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Amr Realty Co. v. State

Decided: May 5, 1977.

AMR REALTY COMPANY AND HARRY LIPKIN, APPELLANTS,
v.
STATE OF NEW JERSEY, BUREAU OF SECURITIES, RESPONDENT



Matthews, Seidman and Horn. The opinion of the court was delivered by Seidman, J.A.D.

Seidman

This appeal is from a final order of the Bureau of Securities which suspended the registration of AMR Realty Company (AMR) as a broker-dealer for a period of 30 days, at the expiration of which the registration was to be revoked unless AMR filed a notice of withdrawal of a principal, or registered an active principal and submitted all necessary forms and fees; and which order directed Harry Lipkin to cease and desist from offering and selling securities except those offered or sold in compliance with the registration or exemption provisions of the New Jersey Uniform Securities Law, N.J.S.A. 49:3-47 et seq.

The order was issued following a hearing before the Bureau, at the conclusion of which the Chief of the Bureau, sitting as the hearing officer, found, among other things, that AMR (1) offered and sold securities (cooperative apartments) while not registered as a broker-dealer, in violation of N.J.S.A. 49:3-56(a); (2) offered and sold securities through an unregistered agent, in violation of N.J.S.A. 49:3-56(b), and (3) failed and refused to file change of status forms for two of its principals, in violation of

N.J.S.A. 49:3-59(c). Harry Lipkin was found to have offered and sold securities while not registered as an agent, in violation of N.J.S.A. 49:3-56(a).

Appellants contend on appeal, as they did below, that (1) the cooperative apartment shares sold by them are not securities within the purview of N.J.S.A. 49:3-49(m) and thus the Bureau had no jurisdiction to require them to register as either a broker-dealer or as a securities agent, and (2) even if the Bureau had jurisdiction over the subject-matter, the sanctions imposed were unwarranted and unreasonable.

The record discloses that during a period of time from and after May 1973, when it was not registered as a securities broker-dealer with the Bureau of Securities, AMR sold shares of Riviera Towers Corp., the owner of a cooperative apartment building in West New York. Harry Lipkin, a real estate salesman licensed as such in New York, but not in New Jersey, had sold cooperative apartments in that building as an employee of AMR's predecessor, J.I. Sopher and Co., and continued to do so for AMR until December 1974 or early January 1975, when AMR ceased making sales because of certain legal difficulties which one of the sponsors of Riviera Towers Corp. was having in New York. Lipkin maintained that he was not aware of any statutory requirement to register as an agent with the Bureau of Securities. He also testified that he personally owned 13 units of Riviera Towers which he had purchased as an investment.

In early 1975, according to the testimony of Edward Gray, who was a registered securities agent in New Jersey at the time, a representative of AMR requested him to become a "limited partner" in AMR to enable it to register as a broker-dealer with the Bureau of Securities. He agreed and signed the application form which was then filed with the Bureau. He terminated his relationship with AMR in July 1975 when he began working for a securities company

and was fearful of a conflict of interest. It appears that although a change of status statement was filed by him with the Bureau to reflect his resignation, AMR itself neglected to notify the Bureau of the termination. The record also indicates that AMR failed to inform the Bureau that one of its parties had been convicted in New York of selling securities there without being registered as a broker-dealer.

The scheme of New Jersey's regulation of the securities business is fully set forth in Mayflower Securities v. Bureau of Securities , 64 N.J. 85, 88-90 (1973). The law, generally modeled upon the Uniform Securities Act (7 Uniform Laws Annotated, Business and Financial Laws (Master ed. 1970)), requires the registration of all broker-dealers and salesmen (agents) employed by them (N.J.S.A. 49:3-56), in accordance with the procedure contained in N.J.S.A. 49:3-57 and N.J.A.C. 13:47A-1.1 et seq. Sanctions for violations of the statute or rules range from criminal prosecution for a misdemeanor (N.J.S.A. 49:3-70(a)), to the imposition of civil monetary penalties (N.J.S.A. 49:3-70(b)) or the administrative suspension or revocation of the registration, depending upon the nature and seriousness of the infraction (N.J.S.A. 49:3-58).

As noted earlier, appellants contend that the cooperative apartment units which they sold were not securities within the purview of the statute. The Chief of the Bureau acknowledged below that if the shares representing interests in the cooperative apartment did not constitute securities, then there would be no necessity for broker-dealer and agent ...


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