The Issue Whether Respondent committed the violations alleged in the Administrative Complaint? If so, what disciplinary action should be taken against him?
Findings Of Fact Based upon the evidence adduced at hearing, admissions made by Respondent, and the record as a whole, the following Findings of Fact are made: The Department is a state government licensing and regulatory agency. Respondent is now, and has been at all times material to the instant case, a licensed real estate broker in the State of Florida. He holds license number 0265883. In March of 1990, Ulrich Wingens, by and through his attorney, Charles Burns, entered into a written contract to purchase from Jupiter Bay Shoppes Ltd. (hereinafter referred to as "JBS") certain commercial property located in Palm Beach County. Respondent brokered the sale. The sale contract provided that JBS was responsible for payment of Respondent's broker's fee of $50,000.00 and that such compensation was to "[t]o be due and payable only if closing occur[red]." Respondent received a $20,000.00 earnest money deposit from Wingens in connection with the sale. The sale contract provided that the $20,000.00 was to be held in the Jim Towns Realty escrow account. The sale did not close. Litigation between Wingens and JBS ensued. During the pendency of the litigation, the parties instructed Respondent to continue to hold Wingens' $20,000.00 earnest money deposit in escrow until they advised him to do otherwise. Wingens and JBS settled their dispute before the case was scheduled to go to trial. On November 14, 1991, the judge assigned to the case, Palm Beach County Circuit Court Judge Edward H. Fine, entered an order directing Respondent "to immediately transfer to Fleming, Haile & Shaw, P.A. Trust Account the escrow deposit in the amount of $20,000.00 and any accrued interest thereon." Respondent did not comply with the order. He had appropriated the $20,000.00 for his own personal use and benefit and was not holding it in escrow. This was contrary to the instructions he had received from Wingens and JBS. At no time had Wingens or JBS authorized Respondent to take such action. Wingens' attorney, Burns, brought the matter to the attention of the Department. The Department assigned one of its investigators, Terry Giles, to the case. As part of her investigation, Giles interviewed Respondent. During the interview, Respondent admitted to Giles that he had closed his real estate office in October of 1991 and had not at any time prior to the interview notified the Department of the closure. At the time he closed his office, Respondent's real estate broker's license was still in active status.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law it is hereby recommended that the Commission enter a final order finding Respondent guilty of the violations alleged in Counts I, II, III and IV of the Administrative Complaint and revoking his real estate broker's license. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 16th day of August, 1993. STUART M. LERNER 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 16th day of August, 1993. APPENDIX TO RECOMMENDED ORDER, CASE IN CASE NO. 93-1315 The following are the Hearing Officer's specific rulings on the "findings of facts" proposed by the Department in its post-hearing submittal: Accepted as true and incorporated in substance, although not necessarily repeated verbatim, in this Recommended Order. First sentence: Accepted as true and incorporated in substance; Second sentence: Accepted as true, but not incorporated because it would add only unnecessary detail to the factual findings made by the Hearing Officer. 3-13. Accepted as true and incorporated in substance. 14-15. Accepted as true, but not incorporated because they would add only unnecessary detail to the factual findings made by the Hearing Officer. Accepted as true and incorporated in substance. Accepted as true, but not incorporated because it would add only unnecessary detail to the factual findings made by the Hearing Officer. Accepted as true and incorporated in substance. COPIES FURNISHED: Janine B. Myrick, Esquire Senior Attorney Department of Business and Professional Regulation, Division of Real Estate Legal Section, Suite N 308 Hurston Building, North Tower 400 West Robinson Street Orlando, Florida 32801-1772 Mr. James C. Towns 7101 Smoke Ranch Road #1007 Las Vegas, Nevada 89128 Darlene F. Keller, Division Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900 Jack McRay, Esquire General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: At all times relevant hereto, respondent, Columbus Equities International, Inc. (Columbus Equities), was registered as a broker/dealer with petitioner, Department of Banking and Finance, Division of Securities and Investor Protection (Division), having been issued broker/dealer registration number 30936. The business address of the firm was 6321 East Livingston Avenue, Reynoldsburg, Ohio. Respondent, Roger L. Parsons, was registered with the Division as an agent with Columbus Equities. He was also registered with the National Association of Securities Dealers (NASD) as the financial and operations principal, general principal and representative of Columbus Equities. As such, Parsons was responsible for supervising the employees of Columbus Equities. Similarly, under the terms of Rule 3E-600.002(4), Florida Administrative Code, Columbus Equities was also responsible for the acts of its employees. Prior to June 1990, Columbus Equities was known as Parsons Securities, Inc. The business was originally formed in 1978 by Parsons, who is majority stockholder and serves as its president, secretary and director. In June 1990, the firm's name was changed to Columbus Equities International, Inc. In January 1991, Columbus Equities filed for protection under Chapter 7 of the Federal Bankruptcy Law. When the events herein occurred, Vincent C. Lombardi was registered with the NASD as general securities principal, representative and registered options principal of Columbus Equities. Lombardi's business address was 450 Tuscarora Road, Crystal Bay, Nevada, where he managed the Nevada branch office of Columbus Equities. Except for Ohio, Lombardi was not registered to sell securities in any other state, including Florida. In the fall of 1990, a Division financial analyst, Joanne Kraynek, received a letter from the Nevada Securities Commission. Based upon that letter, Kraynek wrote a letter on November 21, 1990, to "Parsons Securities/Columbus Equities International, Inc." regarding that firm's alleged sale of unregistered securities to a Florida resident. The letter requested various items of information. On December 6, 1990, Lombardi replied to Kraynek's letter on behalf of Columbus Equities and enclosed a number of documents in response to her request. Based upon this information and a subsequent investigation by the Division, the following facts were determined. On May 31, 1990, Charles D. Flynn conducted a transaction on behalf of his wife, Susan, for the purchase of 4,933 shares of World Videophone, an unregistered security. On June 22, 1990, Flynn purchased 2,500 shares of White Knight Resources Limited on behalf of his wife. That security was also not registered in the State of Florida. On July 9, 1990, Flynn purchased an additional 2,000 shares of White Knight Resources Limited on behalf of his wife. In each transaction, the trade was executed by Lombardi from the Nevada branch office of Columbus Equities. When the sales occurred, Flynn and his wife resided at 2045 Parkside Circle South, Boca Raton, Florida. In finding that the Flynns were Florida residents at the time of the trades, the undersigned has rejected a contention by Parsons that Flynn purchased the stocks while residing in Canada and thus the transactions were not subject to the Division's jurisdiction. Evidence of these transactions and the Flynns' Florida domicile is confirmed by the deposition testimony of Mr. Flynn, admissions by Lombardi, and copies of the order tickets from the Nevada branch office. The order tickets reflect the code "MM" (market maker), which means that Columbus Equities held the securities in its own inventory and did not have to go to an outside source to obtain the stocks. Thus, Parsons (on behalf of Columbus Equities) should have been familiar with these securities. However, at hearing he acknowledged that he was not. This in itself is an indication that Parsons was not properly supervising his employees. Finally, there was no evidence that the three transactions were exempt within the meaning of Sections 517.051 and 517.061, Florida Statutes, and thus were beyond the Division's jurisdiction. As the principal for Columbus Equities, Parsons was responsible for supervising the activities of both Lombardi and the Nevada branch office. Indeed, section 27, article III of the NASD Rules of Fair Practice requires that a NASD member such as Parsons supervise the activities of all associated persons to insure that those persons are complying with all securities laws and regulations. In order to fulfill this duty, Parsons should have reviewed on a timely basis the monthly statements generated by the Nevada office as well as that office's new account applications. For the reasons stated hereinafter, Parsons' review of Lombardi's activities was neither complete nor timely. The Flynn account was opened by Lombardi in April 1990 and Lombardi was the only employee who dealt with the Flynns. Parsons had no knowledge that the Flynn account had been opened because he did not review new account applications. This failure to review new account applications prevented Parsons from detecting whether Lombardi was selling securities in states such as Florida where he was not registered. Lombardi was required to send Parsons a monthly statement reflecting the activity of the branch office. During his review of the May statement in the second or third week of June 1990, Parsons became aware of the first Flynn transaction. Just prior to that, Parsons had learned that Lombardi had also engaged in another illicit trade. In addition, Parsons subsequently became aware of at least four other transactions (including two more with the Flynns) involving the sale of securities by Lombardi in states where he was not registered. However, except for a verbal warning given to Lombardi to discontinue that type of trade, Parsons took no disciplinary action against Lombardi until September 13, 1990, when Lombardi was terminated as an employee and the Nevada branch office closed. By failing to review the new account applications and to take prompt action against Lombardi after having learned of his indiscretions, Parsons failed to properly supervise his employees. Rule 3E-600.014(6), Florida Administrative Code, requires that each member establish, maintain and enforce written procedures governing the conduct of its employees to ensure compliance with all security laws and regulations. To this end, Parsons developed a policy (compliance) manual which was to serve as a guide in the conduct of all employees of Parsons Securities, Inc. and its successor, Columbus Equities. A copy of this manual should have been given to each employee, including Lombardi, for his or her review. However, Parsons did not know if Lombardi ever received and reviewed the manual. In addition, the manual itself was deficient in that it failed to indicate whether employees were to be given a copy for review, and it contained no provisions for taking disciplinary action against an agent if he violated a manual proscription. By failing to develop and utilize an appropriate manual, respondents violated the above cited rule.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered by petitioner finding respondents guilty of all violations alleged in the administrative complaint, ordering respondents to cease and desist all unlawful activities, and imposing a $5,000 fine, jointly and severally, against them. DONE and ENTERED this 26th day of May, 1992, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of May, 1992.
The Issue The issues for determination in this proceeding are whether Respondent, by and through his employees: (a) sold unregistered securities in the secondary market which were marked up in excess of 10 percent of the prevailing market price and which were not exempt from registration; (b) permitted an agent to service accounts prior to the agent's effective date of registration in the State and concealed such action; and (c) failed to maintain minimum net capital requirements for his corporation; and (d) failed to properly supervise the activities of his employees and agents.
Findings Of Fact Respondent owned the stock of a holding company and was an officer in a wholly owned subsidiary of the holding company. Respondent and another individual owned the stock of Dean, Johnson and Burke Holding Company ("Holding"). Holding owned the stock of Dean, Johnson and Burke Securities, Inc. ("Securities"). Respondent was the Secretary of Securities. Respondent had ultimate responsibility for disbursements and profits for Holding and Securities. Respondent monitored the checkbooks and daily expenses for Securities. Respondent's accountant provided financial information to Respondent concerning the daily operations of both companies. The information was provided on forms supplied by Respondent. Respondent kept a daily record of how much each company made or lost, how much was owed, and other accounting information. Respondent made sure that the bills were paid and that the credit of each company remained good. Respondent also controlled the hiring of key personnel. Brent A. Peterson was a manager and principal for Securities. 2/ Mr. Peterson set prices for the firm. Mr. Peterson engaged in transactions in which prices were set for securities to be sold to customers in excess of 10 percent above and below the prevailing market price. Out of 457 trades, approximately 38 were sold at prices that exceeded a 10 percent markup (the "marked up securities"). The marked up securities were sold at prices in excess of 10 percent of the prevailing market rate. The National Association of Securities Dealers, Inc., ("NASD") determined that the securities were marked up in excess of 10 percent of the prevailing market price based upon Securities' contemporaneous costs. When a dealer is simultaneously making a market in a security (a "market maker"), the NASD looks to the prevailing market price for the purpose of determining if a markup exceeds 10 percent. The prevailing market price is the price at which dealers trade with one another, i.e., the "current inter-dealer market." 3/ When a dealer is not simultaneously making a market in a security (a "non-market maker"), the contemporaneous costs of the dealer are used for the purpose of determining if the securities have been marked up in excess of 10 percent. The contemporaneous costs reflect the prices paid for a security by a dealer in actual transactions closely related in time to the dealer's retail sales of that security. Such a standard is normally a reliable indication of prevailing market price in the absence of evidence to the contrary. Securities was not a market maker in the marked up securities. Even though securities may be sold at the same market price by one firm that is a market maker and one that is not a market maker, the latter may be deemed by the NASD to have marked up the security by more than 10 percent depending on the firm's contemporaneous costs. Many of the marked up securities were sold to customers at the same market price as that the customers would have paid other brokerage houses. 4/ Since Securities was not a market maker in the marked up securities, the standard used by the NASD to determine the amount of markup was the contemporaneous costs paid by Securities. The securities involved in the 38 trades were marked up more than 10 percent over Securities' contemporaneous costs. Respondent sold unregistered securities that were not exempt from registration. Unregistered securities may be sold if they are reasonably related to the current market price. The marked up securities were not reasonably related to the prevailing market price because they were marked up more than 10 percent over Securities' contemporaneous costs. Robert M. Long sold securities to customers as an employee of Securities prior to the effective date of his registration with Petitioner. Mr. Long was registered with Petitioner as a registered representative on May 18, 1988. Mr. Long was employed by Securities, from April 19, 1988, through September 20, 1989. Mr. Peterson advised Mr. Long that Mr. Long was authorized to trade securities. Pursuant to Mr. Paterson's advice, Mr. Long sold securities in Tel-optics prior to the effective date of his registration with Petitioner on May 18, 1988. Respondent concealed the sale of securities by Mr. Long prior to the effective date of his registration with Petitioner. Mr. Long's registered representative number was 34. Relevant order tickets showed Mr. Long as the person engaged in the sale of securities prior to May 18, 1988. Registered representative number 30 had been used on the order tickets at the time of the trades. After Mr. Long was registered with Petitioner, Mr. Long's number 34 was added to the order tickets and number 30 was crossed out. Securities operated with a net capital deficiency of approximately $30,000. The net capital deficiency resulted from the failure to accrue liabilities. The net capital deficiency was discovered by Mr. Long and Jeff Clark, an examiner for the NASD. The invoices for bills for the unaccrued liabilities were not filed where bills and invoices were normally filed and were found by Mr. Long concealed in drawers and other remote locations in the office. The net capital deficiency was discovered by Mr. Long on August 28, 1989, but not reported to Petitioner until September 19, 1989. Mr. Long did not notify Petitioner of the net capital deficiency at Securities until the deficiency could be verified by Mr. Clark.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order finding that Respondent is guilty of committing the acts alleged in the Administrative Complaint, requiring Respondent to cease and desist from all violations of Florida statutes and rules, and imposing a fine in the aggregate amount of $9,000. The fine should be imposed in the amount of $2,000 for selling securities in excess of a 10 percent markup and $3,500 for each of the other two acts that constituted violations of applicable statutes and rules. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 25th day of July, 1991. DANIEL MANRY 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 25th day of July, 1991.
The Issue The issue in this case is whether the Respondent, the Department of Revenue (the Department or DOR), should grant the Petitioner's application for a consumer's certificate of exemption as a "religious institution," as set forth in Section 212.08(7)(o)(2)b, Florida Statutes, (1997).
Findings Of Fact The Petitioner, the Beacon of Faith Ministries, applied for a consumer's certificate of exemption from sales and use tax on or about February 17, 1998, claiming to be an exempt religious institution. On or about February 27, 1998, the Department requested additional information, which was received on March 12, 1998. On April 29, 1998, the Department gave notice of intent to deny Petitioner's application for an exemption certificate on the ground that Petitioner did not qualify as a religious organization under Section 212.08(7)(o)(2)b., Florida Statutes (1997). The Petitioner's application and additional information demonstrate: (1) that the Petitioner "does not have an established physical place of worship at which nonprofit religious services and activities are regularly conducted and carried on"; and (2) that the Petitioner "is not a state, district, or other governing or administrative office the function of which is to assist or regulate the customary activities of religious organizations or members." Upon receipt of the Notice of Intent to Deny issued by the Department, Petitioner responded with a document entitled "Christian Church Response to Notice of Intent to Deny," dated May 4, 1998. This document demanded the issuance of an exemption certificate. It contended that the Petitioner was entitled to an exemption as a matter of constitutional right and that the Department had no jurisdiction or authority to deny the Petitioner an exemption regardless whether the Petitioner had "an established physical place of worship" or whether the Petitioner was "a state, district, or other governing or administrative office." The document contained no specific language requesting a hearing. The Petitioner did not appear at final hearing; no evidence was introduced in support of the Petitioner's application, other than the Department's file on the matter.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order denying the Petitioner's application for a consumer's certificate of exemption from sales and use tax. DONE AND ENTERED this 10th day of September, 1998, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON 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 Filed with the Clerk of the Division of Administrative Hearings this 10th day of September, 1998. COPIES FURNISHED: Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera, General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Frank Madden, Pastor Beacon of Faith Ministries 4255 Gulf Drive Holmes Beach, Florida 34217 George C. Hamm, Esquire Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314
The Issue The central issue in this case is whether Petitioners' applications for registration should be approved or denied.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, I make the following findings of fact: On January 26, 1988, KC Securities, Inc. (KC) filed an application for broker-dealer registration. Ted Casey Kata was identified as the president and principal owner of KC. Question 7E. of the application asked: Has any self-regulatory organization or commodities exchange ever: * * * (2) found the applicant or a control affiliate to have been involved in a violation of its rules? The answer KC gave to question 7E.(2) was "yes". Question 7G. of the KC application asked: Is the applicant or a control affiliate now the subject of any proceeding that could result in a "yes" answer to parts A-F of this item? The answer KC gave to question 7G. was "yes." The "control affiliates" whose conduct caused KC to answer in the affirmative to the questions noted above are Ted C. Kata and Mary S. Kata. KC has not previously been registered as a broker-dealer. Petitioner, Mary S. Kata, filed an application for securities industry registration and requested registration as a general securities principal, financial and operations principal, and municipal securities principal. According to the application, Mary S. Kata has been unemployed since October, 1985. Previously, Mary S. Kata was the financial principal for TK Securities. Prior to working for TK, Mrs. Kata worked for Cooper Investments, Inc. and Southeast Securities of Florida, Inc. Mrs. Kata later amended her request to seek registration as an associate with KC. Petitioner, Ted C. Kata, filed an application requesting registration as a general securities principal and a municipal securities principal. According to the application, Ted C. Kata has been unemployed since October, 1985. Previously, Mr. Kata had owned and been the principal for TK Securities, he had managed Cooper Investments, Inc., and had owned and managed Southeast Securities of Florida, Inc. The National Association of Securities Dealers, Inc. (NASD) is a self- regulatory organization comprised of securities dealers of which Ted C. Kata and Mary S. Kata were members. Ted C. Kata, entered the securities business as a registered associate in 1965. In 1973, he purchased a general securities business known as First Broward Securities, Inc. Later, Mr. Kata changed the name of First Broward to Southeast Securities of Florida, Inc. (Southeast). On March 3, 1976, Ted C. Kata, as registered principal of Southeast, and Southeast were censured and fined by NASD based upon a violation of Article III, Sections 1 and 32 of the NASD Rules of Fair Practice. This violation was based upon Southeast's failure to obtain and maintain a blanket fidelity bond as prescribed by NASD requirements. The amount of the fine assessed against Mr. Kata was $400 plus costs in the amount of $20. Mr. Kata considered this a minor infraction but took steps to correct the situation and did obtain the required bond. On November 17, 1978, the NASD filed a complaint against Southeast and Ted C. Kata, the registered principal. This complaint alleged Southeast and Kata had violated several provisions of Article III of the Rules of Fair Practice which were set forth in six separate causes. After hearing on the issues, NASD entered findings which determined Kata had operated in a deceptive manner, had presented a false accounting of the firm's income and capital, and had taken excessive mark-ups. As a result, Mr. Kata was censured and fined $500 and was required to pay costs totaling $1,636. Mr. Kata paid this fine but felt that the investigators had not understood the true facts of the case. On October 9, 1986, the NASD filed a complaint against TK Securities, In., Ted C. Kata and Ruth Elaine Berry. Mr. Kata was charged as the sole general securities principal for TK. This complaint alleged violations related to a failure to maintain sufficient net capital, failure to make and keep current records, and failure to file a correct FOCUS report. In accepting an offer of settlement, the NASD censured Mr. Kata and fined him in the amount of $1000. Again, Mr. Kata paid the fine as required. In the latter part of 1985, James Stibal sued Ted C. Kata and alleged, among other complaints, that Mr. Kata had represented the Stibals in their stock transactions and that Mr. Kata had made numerous false or misleading statements to induce the Stibals to invest. According to Mr. Kata this case was settled when he agreed to pay approximately $22,000 to the Stibals. On December 14, 1987, the Securities and EXCHANGE Commission (SEC) took action against Mary S. Kata. The SEC had charged that Mrs. Kata had willfully aided and abetted violations of the Securities EXCHANGE Act by failing to make and keep current books and records for a company for which she served as the financial principal. The settlement, offered by Mrs. Kata and accepted by the SEC, suspended Mrs. Kata for a period of six months from association in a proprietary or supervisory capacity with any broker, dealer, municipal securities dealer, investment company or investment advisor. It should be noted that the acts complained of against Mrs. Kata in the SEC action and the acts complained of by the NASD against Mr. Kata and Berry resulted from errors allegedly committed at TK. According to Mr. and Mrs. Kata, TK was sold two months prior to the incidents which gave rise to these complaints. The Katas maintained that the acts complained of occurred while Mrs. Berry was operating TK. However, the record is clear that Mr. Kata remained as the principal for TK and Mrs. Kata remained as the financial principal for TK during all periods in question. In fact, the Katas remained employed at TK despite the change in ownership. Further, Mr. Kata continued to advise Mrs. Berry and the staff from time to time on matters regarding the business. Approximately two months after the sale of TK, the company went into liquidation by the Securities and Investor Protection Corporation (SIPC). During the liquidation period, Mrs. Kata assisted the trustee to locate and process records. Leonard Simons has known Ted C. Kata since 1968. Mr. Kata handled Mr. Simons' investment account for a number of years. Mr. Simons found that his sales and purchases were promptly confirmed, that he was always paid correctly, and that Mr. Kata's brokerage rates were competitive. If given the opportunity, Mr. Simons would trade with Mr. Kata again. Mr. Simons was unaware of the NASD actions against Mr. Kata. George Brown has known Ted C. Kata since 1964. Mr. Brown and Mr. Kata studied to become NASD members at the same time, and Mr. Brown subsequently worked both with and for Mr. Kata. Mr. Brown stated that Mr. Kata has always confirmed trades accurately and promptly, has always been fair and considerate, and brought to the attention of salesmen in his employ the applicable rules and regulations. Mr. Brown intends to register with Mr. Kata again if the applicant is approved and considers Mr. Kata worthy to be in the securities business. Christopher Constable has known Ted C. Kata since 1972. Mr. Constable worked for Mr. Kata as an associate of all of the brokerage firms for which Kata served as principal for the period 1973-1985. Mr. Kata required that Mr. Constable and the other sales associates review all new rules and regulations. Mr. Constable knows of no complaints from customers while he was associated with Mr. Kata. Mr. Constable believes Mrs. Kata to be an excellent bookkeeper and believes both Katas to be worthy to engage in the securities business. Mr. Constable was not aware of the NASD actions against Mr. Kata. Don Saxon is the director of the Division of Securities and Investor Protection. According to Mr. Saxon, the NASD actions against Mr. Kata are the type which would result in revocation of registration since the violations were related to failures in books and records keeping, illegal markups, and since the Katas were principals of the company which went into SIPC liquidation.
Recommendation Based on the foregoing, it is RECOMMENDED: That the Department of Banking and Finance, Division of Securities and Investor Protection, Office of the Comptroller enter a final order denying the registration applications of the Petitioners. DONE and RECOMMENDED this 22nd day of December, 1988, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH 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 22nd day of December, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-2493 RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY PETITIONERS: Paragraphs 1 through 9 are accepted. With regard to paragraph 10, the first sentence is accepted. The remainder of paragraph 10 is rejected as contrary to the weight of the evidence, irrelevant or immaterial to the findings made herein. No conclusion is reached as to whether Mrs. Berry exercised control over TK after the sale since the Katas remained as principals with the company. With regard to paragraph 11, that TK went into liquidation approximately two months after the sale is accepted. All other conclusions reached in paragraph 11 are rejected as contrary to the weight of the evidence, irrelevant or immaterial to the findings made herein. Paragraphs 12 and 13 are accepted. Paragraph 14 is rejected as contrary to the weight of the evidence, irrelevant or immaterial to the findings made herein. The evidence established that at all periods in question, before the sale of TK and until its liquidation, that Mrs. Kata was the financial principal for the company. Paragraph 15 is accepted. Paragraph 16 is accepted. The first two sentences of paragraph 17 are accepted. The third sentence is rejected as contrary to the weight of the evidence. Mr. Kata remained as principal for TK after its sale, he continued to work there, and he advised staff regarding business matters. Whether he or Mrs. Berry exercised final control over the business is immaterial since Mr. Kata was the sole registered principal. There is no conclusion that the shortcomings were committed after the sale. Paragraphs 18-20 are accented. Paragraphs 21-22 are rejected as hearsay or not supported by the record. Paragraphs 23 and 24 are accepted. Paragraphs 25 and 26 are rejected as a recitation of testimony not findings of fact. Mr. Kata may not have agreed with the ultimate findings reached by the NASD; however, the censure was issued as found in the findings of fact. With regard to paragraph 27, see the findings of fact, otherwise rejected as contrary to the weight of the evidence. Paragraphs 28-33 are accepted but are irrelevant or immaterial to the conclusions reached herein. Paragraph 34 is accepted to the extent that it describes the NASD action taken against Kata. Those portions of the paragraph which suggest Kata did not have control over the company after its sale are rejected as contrary to the weight of the evidence, irrelevant or immaterial. Kata remained as principal for the company after the sale and continued to advise the staff. That he might have allowed the new owner to exercise poor judgment does not excuse Kata of all liability. Paragraph 35 is rejected as contrary to the weight of the evidence, irrelevant or immaterial. Paragraph 36 is accepted only to the extent that it describes the penalty Kata agreed to accept. The action was resolved without hearing. Paragraph 37 is rejected as immaterial and irrelevant. The first sentence of paragraph 38 is accepted. The second sentence is rejected since the record is clear that the total of the fines and costs associated with the NASD actions exceeded the amount of the fines alone, consequently, it would be erroneous to consider only the fine portion. To his credit, Mr. Kata paid all amounts owed by him for the various violations. Paragraph 39 is accepted only to the extent that it finds that TK went into liquidation two months after the sale. The rest of the paragraph is rejected as speculation, unsupported by the record, or contrary to the weight of credible evidence presented. Paragraph 40 is accepted. Paragraph 41 is accepted but is irrelevant and immaterial to the conclusions reached herein. Mr. Kata's self-serving testimony both as to the denials of all wrongdoing and the reasons for either agreeing to pay fines or settlements has not been credited. Paragraph 42 is accepted. Paragraph 43 is accepted. Paragraphs 44 and 45 are rejected as self-serving comment, Mr. Kata's testimony having not been credited. Paragraph 46 is accepted but is irrelevant to the conclusions reached herein. Paragraph 47 is accepted to the extent it relates charges against Mrs. Kata; however, it should be noted that Mrs. Kata was the financial principal for her husband during the periods in which he was censured for problems relating to bookkeeping. Paragraph 48 is accepted but is irrelevant and immaterial to the conclusions reached herein; Mrs. Kata's self-serving comments have not been credited. Paragraph 49 is accepted. Paragraph 50 is accepted. Paragraph 51 is accepted. Paragraph 52 is rejected; Mrs. Kata remained as financial principal for the company after its sale. Whether she should have discovered the errors or whether she could have discovered the errors is immaterial. The sale does not excuse the responsibility for the errors of the company. Thus, paragraph 52 is immaterial, irrelevant or contrary to the weight of credible evidence submitted. Paragraph 53 is rejected as speculation but in any event, if true, would be irrelevant or immaterial to the conclusions reached. Paragraph 54 is accepted but, again, is irrelevant or immaterial to the conclusions reached. Paragraph 55 is rejected; see comment to p. 53. Paragraph 56 is rejected as contrary to the weight of the evidence; Mrs. Kata remained as a principal throughout all periods. Paragraphs 57-68 are accepted. Paragraph 69 is accepted to the extent that it expresses one witness' perception. However, that witness' testimony conflicted with another's and was given little weight in light of the self-interest and long-term friendship involved. Paragraphs 70-80 are accepted. Paragraph 81 is rejected as argumentative, irrelevant or immaterial to the issues in this case. Paragraph 82 is rejected as contrary to the record. Paragraph 83, the first sentence is accepted. The remainder of paragraph 83 is rejected as contrary to the record. Paragraphs 84-86 are rejected as contrary to the record. Paragraph 87 is rejected as argumentative, irrelevant or immaterial. Paragraph 88 is rejected as argumentative, irrelevant or immaterial. Paragraph 89 is rejected as contrary to the record in its entirety. Paragraph 90 is rejected as argumentative. Paragraph 91 is rejected as a recitation of testimony, argument, or irrelevant. Paragraphs 92-93 are rejected as argument, irrelevant, or immaterial. Whether the Division may properly rely on a rule which establishes prima facie evidence of unworthiness for registration has not been challenged. Such a challenge would have been pursuant to Section 120.56, Florida Statutes. These Petitioners have challenged the denial of their registration pursuant to 120.57, Florida Statutes, and the rule by which they are governed is presumed valid for purposes of this review. RULINGS ON RESPONDENT'S PROPOSED FINDINGS OF FACT: 1. Paragraphs 1-26 are accepted. COPIES FURNISHED: Thomas N. Holloway 2101 W. Commercial Boulevard Suite 5300 Fort Lauderdale, Florida 33306 Charles E. Scarlett Assistant General Counsel Office of the Comptroller Department of Banking and Finance Legal Section, The Capitol Tallahassee, Florida 32399 Hon. Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 Charles L. Stutts General Counsel Plaza Level The Capitol Tallahassee, Florida 32399-0350
The Issue An Administrative Complaint and Cease and Desist Order was filed by the Department of Banking and Finance on March 29, 1990, against the Respondent and thirty-one other persons, alleging various violations of Chapter 517, Florida Statutes (the "Florida Securities and Investor Protection Act"). The only allegation of wrongdoing by Eric Pepper is that he offered or sold an unregistered security in violation of Section 517.07, Florida Statutes. The issues for disposition are whether that violation was committed and if so, what discipline should be imposed. The facts are substantially uncontroverted. Respondent opposes the penalty offered by Petitioner as inappropriate.
Findings Of Fact The following facts are reflected in the parties' Prehearing Stipulation filed on March 27, 1991, and required no proof at hearing: Eric Pepper was registered with the Department as an associated person of Thomas James Associates, Inc., from on or about December 11, 1987 until the termination of his registration with Thomas James Associates, Inc., on or about January 28, 1989. During all times Eric Pepper was registered with the Department, he was simultaneously registered with the National Association of Securities Dealers. He was also registered with the Department as an associated person of Prudential-Bache Securities, Inc., from February 8, 1989 until October 18, 1990. 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 6, 1988. The Initial Public Offering of Electronic Assembly Services, Inc., consisted of 1.5 million (1,500,000) units which were offered to the public at two dollars ($2.00) per unit. The total number of units of Electronic Assembly Services, Inc., initially ordered by Eric Pepper for his clients was four thousand (4,000) for a total price to the customer of eight thousand dollars ($8,000.00). The total number of units of Electronic Assembly Services, Inc., received by those clients was three thousand (3,000) for a total purchase price to the customer of six thousand dollars ($6,000.00). Prior to selling the units of Electronic Assembly Services, Inc., Eric Pepper was told by Brian Thomas (President of Thomas James Associates, Inc.) and Robert Setteducati (Branch Manager of the Orlando Office) that he could sell the units. He inferred from this that the securities were properly registered. On approximately June 15, 1988, Eric Pepper contacted Loretta Horn, Keith MacIntosh, Hal Woodyard, Roxane Morgenthaler, and Willis Devier by telephone. Mr. Pepper told them that a new stock called Electronic Assembly Services (EAS) would soon be distributed. Mr. Pepper indicated these clients could place an order for EAS stock at that time, but that the entire order would probably not be filled because of the limited amount of stock which would be available. Mr. Pepper also told each of his clients that they should send a payment equal to the entire amount of the order as soon as possible, that the payment would be placed in a money market fund pending actual distribution, and that excess funds would remain in the money market for further investment or return to the customer. Loretta Horn placed an order for one thousand (1,000) units of Electronic Assembly Services, Inc., for a total price of two thousand dollars ($2,000.00). She sent Thomas James a check for two thousand dollars ($2,000.00) dated June 23, 1988. Thomas James Associates received the check on or about June 27, 1988. She received seven hundred fifty (750) units as a final price of one thousand five hundred dollars ($1,500.00). Francesca and Keith MacIntosh placed an order for five hundred (500) units of Electronic Assembly Services, Inc., for a total price of one thousand dollars ($1,000.00). They sent Thomas James a check dated June 22, 1988 in the amount of one thousand dollars ($1,000.00). The check was received by Thomas James Associates, Inc., on or about June 27, 1988. They received three hundred seventy-five (375) units at a final price of seven hundred fifty dollars ($750.00). Hal Woodyard placed an order for one thousand (1,000) units of Electronic Assembly Services, Inc., for a total price of two thousand dollars ($2,000.00). Woodyard sent Thomas James a check dated June 20, 1988 in the amount of two thousand dollars ($2,000.00). Thomas James Associates, Inc., received the check on or about June 23, 1988. He received seven hundred fifty (750) units for a final price of one thousand five hundred dollars (1,500.00). Roxane Morgenthaler placed an order for five hundred (500) units of Electronic Assembly Services, Inc., for a total price of one thousand dollars ($1,000.00). Morgenthaler sent Thomas James a check dated June 24, 1988 in the amount of one thousand dollars ($1,000.00). The check was received by Thomas James on or about June 27, 1988. She received three hundred seventy-five (375) units for a final price of seven hundred fifty dollars ($750.00). Willis and Dale Devier placed an order for one thousand (1,000) units of Electronic Assembly Services, Inc., for a total price of two thousand dollars ($2,000.00). The Deviers sent Thomas James a check dated between June 22 and 27, 1988. The check was received by Thomas James on or about June 27, 1988. They received seven hundred fifty (750) units for a final price of one thousand five hundred dollars ($1,500.00). The total commission paid to Eric Pepper for the sale of the units of Electronic Assembly Services, Inc., was three hundred and fifteen ($315.00) dollars. Eric Pepper earned these commissions during a two-week pay period which ended June 17, 1988. The Electronic Assembly Services, Inc., units were delivered to the accounts of Eric Pepper's clients on or after July 6, 1988. These facts are addressed from the evidence presented at hearing, including the weighing of credibility of the witnesses: Eric Pepper's first job in the securities industry was with First Investor's Corporation, from May 1987 through December 1987. He left there to work for Thomas James and to get more varied experience. Eric Pepper has held three jobs in the securities industry. His job at Thomas James was his second in the securities industry. Beginning in early June, 1988, registered representatives at Thomas James were informed by the Branch Manager that an IPO (Initial Public Offering) would soon be coming up. During the middle of June, 1988, another meeting was held, this time with Brian Thomas (President of Thomas James), speaking to the registered representatives on the loudspeaker. Brian Thomas told the registered representatives about Electronic Assembly Services and gave them information concerning the company. At that point, the representatives were told to go ahead and begin the sales of the units of Electronic Assembly Services. Brian Thomas specifically said that the securities were "cleared for sale". From this, Eric Pepper assumed that they were taking orders for units. They were encouraged to get the money in for the securities as soon as possible and were encouraged to use Federal Express. At the time he sold the units, Eric Pepper believed that the securities were registered. He did not believe that he was taking indications of interest, which are revocable by the customer prior to sale. It was the firm's policy at Thomas James to oversell Initial Public Offerings. That is, the firm would solicit more orders than it had securities to sell. The broker was then told to call the customer back and inform the customer that the broker could only get the customer a percentage of the units the customer ordered. The customer would then be asked to place the remainder of the money he had already sent into the secondary market. The secondary market consisted of securities being sold at a higher price for which the broker received a higher commission. Therefore, the broker had a built-in incentive to sell the Initial Public Offering to as many customers as possible so that he could later switch the customer to the secondary market and receive a higher commission. Under normal circumstances, a security is registered with the Florida Department of Banking and Finance or the Securities and Exchange Commission, 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. It is the policy of the Department with regard to individuals who have sold unregistered securities in violation of the law to work out an agreement with those individuals, unless there are other violations also involved at the same time. These agreements typically include restrictions on operating, a fine, and sometimes a brief suspension. The proposal offered to Eric Pepper was similar to those offered to other Respondents with similar alleged violations. The proposal included primarily a registration agreement restricting his actions as an associated person and requiring his employer, who at that time was Prudential-Bache Securities, to make certain reports and provide supervision. Eric Pepper did not accept the proposal because he felt that his only wrongdoing was being egregiously misled by his supervisors at Thomas James. Moreover, his new employer refused to sign the agreement and he was terminated from Prudential-Bache in October, 1990. He is currently unregistered and is working as an executive recruiter with International Recruiting Services.
Recommendation Based on the foregoing, it is hereby recommended that a Final Order be entered, finding Eric Pepper guilty of violating Section 517.07, Florida Statutes; suspending his registration for one year, retroactive to October 1990, when he became no longer registered; and imposing a fine of $315.00, the amount of commissions he earned on the unregistered sales. RECOMMENDED this 5th day of June, 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 5th day of June, 1991. COPIES FURNISHED: Robert K. Good Asst. General Counsel Office of the Comptroller Hurston South Tower, Suite #S-225 400 West Robinson Street Orlando, FL 32801 Edward W. Dougherty, Jr. Mang, Rett & Collette, P.A. P.O. Box 11127 Tallahassee, FL 32302 Hon. Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, FL 32399-0350 William G. Reeves General Counsel Dept. of Banking & Finance The Capitol, Plaza Level, Rm. 1302 Tallahassee, FL 32399-0350
The Issue Whether Rules 3E-600.013(1)(f), 3E-(300.013(1)(p) and 3E-600.013(2)(g), Florida Administrative Code are invalid exercises of delegated legislative authority.
Findings Of Fact Respondent is the state agency charged with the administration and enforcement of Chapter 517 Florida Statutes, which is referred to as the Florida Securities and Investor Protection Act. Rulemaking authority is conferred on Respondent by the provisions of Section 517.03, Florida Statutes. Pursuant to its rulemaking authority, Respondent filed documents on November 15, 1979, with the Florida Secretary of State to adopt the challenged paragraphs as part of Rule 3E- 600.13, Florida Administrative Code. This rule became effective on December 5, 1979, and was subsequently renumbered as 3E- 600.013, Florida Administrative Code. The summary of the public hearing held by the Respondent on November 7, 1979, as part of the rulemaking process makes no mention of the specific provisions at issue here. Section 517.l61(1)(h), Florida Statutes, provides, in pertinent part, as follows: Registration under S. 517.12 may be denied or any registration granted may be revoked, restricted, or suspended by the department if the department determines that such applicant or registrant: * * * (h) Has demonstrated his unworthiness to transact the business of dealer, investment adviser, or associated person; Rule 3E-600.013, Florida Administrative Code, provides, in pertinent part, as follows: The following are deemed demonstrations of unworthiness by a dealer under Section 517.161(1)(h), Florida Statutes, without limiting that term to the practices specified herein: * * * (f) Extending, arranging for, or participating in arranging for credit to a customer in violation of the Securities Exchange Act of 1934 or the regulations of the Federal Reserve Board; * * * Violating any rule of a national securities exchange or national securities association of which it is a member with respect to any customer, transaction or business in this state: * * * The following are deemed demonstrations of unworthiness by an agent under Section 517.161(1)(h), Florida Statutes, without limiting that term to the practices specified herein: * * * Engaging in any of the practices specified in subsections (1) ... (f)... (p) ... Thomas James Associates, Inc. is a securities dealer as defined in Section 517.021(9)(a)1., Florida Statutes, and is registered with Respondent. Section 517.12(16), Florida Statutes, requires securities dealers to be registered as a broker or dealer with the Securities and Exchange Commission. The other Petitioners are or were associated persons of Thomas James Associates, Inc. within the meaning of Section 517.021(4), Florida Statutes. Each Petitioner has been charged in a pending disciplinary proceeding with having demonstrated his unworthiness to transact business in the State of Florida by having committed one or more violations of the foregoing rules either as a dealer or as an agent. More specifically, Respondent's charge of unworthiness to transact business in the State of Florida is based on the allegations that Petitioners have violated certain Rules of Fair Practice of the National Association of Securities Dealers (NASD), the rules of the Securities and Exchange Commission (SEC), the Securities and Exchange Act of 1934, and the rules of the Federal Reserve Board. Section 517.161(6), Florida Statutes, gives the Respondent the authority to deny an application for registration or to suspend or restrict any registration granted pursuant to Section 517.12, Florida Statutes, if the applicant or registrant is charged in a pending enforcement action, including any proceeding brought by the SEC or NASD, with any conduct that would authorize denial or revocation under Section 517.161(1), Florida Statutes. None of the challenged provisions of Rule 3E-600.013, Florida Administrative Code, have been amended since originally adopted in 1979. None of the statutes, regulations or rules referred to in Rules 3E-600.013(1)(f),(p), Florida Administrative Code, have been filed with the Department of State, with the following exception. On August 30, 1982, Respondent filed with the Department of State certain rules of the Securities and Exchange Commission and of the Municipal Securities Rulemaking Board. Respondent has not prepared or filed with the Department of State any other certification describing this referenced material and specifying other rules to which the referenced material applies. Some of the rules which are incorporated by reference by Rule 3E- 600.013(1)(p), Florida Administrative Code, have been changed since its adoption in 1979 by Respondent. Respondent does not maintain a copy of all rules that are incorporated by reference either in the form as they existed in 1979 or as subsequently amended. Respondent has taken no action to amend its rules to reflect changes that may be made from time to time in rules that have been incorporated by reference. Petitioners are members of NASD who have voluntarily agreed to comply with the rules of NASD as they are or may from time to time be adopted, changed, or amended by NASD. Petitioners are likewise required to comply with the rules of the SEC, the Securities and Exchange Act of 1934, and the rules of the Federal Reserve Board as those rules or laws are or may from time to time be adopted, changed or amended. Respondent makes its own factual determination as to whether an applicant or registrant has demonstrated its unworthiness by violating rules proscribed by Rules 3E-600.013(1)(f) and (p) and 3E600.0l3(2)(q), Florida Administrative Code. Respondent does not wait to bring disciplinary action against a registrant or applicant until there has been a formal and final determination by a national securities exchange or by a national securities association that a violation of its rules has occurred. For example, Respondent does not wait for NASD to bring disciplinary action against an applicant or a registrant if Respondent has determined on its own that the applicant or registrant has violated NASD rules.
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.
The Issue The issue in this case is whether consumer certificates of exemption previously issued by the Department of Revenue to Iberia Lineas Aereas de Espana, S.A., should be revoked.
Findings Of Fact Iberia is a foreign air carrier owned and controlled by the government of Spain. Iberia is an agency or instrumentality of the government of Spain. Iberia is not an agency or instrumentality of the United States Government, nor is it an agency or instrumentality of any of the states of the United States or of any county, municipality, or political subdivision of any such state. Iberia operates flights to and from several states of the United States, including Florida. Iberia purchases items for use within Florida. The Department of Revenue is the agency of the State of Florida which is authorized to administer the collection of taxes and the issuance of consumer certificates of exemption pursuant to Chapter 212, Florida Statutes. The two consumer certificates of exemption at issue in this proceeding were issued to Iberia by the Department on September 21, 1990. Both have an expiration date of September 21, 1995. 5/ One of the subject certificates indicates that Iberia is exempt as a "Federal" organization. The other indicates that Iberia is exempt as a "Government" organization. The Department has continuously treated Iberia as an exempt organization since at least September 3, 1975, when the Department issued Iberia's first consumer certificate of exemption. That certificate indicated that Iberia was considered a "Federal" organization. Iberia has never received any express representations from the Department as to its future entitlement to a consumer certificate of exemption. All of the consumer certificates of exemption issued to Iberia have been issued as a result of some form of mistake or misunderstanding by functionaries of the Department, because Iberia has never been eligible for a consumer certificate of exemption under the provisions of Chapter 212, Florida Statutes. 6/ No other foreign airline or foreign air carrier currently holds a consumer certificate of exemption issued by the Department.
Recommendation On the basis of all of the foregoing, it is RECOMMENDED that the Department of Revenue issue a Final Order in this case revoking each of the consumer certificates of exemption previously issued to Iberia. DONE AND ENTERED this 11th day of October, 1996, at Tallahassee, Leon County, Florida. MICHAEL M. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 11th day of October, 1996.
Findings Of Fact Forbes, Walsh & Kelly is a New York corporation licensed to deal in securities under the laws of New York. The company through its secretary, Mr. Robert E. Kelly, contacted the Division of Securities on March 2 and 21, 1979 concerning the procedure for registering to be a securities dealer in Florida. After receiving the appropriate application forms and a copy of the relevant Florida Statutes, Forbes, Walsh & Kelly filed its application on March 26, 1979, to be licensed in Florida as a securities dealer. On April 2, 1979, FWK was notified that its application as a dealer was being held in abeyance, pending receipt of the corporate by-laws, a branch office application, and other materials. Subsequently, on April 20, 1979, FWK applied for a branch office license with Respondent, Carl F. Bailey, Jr. to be the company's "principal" and branch manager in Florida. Between March 26, 1979 and June 26, 1979, while Mr. Carl F. Bailey was not licensed as a securities salesman and while FWK was not registered as a securities dealer, FWK through Bailey executed approximately 774 security sales transactions on behalf of their customers. On June 27, 1979, the Division told FWK that its registration as a security broker-dealer had been approved. At the same time notice was also given that the application for a branch office in Orlando was approved as was the transfer of Carl F. Bailey's registration as a salesman for FWK. Between March 26, 1979 and August 14, 1979, in the course of its business, FWK through Carl F. Bailey "introduced" approximately 263 security transactions on a fully disclosed basis to Robb, Peck, McCooey & company, Inc., which though registered as a securities dealer in New York was not at that time so registered in Florida. Aside from the instant order of suspension, neither Carl F. Bailey, Jr. nor FWK has ever been charged with previously violating the Florida Securities Act. FWK and Carl F. Bailey, Jr., have at least two very satisfied customers, Mr. A.J. Rusterholtz and Mr. Richard W. Baker. They testified in support of Respondents at the final hearing. No evidence was presented to show that either Carl F. Bailey or FWK ever made any inquiry with the Division about when they would be eligible to engage in securities transactions in Florida after submitting their applications for registration. FWK through its Orlando branch office serves approximately 500 securities customers, many of whom are in direct daily contact with the office.
Recommendation In light of the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the registration of Forbes, Walsh, Kelly & Company, Inc., as a dealer and to operate a branch office and the registration of Carl F. Bailey, Jr., as an associated salesman, with Forbes, Walsh, Kelly & Company, Inc. be suspended for a period of 65 business days from the effective date of the Department's final order. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 5th day of October, 1980, in Tallahassee, Florida. MICHAEL P. DODSON Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Philip J. Snyderburn, Esquire Director, Division of Securities Office of Comptroller The Capitol, Suite 1402 Tallahassee, Florida 32301 Patrick T. Christiansen, Esquire AKERMAN SENTERFITT & EIDSON 17th Floor, CNA Building Post Office Box 231 Orlando, Florida 32802
