Bennie et al v. Munn et al Amended Complaint

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Text of Bennie et al v. Munn et al Amended Complaint

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEBRASKA ROBERT R. BENNIE, JR., individually, and on behalf of BOB BENNIE WEALTH MANAGEMENT, INC. Plaintiff, v. JOHN MUNN, in his official and individual capacity, JACK E. HERSTEIN, in his official and individual capacity, RODNEY R. GRIESS, in his official and individual capacity, and JACKIE L. WALTER, in her official and individual capacity. Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. 4:11-cv-03089

AMENDED COMPLAINT FOR DAMAGES FOR VIOLATION OF CIVIL RIGHTS (42 U.S.C. 1983) DEMAND FOR JURY TRIAL

Plaintiff Robert R. Bennie, Jr. (Mr. Bennie), individually and, on behalf of Bob Bennie Wealth Management, Inc., by his attorneys, and for his Complaint against Defendants John Munn (Mr. Munn), in his official and individual capacity, Jack E. Herstein (Mr. Herstein), in his official and individual capacity, Rodney R. Griess (Mr. Griess) in his official and individual capacity, and Jackie L. Walter (Ms. Walter), in her official and individual capacity, (collectively Defendants) states as follows: NATURE OF THE CASE 1. This is an action to redress the deprivation of rights secured to Mr. Bennie by the

Due Process, Equal Protection and Free Speech Clauses of the First, Fifth and Fourteenth Amendments to the Constitution of the United States and Article I, Section 3 of the Nebraska Constitution, which deprivation of rights is actionable under 42 U.S.C. 1983 and 28 U.S.C. 2201.

OMA-329266-1

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JURISDICTION AND VENUE 2. The Court has original subject matter jurisdiction over this civil action pursuant to

28 U.S.C. 1331 and 2201 because it involves the deprivation of rights secured by the United States Constitution and in violation of 42 U.S.C. 1983, and all other claims are so related to claims within the Courts original jurisdiction that they form part of the same case or controversy. 3. The individual Defendants, Mr. Munn, Mr. Herstein, Mr. Griess, and Ms. Walter,

are employees of the State of Nebraska and are located in Nebraska. Therefore, the Court has personal jurisdiction over each Defendant. 4. 5. All acts giving rise to this action occurred in Nebraska. Mr. Munn, Mr. Herstein, Mr. Griess and Ms. Walter are sued individually and in

their official capacities. PARTIES 6. Mr. Bennie is an individual residing in Lincoln, Nebraska. Mr. Bennie works as

an agent of a securities broker dealer and as an investment adviser representative of an investment adviser of securities. He is a Certified Financial Planner (CFP), and holds a Masters Degree in Business Administration (MBA) from Kansas State University and a Bachelor of Science Degree from the University of Nebraska-Lincoln. In 2009, Mr. Bennie was named one of the top 1,000 Financial Planners in the United States by Barrons Magazine. He is a past Board Member of the Financial Planning Association of Nebraska, and is a nationally recognized presenter of hundreds of educational workshops to both investment professionals and the general public. 7. Mr. Munn is the Director of the Department of Banking and Finance (the

Department) for the State of Nebraska. Mr. Munn was duly appointed Director pursuant to 2OMA-329266-1

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Nebraska law under the Securities Act of Nebraska, Neb. Rev. Stat. 8-1101 et seq (the Act). As Director, Mr. Munns responsibilities include the regulation of the securities industry under the Nebraska Securities Act (the Act), Neb. Rev. Stat. 8-1101 to 8-1124. As part of those duties, Mr. Munn oversees the conduct of all persons in Nebraska who register as agents and investment adviser representatives under the Act. Furthermore, Mr. Munn is responsible for the training and supervision of the officers and examiners of the Department. Additionally,

Mr. Munn issues orders to entities and persons in the securities industry, and makes those orders available to the public. At all relevant times, Mr. Munn was acting under the color of state law. 8. Mr. Herstein is the Assistant Director of the Bureau of Securities (the Bureau)

for the State of Nebraska. Mr. Herstein was appointed by the Director as the Assistant Director of the Bureau of Securities within the Department pursuant to Neb. Rev. Stat. 8-1120 and empowered with the Directors delegated powers and duties under the Act. His duties and responsibilities include applying the Departments regulations to agents and investment adviser representatives, and the training and supervision of the officers and securities examiners of the Bureau. At all relevant times, Mr. Herstein was acting under the color of state law. 9. Mr. Griess is the Investigation and Compliance Unit Supervisor for the Bureau of

Securities for the State of Nebraska. Upon information and belief, Mr. Griess is charged with registration and compliance matters related to agents and investment adviser representatives to ensure compliance with the Act and State regulations promulgated by the Department in accordance with the Act. At all relevant times, Mr. Griess was acting under the color of state law. 10. Ms. Walter is a securities examiner with the Bureau. Upon information and

belief, Ms. Walter is charged with investment adviser and broker-dealer examinations including reviewing registrations and applications for registration, and the conduct by registered entities 3OMA-329266-1

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and persons to ensure compliance with the Act and state regulations promulgated by the Department in accordance with the Act. At all relevant times, Ms. Walter was acting under the color of state law. STATUTORY AND REGULATORY BACKGROUND 11. The Department of Banking and Finance is a state administrative agency created

by Nebraska law. The Department, through its Director, is vested with the power and charged with the duty of enforcing all provisions of the Act. 12. Pursuant to Neb. Rev. Stat. 8-1103(1), agents and investment adviser

representatives are required to associate with, as applicable, a registered broker-dealer or investment adviser firm and register, as applicable, as agents of the broker dealer or investment adviser representative of the investment adviser. 13. As part of an overlapping system of regulation of the securities industry by

federal and state agencies, and self-regulatory organizations like the Financial Industry Regulatory Authority (FINRA), an associated person accomplishes this registration by filing through his or her employing broker-dealer a Form U-4 with the Central Registration Depository (CRD), which is maintained and administered by FINRA. The Department requires this registration through the CRD at FINRA pursuant to 48 NAC 6-004.01. 14. Pursuant to Neb. Rev. Stat. 8-1103(4)(a), a registration automatically becomes

effective on the thirtieth (30) day after the application for registration is filed unless a denial order is in effect or a proceeding is pending under subsection 9 of that section. 15. Neb. Rev. Stat. 8-1103(9)(a) provides, in part, the director may by order deny,

suspend, or revoke registration of any. . . agent. . . or investment adviser representative . . . if he or she finds that the order is in the public interest and that the applicant or registrant, has committed one of nine prohibited actions or one of four situations exist. (emphasis added). 4OMA-329266-1

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16.

One of the prohibited actions permitting the Director to take adverse action

against an applicant or registrant is upon a finding that he or she has filed an application for registration . . . which . . . was incomplete in any material respect or . . . was . . . false or misleading with respect to any material fact. Neb. Rev. Stat. 8-1103(9)(a)(i). 17. The Act expressly provides that the Director may summarily postpone or suspend

registration pending a final determination. However, if the Director summarily issues an order, he or she shall promptly notify the applicant or registrant . . . that [the order] has been entered and of the reasons therefor and that within fifteen business days after the receipt of a written request the matter will be set down for hearing. Neb. Rev. Stat. 8-1103(9)(c)(ii). The statute emphasizes that No order may be entered under this section denying or revoking registration without appropriate prior notice to the applicant or registrant, as well as the employer or prospective employer if the applicant or registrant is an agent or investment adviser representative, and opportunity for hearing. Id. 18. Neb. Rev. Stat. 8-1103(4)(d) permits the Director to restrict or limit an

applicant as to any function or activity in this state for which registration is required under the Securities Act of Nebraska. 19. As part of the registration process, the Act requires an agent or an investment

adviser representative to notify the Director in the event his employment with a registered broker-dealer or investment adviser is terminated. Neb. Rev. Stat. 8-1103(1), (2)(d). 20. The Act requires the Defendants to register every eligible applicant and imposes

substantive limitations and constraints on the exercise of official discretion subject to the mandatory language in the Act.

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FACTUAL BACKGROUND 21. From March 1997 until November 2010, Mr. Bennie was an agent and investment