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Marshall v. State

Decided: June 28, 1972.

KENNETH MARSHALL & COMPANY, A NEW JERSEY CORPORATION, APPELLANT,
v.
THE STATE OF NEW JERSEY, BUREAU OF SECURITIES, GEORGE F. KUGLER, JR., ATTORNEY GENERAL OF THE STATE OF NEW JERSEY, AND JOSEPH F. KRUPSKY, CHIEF, BUREAU OF SECURITIES, RESPONDENTS



Labrecque, Kolovsky and Allcorn.

Per Curiam

[119 NJSuper Page 589] In February 1970 appellant filed a verified application with the Bureau of Securities seeking registration as a broker-dealer pursuant to N.J.S.A. 49:3-57, a section of the Uniform Securities Law (1967), N.J.S.A. 49:3-47, et seq.

The application form called for an answer to the following question:

13. Will the applicant in the course of its business have custody of client's funds or securities?

Appellant's answer was "Yes," an answer which under the Bureau's regulation 13:13-3 mandated that its net capital be at least $25,000. Appellant's answer to question 15 indicated that the rule requirement was satisfied -- its net capital was given as $36,496.45.

In view of the information set forth in the application, the Bureau had no objection thereto and the registration became effective.

However, appellant's compliance with the minimum capital requirement was short-lived. By July 10, 1970 its capital was reduced to $1970 (if the testimony given by the Bureau's investigator is accepted) or to $5100 (if appellant's calculations are correct). Appellant thereafter obtained additional capital so that its capital, as of the end of the months September 1970 to February 1971, inclusive, varied from a high of $15,927 to a low of $9766.15. In March 1971, $25,000 additional capital was put into the company so that its capital as of March 31, 1971 was $34,971.66.

The Bureau of Securities did not learn of the depletion in appellant's capital until appellant, in response to the Bureau's reminder notice of April 6, 1971 that its annual certified report of financial condition was due, submitted a report as of July 10, 1970. Investigation by the Bureau followed and resulted in the service on appellant of notice dated April 29, 1971 that its registration as a broker-dealer was "proposed to be revoked." At the same time appellant was served with a "notice of preliminary findings and opportunity for a hearing." Appellant requested a hearing. The hearing was held before the chief of the Bureau.

The chief thereafter filed his "findings of fact and conclusions of law" in which, after rejecting several preliminary motions made by appellant and setting forth his findings, he concluded:

The undersigned finds and concludes that Respondent on several and frequent occasions in 1970 and 1971 failed to maintain the minimum capital of $25,000. which was required by Regulation 13:13-3 and which was promulgated pursuant to N.J.S.A. 49:3-57(e), and as a consequence Respondent violated N.J.S.A. 49:3-58(a)(2)(ii).

The undersigned holds that when a broker-dealer receives from the Sovereign a privilege and opportunity of custody of other peoples money and property, and where in connection therewith that broker-dealer exercises albeit restrictedly said privilege, and where that broker-dealer on several and frequent occasions violates the minimum capital requirement for the custodial class in which the broker-dealer is situate, that broker-dealer has engaged in a "course of ...


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