Turbeville v. Department of Financial Services
Posted on Categories Court Decisions, Securities/Commodities Regulation

By Burton W. Wiand

That a state insurance agency relies, for revocation purposes, upon a sanction for refusing a FINRA Rule 8210 request, does not constitute a violation of the right against self-incrimination.

Turbeville vs. Department of Financial Services, No. 1D17-221 (Fla. App., 1Dist., 5/3/18).

On December 30, 2009, FINRA filed a complaint against Appellant Anthony Lee Turbeville (hereinafter “Appellant”) for selling Collateralized Mortgage Obligations to elderly investors who were unaware of the risks associated with the instruments. On May 31, 2012, a FINRA Extended Hearing Panel concluded that Appellant violated various provisions of the Securities Exchange Act and the National Association of Securities Dealers rules. Appellant subsequently appealed the decision to the National Adjudicatory Council, FINRA’s appellate panel, where the decision was affirmed on April 16, 2016.

The following year, the Department of Financial Services (hereinafter “Department”) filed a complaint against Appellant alleging a violation of section 626.621(13), Florida Statutes. The Department ultimately found that Appellant violated section 626.621(13) and thereafter revoked his insurance license pursuant to Florida Administrative Code Rule 69B-231.090(13).

Appellant appealed the final order revoking his insurance license for violating section 626.621(13). On appeal, Appellant raises three arguments: 1) the language of section 626.621(13) is ambiguous and should thus be construed in his favor; 2) the Department’s application of rule 69B-231.090(13) constitutes an ex post facto violation; and 3) the Department’s application of section 626.621(13) to licensees of FINRA violates a licensee’s right to remain silent.

The Court first considers whether the language of section 626.621(13) is ambiguous. That section authorizes the sanction of revocation if the licensee has been “the subject of…any decision…by any…national securities…association involving…a violation of any rule or regulation of any national securities…association.” Appellant argues that this section is ambiguous because: 1) it does not specify whether the decision of the Extended Hearing Panel or of the National Adjudicatory Council should be utilized; and 2) it applies to any decision. The Court rejects Appellant’s first argument because it incorrectly implies that two parallel decisions exist concurrently. Instead, the decision of the Extended Hearing Panel only becomes effective if it is not appealed; if it is appealed, it is stayed until the National Adjudicatory Council makes a decision, which then becomes FINRA’s final action. With respect to Appellant’s alternative argument to demonstrate ambiguity, the Court holds that the phrase ‘any decision’ is not ambiguous, especially in light of caselaw that supports that conclusion.

Next, the Court considers whether the application of Florida Administrative Code Rule 69B-231.090(13) constitutes an ex post facto violation. Appellant argues that the decision of the Extended Hearing Panel, issued on May 31, 2012, operated as FINRA’s final action, and thus the sanctions under Florida Administrative Code Rule 69B-231.090(13) constitutes an ex post facto violation since the rule was promulgated on March 24, 2014, nearly two years after the final action. The Court rejects this argument holding that FINRA’s action was not final until it was resolved by the National Adjudicatory Council on April 16, 2015 – over a year after the Florida Administrative Code Rule 69B-231.090(13) was promulgated. Thus, the Court finds that no ex post facto violation had occurred.

Finally, the Court considers whether the use of a FINRA decision in a license-revocation proceeding constitutes a violation of the privilege against self-incrimination. Under FINRA Rule 8210, members must submit sworn testimony in response to FINRA inquiries, and failure to respond may result in sanctions. Appellant therefore argues that, because section 626.621(13) allows the Department to revoke a licensee’s license if he or she has been subject to a decision by FINRA, a licensee can indirectly have his license revoked by failing to respond to a FINRA Rule 8210 request. Thus, Appellant concludes that the Department cannot revoke a license by relying on the decision of an association that does not afford its members the right to remain silent. The Court disagrees, however, holding that, because testimony to FINRA is not compelled by state action, the privilege against self-incrimination is not activated, and thus the Department’s reliance on FINRA’s decision in punishing Appellant under Florida Administrative Code Rule 69B-231.090(13), pursuant to section 626.621(13), is not unconstitutional. Accordingly, the Department’s final order is affirmed.

(B. Wiand)

(SOLA Ref. No. 2019-01-08)

NOTICE: The court decision synopsis published above represents an abbreviated description of the actual decision and is re-printed here for its educational value. The author's effort is to report concisely the substance of the decision or a selected portion of the decision; commentary or analysis is generally reserved for the italicized section at the bottom of the summary. Subscribers to SAC's Online Litigation Alert (SOLA), from which this synopsis is excerpted, have immediate access to the full decision, in addition to the synopsis. 

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