The Issue Count I of the Amended Administrative Complaint as modified by the August 22, 1991 Order on Reconsideration alleges Respondent Certified Public Accountant (CPA) practiced public accounting in an unlicensed firm by appending the CPA designation after her name in the telephone book and on business cards in violation of Sections 473.323(1)(a), (g), and (h) F.S. and Rule 21A-20.012 F.A.C. Count II of the Amended Administrative Complaint as modified by the August 22, 1991 Order on Reconsideration alleges that Respondent CPA violated Sections 473.323(1), (g), and (h) and Rule 21A-24.001(1)(g) F.A.C. by appending the certified financial planner (CFP) designation along with the CPA designation after her name in the telephone book and on business cards, in that the CFP designation allegedly is an unapproved specialty of accountancy. Count III of the Amended Administrative Complaint as modified by the August 22, 1991 Order on Reconsideration alleges that Respondent CPA practiced public accounting by holding herself out as a CPA by appending the CPA designation after her name in the telephone book and on her business cards, implying that she abides by the provisions of Chapter 473 F.S., and is thereby in violation of Sections 473.323(1)(f), (g), and (h) F.S. and Rule 21A-24.001 F.A.C. [no specific subsections cited].
Findings Of Fact Respondent Silvia S. Ibanez is a practicing attorney, a member of the Florida Bar, and holds active Florida CPA License No. 10842, currently in good standing. She is also a Registered Investment Advisor with the Florida Division of Securities and a certified financial planner (CFP). At all times material, she has been actively certified as a CFP in good standing with the International Board of Standards and Practice for Certified Financial Planners (IBCFP). The IBCFP is a corporation. "CFP" and "certified financial planner" are registered trademarks. The IBCFP has no governmental affiliations within the state of Florida. The Florida Board of Accountancy has no involvement in the CFP accrediting process and no proprietary interest over the CFP mark. As a licensee with the federal Securities and Exchange Commission, Ibanez is required to, and does, disclose the fact that she is a CPA. Ibanez' CPA certificate (like all Florida CPA certificates) authorizes her to display her CPA credentials. The CPA certificate represents that the recipient, . . . has passed all examinations and has met all other requirements prescribed by law and by rule of this board for certification as an expert public accountant, and *is therefore entitled to append the letters CPA after this registrant's name to evidence registration by this board as a Certified Public Accountant.* [Emphasis supplied between *] The Board of Accountancy's only classifications of CPA licenses/licensees are "active" or "inactive." "Active" and "inactive" refer to the status of the CPA license and do not refer to or imply that the licensee is actively practicing public accounting. One can be an actively licensed CPA and not be practicing public accounting. The Board of Accountancy issued a letter opinion to Ibanez that a CPA who offers financial planning services for a fee but who does not hold out as a CPA or become associated with financial statements would not be practicing public accounting. Ibanez is listed in the yellow pages under the heading, "Attorneys," as, "Ibanez, Silvia, S., CPA, CFP." Respondent also is listed in the white pages as "Ibanez, Silvia S., CPA CFP atty." On their face, there is nothing false or fraudulent about these listings. As an attorney, Petitioner also places "CPA" after her name on her business cards and on her letterhead. The Respondent's business card states "Silvia Safille Ibanez, JD, CPA, CFP." DPR contends that because Petitioner "holds out" to the public as a CPA, uses accounting skills, and provides one or more types of management, advisory or consulting services, she is currently "practicing public accounting." Ibanez is not listed in the yellow pages under "accountants," "accountants, certified," or "CPAs." Neither the CFP nor CPA credential is part of the firm name, "Silvia S. Ibanez, P.A. - Law Offices," which also appears on Ibanez' business card. Ibanez' telephone directory listings and card at issue show the CPA and CFP credentials strictly appended to Respondent's individual name. Louis Dooner, accepted as an expert certified public accountant, testified that the Respondent is involved in the practice of public accounting because by merely appending the CPA designation after her name on her business cards, she is telling the public that she is offering to perform services that CPAs perform. Respondent Ibanez currently operates as a sole practitioner of law employed by the law firm of "Silvia S. Ibanez, P.A." As such, she provides specialized legal services for her clients not provided by CPAs. As part of her current, normal professional activities as an attorney, she provides all types of tax services to her clients, including tax opinion work, representation before the Internal Revenue Service, and evaluation of the tax consequences of certain transactions. She also performs financial counselling and planning for her clients. In doing so, she utilizes both her legal education, training, and experience and her education, training, and experience as a CPA. Prior to admission to the Florida Bar, Ibanez was employed by two CPA firms where she did substantially similar work, plus audits. It is conceded by the parties that it is possible to practice law and public accounting in the same business activity and that many activities conducted by professionals and nonprofessionals other than by CPAs and other than by attorneys are identical to activities performed by CPAs engaged in public accounting. For instance, anyone can legally prepare a tax return. Bookkeepers and free-lance tax assistors of all sorts are unregulated in any way. Truthful use, communication, or disclosure of the CPA credential by an actively licensed CPA does not per se constitute false, misleading, or deceptive advertising. The evidence does not support a finding that withholding truthful disclosure that one has earned the CPA credential benefits the public welfare or effects the purposes of the enabling legislation, or indeed, how such nondisclosure could promote them, particularly since it has been shown that persons of considerably lesser competency and achievement levels in the discipline of accounting may legally offer to the public almost all the services provided by CPAs. The use of the term "CPA" implies a specific competency to the public. The fact that Ibanez is a CPA is valuable to her legal clients. CPA status is a valuable property right to each CPA, and the ability of a practicing attorney to publicize the fact that s/he holds an active CPA license is a valuable asset to that individual. The only activity among public accounting activities that is a unique activity of CPAs is the "attest" function. See, Section 473.322(1)(c) F.S. There is no evidence that Respondent Ibanez attests as a CPA in the course of her law practice or that she personally performs audits. Ibanez testified credibly that her intent in appending the CPA and CFP credentials solely to her own name is to indicate that she is, in her own right, individually licensed as a CPA and CFP. Respondent Ibanez has clearly marked her office premises with all the indicia of a law office, including two signs posted outside the building itself. One sign specifies that the building constitutes "law offices," that "Silvia S. Ibanez, P.A." is located there, and that Ibanez is an "attorney at law," with no reference to her CPA or CFP credentials. Another sign specifies, "law offices," without any reference to her CPA or CFP credentials. A potential client must pass these two signs just to enter the building that houses Ibanez' law office. Once in the building, a potential client also must be admitted by a secretary to Ibanez' inner office. Ibanez has consistently required her secretary to screen all telephone calls and potential clients who enter the office to be certain that persons seeking out Ibanez will be fully informed that Ibanez is not offering strictly accounting services and that she is practicing law. Ibanez also personally makes that information clear to individuals at each initial office consultation and consistently follows up office consultations at which her legal employment has been negotiated with letters and/or employment contracts which set forth the parameters of the legal services she has agreed to perform for clients. Elise Rice is an employee of Petitioner Department of Professional Regulation who has earned a vocational school accounting diploma. She is not a CPA, nor is she an attorney. Ms. Rice testified that she, personally, drew the conclusion from looking at Respondent's business card that the Respondent was a CPA, but that she did not know what CFP or JD signified and therefore she would not assume from the card that Ibanez was a lawyer or a certified financial planner. Clearly, the designation "CFP" did not suggest to Ms. Rice that Ibanez was advertising either a specialty or particular competence in public accounting. Ms. Rice further stated that, despite Ibanez' business card's clear use of the term "law offices," she would continue to believe that Ibanez was doing both CPA work and legal work out of "law offices." Ms. Rice further stated that even if she telephoned ahead and spoke to a secretary who clearly indicated that Ibanez was a CPA but was working as a lawyer, she would persist in believing that Ibanez was doing both CPA work and legal work out of "law offices." Ms. Rice also testified that if she arrived at Ibanez' office building and was confronted by the sign posted there which clearly indicates Ibanez is an attorney at law and the two signs that clearly state that the building houses only "law offices," she would then believe that she had come to the wrong place to find Ibanez the CPA. However, Ms. Rice conceded that, under the latter circumstances, the premises were, indeed, law offices. Ms. Rice's personal view that Ibanez must be acting as a CPA in the face of significant information to the contrary is not persuasive that the average layman would be misled by Ibanez' business card and telephone listings in the face of all her other disclosures. One who has initially consulted the yellow pages of the telephone directory under the heading "attorneys" would most logically infer from Ibanez' yellow pages listing that Ibanez is a practicing attorney who is dually licensed as a CPA and who possesses a CPA's education, training, experience, and skills and that Ibanez is offering to act as a lawyer capable of applying her additional education, training, experience, and skills as a CPA and CFP. The inferences that the average viewer might draw from Ibanez' white pages telephone listing and her business card are more blurred, but Ibanez demonstrated, and it is conceded by both parties, that an individual may have the opportunity to disabuse members of the public that s/he is engaged in the activity of the practice of public accounting or that s/he is offering all the services normally associated with a CPA, as opposed to law or some other profession, at least where there is direct contact by letter or telephone. It may be reasonable that at least until making direct contact with Ibanez or her office staff, the average viewer of either the telephone listings or the card would assume that, as a CPA, Ibanez is subject to disciplinary oversight by the licensing authority for accounting functions only and that she abides by all Board of Accountancy regulations while doing accounting. However, prior to any meaningful employment, Ibanez exercises reasonable care to disabuse the average viewer of that belief. Since 1982, the Board has consistently issued letter opinions on an individual basis to the effect that the designation "certified financial planner" is an accountancy specialization which has not been approved by the Board and further holding that "CFP" could not be displayed by CPA licensees on stationery or in yellow pages listings in conjunction with the CPA designation. The Executive Director of the Florida Board of Accountancy did not know how "certified financial planner" came to be viewed as a specialty designation of certified public accounting, and the letter opinions do not set forth the Board's rationale for considering it as a specialty. The Board has adopted no rule to that effect. Further, in this proceeding, the agency has not proven any rationale for the policy set forth in the Board opinions. The agency presented no evidence by way of anecdotal experience, professional studies, or accumulated data to show that licensed CPAs or certified CFPs have ever mislead members of the public purely by displaying their credentials in the manner Ibanez has done here. DPR knows of no complaint and has never received any complaint from a member of the public regarding Ibanez' professional activities or advertising. Nor is there any evidence that any member of the public has ever been confused about whether or not Ibanez was practicing accounting or law or financial planning or that any member of the public was mislead into hiring Ibanez under the impression that she would be acting as a CPA solely and not as an attorney, or that she would be performing audits or performing the attesting function of a CPA. Upon the scenario established in the case sub judice, Ibanez is not guilty of any fraudulent advertising so as to mislead the public to the effect that she abides by all regulations of the Board of Accountancy.
Recommendation Upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Board of Accountancy enter a Final Order that: Finds Respondent Ibanez is not "holding herself out as a certified public accountant" and Finds her not guilty of all charges alleged under Counts I through III and dismisses them. DONE and ENTERED this 15th day of January, 1992, at Tallahassee, Florida. ELLA JANE P. DAVIS, 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 15th day of January, 1992.
The Issue The issues in the case are whether the allegations set forth in two separate Notices to Show Cause are correct, and, if so, what penalty, if any, should be imposed.
Findings Of Fact The Respondent is the association governing the Clarcona Condominium in Apopka, Florida. The Clarcona Condominium is comprised of a total of 946 units. The Respondent has an office located on the Clarcona property where available records of the association are located. Notice to Show Cause dated April 1, 2003 (DOAH Case No 03-3209, DBPR Docket No. 2003040435) By letter hand delivered to the Respondent's office on February 13, 2002, Mike Sims, a Clarcona unit owner, asked to review the Respondent's financial records, including accounts receivable and a "reserve study." Mr. Sims previously requested information and records from the association, and apparently received the information on a timely basis. Subsequent to the February 13 request, Mr. Sims designated another resident, Curtis Faulk, to represent him in his records request. The Association manager made an appointment with Mr. Faulk for February 23, 2002, to review the requested records. During the appointment, Mr. Faulk reviewed some of the requested information. As of the February 13 request and, apparently, continuing through at least February 23, the Respondent's accounts receivable records were being converted from one type of software system to another. There was concern by the Association manager that the Association's accounts receivable records were not accurate. The only reserve study apparently available was a "draft" that had been prepared for review by an accountant for the Association manager. Because the Respondent was concerned about the accuracy of the accounts receivable records and the draft reserve study, the Respondent did not provide the accounts receivable or the draft reserve study for Mr. Faulk's review. The evidence establishes that the requested accounts receivable and reserve study information were not provided within five working days of the Respondent's receipt of Mr. Sims' request. Notice to Show Cause dated July 16, 2003 (DOAH Case No 03-3208, DBPR Docket No. 2003056262) By letter received on February 19, 2003, Clarcona unit owner Ansel Wood sought to review certain association records including the "unapproved minutes of the most recent meeting" of the Association membership. Mr. Wood and the Association manager set an appointment for February 26, 2003, to review the requested records. At the appointed time, Mr. Wood received access to some of the requested records, but not to the "unapproved minutes of the most recent meeting." At the time of the review by Mr. Wood, the meeting minutes had not been typed. The meeting referenced in Mr. Wood's letter of request occurred in January 2003. The evidence establishes that the requested minutes of the January 2003 meeting were not provided within five working days of the Respondent's receipt of Mr. Wood's request. Mr. Wood sold his unit sometime in May 2003. The minutes of the meeting were not typed until June 4, 2003. Mr. Wood did not receive access to the meeting minutes prior to the sale of his unit.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation, Division of Florida Land Sales, Condominiums, and Mobile Homes, enter a Final Order finding that the Respondent has violated Subsection 718.111(12)(b), Florida Statutes (2003), as set forth herein and assessing a penalty of $7,500. DONE AND ENTERED this 16th day of February, 2004, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM 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 16th day of February, 2004. COPIES FURNISHED: Joseph S. Garwood, Esquire Department of Business and Professional Regulation The Augusta Building, Suite 100 8685 Northwest 53rd Terrace Miami, Florida 33166 Robert L. Taylor, Esquire Taylor & Carls, P.A. 850 Concourse Parkway, South Suite 105 Maitland, Florida 32751 Nancy Campiglia, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-2202 Ross Fleetwood, Division Director Division of Florida Land Sales, Condominiums, and Mobile Homes Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792
Findings Of Fact The Pointe Condominium is a 20-unit project located in Indian Shores, Florida. The declaration of condominium was recorded in Pinellas County on October 2, 1979. A turnover meeting was held on May 8, 1980, at which time Respondent transferred control of the condominium to the condominium association. No documents or accounts were turned over at this meeting or any time within the next 60 days. Subsequent demands by the condominium association resulted in the turnover of the following documents over 60 days after transfer: declaration of condominium articles of incorporation minutes book house rules resignations of developer's board members partial financial records, without audit or certification association accounts building plans and specification (incomplete - did not include architect's certificate or plumbing and electrical drawings) insurance policy certificate of occupancy manufacturer's warranties roster of unit owners service contracts (incomplete - did not include street maintenance contract later discovered by unit owners through contact with the city) Respondent concedes it has never obtained a review of condominium financial records by an independent certified public accountant, and acknowledges that the records furnished to the condominium association are incomplete. Respondent admits to negligence in failing to maintain the required records and has subsequently offered to assist the condominium association in reconstructing those records which are still missing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order assessing a civil fine in the amount of $4,000, as authorized by Subsection 718.501(1)(d) 4, F.S.; provided, however, that $3,000 of said fine be waived if Respondent secures the required independent records review discussed herein within 60 days of the Final Order. DONE and ORDERED this 27th day of July, 1983, in Tallahassee, Florida. R. T. CARPENTER, 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 27th day of July, 1983. COPIES FURNISHED: Helen C. Ellis, Esquire Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301 John C. Hucks, Esquire One Plaza Place, N.E. Suite 700 St. Petersburg, Florida 33701 E. James Kearney, Director Division of Florida Land Sales and Condominiums Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301 Gary R. Rutledge, Secretary Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
Findings Of Fact The Petitioner completed an academic program in accounting at the University of South Florida in March, 1976. She applied to sit for the May, 1976 Certified Public Accountant's examination, and paid her fee. There are four sections to the examination: Auditing, Law, Theory, and Practice. At the May, 1976 examination the Petitioner passed the Law section, but failed the sections on Auditing, Theory and Practice. Accordingly, under the Board's rules, the Petitioner was not credited with having passed any sections of the examination, and needed to take the entire test again. She applied to sit for the November, 1976 examination, paid her application fee, and sat for the examination. On this occasion she passed the Theory and Practice sections of the examination but failed the Auditing and Law sections. Under the Board's rules the Petitioner at this juncture was credited with having passed the Theory and Practice sections, and would be allowed to sit for the next three consecutive examinations in order to pass the remaining two sections. She applied to sit for the May, 1977 examination, paid her fee and sat for the examination. She passed the Law section and failed Auditing. At this juncture she needed to pass only the Auditing section, and had two examinations within which to accomplish that. She applied to sit for the November, 1977 examination. The deadline for making application was September 1, 1977. The Petitioner, through her own mistake, was lake in making application, and her application was rejected. She was not permitted to sit for the November examination. She did timely apply for the May, 1978 examination. She again failed the Auditing section with a score of 69. Under the Board's rule her application for certification as a CPA was considered she would need to being again the testing process, without being credited with having passed any sections. She applied for a regrading of the May, 1978 examination. The examination was regraded, but her score was not changed. The Petitioner is seeking, through this proceeding, an opportunity to retake the Auditing section of the examination, while continuing to receive credit for having passed the Law, Theory, and Practice sections. Under the Board's interpretation of its rules, she would not receive credit for having passed the sections, but would need to begin the testing procedure as a new applicant.
The Issue Whether Gary Savage committed the statutory violations alleged in the Amended Administrative Complaint and, if so, what penalty is authorized for such violations.
Findings Of Fact The Parties and Principle Allegations The Department is the state agency charged with the licensing of insurance agents in Florida, pursuant to authority granted in chapter 626, parts I and IX, Florida Statutes, and Florida Administrative Code Chapter 69B-231. Mr. Savage is a 75-year-old registered investment advisor and financial planner who also is licensed to sell life insurance in Florida. The Department’s Complaint seeks to revoke Mr. Savage’s license as an insurance agent. Counts I through III and V through VIII concern eight clients, whereby Mr. Savage earned commissions for selling them annuities and, based on agreements they signed, charged them annual one-percent financial planning service fees tied to the value of their portfolios, including the annuities. Each of these counts alleged the following statutory violations: Engaging in unfair insurance trade practices for knowingly collecting an excessive premium or charge. § 626.9541(1)(o)2., Fla. Stat.; Demonstrating a lack of fitness or trustworthiness to conduct insurance business. § 626.611(1)(g), Fla. Stat.; Demonstrating a lack of reasonably adequate knowledge and technical competence to engage in insurance transactions. § 626.611(1)(h), Fla. Stat.; Engaging in fraudulent or dishonest insurance practices. § 626.611(1)(i), Fla. Stat.; and Misappropriating, converting, or unlawfully withholding moneys belonging to others in conducting insurance transactions. § 626.611(1)(j), Fla. Stat. Count IX charged Mr. Savage with two violations concerning adverse administrative action taken by the Financial Industry Regulatory Authority (“FINRA”) against his securities license: Failing to timely report final administrative action taken by FINRA against his securities license. § 626.536, Fla. Stat.; and Being suspended and fined for violating FINRA’s rules. § 626.621(12), Fla. Stat. At the time of the hearing, Mr. Savage was not working in the financial services industry because FINRA suspended him for several months. During his suspension, Mr. Savage continued to meet with his insurance clients, though he currently has no appointments with life insurers to sell their products. Wearing Two Hats - An Investment Advisor and Insurance Agent Mr. Savage has worked in the investment industry for over 50 years, initially focusing on securities but evolving into financial advising and estate planning work. He has taken numerous courses and examinations relevant to securities law, financial planning, and tax law. Mr. Savage owns two investment advisor businesses: Wall Street Strategies, Inc. (“Wall Street”), is a stock brokerage firm that handles securities transactions; and Advanced Strategies, Inc. (“Advanced Strategies”), is a registered investment advisor firm, offering clients financial planning, tax management, and estate planning advice. In order to provide a wide variety of products to his financial planning clients, Mr. Savage also is licensed as a nonresident agent in Florida to sell life insurance, including annuities.2/ Annuities provide a guaranteed income stream over a term of years, but also come with substantial penalties if they are surrendered or cancelled before the term expires. Fixed index annuities, like those Mr. Savage sold to the clients at issue here, offer portfolios of funds tracking stock market indexes. Owners choose from around six portfolios and can then reallocate by choosing different portfolios each year. Mr. Savage considers himself an investment advisor who is licensed to sell insurance, which is what he tells new clients. Indeed, his businesses are securities and investment advisor firms, not insurance agencies. Mr. Savage’s client base is diverse. Many have portfolios with annuities and other investment products. Some have portfolios with no annuities. Others have portfolios with only annuities, like most of the clients at issue. In order to procure new clients, Mr. Savage held financial planning seminars where diverse speakers discussed financial and estate planning, and tax management. Mr. Savage discussed the types of insurance products he preferred, including fixed index annuities. Other speakers discussed real estate, oil, and investment trusts, which were beneficial from a tax perspective. Most of the clients at issue attended such a seminar and later met with Mr. Savage to discuss their financial plans. When Mr. Savage first met with the clients at issue, he asked them to bring tax returns, investment statements, wills and/or trusts, and other documents relevant for a financial planning discussion. They completed a new client form with information about their assets, investments, and objectives. He often met several times with new clients to develop a plan for them to reach their financial, estate, and tax management goals. To provide financial planning services, Mr. Savage—— like most investment advisors——charged an annual one-percent fee based on the total value of the portfolio. He has reduced or waived his fee if the clients’ situation warranted it or if they continued to purchase products for which he received commissions to compensate him for providing financial planning services. Before that are charged an annual fee, Mr. Savage’s clients signed a “Service Fee Agreement” (“Fee Agreement”), which was on “Advanced Strategies, Inc., Registered Investment Advisor” letterhead and provided as follows: Advanced Strategies charges a 1% (one percent) financial planning retention fee annually. This fee is based upon the total combined value of accounts including annuities, indexed life, mutual funds, income products and brokerage accounts that we manage or provide service for. This amount is tax deductible as a professional fee. The Fee Agreement offered to provide several financial planning services3/: Address, ownership, and beneficiary changes; Duplicate statements and tax returns; Required minimum distribution and withdrawal requests, and deposits; General account questions; One printed analysis per year; Annual review; Asset rebalancing when applicable; Informing client of new tax laws, changes in estate planning, and new exciting products and concepts. The Fee Agreement noted that the non-refundable fee was due on the service anniversary date and that non-payment would result in discontinuation of the planning services until paid in full. Mr. Savage confirmed that the Fee Agreement was voluntary. If clients wanted to purchase a product, but did not want him to manage their portfolio or provide the outlined services, they did not have to sign the agreement. In that event, Mr. Savage would procure the product and not provide financial planning services. All of the clients at issue here purchased annuities from Mr. Savage. He helped them complete the applications with the insurance companies and, if necessary, assisted them with transferring or closing out other investments used to pay the premiums. He ensured that the insurers received the paperwork and the premiums. Once the annuities were procured, he received commissions from the insurers. The Complaint did not allege that he acted unlawfully in recommending annuities to the clients or receiving commissions from the insurers. All of the clients at issue also signed the Fee Agreement and Mr. Savage provided them with services every year.4/ Some of the services were things an insurance agent technically could handle, such as answering client calls, making address and beneficiary changes, providing duplicate statements, assisting with the paperwork for required minimum distributions, withdrawals, and deposits, and asset reallocation. Other services were things that an agent could not provide, such as tax management/credits, duplicate tax forms, assistance with estates, trusts, and wills, and financial planning advice. But, even as to the services an agent technically could provide, Mr. Savage used his financial planning expertise to advise these clients as to a number of decisions relating to their annuities. For instance, although agents can assist with reallocation, required minimum distributions, and withdrawals, Mr. Savage’s securities and financial planning expertise allowed him to make recommendations that took into account an analysis of the stock market, the economy, and the clients’ financial circumstances and overall goals. An agent is not required to have that expertise, which is one reason he charged the clients an annual service fee. Many of these clients did not recall Mr. Savage providing most of the services listed in the Fee Agreement, but the weight of the credible evidence reflects otherwise. He analyzed asset reallocations for these clients every year and, when he believed reallocation was appropriate, he undisputedly made it happen. He provided annual account analyses consolidating the clients’ investment statements. He met with some of them every year to conduct an annual review and, for those he did not meet, he offered to do so in their annual invoice letter. Whenever the clients asked for assistance with questions, address, beneficiary, or ownership changes, withdrawals or required minimum distributions, or deposits, among others, he performed the task. And, as he confirmed and some of the clients acknowledged, the Fee Agreement made it clear that the services were available, even if they did not need all of them in a particular year or did not think to ask. Although some of the clients testified that Mr. Savage failed to tell them that his fee was optional, all of them had a chance to review the Fee Agreement before voluntarily signing it. The agreement noted that the fee was a “financial planning retention fee” based on the value of the accounts “that we manage or provide service for,” and that non-payment “will result in the discontinuation of my/our planning services.” These clients believed they hired Mr. Savage as an investment advisor and many understood that such advisors do charge fees for providing services. More importantly, no client testified that Mr. Savage said his annual fee was required to procure the annuities or was a charge for insurance. Nothing in the Fee Agreement gave that indication either. Mr. Savage credibly confirmed that he did not charge a fee for insurance; rather, the client paid the fees for financial planning services. And, if they decided they no longer wanted Mr. Savage’s services and stopped paying his fee, they took over management of their annuities without losing access to them or the money in them. The Department concedes that Mr. Savage may wear two hats, as both the agent selling an annuity and the financial advisor managing his client’s portfolio. It contends, however, that Mr. Savage violated the insurance code by selling annuities to these clients and thereafter charging them annual fees——tied to the value of the annuities——to provide services that he should have provided for free after earning commissions on the sale of those annuities. The Department’s investigator, Ms. Midgett, testified about annuities, commissions, and insurance agent services based on her experience in the industry as both a former agent and certified chartered life underwriter.5/ Ms. Midgett confirmed that the Department approves both the premiums and commissions applicable to annuities. Once the premium or deposit is paid, the commission is earned; if an additional deposit is made into the annuity, the agent would earn another commission. Ms. Midgett testified that it is improper for an agent to receive a commission and knowingly charge a client any fees with respect to that annuity under section 626.9541(1)(o). However, she admitted that a financial advisor may charge service fees on annuities if they did not receive a commission on the sale. And, if the annuity is ever rolled into a non- insurance product, that agent could charge service fees on that asset because they are no longer tied to the annuity. Ms. Midgett also testified about the services agents are expected to provide. Once an agent sells a product, he or she becomes the agent of record and does “things such as answer questions, beneficiary changes, address changes, yearly reviews, anything to keep that client and to help them in any way they can.” According to her, “it’s basic 101 insurance that an agent services their clients,” which is “extremely important if you want to build your book of business and to keep a client happy.” Importantly, however, Ms. Midgett conceded that no statute or rule specified what services agents were required to provide once they sold an annuity. “It’s just understood when you’re an insurance agent that you’re going to service your clients. It’s part of the sale of the product.” She believed agents learned this in the course study to obtain a license. Although Ms. Midgett testified that Mr. Savage should have provided most of the services listed in the Fee Agreement for free once he earned commissions on the sale of the annuities, she conceded that at least two of them——duplicate tax forms and informing the client of new tax laws——were not services agents would do. She also agreed that agents could not advise clients as to taking money from an annuity and investing in stocks, mutual funds, real estate trusts, or other investment-related options as “those are all investment advisor functions.” Ms. Midgett initially admitted having no knowledge of whether insurance agents were trained in asset reallocation, though she “would assume so” because “[i]f you have a license to sell the product, then obviously you have to have the knowledge of how to be able to service that product and make the allocations.” When she testified several months later in the Department’s rebuttal case, she stated that the manual used to obtain a license in Florida had a chapter on annuities that “touched on” reallocation. But, she admitted she was not an expert on reallocation or analyzing market conditions, and she had only previously worked with one agent who sold annuities, though he did advise his annuity clients on reallocation. In sum, the Department conceded that no statute or rule articulated the services an agent is required to provide upon receiving a commission. The appointment contracts between the agents and the insurance companies, two of which are in the record, apparently do not specify the services agents are expected to provide. At best, the evidence established what a good agent should do to build a book of business; the evidence did not establish what services an agent, like Mr. Savage, was legally required to provide for receiving a commission. Count I – Kathy Butler Ms. Butler met Mr. Savage while working at a yacht club. In February 2011, they met at his office and she filled out a new client form with financial information. In March 2011, Mr. Savage assisted Ms. Butler with the application for a fixed index annuity for $50,000. On that same day, she signed the Fee Agreement, which she understood to be paying for his services as an investment advisor to manage the annuity and ensure it was being invested correctly; she believed he received income from the insurance company. In January 2012, she purchased another fixed index annuity for $8,000. Mr. Savage procured both annuities. Between 2012 and 2015, Ms. Butler received annual invoices from Mr. Savage and paid about $3,265 in service fees. At this point, Ms. Butler deals directly with the insurance companies, though Mr. Savage is still listed as her agent. The weight of the credible evidence shows that Mr. Savage answered general account questions, made a beneficiary change, conducted annual reviews when requested, sent annual account statements, analyzed reallocation each year and, when he recommended reallocation in 2014 and 2015, he handled the paperwork. Ms. Butler knew she could avail herself of the services in the Fee Agreement, even though she chose not to request many of them. Count II – Beverly Wilcox Ms. Wilcox met Mr. Savage at a seminar in early 2009. In February 2009, they met at his office, she completed a new client form, and she signed the Fee Agreement. She believed he was a financial advisor and that she would owe him money, but she did not read the Fee Agreement before signing it. In March 2009, Mr. Savage assisted Ms. Wilcox with the application to purchase a fixed index annuity for $120,000. He procured the annuity, as requested. Between 2010 and 2016, Ms. Wilcox received yearly invoices from Mr. Savage and paid about $6,500 in fees, after which she decided to deal with the annuity company directly. The weight of the credible evidence shows that Mr. Savage answered questions when asked, offered to conduct annual reviews each year, sent annual account statements, analyzed reallocation each year and, when he recommended reallocation in 2010 and 2012, he handled the paperwork. Count III – Joseph Cerny Mr. Cerny met Mr. Savage while working at a yacht club and knew he was a financial advisor. Mr. Cerny purchased several fixed index annuities and other investments from Mr. Savage, who helped him complete the paperwork and procured the policies. Between 2003 and 2004, he bought two annuities for $100,000 each and two mutual funds for about $30,000 each. In 2008, he bought an annuity for $10,000. In 2010, he bought another annuity for $119,400. Mr. Savage did not charge fees for the first few years. Mr. Cerny believed he received compensation from the companies. However, in March 2010, Mr. Cerny signed the Fee Agreement. Between 2011 and 2012, he received two invoices, paying the first for $1,266.84 but refusing to pay the second. Mr. Cerny and Mr. Savage ended their relationship at that point. The weight of the credible evidence shows that Mr. Savage answered questions, provided annual statements, assisted with making withdrawals when requested, met with Mr. Cerny yearly, analyzed reallocation each year and, when he recommended reallocation in 2010 and 2011, he handled the paperwork. Count V – Marion Albano Ms. Albano met Mr. Savage at a retirement seminar in early 2007. In February 2007, they met at his office to go over her investments, including several annuities. Based on his recommendation, she surrendered her old annuities and purchased a fixed index annuity for about $1.6 million. He assisted her with the application and procured the annuity. In February 2007, Ms. Albano also signed the Fee Agreement. Mr. Savage told her there was a service charge to manage the annuity and she agreed because her brother pays the same rate on his managed brokerage account. She was never worried about losing the annuity if she failed to pay the fee. Ms. Albano received invoices from Mr. Savage every year from 2008 through 2015 and testified that she had paid between $110,000 and $120,000 in fees during that time. She had to pay some of the fees out of her distributions. The weight of the credible evidence shows that Mr. Savage answered account questions, corresponded with her daughter about his recommendations, provided her with an account analysis each year, met with her annually to review her account, and assisted her with required minimum distributions and withdrawals. He analyzed reallocation each year and, when he recommended reallocation in 2010 and 2011, he handled the paperwork. Count VI – Jane D’Angelo Ms. D’Angelo and her late husband, whose son-in-law was an insurance agent, met Mr. Savage at an estate planning seminar in early 2003; they believed he was an investment advisor. In March 2003, he came to their home and they completed a new client form, indicating they had several types of investments, including annuities. Between 2003 and 2016, the D’Angelos invested with Mr. Savage. In 2003, they purchased a tax credit investment for $10,000. In 2005, they purchased a similar investment for $19,000, which resulted in tax credits totaling $17,174. Between 2005 and 2011, they purchased eight fixed index annuities from Mr. Savage. He assisted them with the applications, informing them that the companies paid him directly. He procured the following annuities, some of which were purchased by transferring money from their existing annuities: In April 2005, they bought an annuity for $250,000; in May 2007, they bought an annuity for $32,789.78; in May 2008, they bought an annuity for $29,510; in March 2009, they bought three annuities for $337,554, $550,000, and $6,000; in May 2011, they bought two annuities, one for $40,715 and another for $150,889; and, in June 2011, they bought an annuity for $24,667. Prior to 2010, they paid no service fees. However, in April 2010, they signed the Fee Agreement. Although they were surprised and felt like they had to sign, Ms. D’Angelo agreed they were not coerced or told the annuities would lapse if they failed to do so. Indeed, she never lost access to the annuities even after she stopped paying Mr. Savage’s fees in 2015. Mr. Savage sent them annual invoices from 2010 through 2015, totaling $54,000 in fees. Mr. Savage agreed to waive the 2010 fee and, ultimately, they only paid about $14,511 total. In 2016, Ms. D’Angelo informed Mr. Savage that she no longer needed his services. She had been dealing directly with the insurance companies herself, though they have provided her with names of individuals if she wanted someone to advise her. The weight of the credible evidence shows that Mr. Savage provided numerous services to the D’Angelos on the investments he managed for them.6/ He had discussions with them, sent them annual statements, and assisted them with deposits and transfers between annuities, required minimum distributions and withdrawals, income riders, and beneficiary and ownership changes. He analyzed reallocation every year and handled the paperwork when he felt it was appropriate. He also offered to meet annually and held those meetings in years in which they were requested. Count VII – Ernest Blougouras Rev. Ernest Blougouras, a Greek Orthodox priest, attended several financial planning seminars with Mr. Savage. They met privately in February 2005, at which he completed a new client form listing his investments, which included fixed annuities, CDs, mutual funds, bonds, and stocks. Rev. Blougouras purchased fixed index annuities and other investments from Mr. Savage. He told Rev. Blougouras that he received commissions for selling the annuities. Mr. Savage assisted with the applications and procured the policies. Over the last 14 years, Rev. Blougouras purchased nine fixed index annuities. In March 2005, he bought an annuity for $347,003; in April 2005, he bought an annuity for $229,458; in August 2005, he bought an annuity for $102,227; in June 2006, he bought an annuity for $8,300; in May 2007, he bought an annuity for $41,143; in June 2009, he bought an annuity for $50,000; in July 2009, he bought an annuity for $14,308; and, though the record is unclear as to the date, he bought another annuity that was worth $40,572 in 2010. Since 2011, he bought an additional annuity and several non-insurance investments, such as real estate trusts and energy funds. Prior to 2010, Mr. Savage did not charge Rev. Blougouras service fees because he continued to purchase annuities. However, in 2010, Mr. Savage decided to start charging an annual service fee and sent Rev. Blougouras the Fee Agreement. Rev. Blougouras believed that Mr. Savage’s services would be cancelled if he failed to pay the fee and he would have to hire another advisor. He signed the Fee Agreement and continues to use Mr. Savage’s services. Mr. Savage has sent annual invoices to Rev. Blougouras every year since 2010. The record only contains the 2010 invoice for $9,883 and Rev. Blougouras could not recall how much he paid overall. However, he confirmed that he has paid every invoice he has received either himself or with distribution checks he received from the annuities. The weight of the credible evidence shows that Mr. Savage provided numerous services to Rev. Blougouras. He prepared paperwork and documents for required minimum distributions and withdrawals, held meetings to review and organize his tax paperwork, copied documents requested, and made address changes when requested. He analyzed asset reallocation every year and, when he recommended reallocation in 2010 and 2011, he completed the necessary paperwork. Count VIII – George Flate Mr. Flate and his wife met Mr. Savage at a financial planning seminar in 2010. In February 2010, they met Mr. Savage and completed their new client form listing their investments, including fixed annuities, CDs, mutual funds, and stocks. They also signed the Fee Agreement, which Mr. Flate believed was a standard service agreement. They thought they hired Mr. Savage as an investment advisor and never believed they would lose access to the annuities if they stopped paying his fees. Based on Mr. Savage’s recommendation, the Flates purchased two fixed index annuities: one annuity was issued in April 2010 for approximately $22,000, and the other annuity was issued in May 2010 for approximately $22,500. Mr. Savage assisted them with filling out the applications and handled the paperwork to ensure the annuities were issued. Between 2012 and 2015, Mr. Savage sent the Flates invoices for his annual service fees every year. In total, they paid approximately $1,506 in service fees. In 2015, the Flates terminated their relationship with Mr. Savage. They have worked with two financial advisors since then, neither of whom charged them service fees relating to the annuities. The weight of the credible evidence shows that Mr. Savage provided numerous services to the Flates. Each year, he met with them to go over their account, provided them with account analyses, analyzed reallocation and, the two to three times they agreed with his recommendations, he handled the paperwork. He handled withdrawals and address changes for them when requested, and he provided them with information as to changes in tax law and estate planning, though they did not believe that was necessary since they had tax and estate lawyers. The Flates understood that Mr. Savage was available to answer their questions and provide the services if they asked. Count IX – FINRA Disciplinary Proceeding On July 14, 2016, two former clients of Mr. Savage’s filed a Statement of Claim with FINRA alleging that he had recommended investments that were not suitable for them. Over Mr. Savage’s objections to proceeding with the hearing as scheduled, the arbitration panel awarded the clients over $725,000 in damages, fees, and costs. The clients filed a petition in Florida circuit court to approve the arbitration award. Mr. Savage responded in opposition and moved to vacate the arbitration award on grounds that it violated his due process rights. On November 9, 2017, the circuit court issued a final judgment awarding over $769,000. On December 4, 2017, Mr. Savage appealed the circuit court’s order to the Second District Court of Appeal. On June 12, 2018, while the appeal was pending, Mr. Savage signed a Letter of Acceptance, Waiver and Consent (“AWC”) with FINRA. The AWC stated that Mr. Savage accepted and consented, without admitting or denying, the following findings: Wall Street failed to apply for a material change in its business operations, i.e., to sell oil and gas interests, private placements, and non-traded real estate investment trusts, before engaging in more than 50 such transactions, many of which were consummated by Mr. Savage; Mr. Savage failed to timely update his FINRA Form U4 within 30 days of the Statement of Claim being filed against him in July 2016; Mr. Savage failed to timely respond to FINRA’s requests for information relating to an upcoming examination of Wall Street; and Wall Street failed to maintain the minimum net capital requirements of $5,000 while engaging in securities transactions. Mr. Savage agreed to three sanctions: (1) a five- month suspension from associating with any FINRA registered firm; (2) a three-month suspension from association with any FINRA registered firm in a principal capacity, to be served following the five-month suspension; and (3) a $30,000 fine. The AWC confirmed that Mr. Savage waived his procedural rights relating to these alleged violations and made clear that it would become part of his permanent disciplinary record that could be considered in future actions brought by FINRA or other regulators. He was precluded from taking positions inconsistent with the AWC in proceedings in which FINRA was a party, but was not precluded from taking inconsistent positions in litigation if FINRA was not a party. The five-month suspension began on June 13, 2018, and ended on November 17, 2018. The three-month suspension began on November 18, 2018, and ended on February 17, 2019. In the interim, on August 16, 2018, FINRA notified Mr. Savage by letter that it was suspending his securities license indefinitely for his “failure to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance.” This letter is not in the record and, as such, it is unclear whether Mr. Savage had an avenue to challenge that suspension directly. Mr. Savage had challenged the underlying arbitration award, which remained pending on appeal in the Second District Court of Appeal. On November 7, 2018, the Second District affirmed the circuit court’s arbitration order. On November 20, 2018, Mr. Savage put the Department on notice of the FINRA disciplinary actions, including the AWC from June 2018 and the decision of the Second District affirming the arbitration award.
Conclusions For Petitioner: David J. Busch, Esquire Department of Financial Services Room 612, Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 For Respondent: Michael Buchholtz, Esquire The Law Office of Michael Buchholtz Post Office Box 13015 St. Petersburg, Florida 33777
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services issue a final order suspending Mr. Savage’s license as an insurance agent for twelve months. DONE AND ENTERED this 30th day of September, 2019, in Tallahassee, Leon County, Florida. S ANDREW D. MANKO Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of September, 2019.
