69W-1000.001: Disciplinary Guidelines
PURPOSE AND EFFECT: Section 517.1611(1), F.S., requires the Financial Services Commission to adopt disciplinary guidelines for each ground for which disciplinary action may be imposed by the Office of Financial Regulation against individuals and firms that are subject to regulation under Chapter 517, F.S., the Florida Securities and Investor Protection Act. The proposed rule implements this statutory requirement. It is noted that a Notice of Development of Rulemaking for this proposed rule was published in the December 24, 2009, edition of the Florida Administrative Weekly. Based on comments received by the Office, changes were made to the proposed rule, which are reflected in this notice.
SUBJECT AREA TO BE ADDRESSED: Securities Regulation.
SPECIFIC AUTHORITY: 517.1611(1) FS.
LAW IMPLEMENTED: 517.1611(1) FS.
IF REQUESTED IN WRITING AND NOT DEEMED UNNECESSARY BY THE AGENCY HEAD, A RULE DEVELOPMENT WORKSHOP WILL BE NOTICED IN THE NEXT AVAILABLE FLORIDA ADMINISTRATIVE WEEKLY.
THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE DEVELOPMENT AND A COPY OF THE PRELIMINARY DRAFT, IF AVAILABLE, IS: Bill Reilly, Chief, Bureau of Securities Regulation, Division of Securities, Office of Financial Regulation, 200 East Gaines Street, Tallahassee, FL 32399, phone (850)410-9805, E-mail: Bill.Reilly@flofr.com
THE PRELIMINARY TEXT OF THE PROPOSED RULE DEVELOPMENT IS:
69W-1000.001 Disciplinary Guidelines.
(1) Pursuant to Section 517.1611, F.S., disciplinary guidelines applicable to each ground for which disciplinary action may be imposed by the Office against an individual or a firm under Chapter 517, F.S., are hereby adopted. The disciplinary guidelines are contained in “Office of Financial Regulation, Division of Securities, Disciplinary Guidelines for Dealers, Investment Advisers and Associated Persons” (May 2010), which is hereby incorporated by reference. A copy of the disciplinary guidelines may be obtained by mail from the Florida Office of Financial Regulation, Division of Securities, 200 E. Gaines Street, Tallahassee, Florida 32399, or may be obtained electronically through the following website: http://www.flofr.com/Securities/index.htm. In the application of these disciplinary guidelines, the Office intends that disciplinary action serve a remedial rather than a punitive purpose. The intent of the guidelines is to protect the public interest by discouraging future misconduct by a respondent, deter others from engaging in similar misconduct and improve business practices. Every case is unique; therefore, sanctions should be tailored to fit the facts of each particular case by increasing or decreasing the level of the sanction as provided in subsection (5) of this rule. The Office’s intent is that sanctions should always be more severe for recidivists. However, some respondents may commit acts so egregious that sanctions outside the guidelines are warranted. The Office’s policy is to treat all respondents with equal consideration and courtesy irrespective of representation or lack thereof.
(2) Each violation of any provision of Chapter 517, F.S., or the rules adopted under the rulemaking authority of Chapter 517, F.S., constitutes a ground for disciplinary action by the Office. The level of sanction imposed for each violation of a ground for disciplinary action is reflected in the disciplinary guidelines. In determining an appropriate sanction for each violation of a ground for disciplinary action, the Office shall consider the circumstances set forth in subsection (5).
(3) In accordance with the disciplinary guidelines contained in this rule:
(a) The Office may impose a cease and desist order in conjunction with and in addition to any of the designated sanctions set forth in this rule when appropriate under the circumstances; and
(b) The Office has determined that repeated disciplinary action for violations of the same or similar ground for disciplinary action should be punished more severely than a first disciplinary action for violation of a ground for disciplinary action. In most instances of repeated violations of a ground for disciplinary action, the disciplinary guidelines allow for increasingly severe sanctions.
(4) The list of grounds for disciplinary action is intended to be comprehensive, but the omission of a violation from the list does not preclude the Office from taking any action authorized by Chapter 517, F.S.
(5) In accordance with Sections 517.1611(1)(a) and (b), F.S., the Office will consider the following mitigating and aggravating circumstances in determining the appropriate level of sanction within the range of sanctions prescribed in this rule for each violation of a ground for disciplinary action:
(a) The individual’s or firm’s disciplinary history;
(b) Whether the individual or firm self-reported the conduct to regulatory authorities prior to examination or discovery by regulatory authorities;
(c) Whether the firm implemented corrective measures, prior to examination or discovery by regulatory authorities, to revise procedures to avoid recurrence of misconduct;
(d) Whether the individual or firm, prior to the entry of a Final Order, voluntarily made restitution or otherwise remedied the misconduct;
(e) Whether, at the time of the violation, the firm had controls and procedures that were implemented and reasonably designed to prevent or detect such a violation;
(f) Whether, at the time of the violation, the firm developed and implemented adequate training and educational initiatives;
(g) Whether the individual or firm demonstrated reasonable reliance on competent legal advice;
(h) Whether the individual or firm engaged in numerous acts to facilitate the violation or whether multiple clients were impacted by the acts or both;
(i) Whether the individual or firm engaged in the misconduct over an extended period of time;
(j) Whether the individual or firm attempted to conceal his or her misconduct or to lull into inactivity, mislead, deceive or intimidate a customer, regulatory authorities or, in the case of an individual respondent, the firm with which he or she is or was associated;
(k) With respect to other parties, including the investing public, the firm with which an individual respondent is associated or other market participants:
1. Whether the individual’s or firm’s misconduct resulted directly or indirectly in injury to such other parties, and
2. The nature and extent of the injury;
(l) Whether the individual or firm provided substantial assistance to the Office in its examination or investigation of the underlying misconduct, or whether the respondent attempted to impede or delay Office’s examination or investigation, to conceal or withhold information from the Office, or to provide incomplete, inaccurate or misleading testimony or documentary information to the Office;
(m) Whether the individual’s or firm’s misconduct was the result of an intentional act, recklessness or negligence;
(n) Whether the firm with which an individual is or was associated disciplined the individual for the misconduct at issue prior to discovery by regulatory authorities and the extent of the discipline imposed by the firm;
(o) Whether the individual or firm engaged in the misconduct at issue, notwithstanding prior direct notice from the Office, another regulatory authority or the firm’s staff, that the conduct may or will violate the provisions of Chapter 517, F.S.;
(p) Whether the individual or firm can demonstrate that the misconduct at issue was not reflective of their historical compliance record;
(q) Whether the individual’s or firm’s misconduct resulted in actual or potential financial or other gain or the value of such gain,
(r) The number, size and character of the transactions at issue;
(s) The age, financial status, and level of investment sophistication of the investor;
(t) Whether the violation is attributable to a principal, manager, supervisor or person exercising a similar function;
(u) The financial resources of the firm, nature of the firm’s business, the number of individuals registered with the firm, the level of trading activity of the firm, other entities the firm controls, is controlled by, or is under common control with;
(v) Whether the violation of the ground for disciplinary action is the result of an individual acting alone or the result of two or more persons acting in furtherance of an agreement, scheme or plan; and
(w) Other relevant, case-specific circumstances.
(6)(a) The fines imposed for violation of a ground for disciplinary action are up to $2,000 for a level “A” fine, $2,001 to $5,000 for a level “B” fine, $5,001 to $7,500 for a level “C” fine and $7,501 to $10,000 for a level “D” fine. The mitigating and aggravating circumstances provided in subsection (5) may be applied to the fines imposed for violation of a ground for disciplinary action resulting in a range of fines of up to $2,000 for a level “A” fine, $2,001 to $5,000 for a level “B” fine, $5,001 to $7,500 for a level “C” fine and $7,501 to $10,000 for a level “D” fine.
(b) A Notice of Noncompliance shall be a statement issued by the Office as described in Section 120.695, F.S. For the purpose of this rule, a Notice of Noncompliance is not considered an occurrence of a violation.
(c) A previous “occurrence” is the same or similar misconduct which was the subject of a Final Order entered by the Office prior to the acts or omissions which are the subject of the current action by the Office.
(7) The ranges for suspensions imposed by this rule are up to 5 days for an “A” level suspension; 6 to 30 days for a “B” level suspension; and, over 30 days for a “C” level suspension. A business day is defined as a day the major stock exchanges are open. Suspensions of 30 or fewer days are measured in business days while a suspension of 31 or more days is measured in calendar days. The mitigating and agravating circumstances provided in subsection (5) may be applied to the suspensions imposed for violation of a ground for disciplinary action resulting in a range of suspension of up to 5 days for an “A” level suspension; 6 to 30 days for a “B” level suspension; and over 30 days for a “C” level suspension.
(8) In addition to the provisions of this rule, the Office may, when appropriate, seek civil remedies including the entry of an injunction, the appointment of a receiver by a court of competent jurisdiction, or any other remedy authorized by law.
Rulemaking Authority 517.1611(1) FS. Law Implemented 517.1611(1) FS. History–New_________.