08-005984 Office Of Financial Regulation vs. David A. Tucker Status: Closed Recommended Order on Friday, May 22, 2009.

Summary: Petitioner proved multiple violations of FIRA Coduct Rule 2210 with respect to Respondent's advertisements. Recommend a cease and desist and a $15,000 fine.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

OFFICE OF FINANCIAL REGULATION, )

)

Petitioner, )

)

vs. ) Case No. 08-5984

)

DAVID A. TUCKER, )

)

Respondent. )

)

RECOMMENDED ORDER

On April 8, 2009, a duly-noticed hearing was held by means

of video teleconferencing with sites in Daytona Beach and

Tallahassee, Florida, before Lisa Shearer Nelson, Administrative

Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Douglas M. Holcomb, Esquire

Office of Financial Regulation

400 West Robinson Street, Suite D-225

Orlando, Florida 32801

For Respondent: Philip Snyderburn, Esquire

Snyderburn, Richoi & Swan, L.L.P.

258 Southall Lane, Suite 420

Maitland, Florida 32751

STATEMENT OF THE ISSUES

The issues to be resolved are whether Respondent committed the acts alleged in the Administrative Complaint and if so, what

penalties should be imposed?

PRELIMINARY STATEMENT

On October 30, 2008, the Office of Financial Regulation

(Petitioner) filed an Administrative Complaint charging

(d)(1)(A) and (d)(2)(C)(1), thereby violating Section

517.161(1)(a) and (h), Florida Statutes, and Florida

Administrative Code Rule 69W-600.013(2)(h). Respondent disputed

the allegations in the Administrative Complaint and timely filed

a Petition for Administrative Hearing, and the matter was

forwarded to the Division of Administrative Hearings for

assignment of an administrative law judge.

The case was originally scheduled for hearing to be held

February 2, 2009. At the request of Respondent, the case was

continued and rescheduled for April 8, 2009, and proceeded as

scheduled. Prior to hearing, Petitioner moved for official

recognition of the NASD (now known as FINRA) Conduct Rule 2210

and Florida Administrative Code Rule 69W-600.013. Respondent did

not oppose the motion and it was granted at the commencement of

the hearing. Petitioner presented the testimony of Michael

Moore, David Tucker and William Reilly, Jr. Petitioner's

Exhibits 1-9 were admitted into evidence. Respondent testified

on his own behalf and Respondent's Exhibits 1-5 were also

admitted. The proceedings were recorded and the Transcript was

filed with the Division April 21, 2009.

Both parties submitted Proposed Recommended Orders that have

been carefully considered in the preparation of this Recommended

Order. All references to Florida Statutes are to the

codification in effect during the time the conducted alleged

occurred, i.e. , 2006 and 2007, unless otherwise indicated.

FINDINGS OF FACT

1. From 1999 until his termination in December 2007,

Respondent was registered with the Office of Financial Regulation

as an associated person of ProEquities, Inc. (ProEquities).

2. At all times material hereto, Respondent engaged in both

the sale of insurance and the sale of securities products from

his Daytona Beach office. His activities with respect to the

sale of securities were supervised from ProEquities' Orlando

branch office.

3. In the fall of 2006, Respondent appeared as a guest in a

short segment of a radio program. He did not obtain prior

approval from ProEquities for this appearance.

4. ProEquities received an inquiry from the National

Association of Securities Dealers (NASD) regarding the radio

appearance, and asked Respondent to explain his participation.

He responded by letter stating,

I was a guest on the radio show to provide

educational information. The show is about a

wide range of educational information for

seniors, and since it wasn't my own show I

didn't feel I needed to get approval. I was

only on for about 6 minutes, and of course as

we discussed this should have been approved.

In the future I will submit approval for any

advertising or other appearances that I

participate in.

4. As a result of the November 2006 radio appearance,

ProEquities issued a Letter of Caution to Respondent for

providing his contact information and offering his services to

listeners without prior firm approval. Respondent signed the

Letter of Caution on December 7, 2006, and agreed to comply with

ProEquities' advertising policies.

5. Sometime after the Letter of Caution was issued,

Respondent discussed with ProEquities' Compliance Officer,

Michael Moore, the possibility of having his own radio show.

Moore told him the firm would have to review and approve the

scripts. Although initially Respondent forwarded the scripts to

Moore, at some point he stopped doing so and Moore assumed that

Respondent had stopped doing the show. 1/

6. ProEquities received a second inquiry from the Financial

Industry Regulatory Authority (FINRA), formerly NASD, regarding

Respondent's radio show and both print and radio ads that

Respondent was using.

7. On November 2, 2007, Respondent submitted an e-mailed

statement to the firm stating, "I thought the radio ads had been

approved last November. As far as the print ad goes, it was so

generic and didn't state any specific product information that I

assumed it did not need to be approved."

8. In addition, Respondent submitted a copy of a print

advertisement and the transcripts of two 30-second radio

commercials.

9. The scripts for the radio commercials stated as follows:

1. Great news for those who are planning for

retirement or already retired. David Tucker

has been showing the people of Daytona Beach

how to retire in comfort for 32 years. David

will show you the tools needed to help meet

your retirement goals. Call David Tucker of

David Tucker & Associates at [phone].

Be sure to listen to Investment Strategies

with David Tucker every Sunday from 12:00 to

12:30 PM on WNDB 1150 AM.

2. If you are unhappy with your investments

call David Tucker at [phone]. He can

show you how to benefit from any market

gains, and safeguard 100% of your principal,

and interest earned, regardless of market

fluctuations. Be sure to listen to

Investment Strategies with David Tucker every

Sunday from 12:00 to 12:30 PM on WNDB 1150

AM.

10. The print advertisement submitted to ProEquities stated

in part,

We offer stocks, bonds, annuities, mutual

funds, life & health insurance, and long-term

care. Ask Us How To Guarantee Income for

Life.

11. The print advertisement submitted by Respondent also

contained the required disclosure that Respondent sold securities

through ProEquities, which stated:

Securities offered through ProEquities, Inc.,

A Registered Broker-Dealer. Member, NASD and

SIPC. David A. Tucker & Associates is

independent of ProEquities, Inc. Securities

offered through ProEquities, Inc., like

all investments, are subject to risks.

Past performance is not a guarantee of

future returns.

12. In reliance upon Tucker's submission of the print

advertisement described above, and believing that was the

advertisement used, ProEquities submitted the print advertisement

to FINRA in response to the November 2, 2007, inquiry.

13. On November 26, 2007, ProEquities issued a "Letter of

Warning" to Respondent, based on the fact that prior approval had

not been obtained for the print advertisement or the radio spots.

The Letter of Warning reminded Respondent of the previously

issued Letter of Caution, and stated in part:

By signing that Letter of Caution, you agreed

that you would comply with all firm policies

regarding advertising and sales literature,

including but not limited to, print material,

personal and business websites, radio

broadcasts, television broadcasts, seminars

and other advertising or promotional events.

The firm's policies, as well as FINRA Rule

2200, regarding communications with the

public, are clear - any and all sales and

promotional materials must be pre-approved by

the firm's compliance department. The firm

intends to maintain strict compliance with

securities industry rules and regulations;

and we expect our representatives to uphold

the same standard. This particular area of

communications with the public is the focus

of heightened regulatory scrutiny; therefore

violations of this rule hold the increased

possibility of regulatory action against the

firm, your OSJ and you.

14. The Letter of Warning imposed a $500 fine; an immediate

three-month suspension of all forms of advertising and/or

promotional events, with the exception of certain identified,

previously scheduled events; and the option at the end of the

three-month period to either pay another fine of $1,500 or

continue the suspension of advertising privileges for another

three months.

15. Respondent acknowledged the Letter of Warning in

writing and paid the $500 fine on November 26, 2007.

16. Following the issuance and acknowledgment of the Letter

of Warning, ProEquities conducted an unannounced audit of

Respondent's Daytona Beach office. During the audit, Mr. Moore

discovered that there was print advertisement that was used by

Tucker that did not match the print advertisement submitted to

ProEquities and in turn supplied to FINRA in response to its

inquiry.

17. This additional print advertisement did not include the

securities disclosure quoted in Finding of Fact 11. It simply

states, "We Offer Stocks, Bonds, Annuities, Mutual Funds, Life

and Health Ins. and Long-Term Care. Ask Us How to Guarantee

Income for Life."

18. It is not clear whether both print ads were being used

simultaneously, whether the disclosure language was added

deliberately before submitting the advertisement to ProEquities,

or whether failing to send it was, as Respondent contends, an

oversight. What is clear is that Respondent used the

advertisement without the disclosure language on numerous

occasions and saw no problem with its use.

19. The advertisement which contains no disclosure

statement was published 110 times. The radio commercials, which

also failed to include any type of disclosure regarding the name

of the member, ProEquities, aired 120 times.

20. The statement "ask us how to guarantee income for life"

in the print advertisement required disclosures so that it was

fair and balanced and not misleading to the public. It also

needed to clarify what product it was advertising, and that any

guarantee was subject to the claims paying ability of the issuing

insurance company if the advertised product is an annuity.

20. Respondent asserted that the claim is meant only for

annuities products, such as equity indexed annuities. However,

nothing in the advertisement indicates that the guarantee is

limited to this type of product, as opposed to the array of

products mentioned in the advertisement, and Respondent indicated

that the consumer would not receive that information until they

came in for an appointment to discuss what type of investment the

consumer might with to purchase. Forcing a consumer to come in

for an appointment in order to receive information that should

have been disclosed in the advertisement is misleading and a

waste of the consumer's time.

CONCLUSIONS OF LAW

21. The Division of Administrative Hearings has

jurisdiction over the subject matter and the parties to this

action in accordance with Sections 120.569 and 120.57(1), Florida

Statutes (2008).

22. The Office of Financial Regulation is the state agency

charged with the administration and enforcement of Chapter 517,

Florida Statutes, and the rules promulgated thereunder pursuant

to Sections 20.121(3)(a)2. and 517.03(1), Florida Statutes.

23. Action against a licensee is considered a penal

proceeding, and Petitioner must demonstrate by clear and

convincing evidence that Respondent has committed the allegations

charged in the Administrative Complaint. Department of Banking

and Finance v. Osborne Stern and Company , 670 So. 2d 932 (Fla.

1996).

24. The Administrative Complaint alleges that Respondent

h),

Florida Statutes, and Florida Administrative Code Rule 69W-

600.013(2)(h).

25. Section 517.161(1)(a) and (h), Florida Statutes (2006

and 2007) provides:

(1) Registration under s. 517.12 may be

denied or any registration granted may be

revoked, restricted, or suspended by the

office if the office determines that such

applicant or registrant:

(a) Has violated any provision of this

chapter or any rule or order made under this

chapter;

* * *

(h) Has demonstrated unworthiness to

transact the business of dealer, investment

adviser, or associated person; . . . .

26. Florida Administrative Code Rule 69W-600.013(2)(h)

provides:

Prohibited Business Practices for Dealers and

Their Associated Persons.

(2) The following are deemed demonstrations

of unworthiness by an associated person of a

dealer under Section 517.161(1)(h), F.S.,

without limiting that term to the practices

specified herein:

* * *

(h) Engaging in any of the practices

specified in paragraph (1)(a), (b), (e), (f),

(g), (h), (i), (j), (k), (l), (m), or (n).

27. Florida Administrative Code Rule 69W-600.013(1)(h)

prohibits, with respect to any customer, transaction, or business

in this state, violating any of the following:

1. Conduct Rules, Marketplace Rules, or the

Uniform Practice Code of the National

Association of Securities Dealers (NASD). . . .

28. The relevant portions of FINRA's Conduct Rules are as

follows:

2210. Communications with the Public

(a) Definitions

For the purposes of this Rule and any

interpretation thereof, "communications with

the public" consist of:

(1) "Advertisement." Any material, other

than an independently prepared reprint and

institutional sales material, that is

published, or used in any electronic or other

public media, including any Web site,

newspaper, magazine or other periodical,

radio, television, telephone or tape

recording, videotape display, signs or

billboards, motion pictures, or telephone

directories (other than routine listings).

(2) "Sales literature." Any written or

electronic communication, other than an

advertisement, independently prepared

reprint, institutional sales material and

correspondence, that is generally distributed

or made generally available to customers or

the public, including circulars, research

reports, performance reports or summaries,

form letters, telemarketing scripts, seminar

texts, reprints (that are not independently

prepared reprints) or excerpts of any other

advertisement, sales literature or published

article, and press releases concerning a

member's products or services.

* * *

(5) "Public appearance." Participation in a

seminar, forum (including an interactive

electronic forum), radio or television

interview, or other public appearance or

public speaking activity.

* * *

(b) Approval and Recordkeeping

(1) Registered Principal Approval for

Advertisements, Sales Literature and

Independently Prepared Reprints

(A) A registered principal of the

member must approve by signature or

initial and date each advertisement,

item of sales literature and

independently prepared reprint before

the earlier of its use or filing with

the NASD's Advertising Regulation

Department ("Department").

* * *

(C) A registered principal qualified to

supervise security futures activities

must approve by signature or initial and

date each advertisement or item of sales

literature concerning security futures.

(D) The requirements of paragraph (A)

shall not apply with regard to any

advertisement, item of sales literature,

or independently prepared reprint if, at

the time that a member intends to

publish or distribute it:

(i) another member has filed it

with the Department and has

received a letter from the

Department stating that it appears

to be consistent with applicable

standards; and

(ii) the member using in reliance

upon this paragraph has not

materially altered it and will not

use it in a manner that is

inconsistent with the conditions of

the Department's letter.

* * *

(c) Filing requirements and Review

Procedures

* * *

(7) Spot-Check Procedures

In addition to the foregoing requirements,

each member's written and electronic

communications with the public may be subject

to a spot-check procedure. Upon written

request from the Department, each member must

submit the material requested in a spot-check

procedure within the time frame specified by

the Department.

* * *

(d) Content Standards

(1) Standards Applicable to All

Communications with the Public

(A) All member communications with the

public shall be based on principles of

fair dealing and good faith, must be

fair and balanced, and must provide a

sound basis for evaluating the facts in

regard to any particular security or

type of security, industry, or service.

No member may omit any material fact or

qualification if the omission, in the

light of the context of the material

presented, would cause the communication

to be misleading.

* * *

(2) Standards Applicable to Advertisements

and Sales Literature

* * *

(C) All advertisements and sales

literature must:

(i) prominently disclose the name

of the member and may also include

a fictional name by which the

member is commonly recognized or

which is required by any state or

jurisdiction;

29. While the Administrative Complaint also refers to FINRA

Rule of Conduct 2110, the Department's unopposed request for

official recognition provided only Conduct Rule 2210, and the

text of Conduct Rule 2110 was not provided. Therefore, no

findings or conclusions have been made with respect to any

violation of Conduct Rule 2110.

30. The Office has demonstrated by clear and convincing

evidence that Respondent violated FINRA Conduct Rule 2210(b)(1)

by failing to submit to ProEquities print and radio

advertisements for review and approval prior to first use.

Respondent did so with respect to the original radio appearance

in December 2006; his radio show in 2007 and his radio

commercials and printed ads in 2007.

31. Respondent's claim that Michael Moore told him he did

not need to continue to submit scripts of the show but simply

needed to keep tapes is specifically rejected. Such a procedure

was expressly denied by Michael Moore, and is inconsistent with

the plain language of the requirements of Conduct Rule 2210.

32. Moreover, even assuming that assertion with respect to

the radio show was true, there was no approval of his radio

commercials or his written advertisements. All required prior,

written approval.

33. The Office proved by clear and convincing evidence that

Respondent violated Conduct Rule 2210(c)(7) by failing to submit

all of the print advertisements actually used in response to the

November 2007 FINRA inquiry. While Respondent claims that the

advertisement without the disclosure was not provided through

oversight by his secretary, it is his responsibility to make sure

that all information requested was provided. It is not a

responsibility that can be delegated to his staff. Moreover,

this explanation is consistent with the cavalier attitude

displayed by Respondent with respect to his responsibilities to

have advertising approved. He apparently did not feel it was

important so did not make it a priority.

34. The Office demonstrated by clear and convincing

evidence that Respondent violated Conduct Rule 2210(d)(1)(A) by

failing to provide a sound basis for the statement "Ask Us How to

Guarantee Income for Life" in print advertisements. As stated in

the Findings of Fact, Respondent's claim that no disclosure is

required because the statement is referring to products that are

not securities is without merit. The advertisement refers to a

variety of products, including securities. Nothing in the

advertisement identifies a particular type of product to which

the statement is meant to apply. Where, as here, there is no

differentiation in the advertisement itself, disclosure is

necessary to alert the consumer which product is at issue.

35. Finally, the Office demonstrated by clear and

convincing evidence that Respondent violated Conduct Rule

2210(d)(2)(C)(i) by using radio advertisements that failed to

disclose the name of the member, ProEquities.

36. By Respondent's violation of the provisions of Conduct

Rule 2210 listed above, Respondent also violated Section

517.161(1)(a) and (h), Florida Statutes, and Florida

Administrative Code Rule 69W-600.013(2)(h).

37. Section 517.221(1), Florida Statutes, authorizes

Petitioner to issue and serve an order to cease and desist and to

take corrective action whenever it has reason to believe the

person is violating, has violated, or is about to violate any

provision of Chapter 517, Florida Statutes, or any rule of the

Office issued pursuant to Chapter 517, Florida Statutes.

Subsection 517.221(3) authorizes fines not to exceed $5,000 per

violation when a person is found to have violated any provision

of Chapter 517, Florida Statutes, or any rule of the Office

promulgated pursuant to Chapter 517, Florida Statutes.

38. Pursuant to the authority in Section 517.221(1) and

(3), Petitioner asserts that Respondent should receive an order

to cease and desist and be fined $15,000. Petitioner's suggested

penalty is appropriate.

RECOMMENDATION

Upon consideration of the facts found and conclusions of law

reached, it is

RECOMMENDED:

That a final order be entered finding that Respondent

violated the provisions of Conduct Rule 2210(b)(1), (c)(7),

517.161(1)(a) and (h), Florida Statutes, and Florida

Administrative Code Rule 69W-600.013(2)(h);

That Respondent be ordered to cease and desist from any

further violations of Chapter 517, Florida Statutes; and

That Respondent be ordered to pay an administrative fine of

$15,000.00.

DONE AND ENTERED this 22nd day of May, 2009, in Tallahassee,

Leon County, Florida.

S

LISA SHEARER NELSON

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 22nd day of May, 2009.

ENDNOTE

1/ Respondent testified that Moore told him he did not need to

send the scripts any longer as long as he saved the tapes from the

radio show. Moore denied this assertion and Moore's testimony is

credited.

COPIES FURNISHED:

Douglas M. Holcomb, Esquire

Office of Financial Regulation

400 West Robinson Street, Suite S-225

Hurston South Tower

Orlando, Florida 32801-1799

Philip J. Snyderburn, Esquire

Snyderburn, Rishoi & Swann, LLP

258 Southhall Lane, Suite 420

Maitland, Florida 32751

Alex Hagar, Acting Commissioner

Office of Financial Regulation

200 East Gaines Street

Tallahassee, Florida 32399-0350

Robert Beitler, General Counsel

Department of Financial Services

200 East Gaines Street

Tallahassee, Florida 32399-0350

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this recommended order. Any exceptions to

this recommended order should be filed with the agency that will

issue the final order in this case.