The Issue The issue for consideration in this case is whether Petitioner should be granted registration as an associated person by the Department of Banking and Finance, or whether his application should be denied because of alleged misconduct outlined in the letter of denial.
Findings Of Fact At all times pertinent to the issues herein, the Petitioner, Richard Graibus, was either a registered associated person associated with a security firm or an applicant for registration as an associated person in Florida, and the Respondent, Department of Banking and Finance, Division of Securities and Investor Protection, (Department), was and is the state agency charged with the responsibility of regulating the sale of securities in this state. On August 19, 1988, Mr. Graibus filed an application to be an associated person of Finnet Securities, Inc., (Finnet), with the Department. On March 3, 1989, by letter, the Department notified Mr. Graibus of its intent to deny his application on the basis that prior disciplinary action taken against him by other states was prima facie evidence of his unworthiness to act as a securities dealer in Florida. Specifically, the bases for denial were: A Minnesota Cease and Desist Order in December, 1977. A Securities and Exchange commission suspension order in May, 1983. The denial of Petitioner's application for registration as an associated person with J. W. Gant and Associates by 10 states. Three judgements against Petitioner. His termination for cause from employment with American Western Securities. Petitioner was employed by American Western Securities in Denver, Colorado from November, 1977 to July 1980 when he left feeling a change would be beneficial to his career. No evidence was presented to support the Department's allegation that Petitioner was terminated for cause from that period of employment and that allegation is found to be unsupported. In December, 1977, the State of Minnesota issued a Cease and Desist Order against Petitioner alleging that he offered to sell, and did sell, unregistered securities while neither he, the firm, nor the securities were registered in that state as required by state law. Petitioner did not dispute the allegations of fact outlined in the Minnesota Order. The actual sale was made to a father and son who Petitioner had inherited as customers from his stepfather. The trades were unsolicited and were approved by petitioner's supervison who had many years experience in the securities trade. On May 23, 1983, the Securities and Exchange Commission, (SEC), found that Mr. Graibus had, at an unspecified time, wilfully violated and aided and abetted in violations of the anti-fraud and anti-manipulation provisions of the United States security law, and had failed to reasonably supervise others under his control to prevent violations of the same law. Petitioner engaged in cross trading, manipulation of stock prices, and fraudulent representations to customers regarding two stocks. These findings were incorporated in a Findings and Order Imposing Remedial Sanctions which were drafted and adopted from an offer of settlement submitted by Mr. Graibus. In its Order, the SEC took the following disciplinary action: It suspended Petitioner from association with any broker/dealer for 60 days; It barred Petitioner from acting in a supervisory capacity as a principal, officer, director or employee for 12 months; and It stipulated that Petitioner was not to act in a supervisory position without prior approval from the Commission, after the expiration of the previously mentioned 12 month period. Mr. Graibus has twice previously been granted registration as an associated person in Florida. Specifically, on May 9, 1984, he was approved as an associated person with Chesley and Dunn; and on January 28, 1985, he was approved as an associated person with J. W. Gant and Associates. In both cases, the Department had knowledge of the Minnesota Order and the SEC action since Petitioner disclosed both on each application. In 1984, while Petitioner was a principle of the brokerage firm of Chesley and Dunn, Inc., the Securities and Exchange Commission revoked the firm's registration for violations of various net capital and financial reporting regulations. There was no charge against the Petitioner. As a result of his association with this firm, and his having signed notes on behalf of the firm in his personal capacity, Mr. Graibus incurred a substantial liability for obligations of the firm, which are memorialized by three default judgements against him. The initial loan totaled $150,000.00. While manager of the firm's Sarasota office, Petitioner also invested approximately $175,000.00 of his own money which was lost. All his private obligations were fully disclosed to prospective creditors when he borrowed the money for the firm. In 1985, Mr. Graibus submitted applications to several states for registration as an associated person with J. W. Gant and Associates. These applications fully disclosed the entry of the Minnesota Order and the results of the SEC action. His applications were approved in twenty-two states, but as a result of the aforementioned SEC action, were denied by the states of Pennsylvania, Nebraska, Ohio, and Tennessee. He protested the denial by Tennessee and on November 22, 1985, that state entered a Final Order confirming its denial of his application for registration, finding that he had failed to disclose the adverse finality of the Minnesota Cease and Desist Order claiming Instead that the order had been resolved by corporate counsel. This comment is also made- in Mr. Graibus's Gant application in Florida which granted his application. Mr. Graibus did not protest the entry of the Final Order In Tennessee. Mr. Peter Maftieu is a registered securities dealer in four separate classifications. He has worked for J. W. Gant and Chesley and Dunn since January, 1983. Petitioner trained him when he first started in the industry. Incorporated as a fundamental part of Petitioner's training [pg was the insistence on full disclosure of material facts to clients and the need to insure that he, as a salesman, educated himself as to his client's situation by a full and detailed questioning to insure the securities recommended were suitable for and consistent with the client's needs. As a part of his training, Petitioner showed Mr. Maftieu the SEC and Minnesota orders as examples of what can happen if there is not full compliance with the rules. Due to increasing instances of misconduct within the securities industry in this state, none of which was shown to relate to Petitioner, in 1985 the Florida Comptroller created a task force to study the problem and come up with recommendations for efforts to combat fraud in the securities industry in Florida. In March, 1986, the task force submitted its report which, in part, recommended that the Department tighten up its review of applications for registration as securities dealers to eliminate or disqualify applicants with a disciplinary record within the industry. As a result of this recommendation, the Department altered its policy in exercising its discretionary approval authority. Petitioner has, for many years now, practiced full disclosure in the conduct of his business and it has been in excess of six years since the last findings of any violations of securities laws, rules or regulations by Petitioner. Nonetheless, in this case, the Department's denial of Mr. Graibus' application, which was based on his disciplinary history in other states, was consistent with its policy against granting registration to "unworthy" persons, as outlined in the Department's rules, and the intent of the Legislature as outlined in Section 517.1205, Florida Statutes.
Recommendation Based, on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that Petitioner's application for registration as an associated person with Finnet Securities, Inc., be granted. RECOMMENDED this 5th day of January, 1990, in Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of January, 1990. COPIES FURNISHED: Edward W. Dougherty, Jr., Esquire Mang, Rett & Collette, P.A. 660 D. Jefferson St. Post Office Box 11127 Tallahassee, Florida 32301-3127 M. Catherine Green, Esquire Paul C. Stadler, Esquire Department of Banking and Finance Suite 1302 The Capitol Tallahassee, Florida 32399-0350 Hon. Gerald Lewis Comptroller State of Florida The Capitol Tallahassee, Florida 32399-0350 Charles L. Stutts General Counsel Department of Banking and Finance Suite 1302 The Capitol Tallahassee, Florida 32399-0350
The Issue The issue for consideration in this matter is whether Petitioner should be granted registration as an associated person of FISCL Securities in Florida.
Findings Of Fact At all times pertinent to the allegations herein, the Petitioner was an applicant for registration as an associated person of FISCL Securities. The Respondent, Department, was the state agency charged with the administration and enforcement of Chapter 517, FLORIDA STATUTES, the Florida Securities and Investor Protection Act, and the rules promulgated thereunder which include the registration of associated persons as securities dealers inthis state. Under the rules of the Department, anyone who seeks to represent a securities dealer in Florida is required to file an application form, (Form U- 4), with the National Association of Securities Dealers, (NASD), which, upon review, is forwarded to the state in which the applicant resides and seeks registration. If the records of the NASD disclose any disciplinary action having been taken against the applicant, it is identified to the state in which registration is sought. In Florida the Department is the appropriate agency and Department officials review the application to see if it should be approved. In this regard, all disciplinary information, the records of the NASD, is forwarded to the pertinent state for review in accordance with the rules and statutes of that state and, based on the information provided, a decision is made as to whether the application should be approved fully, approved with conditions, or denied. In Florida, all documents relating to the applicant's disciplinary history are secured and reviewed by the Department's Division of Securities prior to a recommendation being made as to approval or denial of the application for registration. In the instant case, the information submitted by NASD, pertaining to the Petitioner herein, included evidence of a prior disciplinary record. Upon receipt of the notice, Ms. Cain, the Division's Assistant Director, sent out a discrepancy letter to the Petitioner and requested copies of the disciplinary record and his form U-4 from NASD. The information submitted to the Department by Ellen J. Badler, Assistant Director, Special Registration, with NASD, dated July 18, 1990, reflected three letters of admission, waiver and consent from First Heritage Corporation, a securities dealer in Southfield Michigan, and Louis Feldman, Petitioner, a registered options principal with and president of the firm. The documents show that on the basis of periodic review of the company records in October and November, 1981, the corporation failed to obtain or maintain option account agreements for 7 of its option customers; that in 5 cases it failed to obtain or maintain sufficient background and financial information on customers approved for trading; and that it failed to show the date prospectuses were furnished to options customers. All of the above were cited as violations of Article III, Section 33, Appendix E, NASD's Rules of Fair Practice. This inquiry also indicated that the corporation and Petitioner failed to inform its customers, in writing, of the method it used to allocate exercise notices to its customers' accounts, and failed to explain the way the system operated and its consequences, in violation of Section 63, of NASD's Uniform Practice Code. Mr. Feldman, along with the company, admitted those violations in a Letter of Admission, Waiver and Consent he executed in response to NASD's District 8 Business Conduct Committee, (Committee), and they were punished with a censure to the company and a joint fine of up to $500.00 for Mr. Feldman andthe company. No further disciplinary action was taken against the Petitioner or his company by NASD, the SEC, or the state of Michigan until, in 1989, NASD entered its Decision and Order of Acceptance of Respondents' Offer of Settlement regarding three Complaints filed by the Committee in 1988 for alleged violations of rules of the Municipal Securities Rulemaking Board, (MSRB), and the Rules of Fair Practice. These complaints, filed against Petitioner, First Heritage, and as to one of the three, to a third party as well, related to: effecting the purchase and sale of municipal securities at prices in which the aggregate price at which the securities were purchased or sold were not reasonable and fair under the circumstances; placing several different advertisements which omitted material facts and were mis- leading; again, purchasing and selling municipal securities at prices which were not fair and reasonable. The Committee found that the Petitioner and the other parties involved were in violation of the rules as alleged, and fined Petitioner and First Heritage $10,000.00 jointly as to the two price allegations, and $5,000.00 as to the advertising allegation. Petitioner claims the violations were more ministerial and technical than substantive and that no customer ever complained about or was in any way injured by those actions. As to the advertisements, he claims they were not misleading. Examination of the advertisements does not necessarily support that claim, however, He also claims that the policies complained of were the same as those followed for the 13 years the company was in business and prior audits by NASD had never resulted in any noted discrepancies. The Department does not consider as pertinent the fact that injury to a consumer was not involved. By the same token, given, as here, the completed disciplinary action which has become final, it will not look behind that action and re-litigate, at a hearing such as this, the truth of the allegations. Petitioner also claims that in each case he was advised by counsel that it would be useless to fight the allegations of misconduct since it appeared the collective mind of the agency was made up to take action. Further, weighing the minimal fines sought against the extensive cost to Petitioner in attorney fees and lost commissions while litigating the allegations, he elected to take that route less expensive to him in the short run and accept punishment. This decision did not, it would appear, redound to his benefit. Petitioner also claims, and it is so found, that at no time has any disciplinary action ever been taken against him for actions in the securities business by the states of Michigan or Florida. On the basis of those actions, by letter of October 11, 1990, the Department notified the Petitioner that his application for registration was denied. The two page letterclearly indicated the Petitioner's professional history and the fact that he was the subject of "at least two regulatory actions filed by the NASD." The letter then listed the specific allegations of misconduct charged against the Petitioner in each of the two actions and noted the agency action taken in each case. The Department's letter also cited the pertinent statute which authorizes it to deny an application for registration and the bases therefor, and noted the reasons for its action. Petitioner was also notified of his right to and the procedure for contesting the Department's action.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is therefore recommended that a Final Order be entered denyingPetitioner, Louis Feldman's application for registration as an associated person of FISCL Securities in Florida. RECOMMENDED in Tallahassee, Florida this 17th day of September, 1991. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of September, 1991. COPIES FURNISHED: Gregory G. Schultz, Esquire Schultz & Associates, P.A. 26750 U.S. Highway 19 N. Suite 310-A Clearwater, Florida 34621 Margaret S. Karniewicz, Esquire Department of Banking and Finance Suite 1302, The Capitol Tallahassee, Florida 32399-0350 Gerald Lewis Comptroller The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves General Counsel Department of Banking and Finance The Capitol, Plaza Level, Room 1302 Tallahassee, Florida 32399-0350
Findings Of Fact Based on the stipulations and admissions of the parties, on the exhibits received in evidence, and on the testimony of the witnesses at hearing, I make the following findings of fact. The Petitioner, Christopher James Arenal, filed a Form U-4 application seeking registration as an associated person with Rocky Mountain Securities & Investments, Inc., located at 1600 Stout Street, Suite 920, Denver, Colorado 80202. Said application was received by the Respondent on April 24, 1986. By letter dated June 17, 1986, the Respondent advised the Petitioner that it intended to deny his application for registration for the reasons set forth at length in the letter. (At the hearing the Respondent stipulated that the allegations of the top paragraph on the second page of the denial letter of June 17, 1986, should be deleted.) Thereafter, the Petitioner filed a timely request for hearing. Except for the reasons stated in the Respondent's denial letter dated June 17, 1986, the Petitioner is otherwise eligible for the registration he seeks. On October 26, 1982, the State of Tennessee issued a Complaint and Notice in the matter of First Colorado Investments and Securities, Inc., Mr. Arenal, and others, alleging the sale of securities while not being properly registered. On February 7, 1983, Mr. Arenal entered into a Findings and Consent Order which found that Mr. Arenal and others had engaged in securities transactions involving Tennessee residents at a time when Mr. Arenal and others were not registered in the State of Tennessee. Mr. Arenal and others were ordered to cease and desist from acting as agents in the State of Tennessee without being lawfully registered to do so. The transactions in question took place during 1981. The evidence does not show how many of those transactions involved Mr. Arenal. On April 28, 1983, the State of Wisconsin entered into a Stipulation and Consent Order of Prohibition with Mr. Arenal in which Mr. Arenal agreed to the entry of an Order of Prohibition. On June 2, 1983, a Consent Order of Prohibition was entered into in which Mr. Arenal was prohibited from transacting business as a securities agent in Wisconsin without lawful registration in that state. That order had as its genesis the fact that during 1981 Mr. Arenal had engaged in nine securities transactions for a Wisconsin resident who had previously been a client of Mr. Arenal when the client resided in New York. On January 11, 1984, the State of Iowa issued a Summary Order Denying Application For Securities Agent License on an application filed by Mr. Arenal. The findings of fact in that order included findings that Mr. Arenal had "engaged in securities transactions on behalf of an Iowa resident in March, 1981, while unlicensed as a securities agent," and, with regard to an affidavit filed with the Iowa Division of Securities, that "Mr. Arenal's filed and notarized statement is a false statement." Since the issuance of the January 11, 1984, order, the State of-Iowa has approved Mr. Arenal's application to be registered as a securities agent and he is presently registered in that state. On November 5, 1984, the State of Utah entered an Order Summarily Denying Application For Registration as an Agent on an application filed by Mr. Arenal. The denial was based on Mr. Arenal's prior disciplinary history. Since the issuance of the November 5, 1984, order, the State of Utah has approved Mr. Arenal's application to be registered as a securities agent and he is presently registered in that state. The State of Oregon, by letter dated November 1, 1985, denied Mr. Arenal's application for registration in that state. The Oregon denial letter does not set forth a factual basis for the denial. On September 6, 1984, the State of Nebraska issued an Order Denying Agent Registration on an application filed by Mr. Arenal. The denial was based on his prior disciplinary history. Mr. Arenal was again denied registration in the State of Nebraska on February 20, 1986. During 1985, the staff of the Respondent's Division of Securities was almost tripled in size. Shortly after the increase in staff size, a Task Force recommended that the Division of Securities devote more time and energy to the review of applicants with disciplinary history in order to more carefully screen such applicants. As a result of the increase in staff size and the increased emphasis on review of applicants with disciplinary history, the Respondent is now rejecting applications that previously might have gotten through a cursory review. All of the adverse actions taken against Mr. Arenal by the states of Tennessee and Wisconsin were based on events that occurred in 1981, at one firm, First Colorado Investments and Securities, Inc. Mr. Arenal's supervisors at that firm advised him that it was permissible for him to sell certain securities in states where he was not registered. Since those improper sales in 1981, Mr. Arenal has not engaged in any subsequent transactions in states where he was not registered. During his approximately eleven years of professional experience in the securities field, there have never been any client complaints against Mr. Arenal. Mr. Arenal has been previously registered as an associated person in the State of Florida. He was last registered in Florida from approximately February of 1985 until December of 1985. His prior registrations were processed prior to the changes in policy and procedure described in paragraph B, above.
Recommendation Based on all of the foregoing, I recommend the entry of a Final Order granting Mr. Arenal's application for registration as an associated person. DONE AND ENTERED this 9th day of June, 1987, at Tallahassee, Florida. MICHAEL M. PARRISH, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1987. COPIES FURNISHED: H. Richard Bisbee, Esquire Assistant General Counsel Office of the Comptroller Suite 1302, The Capitol Tallahassee, Florida 32399-0350 Mr. Christopher James Arenal 1600 Stout Street Suite 920 Denver, Colorado 80202 The Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 =================================================================
Findings Of Fact Petitioner, Richard L. Hoffman (Hoffman), applied to Respondent, Office of the Comptroller, Department of Banking and Finance, Division of Securities and Investor Protection (Department), for registration as an associated person with First Southern Investment Corporation. By letter dated November 25, 1986, the Department advised Hoffman that his application had been denied, and Hoffman filed a timely request for formal hearing. By "memorandum of understanding" dated June 10, 1986, Hoffman was employed by First Florida Securities Group, Inc. (First Florida) as the manager and compliance officer of its Fort Lauderdale branch office. Pertinent to this case, the memorandum of understandings provided: It is today agreed that Richard Hoffman, as manager of a branch office of First Florida Securities Group, Inc., and representing a certain "Group" in that office agrees to work for and manage the office for First Florida Securities Group, Inc., under the following conditions: 1/ * * * E. The "Group" will be allowed an inventory bank of $50,000.00 of cost -- no one item to exceed This will be reviewed periodically. It maybe exceeded only with written approval of two officers of First, Florida Securities Group Inc. 2/ The branch office opened on June 15, 1986, and by June 27, 1986, Serious problems in the operation of the branch office began to surface. These problems were addressed in a meeting on Monday, June 30, 1986, between Nick Christos, chief executive officer of First Florida; Jim Palmer, compliance officer for First Florida; and, Hoffman. The results of that meeting were memorialized in a memorandum to Hoffman of July 7, 1986, which provided, inter alia: This is to summarize the results of my meeting with you on Monday, June 30, 1986. In attendance, also, was Jim Palmer, Compliance Officer. The following is intended as a summary of conclusions, without benefit of detailed conversations that led to our mutual understanding Letter to be sent to Jim Palmer from you, with respect to "as of" trades and other trades Purchased by customers at prices under the market on Jocom. (Not yet received as of this date). * * * Understanding by you that your office would henceforth adhere strictly to the $25,000 limit with respect to maximum inventory levels per corpora- tion -- with a $50,000.00 maxi- mum for your office at the end of each trading day. (Note that this limit was violated on Friday, June 27 when 41,200 International Communications was in inventory, with a value of $51,500). * * * We reviewed the fact that our Bear Stearns Margin Clerk was concerned about the Sy Schwartz account (purchases of 30,000 and 110,000 shares of Jocom) of which 110,000 shares or $96,250 still remains unpaid as of this date. Review of concern about the number and total dollars involved in over-due payments of Ft. Lauderdale customers (not materially reduced as of this date). The proof established that Hoffman failed to comply with his agreement to explain the "as of" trades and other trades purchased by customers at prices under the market in Jocom, adhere to the maximum inventory levels, and address over- due payments. Since there was no improvement in the operation of the branch office, Mr. Christos advised Hoffman on Monday, July 14, 1986, that: Your Ft. Lauderdale group, as of pre-opening this morning, will have no authority to represent the firm in trading NASDAQ stocks. * * * 3. You will have one week, effec- tive with the termination of business on Friday, July 18, 1986, for your branch to find another "home" ... (associate themselves with another deal- er). The principal of First Florida, Mr. Winkler, declined to support Mr. Christos because of his belief that the branch office had generated substantial revenues and that it would work out its problems. Accordingly, since Hoffman and the "Group" were not to be terminated, Mr. Christos and Mr. Palmer resigned as chief executive officer and compliance officer, respectively, for First Florida. On July 15, 1986, Hoffman, who held a principal's license, was elected president of First Florida, although he continued to operate as branch manager. The confidence Mr. Winkler placed in the branch office and Hoffman was short lived. Between July 19, 1986, and July 31, 1986, First Florida received complaints from over thirty customers of the branch office regarding unauthorized transactions, the failure to report or process trades, and the failure to provide confirmations or proceeds of sale. As a consequence of these complaints, Hoffman was terminated on July 31, 1986. First Florida's loss from the operation of the branch totaled approximately $657,000. Of this sum, $357,000 was expended to cover the debit balance with its correspondent Bear Stearns for unpaid securities accounts, and $300,000 for settlements with customers who alleged that purchases in their accounts were unauthorized. While First Florida's association with the "Group" may have been unprofitable, Hoffman benefited quite well. During the period of June 15-July 15, 1986, Hoffman earned over $60,000 in commissions through First Florida. While Hoffman concedes that trades he received from customers were not processed, he asserts that the blame for such failure rests on Mr. Brazel, the "trader" for the branch office. According to Hoffman, Mr. Brazel frequently traded at home, rather than at the office, and during the week of July 21- 25, 1986, traded exclusively at home. Because of Brazel's absence, Hoffman asserted that trades were not executed or they were "lost" because of some motivation of Brazel not to process them. Hoffman concludes: "I didn't have any idea what was going on" and there was "no way (I) could control the trades." Hoffman's attempt to "pass-the-buck" to Brazel is unpersuasive. While Brazel may be culpable, Hoffman also knew by mid-July 1986, if not by early July, that serious trading problems existed at the branch office, and that Brazel, if Hoffman is to be believed, was no small part of those problems. Yet Hoffman, who had been in the business for over 30 years, was the manager of the small branch office for First Florida, was president of the firm, was the firm's trader in Brazel's absence, and was a salesman for his own accounts, denies any responsibility for his failure to assure that trades were executed on behalf of his clients or the firm. Hoffman's testimony is inherently improbable and unworthy of belief. Hoffman's failure to diligently exercise his responsibilities as branch manager, president, trader, and salesman resulted in losses to his clients, as well as to other clients of the firm, since he failed to assure that their requests to sell securities were properly processed. 3/ In addition to Hoffman's failure to properly manage the branch office and his clients accounts, several other irregularities surfaced during his tenure with First Florida. Inexplicably, while employed by First Florida, Hoffman provided a customer, Sy Schwartz, with a written guarantee against loss. That guarantee provided: Sy Schwartz: This is to inform you, I agree that if Jocom is not up by July 7, 1986 you do not have to pay for it and I will take the trade back into my trading account. /s/ Richard L. Hoffman Also unexplained by Hoffman, was his personal payment of over $119,000 to his customer, Bruce Ross, between June 19, 1986, and July 15, 1986. These monies were variously described by Ross as involving the repayment of loans or his dealings in stocks. The substance of these transactions was not, however, further explained by either Mr. Ross or Hoffman. Following his termination with First Florida, Hoffman associated himself with First Southern Investment Corporation (First Southern). During his tenure at First Southern, although not registered, Hoffman held himself out as a senior account executive, and attempted to sell securities to customers he had previously serviced at First Florida. Both Hoffman and the Department offered the testimony of various witnesses concerning their opinion of Hoffman's reputation in the business community. Not surprisingly, those who had a good experience with Hoffman found him reputable, and those who felt they had suffered adversely under his representation found him to be of bad repute. The proof of Hoffman's reputation, offered through these witnesses, was not persuasive.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the application of petitioner, Richard L. Hoffman, for registration as an associated person with First Southern Investment Corporation be DENIED. DONE AND ORDERED this 15th day of July, 1987, in Tallahassee, Florida. WILLIAM J. KENDRICK Hearing Officer Division of Administrative Hearings The Oakland Building 2900 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of July, 1987.
The Issue The central issue in this case is whether Petitioner is entitled to registration as an associated person of First American National Securities, Inc. (FANS).
Findings Of Fact Petitioner, Len C. Richardson, filed an application for registration as an associated person of First American National Securities, Inc. The Department is the appropriate state agency charged with the responsibility of reviewing applications such as the one at issue in this case. On August 14, 1989, the Petitioner pled guilty to a criminal charge of retail theft. Upon entry of the plea, which was accepted, adjudication of guilt was withheld and the Petitioner was released. According to court records, the Petitioner was sentenced to one day but given credit for one day served. Further, the Petitioner was directed to pay, by September 1, 1989, the sum of $85.50 as court costs and various fees. The criminal record described in paragraph 3 was the basis for Petitioner's application denial as outlined in a letter dated June 26, 1992, from Don B. Saxon, Director of Securities, to Petitioner. Prior to the denial letter, the Department had advised Petitioner that his application might be approved provided restrictions could be imposed by agreement to the registration. The terms of such restrictions were set forth in a registration agreement tendered to Petitioner on or about April 10, 1992. The Department also advised Petitioner that if the registration agreement was not returned, completely executed, within fifteen days, that a denial would be issued. For reasons unknown, the parties were unable to resolve issues related to the registration agreement, and the Department issued the denial as noted above. According to Ms. Cain, in order to assure the terms of the agreement could be met, the Petitioner would have to work out of a registered branch office and receive strict supervision from a person physically present at the branch who is registered as a principal. At the hearing, Petitioner did not deny the acts which gave rise to his criminal charge and plea. Rather, he likened his conduct to writing a bad check. No credible explanation was offered for the conduct save his assertion that the plea of guilty was a matter of convenience.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED: That Office of Comptroller, Department of Banking and Finance enter a final order granting Petitioner's application for registration as an associated person of FANS with restrictions and conditions set forth in a registration agreement to be executed by all parties. DONE AND RECOMMENDED this 25th day of January, 1993, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of January, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-6158 RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE PETITIONER: 1. Paragraphs 1 through 8 are rejected as argumentative, irrelevant, or not supported by the weight of credible evidence. RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE RESPONDENT: The Respondent submitted an amended proposed order on January 11, 1993. The findings of fact in that document are addressed. Paragraphs 1, 2, 4a, 4b, 5 and 6 are accepted. Paragraph 3 is rejected as outside the scope of the record presented. COPIES FURNISHED: J. Ashley Peacock Assistant General Counsel Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32399-0350 Len C. Richardson 60 Crystal River Drive Cocoa Beach, Florida 32931 Honorable Gerald Lewis Comptroller, State of Florida Department of Banking & Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking & Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350
Findings Of Fact At all times material hereto, Respondent, Lawrence P. Weiner, was a registered Florida real estate salesman employed by Continental Marketing Services, Inc. Continental Marketing Services, Inc. solicited real property listings from property owners in the State of Florida by means of postal cards inquiring of those property owners whether they would like to sell their Florida real property. Interested owners were requested to fill out a card with their address and telephone number, and to forward that card to Continental Marketing Services, Inc. which would then contact the property openers by telephone, Respondent, as a real estate salesman in the employ of Continental Marketing Services, Inc., would then contact responding property owners from a list furnished him by his employer. Respondent would obtain information by telephone from property owners such as initial purchase price, size and location of the property. Both Respondent and his employer represented to property owners that, should they list their property with Continental Marketing Services, Inc., the property would be advertised in foreign countries where investors existed who were interested in purchasing Florida real estate. In order to list their property with Continental Marketing Services, Inc., property owners were required to pay an "advance fee" for these listings, usually $350, which amount they were told would be used to defray the cost of initial preparation of a directory listing those properties in Florida which were for sale. After obtaining initial background information, Respondent would submit the information to his employer, which, though unclear from the record, would analyze these facts and return to Respondent for transmission to the property owner a suggested sales price. This suggested sales price was usually several times the initial purchase price for the property. For example, one witness at the hearing testified that a lot purchased on April 27, 1967 for $2,640 was ultimately listed with Continental Marketing Services, Inc. at Respondent's suggestion, at a sales price of $7,600. Testimony at the hearing indicated that comparable lots in the same area are presently selling for $4,700. Another witness testified that two lots purchased in 1965 for $2,390, were discussed in 1977 with Respondent who suggested that they be listed at a suggested sales price of $16,600. Finally, still another witness testified that he listed property with Continental Marketing Services, Inc. as a result of his contacts with the Respondent at a purchase price of $5,000 per acre in 1976 for property that he had purchased for $500 an acre in 1964. Those property owners testifying at the hearing who listed their property for sale with Continental Marketing Services, Inc., indicated that they had no further contact with either Respondent or Continental Marketing Services, Inc. after having paid their $350 listing fee. None of these property owners received any offers to purchase their property as a result of its listing with Continental Marketing Services, Inc., and, as of the date of the final hearing in this cause, the property remained unsold. The Respondent testified that his only responsibilities with Continental Marketing Services, Inc. involved contacting those persons on the lists furnished to him, and obtaining their agreement to listing their property with Continental Marketing Services, Inc. Suggested sale prices for particular pieces of property were furnished to Respondent by other employees of Continental Marketing Service, Inc. Respondent further testified that placing of advertisements for properties listed with Continental Marketing Services, Inc. was accomplished by other employees of the company. Respondent testified that he "understood" that Continental Marketing Services, Inc. had sold properties and that some of these sales were to foreign investors, although he did not know the identity of the foreign investors, or the number of parcels sold by the company. Respondent denied that he had represented to property owners that the sale of their property would be accomplished in sixty to ninety days. This contention is borne out by the testimony of two of the property owners testifying in this proceeding, one of whom testified that Respondent indicated that her property could "probably be sold within sixty to ninety days", and another property owner testified that Respondent made no representation to him concerning the length of time necessary to effect a sale of his property. There is no evidence in the record to establish that Continental Marketing Services, Inc. failed to advertise property listed for sale as promised in the Listing Brokerage Agreement with those property owners testifying in this proceeding. There is no evidence in the record in this proceeding to establish that Continental Marketing Services, Inc., in fact, knew of no foreign investors interested in purchasing property in the United States. Further, there is no testimony in the record in this proceeding to establish that Continental Marketing Services, Inc. had never sold property for other property owners in either the United states or the State of Florida. Finally, although property belonging to three of the witnesses testifying in this proceeding was listed at several times its initial purchase price, there is no indication in the record that Respondent played any part in setting the suggested listing prices.
Findings Of Fact The complaining witnesses in this case, the Marino's, owned real property in Fern Park, Florida that they listed in November, 1973, with Area One, Inc., a corporate broker. They were very anxious to sell this property. At all times here involved, respondent was a registered real estate broker and was employed as a salesman and office manager of Area One, Inc. The property was listed through salesman Eleanor Stanfield although respondent Greene accompanied her to the Marino's when the listing was obtained. Approximately two weeks thereafter, respondent obtained a prospective buyer for the property who was willing to purchase but couldn't meet the cash down payment required to make up the balance over a 95 percent mortgage. The buyer, Borsack, was an acquaintance respondent had known socially for a year or so. The suggestion was made that if Marino could loan Borsack the money for the down payment the latter would sign a balloon note payable twenty dollars per month for the first five years with the balance then due and payable. When bringing this proposal to Marino, respondent told him it was not the best deal but it was the best he could offer at the moment. At the time, Borsack was employed as a salesman and was apparently earning a good salary. Marino was receptive to the idea and agreed to loan the buyer $2400. Marino was advised by his lawyer that he should have more security for the loan than the note signed by Borsack alone and respondent agreed to guarantee the note. Marino prepared a check for $2400 which he exchanged for a cashier's check for a like amount. This was given to respondent when he executed as the guarantor and was subsequently given to the closing agent. There was conflicting testimony regarding the dispenser of the information that the existence of the note should be withheld from the mortgage broker at the closing. The complaining witnesses contended that respondent so advised them, but he denies ever giving such advice. Regardless of the complicity of respondent in this regard, both parties to the contract were aware that the mortgage would not be approved if the existence of the loan was disclosed to the mortgagee. To account for his cash payment at closing, Borsack produced for the mortgage a letter from his sister reciting a gift from her of $2200. Borsack also signed a residential loan application (Exhibit 8) in which he indicated no financing other than first mortgage and the cash he would pay at closing. Both buyer (Borsack) and seller (Marino) executed an affidavit (FNMA Form 1009)(Exhibit 10) on which they advised the mortgagee no secondary financing was involved in the transaction. At the time the loan was made by Marino to Borsack the former's attorney was aware of the circumstances surrounding the transaction and this attorney advised Marino that it would be all right for him to accept the note provided payment was guaranteed by respondent. Although no testimony was elicited from the attorney in this regard, I would expect him to be cognizant of the fact that the mortgage would not be approved if the mortgagee was aware of the loan from seller to buyer. Considerable testimony was adduced regarding whether or not the promissory note given by the buyer to the seller constituted secondary financing as intended on Exhibits 8 and 10. Since this determination is not necessary to the results reached below, respondent's understanding that "secondary financing" relates only to that financing that would create a lien on the property is likewise immaterial to the result. During a 60 day period including the time this transaction occurred, respondent sold four pieces of property for the Marino's. At no time during the negation which resulted in the sales of the property from Marino to Borsack did respondent give any false or misleading information to the Marinos. Although no evidence was presented to this effect, the complaint alleges, and the answer admits, that after the transaction closed Borsack subsequently defaulted on his mortgage and on his note to Marino; that respondent made a few payments on the note he had guaranteed before stopping these payments; and that Marino obtained a judgment against respondent for the amount of the promissory note. Thereafter, in December 1975, some two years after any act of respondent in this transaction that could have given rise to a violation of Chapter 475, F.S. occurred, the Marinos filed a complaint with the FREC and the investigation and administrative complaint here involved followed.
The Issue Whether the Petitioner is entitled to licensure in Florida as a Non-resident Life and Variable Annuity Agent?
Findings Of Fact The Petitioner, Linda C. Ballou, applied for a license as a Non-resident Life and Variable Annuity license by application completed on October 30, 2003. The Department denied her license by letter dated March 18, 2004. There is no explanation of why there was a delay in issuing the March 18, 2004 denial letter. There was no apparent request for additional information to complete the application after October 30, 2004, or information requested to resolve qualification issues. The Department denied the Petitioner's application on the basis that the Petitioner was not trustworthy or competent based upon her having been enjoined from violating the Federal Securities and Exchange Law and being barred from associating with any broker or dealer for three years after which she could reapply for association. The Department introduced and properly authenticated Respondent's Exhibits 3, 5, 6, and 7, together with a copy of the Petitioner's statement, Respondent's Exhibit 4, regarding the action of the Securities and Exchange Commission (SEC). The Petitioner testified regarding the events that were the subject of the SEC action. The Petitioner was counseling persons, particularly seniors, on purchasing life and annuity contracts primarily for long term care. She was an agent for CNA and New York Life, both of which were insurance companies. She was required to possess a "6-63 license" by her employer that authorized her to sell mutual funds and other instruments, which would be classed as securities. She carried errors and omissions (O & E) coverage with New York Life and paid the premium for O & E coverage for one year. While so employed, she was introduced by the president of CNA to his father, who told her about bonds payable in full in nine (9) months. He explained to her that these bonds were not securities, which are instruments payable in year or longer. There were several of these bonds available; however, the only one that she sold was one issued by Sebastian International Enterprises (SIE), a Florida-based television production company. These bonds paid very high rates of interest, and appeared to be a good investment. The Petitioner called the local bank and found that SIE was a viable company engaging in the business of producing films for television. She visited the company and saw them making television shows. The company had contracts to make additional television shows, and the company remained at all times pertaining to this case a viable company. After checking into the company, she invested in the company's bonds; she sold the bonds to members of her family; and members of the public. She never had any problems with the payment of premiums by the company. After selling SIE bonds for approximately a year, she saw a news story about one of the other companies, which had been presented to her by the father of the president of CNA, being investigated for being a "Ponzi" scheme. She checked with her attorney about the sale of SIE bonds, and, thereafter, contacted the Federal Bureau of Investigation (FBI) on his advise. The FBI referred the matter to the SEC, which opened an investigation of SIE. The Petitioner cooperated fully with this investigation. Ultimately, the financial records of SIE were seized, and the SEC determined that the sale of the nine-month bonds was a "Ponzi" scheme. Although no action was ever taken against SIE or the Petitioner's broker, the Petitioner and two others holding SEC licenses were disciplined. Although as a result of the aforementioned, the Petitioner surrendered her California license to sell insurance, she has been reinstated, and was able to seek an SEC securities broker's license after the three years ran. The administrative proceeding SEC brought against the Petitioner alleged that the Petitioner violated the Federal Securities and Exchange Act. The SEC order and complaint is based upon admissions by the Petitioner and recites that the Petitioner consents to the entry of the anticipated injunction without admitting or denying the allegations of the complaint. See Respondent's Exhibit 3. The complaint filed against the Petitioner in the United States District Court, Middle District of Florida is Respondent's Exhibit 5. This complaint states that the funds from the sale of the subject bonds were to fund the operations of SIE. The Petitioner testified that the proceeds were used to fund the daily operation of the company. This complaint also makes various allegations of misconduct and fraud against the Petitioner; however, no evidence was received at hearing in support of any of the SEC allegations, and the consent agreement signed by the Petitioner specifically states that she does not admit or deny the allegations contained in the complaint. By signing the agreement, the Petitioner avoided litigation on the issue and, although she voluntarily agreed to repay all commissions she earned from the sale of these notes (approximately $156,000), the agreement recites that she would not have to repay the money in light of her bankruptcy unless her statement were determined to be false. 77 United States Code 77c provides in pertinent part regarding items that are exempted as securities as follows: (3) Any note, draft, bill of exchange, or banker's acceptance which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited[.] (Emphasis supplied.)
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Department issue the Petitioner a Non-resident Life and Variable Annuity Agent license. DONE AND ENTERED this 18th day of October, 2004, in Tallahassee, Leon County, Florida. S STEPHEN F. DEAN 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 18th day of October, 2004. COPIES FURNISHED: Linda C. Ballou 1001 Bridgeway No. 314 Sausalito, California 94965 Michael T. Ruff, Esquire Department of Financial Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Pete Dunbar, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Tom Gallagher, Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issue is whether the Petitioner's application for registration as an associated person of Koch Capital, Inc. should be denied.
Findings Of Fact Petitioner, Glenn D. Whaley submitted a Form U-4, Uniform Application for Securities Industry Registration, seeking registration as an associated person of Koch Capital, Inc. One of the states in which Petitioner sought registration was the State of Florida. The Department of Banking and Finance (Department) is the Florida agency charged with the administration and enforcement of Chapter 517, Florida Statutes, the Florida Securities and Investor Protection Act (the Act), and its implementing rules. The Department denied Mr. Whaley's application for registration as an associated person in a letter dated August 27, 1990, based upon its determination that he had violated the Act, that he had filed an application for registration which contained a material false statement; and that his disciplinary history within the securities industry constituted prima facie evidence of his unworthiness to transact the business of an associated person. Mr. Whaley has been employed in the securities industry since approximately 1984, and has been employed with several different securities dealers, including Rothschild Equity Management Group, Inc. (Rothschild), Fitzgerald Talman, Inc., and H. T. Fletcher Securities, Inc. The effective date for Mr. Whaley's registration as an associated person of Rothschild in the State of Florida was April 18, 1985. In October 1985, Department examiner Michael Blaker, conducted an examination of the books and records of Rothschild. The examination revealed violations of the provisions of the Act, including the sale of securities by unlicensed representatives. The commission reports and sales journals prepared by Rothschild revealed that Mr. Whaley, while unregistered with the Department, had effectuated approximately sixteen (16) sales of securities during the period of April 1 through 17, 1985. On May 15, 1989, the State of Missouri Commissioner of Securities issued a cease and desist order against Fitzgerald Talman, Inc. and Glenn D. Whaley. The order found that Mr. Whaley had offered for sale and sold securities on behalf of Fitzgerald Talman, Inc. in the State of Missouri without benefit of registration for himself or the securities. On or about November 8, 1989, the Department issued an Administrative Charges and Complaint against Mr. Whaley seeking revocation of his registration as an associated person of H. T. Fletcher Securities, Inc. based on his failed to timely notify the Department of the Missouri Cease and Desist Order, as required by Rule 3E-600.010(1)(a), Florida Administrative Code. The Administrative Charges and Complaint were served on November 13, 1989. On or about December 12, 1989, the Department issued a Default Final Order revoking Mr. Whaley's registration with H. T. Fletcher Securities, Inc., based upon his failure to request a hearing regarding the Administrative Charges and Complaint. The Form U-4 requires the applicant to swear and affirm that the information on the application is true and complete to the best of his knowledge and that false or misleading answers will subject him to administrative penalties. The Form U-4 application contains no disclosure of the Department's December 1989, revocation of Petitioner's registration with H. T. Fletcher Securities, Inc., as required by Question 22E.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Banking and Finance enter a Final Order denying the application of Mr. Whaley for registration as an associated person of Koch Capital, Inc., in the State of Florida. RECOMMENDED this 25th day of January, 1991, at Tallahassee, Florida. WILLIAM R. DORSEY, JR. 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 January, 1991. COPIES FURNISHED: Margaret Karniewicz, Esquire Department of Banking and Finance The Capitol, Legal Section Tallahassee, Florida 32399-0350 Glenn D. Whaley 5400 Northwest Fifth Avenue Boca Raton, Florida 33487 Honorable Gerald Lewis, Comptroller Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking and Finance The Capitol Plaza Level, Room 1302 Tallahassee, Florida 32399-0350
