephoned the bureau chief and advised him the firm would not withdraw the application. On July 16, 1985, the Division prepared and dated an Order Denying Application for Registration as an Associated Person. The next day a Division attorney sent a copy by certified mail to Symons' at 5700 Grillett Place, S.W., Fort Myers, Florida. Because Symons' wife had previously provided the post office with a change of address form the envelope containing the order was forwarded from Fort Myers to Post Office Box 3229 in Boca Raton. Certified mail notices were thereafter placed in the box on July 24 and July 31. However, the mail was never claimed. On August 8, 1985 the envelope was returned to the Division. It was received in Tallahassee on August 12, 1985. There is no evidence that Symons was aware the order had been mailed or that he deliberately failed to claim the letter. The agency attorney similarly assumed that Symons had not received a copy. Accordingly, it is found that at this point in time Symon had no knowledge that the July 16 order-was entered, and had been mailed to him in Fort Myers and Boca Raton. On August 19, 1985 the Division attorney again sent a copy of the July 16 order by certified mail to 7200 West Camino Real, Suite 200, Boca Raton. This was the address of EGK. According to the attorney, it was her intention to mail the order to Symons, and not his employer. The order contained the following pertinent language on page 5: Respondent is advised that Respondent may request a hearing to be conducted in accordance with the provisions of Section 120.57, Florida Statutes. A request for such hearing must comply with the provisions of Rule 28-5.201, Florida Administrative Code, and must be filed within twenty-one (21) days after receipt of this order. Otherwise, Respondent will be deemed to have waived all rights to such hearing. The certified mail receipt for the envelope containing the order was apparently signed for by Charlie Shields, an EGK employee. 1/ It eventually reached the desk of EGK's chief financial officer, James Weber, in an unopened envelope on August 23, 1985. Weber opened the envelope and read the enclosed order. He noticed on page five of the order that there was a twenty-one day time frame in which an appeal of the agency denial could be made. Believing that the twenty-one day time frame began on July 16, Weber erroneously concluded that the time to request a hearing had already expired. This was probably because he had never before seen a denial order, and was not familiar with the procedures under Chapter 120, F.S. Weber then showed the order to Edward Guthmann, a principal and vice- president of EGK. Guthmann telephoned an out- of-state attorney seeking advice on how to proceed, and sent a copy of the order to the attorney on August 23. The attorney did not take any action, and returned the order to Guthmann on an undisclosed dated between late August and the middle of September. On September 17 Weber "came to the realization" that under any interpretation of the order the time frame in which to request a hearing had run. He then contacted petitioner's present counsel on September 17 to discuss obtaining legal representation for Symons. Symons has continued using that counsel since that time. A petition for hearing was eventually filed with respondent on October 1, 1985. This petition was denied by agency order entered on October 16, 1985 on the ground Symons had "constructive receipt and notice of the Denial Order at the time of its delivery by U.S. Certified Mail to Respondent's personal address on July 24 1985, and furthermore, deems Respondent to have received actual notice. . . on August 25, 1985, when the Denial Order was claimed and signed for at EGK's address as listed on the application." Neither Weber or Guthmann informed Symons prior to September 15 that they had received the Division order, or that the document even existed. They also did not advise him that they had contacted an out-of-state attorney in August in an effort to obtain advice. In this regard, petitioner had not authorized them to take any action with respect to the denial order, or to seek the advice of an attorney. Symons was unaware of the existence of the denial order prior to September 20, 1985 when he was shown a copy of the order by his employer. Had he been aware of the order prior to September 15, he would have filed a request for a hearing. Even though he did not specifically voice an objection to his employer opening his mail, Symons did not expressly authorize his employer to accept the order or any other notices from respondent. Indeed, Symons considered certified mail to be "a personal thing," and something that "an employer has (no) right to open."
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered finding that petitioner timely requested an administrative hearing to contest respondent's denial of his application for registration as an associated person. DONE and ORDERED this 4th day of December, 1986 in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER 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 4th day of December, 1986.
Findings Of Fact Petitioner filed application for registration with respondent a a securities agent with First Florida Securities Inc., Pompano Beach, Florida, on March, 1977. Although he met the various statutory and regulatory procedural requirements for registration, on or about May 19, 1977, he was advised by the Director, Division of Securities, of intended denial of his application and advised of his right to petition for an administrative hearing. Petitioner did so request a hearing on June 2, 1977. The stated ground for the proposed denial of the application in accompanying "Administrative Charges and Complaint" was as follows: "The license application of respondent was refused or denied by the Division of Securities, Department of Banking and Finance, State of Florida, by stipulation and consent on February 18, 1976. Said denial constitutes prima facie of unworthiness to transact the business of a securities salesman In the State of Florida." The above-mentioned "Stipulation and Consent" resulted from a prior application denial by respondent of an application by MFP Petroleum Exploration and Investment, Inc., its officers and salesman, including petitioner. The grounds for denial of petitioner's application in that instance were that he had sold unregistered securities in the form of shares in oil drilling ventures in violation of Section 517.07, F.S., while not registered as a securities salesman in further violation of Section 517.12(1), F.S. The various parties in that administrative proceeding consented to the denial of their applications by stipulation without admitting the allegations of respondent. (Exhibits 1, 2, 4, 5) Petitioner has never been registered with respondent as a securities dealer, agent or salesman. He testified that when he joined MFP sometime in 1974, its president, Mark F. Preddy, led him to believe that one selling interests in oil drilling ventures need not register as a salesman in Florida. Consequently, he sold such interests to clients for several months before he learned that it was necessary for him to be so registered. Some nine months after commencing employment with MFP, he went to Shreveport, Louisiana, to take securities examinations for Florida and the NASD. After waiting approximately three months more to obtain the results of the MFP application for registration, he resigned from the firm. He admitted selling during the entire nine-month period in which he had been associated with MFP, even though he knew during a substantial portion of that period that registration was required. After his resignation, he authorized an attorney to execute the "Stipulation and Consent" which authorized respondent to deny his application for registration. (Testimony of Weber, Exhibits 2, 3, 5) A client of petitioner testified as to the latter's honesty and conscientiousness. (Testimony of Hansis) Respondent's Assistant Director, Division of Securities, stated the Division's position that although it felt justified in denying petitioner's current application, it would be amenable to reevaluate any application submitted one year from the final order in this proceeding and, if petitioner's record was clear and he otherwise met requirements for registration, it would issue the same on a supervised basis for a period of one year. (Testimony of Brandi)
Recommendation That petitioner Paul Anthony Weber be issued a certificate of registration as a securities salesman pursuant to Chapter 517, Florida Statutes. DONE and ENTERED this day of August, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Ryland Terry Rigsby, Esquire Assistant General Counsel Office of the Comptroller Legal Annex Tallahassee, Florida 32304 Paul Anthony Weber 1745 Northeast Fifty-Second Street Ft. Lauderdale, Florida 33308
Findings Of Fact Respondent has been employed in the securities industry since approximately 1957. He has worked for a number of broker/dealers over the years and is familiar with the procedures involved in transferring employment from one broker to another. It is the custom in the securities industry that when a securities salesperson changes employment, forms U-4 and U-5 are filed with the National Association of Securities Dealers. As registration is approved by that organization and by the various states involved, the states give that information to the National Association of Securities Dealers, which in turn gives that information to the securities firm which employs the associated person seeking registration, and that brokerage firm in turn notifies the applicant. Respondent began to work at Alison Baer Securities, Inc., in September, 1988, and remained employed there until February, 1989. When he associated himself with Alison Baer, Respondent applied for registration as an associated person with that company. As is the proper procedure, he submitted a U to the National Association of Securities Dealers. While waiting for his registration to be approved, Respondent maintained telephone and personal contact with his own clients. He did not, however, sell or offer to sell securities until after he was sure his registration was approved. Respondent's application for registration as an associated person with Alison Baer Securities, Inc., was approved by the National Association of Securities Dealers and was also approved by the states of New York, Texas, Georgia, Florida, and Oklahoma. In late October of 1988, Jeffrey Britz, the President and Chief Executive Officer of Alison Baer Securities, told Respondent that his registration as an associated person with Alison Baer Securities had been approved by the state of Florida. In fact, Respondent was not registered as an associated person by the state of Florida until December 7, 1988. Respondent did not attempt to directly confirm with the Department of Banking and Finance his registration as an associated person with Alison Baer Securities. Respondent has applied for registration with the Department as an associated person with Shamrock Partners, Ltd. The Department denied that application based solely on the allegations which are the subject matter of this proceeding.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding Respondent not guilty of the allegations contained in the Administrative Complaint, dismissing the Administrative Complaint filed against him in this cause, and granting his application for registration with the Department as an associated person with Shamrock Partners, Ltd. DONE and ENTERED this 14th day of February, 1992, at Tallahassee, Florida. LINDA M. RIGOT 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 14th day of February, 1992. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed finding of fact numbered 27 has been adopted in this Recommended Order. Petitioner's proposed findings of fact numbered 1-5, 11-14, 16-18, 23- 26, 28, 29, and 31-34 have been rejected as not constituting findings of fact but rather as constituting conclusions of law, argument of counsel, or recitation of the testimony. Petitioner's proposed findings of fact numbered 6-10, 15, 19, and 30 have been rejected as being subordinate to the issues involved in this proceeding. Petitioner's proposed findings of fact numbered 20-22 have been rejected as not being supported by any competent evidence. COPIES FURNISHED: Deborah Guller, Esquire Assistant General Counsel Office of the Comptroller Suite 211 111 Georgia Avenue West Palm Beach, Florida 33401 Richard Doggett, Esquire 808 Northeast 3rd Avenue Fort Lauderdale, Florida 33304 Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0350
Conclusions The Office of Financial Regulation ("Office") issued a denial of Petitioner’s application to become licensed as an “associated person”. Petitioner in turn filed a Petition for Administrative Hearing, which the Office referred to the Division of Administrative Hearings ("DOAH"). The assigned Administrative Law Judge ("ALI") held a formal administrative hearing, and entered a Recommended Order thereon. That Recommended Order of November 17, 2604, is attached to this Final Order, and incorporated herein by reference.
The Issue There were originally three counts in the Administrative Complaint. Count II was dismissed by the Petitioner Board at the beginning of the hearing. Count I alleges that the Respondents failed to refund a fee as required by the contract and the statutes; and Count III alleges that Respondents employed unlicensed persons as sales personnel. Based upon the stipulation of the parties, the primary issue in Count I was whether the Respondents refused the refund in bad faith or under color of some right to the fee. The issue in Count III was whether the activities engaged in by the unlicensed persons were regulated activities.
Findings Of Fact Count I Sav-On Rentals, Inc. (Sav-On), is a licensed corporate real estate broker located in Orlando, Florida, holding License #211231. Carl Stuart Courtney is the active broker for Sav-On and holds Licenses #0211232 and #0017643. Both Respondents were licensed at all times pertinent to the allegations in the Administrative Complaint. Susan Young and A. J. Stephens went to Sav-On on July 18, 1980, seeking information on renting a house. They executed a contract with Sav-On, paid the required $40 fee, and were given data on houses for rent. The contract contains the following pertinent language: . . .Notice: Pursuant to Florida Law: If the rental information provided under this contract is not current or accurate in any material aspect, you may demand within 30 days of this contract date a return of your full fee paid. If you do not obtain rental information you are entitled to receive a return of 75 percent of the fee paid, if you make demand within 30 days of this contract date. . . That night Young and Stephens changed their minds about renting a house. The next day they called Sav-On and requested a refund of their fee. Young rented an apartment from an apartment complex. On August 14, 1980, Stephens prepared the written refund request at Sav-On. Sav-On had a listing for the sublease of an apartment in the same complex in which Young rented her apartment. There is no evidence that Sav-On gave Young or Stephens any information on that sublease, or that Young rented her apartment based on her contact with Sav-On. Sav-On denied the refund on the basis that Young had leased a property available through Sav-On. As of the date of the hearing, Young and Stephens had not received a refund. Count II Christopher LaFrance, a licensed real estate salesman, was one of the first licensees hired by Sav-On Rentals, Inc., after its incorporation in July of 1979. He was employed until January, 1980. When LaFrance was first hired, there were several unlicensed clinical staff employed by Sav-On. These employees were holdovers from Sav-On's non- licensed business. One of the unlicensed persons, Dawn (last name not stated), was responsible for telephone service to persons already registered. She provided additional listings to persons already registered with Sav-On. Another of the unlicensed persons was Stephanie (last name not stated), who was a verifier. She called listings to determine if they were unrented and still available. Stephanie and Dawn were not licensed at the times in question. Between July of 1979, and January, 1980, these unlicensed personnel were gradually replaced by licensed persons.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, and considering the facts in mitigation, the Hearing Officer recommends that the Respondent, Carl Stuart Courtney, receive a letter of reprimand for violation of Section 475.25(1)(d), Florida Statutes; and that the Respondent, Sav-On Rentals, Inc., be placed on probation for a period of six months for the violation of Section 475.25(1)(d), Florida Statutes. DONE and ORDERED this 15th day of March, 1982, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN, 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 15th day of March, 1982. COPIES FURNISHED: Salvatore A. Carpino, Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Ronald W. Brooks, Esquire 338-D North Magnolia Avenue Orlando, Florida 32801 C. B. Stafford, Executive Director Board of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Samuel Shorstein, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301
