Goldata Computer Services, Inc. v. Dept. of Banking & Securities

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Goldata Computer Services, Inc. :

d/b/a Goldata Financial, Elliot :

Mitchell Goldberg, 1931 Funding, LLC, :

442 Funding, LLC, 567 Funding, LLC, :

803 Funding, LLC, and Legs 1, LLC, :

Petitioners :

:

v. :

:

Department of Banking and :

Securities, : No. 328 C.D. 2024

Respondent : Submitted: April 8, 2025

BEFORE: HONORABLE ANNE E. COVEY, Judge

HONORABLE MATTHEW S. WOLF, Judge

HONORABLE BONNIE BRIGANCE LEADBETTER, Senior Judge

OPINION BY

JUDGE COVEY FILED: December 9, 2025

Goldata Computer Services, Inc. d/b/a Goldata Financial (Goldata),

Elliot Mitchell Goldberg (Goldberg), 1931 Funding, LLC (1931), 442 Funding, LLC

(442), 567 Funding, LLC (567), 803 Funding, LLC (803), and Legs 1, LLC (LEGS)

(collectively, the Goldberg Entities) petition this Court for review of the Department

of Banking and Securities’ (Department) February 28, 2024 final order (Final Order)

adopting the Department Hearing Officer’s (Hearing Officer) Proposed Report and

Order, as amended, that concluded that the Goldberg Entities violated the

Pennsylvania Securities Act of 1972 (Act)1 and the Department’s attendant

regulations (Regulations), ordered the censure of Goldata and Goldberg, and

directed the Goldberg Entities to pay $931,000.00 in administrative assessments.

The Goldberg Entities present six issues for this Court’s review: (1) whether the

record evidence supported the Department’s finding that the 1931, 442, 567, 803,

1

Act of December 5, 1972, P.L. 1280, as amended, 70 P.S. §§ 1-101 - 1-705.

and LEGS’ (collectively, LLCs) promissory notes (LLC Notes) were not exempt

from registration; (2) whether the record evidence supported the Department’s

finding that Goldata had custody of client funds; (3) whether strict liability applied

to the Department’s Bureau of Securities Compliance and Examinations’ (Bureau)

claims brought pursuant to Section 401(b) the Act, 70 P.S. § 1-401(b), and whether

omitting merchant cash advance (MCA) transaction funder identities and omitting

the disclosure that Goldberg may not collect his full management fee under the terms

of the LLC Notes were actionable thereunder; (4) whether the record evidence

supported the Bureau’s claims brought pursuant to Section 401(c) of the Act, 70 P.S.

§ 1-401(c), based on the Bureau’s expert testimony; (5) whether the record evidence

supported the allegations relative to Section 401(b) and (c) of the Act in the absence

of any damage complaints; and (6) whether the Department abrogated the Goldberg

Entities’ constitutional rights to a jury trial and other due process rights guaranteed

by both the United States (U.S.) and Pennsylvania Constitutions, including a

prohibition against excessive penalties. After review, this Court affirms.

Background2

Pursuant to Section 301 of the Act,3 70 P.S. § 1-301, Goldberg

registered Goldata with the Department as a registered investment adviser (RIA)4 in

2

The background is largely taken from the parties’ October 7, 2022 Joint Stipulation of the

Parties. See Reproduced Record at 123a-139a.

Goldata’s Reproduced Record fails to comply with the Pennsylvania Rules of Appellate

Procedure (Rule). See Pa.R.A.P. 2173 (“[T]he pages of . . . the reproduced record . . . shall be

numbered separately in Arabic figures . . . thus 1, 2, 3, etc., followed in the reproduced record by

a small a, thus 1a, 2a, 3a, etc.”). This Court will refer to Reproduced Record page numbers

followed by a small a as Rule 2173 requires.

3

Section 301(c) of the Act declares, in relevant part: “It is unlawful for any person to

transact business in this [s]tate as an investment adviser unless he is so registered . . . or unless he

is exempted from registration.” 70 P.S. § 1-301(c).

4

Section 102(j) of the Act defines investment adviser as

2

2005. See Joint Stipulation of the Parties (Stip.) ¶ 20 (Reproduced Record (R.R.) at

131a). From approximately June 2005 to June 30, 2022, Goldberg was president

and owner of Goldata. See Stip. ¶ 14 (R.R. at 130a). From approximately June 2005

to June 30, 2022, Goldberg was registered with the Department in accordance with

Section 301 of the Act as Goldata’s investment adviser representative (IAR).5 See

Stip. ¶ 21 (R.R. at 131a). Goldata’s fiscal year ended June 30th. See Stip. ¶ 90 (R.R.

at 137a). Goldberg formed, and was also the manager and sole member of the LLCs.

See Stip. ¶¶ 15-19, 92 (R.R. at 130a, 138a). The Goldberg Entities had the same

address - 1931 Lafayette Road, Gladwyne, Pennsylvania 19035 - but separate

any person who, for compensation, engages in the business of

advising others, either directly or through publications, writings[,]

or electronic means, as to the value of securities or as to the

advisability of investing in, purchasing[,] or selling securities, or

who, for compensation and as a part of a regular business, issues or

promulgates analyses or reports concerning securities.

70 P.S. § 1-102(j).

5

Section 102(j.1)(i) of the Act defines an IAR, in pertinent part, as follows:

(i) [W]ith respect to any [RIA], any partner, officer, director[,] or

person occupying a similar status or performing similar functions,

or other individuals employed by or associated with an investment

adviser who performs any of the following:

(A) Makes any recommendations or otherwise renders

advice regarding securities;

(B) Manages accounts or portfolios of clients;

(C) Determines which recommendation or advice

regarding securities should be given;

(D) Provides investment advice or holds himself or herself

out as providing investment advice;

(E) Supervises employes who perform any of the

foregoing; or

(F) Receives compensation to solicit, offer[,] or negotiate

for the sale of or for selling investment advice.

70 P.S. § 1-102(j.1)(i).

3

operating agreements and bank accounts. See Stip. ¶¶ 13-19, 91 (R.R. at 130a,

137a).

From approximately November 2016 to December 2016, LEGS sold

limited liability company units (LEGS Units) to individuals (LEGS Purchasers). See

Stip. ¶ 82 (R.R. at 137a). The private placement memoranda (PPM)6 which

accompanied the sales declared that proceeds from the sales would be used to

purchase interests in investment funds that would acquire life settlements. See Stip.

¶ 83 (R.R. at 137a). During that time, LEGS sold LEGS Units to at least 2

Pennsylvania residents (PA Residents) for an aggregate amount of $200,000.00. See

Stip. ¶ 84 (R.R. at 137a). In December 2016, LEGS sold the LEGS Units to at least

1 individual who was also a Goldata client at the time of his/her purchase, for an

aggregate amount of $50,000.00. See Stip. ¶ 85 (R.R. at 137a). On or about

November 22, 2016, LEGS filed a Notice of Exempt Offering of Securities

(Exemption Notice) with the Department pursuant to Regulation D, Rule 506(b) of

the federal Securities Act of 1933 (1933 Act), 17 C.F.R. § 230.506(b) (Federal Rule

506(b)), claiming that the LEGS Units were federally covered securities. See Stip.

¶ 89 (R.R. at 137a). At least 1 LEGS Purchaser was aged 60 or more at the time

he/she purchased the LEGS Units. See Stip. ¶ 86 (R.R. at 137a). As of June 14,

2021, all principal and interest (P&I) due on the LEGS Units was returned to the

LEGS Purchasers. See Stip. ¶ 61 (R.R. at 135a).

6

Goldberg detailed:

The purpose [of a PPM] is to comply with the law. If you’re going

to sell a security, you need to disclose as much as you can of the

risks involved in somebody, in my case[,] purchasing a [N]ote. Part

of the PPM includes the subscription agreement. It includes the

promissory [N]ote. But it also includes many, many disclosures that

people can read so that they can make an informed decision as to

what they’re getting into.

R.R. at 450a.

4

From approximately March 2017 through November 2017, Goldberg

offered and sold Memoranda of Indebtedness issued by 1 Global Capital, LLC, a/k/a

1st Global Capital, LLC, a/k/a 1st Global Capital Financial Services (Global)

(Global Notes), a Florida limited liability company that provided MCA transaction

funding to at least 14 PA Residents for an aggregate amount of at least $646,000.00.

See Stip. ¶¶ 22-25, 27 (R.R. at 131a). For its participation in those Global Note

sales, Global’s marketing agent American Alternative Investments, LLC (AAI) paid

Goldberg $9,293.00. See Stip. ¶ 26 (R.R. at 131a). Global filed for Chapter 11

bankruptcy in the U.S. Bankruptcy Court for the Southern District of Florida on July

27, 2018 and, to date, has been unable to fulfill its financial obligations to those who

purchased Global Notes. See Stip. ¶¶ 28-29 (R.R. at 131a-132a). The bankruptcy

trustee has returned 44% of the principal the PA Residents invested in Global. See

Stip. ¶ 30 (R.R. at 132a). Thus, Global defaulted on payments to some or all of the

PA Residents. See Stip. ¶¶ 28-29 (R.R. at 132a).

In March 2018, through the newly created LLCs - 1931, 442, 567, and

803 - as outside business activity (OBA) separate and apart from Goldata and its

RIA business - Goldberg began participating with companies engaged in making

MCAs to small businesses.7 See R.R. at 106a. In order to increase the LLCs’ capital

7

Goldberg articulated that MCAs are an alternate form of financing to traditional banking

and banking institutions, whereby funders advance money to merchants who pay it back over time.

See R.R. at 282a. Goldberg described:

[W]hen [the funders] get a deal . . . that they underwrite and they do

the collections on, they say we have a merchant ABC, a Joe’s Tire

Shop. And we’re going to give him $50,000.00. Would you like to

participate? And here’s the terms of the deal. And I’ll say . . . I’ll

take $5,000.00 of that. And that will entitle me to 10[%] of the funds

that . . . Joe’s Tire [Shop], pays the funder. We’ll call it ABC

Capital. Okay?

I work with, currently, 36 different ABC Capitals, and I do that so I

can provide money to investors - excuse me - my [N]ote[ ]holders,

5

for business expansion in concert with MCA sector growth, the LLCs borrowed

funds by offering and selling promissory notes (with a variety of fixed repayment

terms and interest rates) to Note holders, see R.R. at 107a, the terms and conditions

of which the LLCs disclosed in PPMs and associated subscription agreements (SA)

provided to each Note holder. See Stip. ¶ 94 (R.R. at 138a). The Notes evidenced

debt that the LLCs owed to Note holders, who became LLC creditors. See R.R. at

107a. Thus, the LLCs were issuers of their respective Notes within the meaning of

Section 102(1) of the Act,8 and those Notes were securities as defined in Section

102(t) of the Act.9 See Stip. ¶¶ 41-42, 55-56, 67-68, 78-79, 87-88 (R.R. at 133a-

137a).

diversification. So that if one funder goes bad, you still have the

fund to be able to pay off your notes. So getting back to my

example, I take $5,000.00 of that $50,000.00 advance. ABC

Capital, the funder, does all the collections. They do all the

underwriting.

They give a report every day. We took in $100.00 from Joe’s Tire

[Shop]. He says okay. You’re entitled to [5%] for that because you

took $5,000.00 out of $100,000.00 of the advance. So you get a pro

rata portion of that money back. So they take in $100.00, and I take

[5%] of it. I’ll get $5.00 back. That money goes into 1931 [].

R.R. at 282a-284a.

8

Section 102(l) of the Act defines issuer, in relevant part, as “any person who issues or

proposes to issue any security[.]” 70 P.S. § 1-102(l).

9

Section 102(t) of the Act defines a security as

any note; stock; treasury stock; bond; debenture; evidence of

indebtedness; share of beneficial interest in a business trust;

certificate of interest or participation in any profit-sharing

agreement; collateral trust certificate; preorganization certificate or

subscription; transferable share; investment contract; voting trust

certificate; certificate of deposit for a security; limited partnership

interest; fractional undivided interest in oil, gas or other mineral

rights; put, call, straddle, option or privilege on a security, certificate

of deposit of a security or group or index of securities, including any

interest in the securities or based upon the value of the securities, or

any put, call, straddle, option or privilege entered into on a national

6

From approximately March 2018 until June 14, 2021, 1931 sold notes

with 1-month to 5-year terms and 6% to 20% rates of return (1931 Notes) to

individuals (1931 Purchasers) for $10,000.00 per 1931 Note, the PPMs for which

represented that proceeds from the sales would be used to provide funds to MCA

funding firms. See Stip. ¶¶ 33-35, 39-40 (R.R. at 132a-133a). During that time,

1931 sold 1931 Notes memorialized in 247 PPMs to 67 individuals within the U.S.

for an aggregate amount of $16,097,218.00. See Stip. ¶ 35 (R.R. at 132a). As of

June 14, 2021, 1931 had returned $6,796,398.00 in P&I to the 1931 Purchasers. See

id. Also during that time, 1931 sold at least 716 1931 Notes to at least 28 PA

Residents for an aggregate amount of at least $7,166,000.00, and approximately 369

1931 Notes to at least 7 individuals who were clients of Goldata’s stock portfolio

advisory services (Goldata Clients) at the time of their purchase, for an aggregate

amount of $3,699,000.00. See Stip. ¶¶ 36-37 (R.R. at 132a-133a). At least 1 1931

Purchaser was aged 60 or more at the time he/she purchased the 1931 Notes. See

Stip. ¶ 38 (R.R. at 133a). On or about April 12, 2018, 1931 filed an Exemption

Notice with the Department for the 1931 Notes under Regulation D, Section 506(c)

of the 1933 Act, 17 C.F.R. § 230.506(c) (Federal Rule 506(c)), as federally covered

securities. See Stip. ¶ 43 (R.R. at 133a). The 1931 Notes were not registered in the

Department pursuant to Section 201 of the Act, 70 P.S. § 1-201. See Stip. ¶ 44 (R.R.

at 133a).

securities exchange relating to foreign currency; membership

interest in a limited liability company of any class or series,

including any fractional or other interest in such interest, unless

excluded by clause (v); or, in general, any interest or instrument

commonly known as a “security”; or any certificate of interest or

participation in, temporary or interim certificate for, receipt for,

guarantee of, or warrant or right to subscribe to or purchase, any of

the foregoing. All of the foregoing are securities whether or not

evidenced by written document.

70 P.S. § 1-102(t).

7

From approximately June 2018 until July 2019, 442 sold notes with 6-

month to 2-year terms and 6% to 16% rates of return (442 Notes) to individuals (442

Purchasers) for $10,000.00 per 442 Note, the PPMs for which represented that 442

was formed for the purpose of providing funds to MCA funding firms that give

MCAs to merchants that they identify, underwrite, and service. See Stip. ¶¶ 59-61,

65-66 (R.R. at 134a-135a). From June 2018 until June 2019, 442 sold 442 Notes

memorialized in 36 PPMs to 27 individuals within the U.S. for an aggregate amount

of $1,152,500.00. See Stip. ¶ 61 (R.R. at 135a). From July 2018 to June 2019, 567

sold at least 37 442 Notes to at least 8 PA Residents for an aggregate amount of at

least $370,000.00, and at least 7 442 Notes to at least 5 individuals who were Goldata

Clients at the time of their purchase, for an aggregate amount of $77,500.00. See

Stip. ¶¶ 62-63 (R.R. at 135a). At least 1 442 Purchaser was aged 60 or more at the

time he/she purchased the 442 Notes. See Stip. ¶ 64 (R.R. at 135a). On or about

June 3, 2019, 442 filed an Exemption Notice with the Department for the 442 Notes

under Federal Rule 506(b) as federally covered securities. See Stip. ¶ 69 (R.R. at

135a). The 442 Notes were not registered with the Department pursuant to Section

201 of the Act. See Stip. ¶ 70 (R.R. at 136a). As of June 14, 2021, 442 had returned

all P&I to the 442 Purchasers. See Stip. ¶ 61 (R.R. at 135a).

From approximately July 2019 until July 2020, 567 sold notes with 1-

month to 5-year terms and 6% to 16% rates of return (567 Notes) to individuals (567

Purchasers) for $10,000.00 per 567 Note, the PPMs for which represented that 567

was formed for the purpose of providing funds to MCA funding firms that give

MCAs to merchants that they identify, underwrite, and service. See Stip. ¶¶ 47-49,

53-54 (R.R. at 133a-134a). During that time, 567 sold 567 Notes memorialized in

31 PPMs to 16 individuals within the U.S. for an aggregate amount of

$1,329,600.00. See Stip. ¶ 49 (R.R. at 133a-134a). From September 2019 to July

2020, 567 sold at least 50 567 Notes to at least 7 PA Residents for an aggregate

8

amount of at least $500,000.00, and at least 6 567 Notes to at least 2 individuals who

were Goldata Clients at the time of their purchase, for an aggregate amount of

$64,000.00. See Stip. ¶¶ 50-51 (R.R. at 134a). At least 1 567 Purchaser was aged

60 or more at the time he/she purchased the 567 Notes. See Stip. ¶ 52 (R.R. at 134a).

On or about August 21, 2019, 567 filed an Exemption Notice with the Department

for the 567 Notes under Federal Rule 506(b) as federally covered securities. See

Stip. ¶ 57 (R.R. at 134a). The 567 Notes were not registered with the Department

pursuant to Section 201 of the Act. See Stip. ¶ 58 (R.R. at 134a). As of June 14,

2021, 567 returned $191,760.00 in P&I to the 567 Purchasers. See Stip. ¶ 49 (R.R.

at 132a-133a).

From approximately July 2020 until June 14, 2021, 803 sold notes with

1-month to 5-year terms and 6% to 20% rates of return (803 Notes) to individuals

(803 Purchasers) for $10,000.00 per 803 Note, the PPMs for which represented that

803 was formed for the purpose of providing funds to MCA funding firms that give

MCAs to merchants that they identify, underwrite, and service. See Stip. ¶¶ 71-73,

76-77 (R.R. at 136a). During that time, 803 sold 803 Notes memorialized in 41

PPMs to 25 individuals within the U.S. for an aggregate amount of $1,096,875.00.

See Stip. ¶ 73 (R.R. at 136a). In addition, 803 sold at least 3 803 Notes to at least 2

PA Residents who were Goldata Clients at the time of their purchase, for an

aggregate amount of $30,000.00. See Stip. ¶ 74 (R.R. at 136a). At least 1 803

Purchaser was aged 60 or more at the time he/she purchased the 803 Notes. See Stip.

¶ 75 (R.R. at 136a). On or about August 25, 2020, 803 filed an Exemption Notice

with the Department for the 803 Notes under Federal Rule 506(b) as federally

covered securities. See Stip. ¶ 80 (R.R. at 136a). The 803 Notes were not registered

with the Department pursuant to Section 201 of the Act. See Stip. ¶ 81 (R.R. at

137a). The parties did not stipulate whether or when 803 returned P&I to the 803

Purchasers.

9

The parties also stipulated:

95. Each LLC PPM contained a Disclaimer disclosing:

“The Subscriber understands that [] Goldberg is a[n]

[RIA] and may have advised them about investment

opportunities in the past, but that this offering is made by

an entity that [] Goldberg controls. Because of this, the

Subscriber should not rely on the advice of [] Goldberg or

any of his affiliate organizations to determine the

suitability of the investment for them. Subscriber should

seek out independent counsel for determining whether or

not to subscribe to the offering.”

96. Each LLC PPM contained a further disclosure

statement: “This booklet contains documents that must be

read, executed[,] and returned if you wish to invest in

[name of LLC], a Pennsylvania limited liability company

(the Company). You should consult with an attorney,

accountant, investment advisor[,] or other advisor

regarding an investment in the Company and its suitability

for you.”

97. Each LLC PPM contained a further disclosure

statement: “Offering Memorandum Advice. You have

either consulted your own investment adviser, attorney[,]

or accountant about the investment and proposed purchase

of a Note and its suitability to you, or chosen not to do so,

despite the recommendation of that course of action by the

Manager. Any special acknowledgement set forth below

with respect to any statement contained in the Offering

Memorandum shall not be deemed to limit the generality

of this representation and warranty.”

98. Each LLC [SA] contained a provision stating:

“Suitability. You have evaluated the risks involved in

investing in the Promissory Notes and have determined

that the Promissory Notes are a suitable investment for

you. Specifically, the aggregate, amount of the

investments you have in, and your commitments to all

similar investments that are illiquid is reasonable in

relation to your net worth, both before and after the

subscription for and purchase of the Promissory Notes

pursuant to this [SA].”

See Stip. ¶¶ 95-98 (R.R. at 138a-139a).

10

On June 14, 2021, the Bureau filed an Order to Show Cause (OTSC)

against the Goldberg Entities pursuant to Section 35.14 of the General Rules of

Administrative Practice and Procedure (GRAPP),10 1 Pa. Code § 35.14, seeking

administrative assessments under the Act for, inter alia: (1) 59 counts of violating

Section 201 of the Act (which makes it unlawful for a person to offer or sell

securities unless those securities are registered under the Act, exempt from

registration, or federally covered securities); (2) 61 counts of violating Section

401(b) of the Act (which makes it unlawful for a person to make untrue statements

of or omit material facts in connection with the offer or sale of securities); (3) 14

counts of violating Section 401(c) of the Act (which makes it unlawful for a person

to engage in fraud or deceit in connection with the offer or sale of securities); and

(4) 5 counts of violating Section 404 of the Act, 70 P.S. § 1-404, and Section

404.014(a)(l) of the Department’s Regulations, 10 Pa. Code § 404.014(a)(l) (which

make it unlawful for an RIA to have custody of client funds or securities unless the

RIA notifies the Department in writing on Form ADV11 that the RIA has such

custody).12 On September 15, 2021, the Goldberg Entities filed an answer to the

OTSC. See R.R. at 32a-96a.

10

1 Pa. Code §§ 33.1-35.251. The Department’s administrative proceedings are governed

by the Administrative Agency Law, 2 Pa.C.S. §§ 501-508, 701-704, see Section 607(e) of the Act,

70 P.S. § 1-607(e), and the GRAPP. See Pa. Bankers Ass’n v. Pa. Dep’t of Banking, 981 A.2d

975 (Pa. Cmwlth. 2009); see also OTSC at 2 (R.R. at 2a).

11

Officially titled the Uniform Application for Investment Adviser Registration and Report

by Exempt Reporting Adviser, investment advisors use Form ADV to register with the U.S.

Securities and Exchange Commission and state security authorities, to amend their registrations,

to report exemptions, and to amend reports.

12

The Bureau also alleged in the OTSC: 14 counts of violating Section 301 of the Act

(which makes it unlawful for a person to act as an agent unless he is registered under the Act); 5

counts of violating Section 404 of the Act and Section 404.014(a)(5) of the Department’s

Regulations, 10 Pa. Code § 404.014(a)(5) (which make it unlawful for an RIA to have custody of

client funds or securities unless they are reviewed annually by an independent certified public

accountant (CPA)); 5 counts of violating Section 305(a)(v) of the Act, 70 P.S. § 1-305(a)(v)

11

On February 28, 2022, pursuant to Section 35.185 of the GRAPP, 1 Pa.

Code § 35.185, the Department designated the Hearing Officer from the

Pennsylvania Department of State to preside at the hearing.13 On July 1, 2022, the

(relating to willful violations of the Act or attendant Regulations), and Section 305.011(a) and (c)

of the Department’s Regulations, 10 Pa. Code § 305.011(a), (c) (which requires all RIAs to

exercise diligent supervision over securities that includes establishing and maintaining written

procedures and a system for applying and enforcing those procedures); 1 count of violating Section

303(d), 70 P.S. § 1-303(d), and 305(a)(v) of the Act and Section 303.042(a)(3)(ii)(A)-(B) of the

Department’s Regulations, 10 Pa. Code § 303.042(a)(3)(ii)(A)-(B) (which require that an RIA with

custody of client funds or securities to have a net worth of $35,000.00 unless he meets certain

criteria); 5 counts of violating Sections 304(b), 70 P.S. § 1-304(b), and 305(a)(v) of the Act and

Section 304.022(a)(l) of the Department’s Regulations, 10 Pa. Code § 304.022(a)(l) (which require

that an RIA with custody of client funds or securities file with the Department by the end of its

fiscal year an audited balance sheet prepared in accordance with generally accepted accounting

principles together with an unqualified opinion by an independent CPA); 17 counts of violating

Section 305(a)(ix) of the Act, 70 P.S. § 1-305(a)(ix) (relating to dishonest or unethical practices in

the securities business taking unfair advantage of a customer within the previous 10 years), and

Section 305.019(a) of the Department’s Regulations, 10 Pa. Code § 305.019(a) (which declare that

persons registered as agents (i.e., fiduciaries) under Section 301 of the Act shall act primarily for

their customers’ benefit and observe high standards of commercial honor and just and equitable

principals of trade in conducting their businesses); 17 counts of violating Section 305(a)(ix) of the

Act and Section 305.019(c)(3)(xi) of the Department’s Regulations, 10 Pa. Code §

305.019(c)(3)(xi) (which declare that the Department will consider dishonest or unethical, an

RIA’s failure to disclose in writing to a client a material conflict of interest that could impair

unbiased and objective advice); and 17 counts of violating Section 305(a)(ix) of the Act and

Section 305.019(c)(3)(xv) of the Department’s Regulations, 10 Pa. Code § 305.019(c)(3)(xv)

(which declare that the Department will consider dishonest or unethical, an RIA taking any action

relative to a client’s securities or funds over which the RIA has custody or possession when the

RIA’s action is subject to and does not comply with Section 404.014 of the Department’s

Regulations). See R.R. at 1a-29a.

13

On June 6, 2022, the Bureau served an application for Subpoena to Produce

Documentary Evidence (Subpoena Application) on PNC Bank and the Goldberg Entities. On June

13, 2022, the Goldberg Entities filed a response opposing the Subpoena Application and a motion

to dismiss the OTSC (Dismissal Motion). The Bureau opposed the Goldberg Entities’ filings. On

July 1, 2022, the Department’s Hearing Officer denied the Subpoena Application. On September

1, 2022, the Goldberg Entities filed a brief in support of their Dismissal Motion in which they

requested that the Department impose sanctions on the Bureau and the Bureau’s attorneys on

grounds that the Bureau failed to adequately investigate the facts as they applied to the Act and

Regulations in initiating the OTSC. That same day, the Bureau submitted a report prepared by its

staff accountant Christian Yother (Yother) asserting that it will raise the LLCs’ insolvency at the

hearing. On September 7, 2022, the Goldberg Entities filed a Motion to Strike Yother’s report and

12

Hearing Officer scheduled a pre-hearing conference for September 8, 2022. On

September 1, 2022, the parties filed pre-hearing statements. On September 19, 2022,

the Hearing Officer ordered the parties to prepare a joint stipulation of facts and

agree to the admissibility of exhibits they would offer into evidence, which they did.

By September 20, 2022 notice, the Department scheduled a hearing by video

conference for December 12 and 13, 2022.

At the hearing, the parties provided documentary evidence and the

Department’s Securities Compliance Officer Nathan Houtz (Houtz), Department

staff accountant Christian Yother (Yother), investor Robert Harmelin (Harmelin),

and Goldberg testified. See R.R. at 142a-510a.

After the hearing, on July 21, 2023, the Bureau filed a Petition to

Reopen the Record for the purpose of taking additional evidence regarding whether

the Bureau was required to prove scienter to establish a violation of Section 401(b)

of the Act. Therein, the Bureau asked the Hearing Officer to take judicial notice

that, on July 19, 2023, the Pennsylvania Supreme Court held in Mimi Investors, LLC

v. Tufano, 297 A.3d 1272 (Pa. 2023),14 that proof of scienter is not required when

alleging a violation of Section 401(b) of the Act. The Hearing Officer reopened the

record to allow consideration of Mimi Investors.

On November 30, 2023, the Hearing Officer issued a Proposed Report

in which he concluded that the record evidence established that the Goldberg Entities

committed 133 violations of the Act and that they should be ordered to pay

testimony as improper and prejudicial as it was not part of the OTSC. The Hearing Officer heard

argument thereon at the September 8, 2022 pre-hearing conference and, thereafter, denied the

Motion to Strike. On September 19, 2022, the Hearing Officer denied the Goldberg Entities’

Dismissal Motion.

14

The Bureau filed an amicus brief in Mimi Investors.

13

$931,000.00 in administrative assessments.15 See R.R. at 621a-696a. On December

29, 2023, the Goldberg Entities filed a Brief on Exceptions to the Proposed Report

(Exceptions) that included a Goldberg affidavit and documents purportedly

confirming that he verified that 1931 Purchasers were accredited investors. See R.R.

at 697a-828a. On January 16, 2024, the Bureau filed its Brief Opposing Exceptions.

See R.R. at 829a-886a. After reviewing the evidence and Exceptions, on February

28, 2024, the Department issued the Final Order adopting the Proposed Report,

stating: “[T]he assessment proposed . . . is supported by the evidence of record and

the law.”16 See Goldberg Entities’ Br. Attachment (Final Order) at 2. The Goldberg

Entities appealed to this Court.17

15

In accordance with Section 602.1(c) of the Act, added by Section 3 of the Act of May 4,

1993, P.L. 4, 70 P.S. § 1-602.1(c), the Hearing Officer specifically proposed that the Goldberg

Entities be held jointly and severally liable to pay to the Commonwealth of Pennsylvania:

$7,000.00 for each of the 61 violations of Section 401(b) of the Act; $7,000.00 for each of the 5

violations of Section 404 of the Act, pursuant to Section 404.014(a)(1) of the Department’s

Regulations; $7,000.00 for each of the 5 violations of Section 404 of the Act, pursuant to Section

404.014(a)(5) of the Department’s Regulations; $7,000.00 for 1 violation of Sections 303(d) and

305(a)(v) of the Act, pursuant to Section 303.042(a)(3)(ii)(A)-(B) of the Department’s

Regulations; $7,000.00 for each of the 5 violations of Section 304(b) and 305(a)(v) of the Act,

pursuant to Section 304.022(a)(1) of the Department’s Regulations; $7,000.00 for each of the 5

violations of Section 305(a)(v) of the Act, pursuant to Section 305.011(a) and (c) of the

Department’s Regulations; $7,000.00 for each of the 17 violations of Section 305(a)(ix) of the Act,

pursuant to Section 305.019(a) of the Department’s Regulations; $7,000.00 for each of the 17

violations of Section 305(a)(ix) of the Act, pursuant to Section 305.019(c)(3)(xi) of the

Department’s Regulations; and $7,000.00 for each of the 17 violations of Section 305(a)(ix) of the

Act, pursuant to Section 305.019(c)(3)(xv) of the Department’s Regulations, for a total

administrative assessment of $931,000.00. The Hearing Officer did not include an assessment for

violation of Section 201 of the Act because the Act does not provide for one. The Hearing Officer

did not include assessments for violations of both Section 401(b) and (c) of the Act because Section

602.1(c)(1)(iii) of the Act does not permit an assessment under Section 401(b) of the Act where

one is imposed under Section 401(c) of the Act. See 70 P.S. § 1-602.1(c)(1)(iii).

16

The Department’s Final Order contained a clarifying amendment to the Proposed Report,

the details of which are not relevant to the issues the Goldberg Entities raised in this appeal. See

Final Order at 2.

17

This Court’s “review is limited to determining whether constitutional rights were

violated, whether the adjudication is in accordance with the law, or whether the necessary findings

14

Discussion

Initially, as the charging party, the Bureau generally had the burden of

proving the OTSC allegations against the Goldberg Entities,18 while Goldberg and

Goldata had the burden to prove advisor status or any exemption, exception, or

exclusion from the Act. See Section 612(a) of the Act, 70 P.S. § 1-612(a).

Moreover, the Department was the fact-finder. See Pa. Bankers Ass’n v. Pa. Dep’t

of Banking, 981 A.2d 975 (Pa. Cmwlth. 2009).

“[I]t is the job of the fact[-]finder to resolve conflicts in testimony.”

Fisler v. State Sys. of Higher Educ., Cal. Univ. of Pa., 78 A.3d 30, 44 (Pa. Cmwlth.

2013) (quoting Commonwealth v. Hoffman, 938 A.2d 1157, 1160 n.10 (Pa. Cmwlth.

2007)). In doing so, “‘the fact-finder is free to believe all, part or none of the

evidence presented,’ even if uncontradicted[.]” Id. “[T]his Court may not reweigh

the evidence and substitute [its] judgment for that of the fact-finder.” Id. Because

“credibility and weight of the evidence are for the [Department],” this Court “will

of fact are supported by substantial evidence.” Byers v. Pa. Dep’t of Banking & Sec., Bureau of

Sec. Compliance & Examinations, 259 A.3d 551, 557 n.4 (Pa. Cmwlth. 2021).

By April 24, 2025 Order, this Court directed the Department to certify the entire record to

this Court on or before May 7, 2025, which the Department did.

18

The degree of proof required to establish a case before an

administrative tribunal is preponderance of the evidence.

Lansberry, Inc. v. P[a.] Pub[.] Util[.] Comm[’]n, . . . 578 A.2d 600,

602 ([Pa. Cmwlth.] 1990). A preponderance of the evidence is

generally understood to mean that the evidence demonstrates a fact

is more likely to be true than not to be true, or if the burden were

viewed as a balance scale, the evidence in support of the

Commonwealth’s case must weigh slightly more than the opposing

evidence. Se-Ling Hosiery, Inc. v. Margulies, . . . 70 A.2d 854, 856

([Pa.] 1950). The Commonwealth therefore has the burden of

proving the charges against a respondent with evidence that is

substantial and legally credible, not by mere “suspicion” or by only

a “scintilla” of evidence. Lansberry, 578 A.2d at 602.

Sherman Hostetter Grp. LLC v. State Bd. of Auctioneer Exam’rs, 336 A.3d 286, 292 (Pa. Cmwlth.

2025); see also Final Order at 40.

15

not disturb those determinations absent an abuse of discretion.” Alsyrawan v. Dep’t

of Hum. Servs., 316 A.3d 1076, 1087 n.17 (Pa. Cmwlth. 2024), appeal allowed in

part, 329 A.3d 448 (Pa. 2024) (quoting Allegheny Cnty. Off. of Child., Youth &

Families v. Dep’t of Hum. Servs., 202 A.3d 155, 164 (Pa. Cmwlth. 2019)); see also

Pa. Bankers Ass’n. “An abuse of discretion occurs where the findings of fact are not

supported by substantial evidence”19 in the record. Pa. Bankers Ass’n, 981 A.2d at

985.

1. LLC Note Registration

The Goldberg Entities first argue that the record evidence did not

support the Department’s finding that the LLC Notes were not exempt from

registration when the stipulated facts supported their compliance in securing the

federally covered security exemptions.

The Bureau alleged in the OTSC that Goldberg violated Section 201 of

the Act by offering and selling purportedly exempt LLC Notes to Pennsylvania

residents that were not, in fact, exempt from registration. Section 201 of the Act

specifies: “It is unlawful for any person to offer or sell any security in this [s]tate

unless the security is registered under this [A]ct, . . . or the security is a federally

covered security.”20 70 P.S. § 1-201 (emphasis added).

Here, the Department’s findings that the LLCs were issuers of the LLC

Notes within the meaning of Section 102(1) of the Act, that the LLC Notes were

securities as defined in Section 102(t) of the Act, and that the LLC Notes were not

19

Substantial evidence is “such evidence as a reasonable mind might accept as adequate to

support a conclusion that requires something more than a scintilla creating a mere suspicion of the

existence of the fact to be established.” Pa. Sav. Ass’n v. Dep’t of Banking, 523 A.2d 837, 839

(Pa. Cmwlth. 1987).

20

Section 211 of the Act, added by Section 11 of the Act of November 24, 1998, P.L. 829,

applies to federally covered securities; see also Section 18(b)(2) of the Securities Act of 1933, 15

U.S.C. § 77r(b)(2).

16

registered pursuant to Section 201 of the Act, are supported by the parties’

Stipulations. See Findings of Fact (FOF) 34-35, 37, 48-49, 51, 60-61, 63, 71-72, 74,

80-81; Stip. ¶¶ 41-42, 44, 55-56, 58, 67-68, 70, 78-79, 81, 87-88 (R.R. at 133a-137a).

The Department also found based on the parties’ Stipulations that the LLCs filed

Exemption Notices with the Department, therein asserting that the 442, 567, and 803

Notes were exempt from registration as federally covered securities under Federal

Rule 506(b), and the 1931 Notes were exempt from registration as federally covered

securities under Federal Rule 506(c). See FOFs 36, 50, 62, 73, 82; Stip. ¶¶ 43, 57,

69, 80, 89 (R.R. at 133a-137a).

Federal Rule 506(b) Exemption

In order for the Federal Rule 506(b) exemption to apply to 442, 567,

and 803, those LLCs had to meet the conditions listed therein. Federal Rule

506(b)(1), applicable to the 442, 567, and 803 Notes, provides, in relevant part, that

“[t]o qualify for an exemption . . . , offers and sales must satisfy all the terms and

conditions of [Federal Rules 501 and 502, 17 C.F.R.] §§ 230.501 [(relating to general

conditions to be met)], 230.502 [(relating to definitions)].” 17 C.F.R. §

230.506(b)(1) (relating to general conditions to be met in offerings).

Specifically, Federal Rule 502(c)(1) prohibits an issuer from

“offer[ing] or sell[ing]” the securities by any form of general solicitation or general

advertising, including, but not limited to “[a]ny advertisement, article, notice[,] or

other communication published in any newspaper, magazine, or similar media or

broadcast over television or radio[.]” 17 C.F.R. § 230.502(c)(1). Advertisement is

defined in Section 102(a) of the Act as “any communication used in connection with

a sale . . . or an offer to sell . . . a security which is publicly disseminated by means

of print, radio, television, [i]nternet[,] or other media.” 70 P.S. § 1-102(a). The

17

Goldberg Entities had “the burden of proving the availability of the . . . exemption[.]”

70 P.S. § 1-612(a).

Houtz testified that, on September 13, 2019, Goldberg’s LinkedIn page

represented that Goldberg was the fund manager for 442, 567, 803, and 1931, which

provided funding to grow small businesses. See R.R. at 200a; see also Bureau Ex.

81. Attached to Goldberg’s LinkedIn page, Houtz identified an article Goldberg

authored, entitled Shark Tank Alternative Merchant Cash Advances, that mentioned

1931. See R.R. at 200a-201a. On August 31, 2022, the Bureau captured a link to

Goldberg’s YouTube channel that listed approximately 10 videos discussing MCAs

and investment opportunities with titles like, An Alternative Investment Opportunity

in Merchant Cash Advances, Alternative Investment Opportunity, Investment

Opportunity in Merchant Cash Advances, the majority if not all of which described

1931 as an investment opportunity. See R.R. at 202a-205a; see also Bureau Exs.

100-101.

Goldberg acknowledged that he was permitted to advertise the 1931

Notes because they were only for accredited investors, but he was not permitted to

advertise the 442, 567, or 803 Notes. See R.R. at 256a-258a. Goldberg claimed that

he “strictly held to that system as much as [he] could.” R.R. at 258a. Although he

primarily directly marketed the LLCs to his contacts (some of whom were RIA

clients), see R.R. at 255a, his LinkedIn page and his YouTube channel, which were

part of his marketing, were also active during that time. See R.R. at 258a-260a.

Goldberg also stated that he had met with Quest Education,21 informed it of the LLC

opportunities available for Quest Education to make referrals, and acknowledged the

possibility that a number of the LLC investors heard about the investments through

Quest Education. See R.R. at 259a-260a. In addition, in his answer to the OTSC,

21

Goldberg explained that Quest Education “provided alternative investments for people

with self-directed [individual retirement accounts].” R.R. at 259a.

18

Goldberg admitted that his LinkedIn page reflected that he was the fund manager for

1931, 442, 567, and 803, and that those funds “offer attractive returns of 6% to 20%

annually to investors by participating in cash advances to small businesses,” and

further “provide[d] a link for a potential investor to view a ‘video at

www.1931Funding.com for details.’” R.R. at 37a-38a.

Goldberg did not dispute Houtz’s observations of the Shark Tank

Alternative Merchant Cash Advances article on Goldberg’s LinkedIn page, and the

approximately 10 videos on his YouTube channel that discussed the MCA

investment opportunities. See R.R. at 200a-201a. Although the LinkedIn website

and videos referenced 1931, Goldberg admitted that his LinkedIn page also

represented that he was the fund manager for 442, 567, and 803, and that those funds

“offer attractive returns of 6% to 20% annually to investors by participating in cash

advances to small businesses[.]” R.R. at 37a-38a. Despite that he testified that he

primarily directly marketed the LLC Notes to his contacts because he was not

otherwise permitted to advertise them, Goldberg acquiesced that he may have

received investor referrals from his online marketing and Quest Education. See R.R.

at 256a-260a.

The Department made specific findings of fact based on that evidence,

see FOFs 148-155, and took judicial notice of a representation on the U.S. Securities

and Exchange Commission’s website that “[a] solicitation that conditions the market

for an offering of securities is generally viewed as a general solicitation that is

marketing the securities.”22 See Final Order at 47-48. The Department concluded

that “Goldberg engaged in general solicitation of the 442 Notes, the 567 Notes, and

the 803 Notes through: (1) [] Goldberg’s LinkedIn webpage[;] (2) [] Goldberg’s

YouTube channel[;] and (3) referrals from Quest Education” and, thus, the Goldberg

22

www.sec.gov/education/capitalraising/building-blocks/general-solicitation (last visited

Dec. 8, 2025).

19

Entities could not rely upon Federal Rule 506(b) to exempt the 442, 567, and 803

Notes from registration under Section 201 of the Act. Whether any investors

purchased 442, 567, or 803 Notes based on Goldberg’s general solicitation is of no

moment when, by their express statutory terms, the offer alone was sufficient to

nullify Federal Rule 506(b)’s protection from Section 201 of the Act.

When reviewing the Department’s factual findings, this Court’s role “is

merely to ensure that the findings are supported by substantial evidence[.]” Pa. Sav.

Ass’n v. Dep’t of Banking, 523 A.2d 837, 839 (Pa. Cmwlth. 1987); see also Pa.

Bankers Ass’n. Importantly, “[t]he presence of conflicting evidence in the record

does not mean that substantial evidence is lacking.” Fisler, 78 A.3d at 44 (quoting

Allied Mech. & Elec., Inc. v. Pa. Prevailing Wage Appeals Bd., 923 A.2d 1220, 1228

(Pa. Cmwlth. 2007)). Moreover, “[i]n determining whether a finding of fact is

supported by substantial evidence, th[is] Court is required to give the party in whose

favor the decision was rendered the benefit of all reasonable and logical inferences

that may be drawn from the evidence of record.” Hauck v. Unemployment Comp.

Bd. of Rev., 271 A.3d 961, 970 (Pa. Cmwlth. 2022) (quoting Allegheny Cnty. Off. of

Child., Youth & Families, 202 A.3d at 164 (quotation marks omitted)). Giving the

Bureau the benefit of all reasonable and logical inferences to be drawn from the

evidence as this Court must, see Hauck, because the Department’s FOFs relative to

Goldberg’s general solicitation were based on substantial record evidence, this Court

will not disturb them. See Alsyrawan.

Federal Rule 506(c) Exemption

For the Federal Rule 506(c) exemption to apply here, 1931 had to meet

the conditions listed in that provision. Federal Rule 506(c)(1) requires that, to

qualify for an exemption thereunder, the offers and sales of securities must satisfy

20

Federal Rule 501.23 Federal Rule 506(c)(2)(i) mandates that “[a]ll purchasers of

securities sold in any offering under paragraph (c) . . . are accredited investors.” 17

C.F.R. § 230.506(c)(2)(i). Federal Rule 501(a) defines accredited investor, in

pertinent part, as

any person who comes within any of the following

categories, or who the issuer reasonably believes comes

within any of the following categories, at the time of the

sale of the securities to that person:

....

(5) Any natural person whose individual net worth, or joint

net worth with that person’s spouse or spousal equivalent,

exceeds $1,000,000[.00]; [or]

....

(6) Any natural person who had an individual income in

excess of $200,000[.00] in each of the two most recent

years or joint income with that person’s spouse or spousal

equivalent in excess of $300,000[.00] in each of those

years and has a reasonable expectation of reaching the

same income level in the current year[.]

17 C.F.R. § 230.501(a). Federal Rule 506(c)(2)(ii) commands that “[t]he issuer shall

take reasonable steps to verify that purchasers of securities sold in any offering under

paragraph (c) of this section are accredited investors.” 17 C.F.R. § 230.506(c)(2)(ii).

Federal Rule 506(c)(2)(ii) adds that the issuer shall be deemed to have taken

reasonable steps to verify accredited investor status if he undertook one of the non-

exclusive and non-mandatory methods listed thereafter, including reviewing Internal

Revenue Service forms reporting the purchaser’s income for the two most recent

years, obtaining written confirmation of the purchaser’s accredited investor status

23

Rule 506(c)(1) of Regulation D also requires compliance with Rule 502(a) of Regulation

D, 17 C.F.R. § 230.502(a) (relating to integration) and (d) (relating to resale conditions), see 17

C.F.R. § 230.506(c)(1), which do not apply here.

21

from a licensed attorney or CPA, or having previously assessed a purchaser’s status

in these ways if there is no reason to believe the status has changed. See id.

The Bureau alleged that the Goldberg Entities failed to demonstrate that

reasonable steps were taken to verify each purchaser’s accredited investor status.

The Goldberg Entities had “the burden of proving the availability of the . . .

exemption[.]” 70 P.S. § 1-612(a). Houtz represented that in the December 26, 2019

response to the Bureau’s request for information regarding accredited investors, the

Goldberg Entities merely affirmed that the 1931 Note investors were accredited

investors, and that the PPMs for the 442 and 567 Notes included confidential

investment questionnaires that were more detailed than the ones provided for the

1931 Note investors. See R.R. at 198a-199a; see also Bureau Ex. 15.

Goldberg similarly testified that he requested, checked, and

documented proof of investor accreditation relative to the 1931 Note sales. See R.R.

at 257a. When asked what proof he relied upon, Goldberg expounded:

[I]f they qualified for $1 million of net worth besides their

primary residence, I asked them to fill out and admit [an]

investor accredited letter that stipulated that and provided

proof of that and a cover of a bank statement. If they

qualified by income, which was $200,000.00 personally or

$300,000.00 joint, I asked for [2] years’ worth of tax

returns plus a sign[-]off that they expect to have that sort

of income in the current year. And some of them were

able to qualify by getting their attorney or accountant to

sign off[; . . . t]he ones that didn’t want to disclose any of

their net worth.

R.R. at 257a-258a. Goldberg claimed that he had documentary proof of his

accredited investor verification process, but he did not produce it, purportedly

because the Bureau did not specifically request it.24 See R.R. at 257a-258a.

24

Goldberg produced an affidavit and verifying documentation for the first time with his

Exceptions. See Goldberg Entities’ Br. at 24; see also Exceptions (R.R. at 753a-828a). Although

22

Harmelin confirmed that he was an accredited investor when he purchased 1931

Notes. See R.R. at 239a; see also Stip. ¶¶ 31, 45 (R.R. at 132a-133a).

The Department acknowledged Goldberg’s testimony that he verified

investor status, see FOF 158, but because he failed to produce any documentation to

that effect, see id., it concluded that “Goldberg’s self-serving statements without

more [we]re not credible.”25 Final Order at 48. As fact-finder and ultimate judge of

credibility, the Department held that the Goldberg Entities failed to take reasonable

steps to verify the accredited investor status of the 1931 Note investors and, thus,

Section 35.212 of the GRAPP authorizes the inclusion of proposed findings and conclusions in

exceptions, see 1 Pa. Code § 35.212(a)(2), they must be based on the record created before the

agency. See 1 Pa. Code § 35.212(a)(1)(iv) (argument must cite to appropriate record references).

The GRAPP does not expressly allow the Goldberg Entities to introduce evidence that existed but

failed to produce at the hearing. Moreover, despite that Section 35.231(a) of the GRAPP allows a

party to petition an agency to reopen the record after a hearing has concluded, reopening is

generally permitted when a material change in the facts or law occurs, see 1 Pa. Code § 35.231(a),

which was not the case here. In addition, “[r]eview of a decision reopening the record is for abuse

of discretion. An exercise of that discretion will not be reversed unless clear abuse is shown.”

Pocono Mountain Charter Sch., Inc. v. Pocono Mountain Sch. Dist., 88 A.3d 275, 291 (Pa.

Cmwlth. 2014). Where, as here, the law placed the burden on the Goldberg Entities to prove that

the securities were exempt from registration, and Goldberg admitted he had such proof at the time

of the hearing, the Department did not abuse its discretion by refusing to reopen the record to later

consider that evidence. Accordingly, this Court will not consider those documents.

Although the Goldberg Entities take issue with the Department’s refusal to reopen the

record for them to produce additional factual evidence when it allowed consideration of the Mimi

Investors ruling, see Goldberg Entities’ Br. at 27 n.9, their request was vastly different than the

Bureau’s request. The Department was bound by the Mimi Investors precedential scienter ruling

and, as such, should have considered it regardless of whether either party requested it to do so. In

fact, the Department could and did take judicial notice of Mimi Investors. See Final Report at 50-

51.

25

The Department also found that “Goldberg relied upon either affirmations from investors

as to their accredited investor status or investor questionnaires that were included in the [] LLC

PPMs[,]” FOF 156, which appears to contradict FOF 157, and thereafter concluded that “the only

credible evidence that [] Goldberg checked the accredited investor status of the 1931 [Note]

purchasers was to take their word for it and nothing more[, which] can hardly be considered taking

reasonable steps to verify the accredited investor status of each 1931 [i]nvestor.” Final Order at

48-49. Although this Court could not locate where in the record Goldberg testified that he relied

solely on investor affirmations to verify their accredited status, in light of the Department’s

credibility determination, this was nominal error.

23

they could not rely upon the registration exemption under Federal Rule 506(c) for

the 1931 Notes. See Final Order at 49. Giving the Bureau the benefit of all

reasonable and logical inferences to be drawn from the evidence, as this Court must,

see Hauck, because the Department’s FOFs relative to accredited investor status

were based on substantial record evidence, this Court will not disturb them. See

Alsyrawan.

Because the record evidence supports that the Goldberg Entities offered

or sold the 442, 567, and 803 Notes by general solicitation and did not verify the

accredited status of 1931 Note investors, they failed to satisfy the conditions of

Federal Rule 506(b) and (c) related to federally covered securities. Accordingly, the

Department properly determined that the Goldberg Entities violated Section 201 of

the Act by not registering the 442, 567, 803, and 1931 Notes with the Department.

2. Custody of Client Funds

The Goldberg Entities next contend that the record evidence did not

support the Department’s finding that Goldata had custody of RIA client funds in

violation of Section 404 of the Act pursuant to Section 404.014(a)(1) of the

Department’s Regulations.26 They specifically assert that Goldata Clients, acting

26

Although the Goldberg Entities also declare in their summary of argument that the

Department’s charges for violations of Sections 303, 304, and 305 of the Act and Section 404 of

the Act by virtue of Section 404.014(a)(5) of the Department’s Regulations should be reversed,

see Goldberg Entities’ Br. at 10, the Statement of Questions Involved and Argument portions of

their brief focus solely on Section 404 of the Act pursuant to Section 404.014(a)(1) of the

Department’s Regulations.

Pursuant to [Rule] 2119(a), the argument section of an appellate

brief “shall be divided into as many parts as there are questions to

be argued; and shall have at the head of each part - in distinctive

type or in type distinctively displayed - the particular point treated

therein, followed by such discussion and citation of authorities as

are deemed pertinent.” Pa.R.A.P. 2119(a). “At the appellate level,

24

independently, purchased the LLC Notes in an OBA that Goldberg conducted in a

properly and fully disclosed non-IAR capacity. They further claim that since the

LLCs operated free of RIA requirements and they were not pooled investments, the

Department’s charges for violating Section 404 of the Act pursuant to Section

404.014(a)(1) of the Department’s Regulations should be reversed.

The Bureau charged in the OTSC:

Goldata, in connection with its advisory services, directly

or indirectly held client funds or securities, through []

1931, [] 567, [] 442, [] 803 and [] LEGS, with the authority

to obtain possession of them or the ability to appropriate

them and thus had “custody” over client funds or securities

as defined in [Section] 102.021 [of the Department’s

Regulations].

OTSC ¶ 104 (R.R. at 17a-18a).

Initially, the Act is remedial legislation, the primary purpose of which

is “to protect the investing public.” Lenau v. Co-eXprise, Inc., 102 A.3d 423, 436

(Pa. Super. 2014) (quoting Commonwealth v. Yaste, 70 A.2d 685, 687 (Pa. Super.

1950)). To that end, Section 404 of the Act makes it unlawful for a person advising

others as to the value or purchase of securities to engage in fraudulent, deceptive, or

manipulative acts. See 70 P.S. § 1-404. Under Section 404.14(a) of the

Department’s Regulations, “[i]t is unlawful . . . for an [RIA] to have custody of client

funds or securities” unless the RIA notifies the Department promptly in writing on

Form ADV that he has or may have custody. 10 Pa. Code § 404.014(a)(1) (emphasis

a party’s failure to include analysis and relevant authority results in

waiver.” Browne v. Dep[’t] of Transp[.], 843 A.2d 429, 435 (Pa.

Cmwlth. 2004).

770 Ameribeer, Inc. v. Pa. Liquor Control Bd., 318 A.3d 998, 1009 (Pa. Cmwlth. 2024). Because

the Goldberg Entities failed to more specifically challenge the Department’s conclusion that they

violated Sections 303, 304, and 305 of the Act in its Statement of Questions Involved and failed

to develop any argument in support thereof, those challenges are waived, and this Court will not

separately address them.

25

added). Section 102.201(a) of the Department’s Regulations specifies that an RIA

has custody

(ii) if a related person[27] holds directly or indirectly, client

funds or securities, or has authority to obtain possession of

them, in connection with advisory services the [RIA]

provides to clients.

(iii) . . . [custody] includes:

....

(C) Any capacity (such as general partner of a

limited partnership, managing member of a limited

liability company or a comparable position or

another type of pooled investment vehicle, or

trustee of a trust) that gives the investment adviser

or its supervised person legal ownership of or

access to client funds or securities.

10 Pa. Code § 102.021(a) (definitions). Section 102.021(a) of the Department’s

Regulations defines client, in this context, as “[a] person to whom an [RIA] or [IAR]

has provided investment advice for which the [RIA] or [IAR] received

compensation.” 10 Pa. Code § 102.021(a).

The Goldberg Entities admitted that Goldberg is an affiliate and related

person of Goldata. See Ans. to OTSC ¶¶ 13, 104 (R.R. at 33a-34a, 73a). Thus, if

Goldberg ever held funds or securities of Goldata’s clients, then Goldata had custody

thereof. Goldberg testified that he was “the 100[%] owner and manager of all the

LLCs” and had complete control of the LLCs and their bank accounts. R.R. at 434a-

437a. The parties stipulated, and the Department found as fact, that Goldberg

offered the LLCs’ Notes for sale to some Goldata clients, and that some Goldata

clients purchased Notes. See FOFs 30, 44, 56, 67, 78. The investing clients became

27

A related person is “a person that is an affiliate of an investment advisor.” 10 Pa. Code

§ 102.021. An affiliate is “a person that directly, or indirectly through one or more intermediaries,

controls, is controlled by, or is under common control with, the person specified.” Section 102 of

the Act, 70 P.S. § 1-102(b).

26

creditors of the LLCs under the Notes and the proceeds from those Note sales

became the property of the LLCs, to be used to fund MCA transactions per the PPMs.

See R.R. at 107a. Harmelin testified that when he purchased an LLC Note at

Goldberg’s suggestion while he was a Goldata client, he sent the purchase money

by wire or check to the LLC. See R.R. at 236a-237a. Another Goldata client directly

transferred funds from their Goldata account to purchase an LLC Note. See FOF

147. This record evidence supports the Department’s findings that Goldata clients

“transferred funds directly to [the LLCs],” over which Goldberg, not a custodian,28

had “complete control . . . including total control and possession of [the LLCs’] bank

accounts.” Final Order at 59.

This Court rejects the Goldberg Entities’ argument that the Department

disregarded relevant evidence that the LLCs were separate and distinct from

Goldata. The Department considered that evidence, including the disclaimer

language in the LLCs’ offerings, and correctly concluded that it does not alter the

analysis of custody under the Regulation. See Final Order at 61. Simply, the

purchase money of the Notes came into the LLCs, which Goldberg controlled, which

amounts to Goldata having custody of client funds under the Department’s

Regulations. Goldata did not notify the Department of that custody as required.

Accordingly, this Court will not disturb the Department’s conclusion that Goldata

violated the custody requirement of the Department’s Regulations.

3. Section 401(b) of the Act

The Goldberg Entities argue that the Department erred by applying

strict liability to evaluate the Bureau’s charges under Section 401(b) of the Act and,

28

The Department found, and the record shows, that TD Ameritrade is a custodian of

Goldata client funds, not of the LLCs and their funds. See FOF 114. TD Ameritrade is not relevant

to whether Goldberg had custody of client funds via his control of the LLCs.

27

based on Mimi Investors, the Department should have applied a negligence standard.

They further contend that the Department erred by applying an overly broad

subjective standard to conclude that they violated Section 401(b) of the Act by

failing to identify the MCA funders engaged by the LLCs and failing to disclose the

consequences of Goldberg collecting his full management fee from each LLC.

The Bureau charged the Goldberg Entities with violating Section

401(b) of the Act related to Goldberg’s failure to disclose the MCA funding firms in

which the LLCs invested and that Goldberg may not collect his full management fee

from each LLC. Section 401(b) of the Act makes it unlawful for any person, in

connection with the offer, sale, or purchase of any security in this state, directly or

indirectly “[t]o make any untrue statement of a material fact or to omit to state a

material fact necessary in order to make the statements made, in the light of the

circumstances under which they are made, not misleading[.]” 70 P.S. § 1-401(b).

The Department took judicial notice that, after the parties filed their post-hearing

briefs, the Pennsylvania Supreme Court issued Mimi Investors, wherein it held for

the first time that proof of scienter is not required for a violation of Section 401(b)

of the Act. See Final Order at 51. Accordingly, the Department did not apply a strict

liability standard when adjudicating this case.

Mimi Investors

Notwithstanding, the Goldberg Entities declare that the Department is

bound by its amicus argument in Mimi Investors that it previously followed Aaron

v. Securities & Exchange Commission, 446 U.S. 680 (1980), in construing violations

of Section 401 of the Act, and that it “should have recognized that Aaron requires

proof of negligence[.]” Goldberg Entities’ Br. at 28. However, Section 401(b) of

the Act’s language neither plainly references nor implies that a negligence standard

applies to violations thereof, and the Pennsylvania Supreme Court’s ruling that strict

28

liability is not an element of a violation of Section 401(b) of the Act does not mean

that a negligence standard applies.

As our analysis involves interpreting Section [401(b)] of

the [] Act, we necessarily begin by considering the

Statutory Construction Act [of 1972 (SCA)]. [See] 1

Pa.C.S.[] §§ 1501[-1991]. The [SCA] is clear the

objective of all interpretation and construction of statutes

is to ascertain and effectuate the intention of the

legislature. [See Section 1921(a) of the SCA,] 1 Pa.C.S.[]

§ 1921(a). [The Pennsylvania Supreme] Court has found

that the best indication of the General Assembly’s intent is

the plain language of the statute. [See] Martin v. . . . Dep’t

of Transp., Bureau of Driver Licensing, . . . 905 A.2d

438 . . . ([Pa.] 2006). When the words of a statute are clear

and unambiguous, there is no need to look beyond the

plain meaning of the statute “under the pretext of pursuing

its spirit.” [Section 1921(b) of the SCA,] 1 Pa.C.S.[] §

1921(b); see Commonwealth v. Conklin, . . . 897 A.2d

1168, 1175 ([Pa.] 2006). Consequently, only when the

words of a statute are ambiguous should a court seek to

ascertain the intent of the General Assembly through

consideration of the various factors found in Section

1921(c) [of the SCA]. [See] 1 Pa.C.S.[] § 1921(c); [see

also] Koken v. Reliance Ins. Co., . . . 893 A.2d 70 . . . ([Pa.]

2006).

Ario v. Ingram Micro, Inc., 965 A.2d 1194, 1201 (Pa. 2009). This Court has

explained:

[A]lthough we must “listen attentively to what a statute

says[,] [o]ne must also listen attentively to what it does not

say.” Kmonk-Sullivan v. State Farm Mut. Auto. Ins.

Co., . . . 788 A.2d 955, 962 ([Pa.] 2001). [This Court] may

not insert a word the legislature failed to supply into a

statute.

Honey v. Lycoming Cnty. Offs. of Voter Servs., 312 A.3d 942, 948 (Pa. Cmwlth.

2024), appeal granted, 327 A.3d 611 (Pa. 2024) (quoting Malt Beverages Distribs.

Ass’n v. Pa. Liquor Control Bd., 918 A.2d 171, 175-76 (Pa. Cmwlth. 2007)).

29

The Mimi Investors Court acknowledged that when the General

Assembly intends to include an element in the Act’s material provisions, it uses

unambiguous language to that effect. See id. The Pennsylvania Supreme Court has

also held that Pennsylvania courts “generally assume that[] ‘where a section of a

statute contains a given provision, the omission of such a provision from a similar

section’ signifies a different legislative intent.” Protz v. Workers’ Comp. Appeal Bd.

(Derry Area Sch. Dist.), 161 A.3d 827, 839 (Pa. 2017) (quoting Fletcher v. Pa. Prop.

& Cas. Ins. Guar. Ass’n, 985 A.2d 678, 684 (2009)). The Mimi Investors Court

distinguished Sections 401(b) and 501(a)(ii) of the Act, the latter of which this Court

observes uses negligence-like language (i.e., knowing, reasonable care) in setting

forth a defense for offerors and sellers of securities for private causes of action. That

same language does not appear in Section 401(b) of the Act related to a Bureau’s

enforcement action, and this Court will not read such language into it. Thus,

regardless of whether the Department may have previously cited to or relied on

Aaron, that case is inapposite here.29

29

This Court adopts the Department’s reasoning that the Goldberg Entities’ reliance on

Aaron is misplaced:

Aaron involved the interpretation of [Section] 17(a) of the [federal]

Securities Act of 1933 [(1933 Act)] and [Section] 10(b) of the

[federal] Securities and Exchange Act of 1934 [(1934 Act)].

Th[o]se federal statutes are not relevant in this instance because

the[ir] text . . . differs materially from the text of the [] Act. In

particular, the federal statutes do not contain a parallel provision to

[Section] 501(a) [of the Act], which . . . allows defendants in private

actions under the [] Act to argue the absence of negligence as an

affirmative defense. Moreover, federal courts - including the [U.S.]

Supreme Court - “are bound by state supreme courts’ interpretations

of state law.” U[.]S[.] v. Harris, 289 A.3d 1060, 1069 (Pa. 2023).

“A federal court’s interpretation of state law, however, does not bind

this court.” Clay v. Advanced Comput. Applications, Inc., 536 A.2d

1375, 1380 n.5 (Pa. Super. 1988), rev’d in part on other grounds,

559 A.2d 917 (Pa. 1989). Finally, [Section] 11 of the 1933 Act

30

Failure to Identify the MCA Funders

Regarding the Goldberg Entities’ arguments that the Department erred

by concluding that they violated Section 401(b) of the Act by failing to identify the

MCA funders engaged by the LLCs and/or operating histories and failing to disclose

the consequences of Goldberg collecting his full management fee from each LLC,

the Department declared: “[T]here is nothing in the text that would give discretion

to [the Goldberg Entities] to determine what information to disclose to the [] LLC

Note [P]urchasers. The test is whether a reasonable [] LLC Note [P]urchaser would

consider the information important before deciding to purchase the [N]otes.”30 Final

Order at 54.

In order to further its purpose of protecting the investing public, see

Lenau, Section 401(b) of the Act prohibited the Goldberg Entities from omitting

material facts in connection with their offer or sale of the LLC Notes. See 70 P.S. §

1-401(b). The General Assembly did not define material fact relative to Section

401(b) of the Act, and there is little precedential case law interpreting that provision.

provides a better analogy to [Section] 401(b) [of the Act] in this

instance because this case involves statements and omissions made

by issuers of securities. Section 11 [of the 1933 Act] “was designed

to assure compliance with the disclosure provisions of the Act by

imposing a stringent standard of liability on the parties who play a

direct role in a registered offering.” Herman & Maclean v.

Huddleston, 459 U.S. 375, 381-82 (1983). Here, the Goldberg LLCs

were issuers, and under [Section] 11 [of the 1933 Act], “[l]iability

against the issuer of a security is virtually absolute, even for

innocent misstatements.” Id. at 382.

Department Br. at 32 n.8.

30

The Goldberg Entities cite to Aaron to support their declaration that the Department

ignored their valid business reason for omitting the MCA funder identities and erroneously applied

a subjective test (i.e., what information a potential investor would consider important to have

before making an investment) to find a violation. However, not only has this Court declared Aaron

inapplicable to the instant matter, the test the Department applied was “an objective one.” TSC

Indus., Inc., 426 U.S. at 445.

31

See Mimi Investors. However, Section 4107(a)(8) of the Crimes Code (relating to

deceptive or fraudulent business practices) defines material statement as

a statement about any matter which could affect an

investor’s decision to invest in a business venture,

including, but not limited to, statements about:

(i) the existence, value, availability[,] or marketability of

a product;

(ii) the number of former or current investors, the amount

of their investments[,] or the amount of their former or

current compensation;

(iii) the available pool or number of prospective investors,

including those who have not yet been solicited and those

who already have been solicited but have not yet made an

investment;

(iv) representations of future compensation to be received

by investors or prospective investors; or

(v) the source of former, current or future compensation

paid or to be paid to investors or prospective investors.

18 Pa.C.S. § 4107(a)(8). In addition, in Commonwealth v. Stockard, 499 A.2d 598,

606 (Pa. Super. 1985), Pennsylvania Superior Court President Judge Spaeth

observed in his concurrence:31

The . . . Act does not define “material fact,” and case law

under the Act to date has not developed a definition, but it

is clear that in the context of a transaction in securities,

“material fact” has a specialized meaning. The [U.S.

Court of Appeals for the] Second Circuit has defined

“material fact” as follows:

As we said in List v. Fashion Park, Inc., 340 F.2d

457, 462 (2[]d Cir. 1965)[:] “The basic test of

materiality . . . is whether a reasonable man would

31

Although defining the term material as it is used in Section 401(b) of the Act was not

ultimately necessary based on the Superior Court’s disposition of that case, Judge Spaeth’s

concurrence is persuasive.

32

attach importance . . . in determining his choice of

action in the transaction in question. Restatement

[(First) of] Torts § 538(2)(a) [(A.L.I. 1938)];

accord Prosser, Torts 554-55; I Harper & James,

Torts, 565-66.” (Emphasis supplied.) This, of

course, encompasses any fact “. . . which in

reasonable and objective contemplation might

affect the value of the corporation’s stock or

securities. . . .” List . . . , . . . [340 F.2d] at 462 . . . .

(Emphasis supplied.)

Sec[.] [&] Exch[.] Comm[’n] v. Texas Gulf Sulphur Co.,

401 F.2d 833, 849 (2d Cir. 1968), cert. denied sub. nom.

Coates v. Sec[.] [&] Exch[.] Comm[’n], 394 U.S. 976 . . .

(1969)[; s]ee also Affiliated Ute Citizens v. United States,

406 U.S. 128, 153-54 . . . (1972) (“All that is necessary is

that the facts withheld be material in the sense that a

reasonable investor might have considered them important

in the making of this decision.”)[.]

Stockard, 499 A.2d at 606 (Spaeth, J., concurring); see also Basic Inc. v. Levinson,

485 U.S. 224 (1988) (adopting the U.S. Supreme Court’s materiality standard set

forth in TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976), in the context

of the 1934 Act); TSC Indus., Inc., 426 U.S. at 445 (“The question of materiality, it

is universally agreed, is an objective one, involving the significance of an omitted or

misrepresented fact to a reasonable investor.” “Variations in the formulation of a

general test of materiality occur in the articulation of just how significant a fact must

be or, put another way, how certain it must be that the fact would affect a reasonable

investor’s judgment.”).

Here, Houtz testified that the PPMs for 442, 567, 803, and 1931,

portions of which described the relationships between them, their subscribers, and

the bank firms to whom they would provide MCAs did not provide the names or

operating histories of the MCA funders. See R.R. at 207a-214a. Goldberg

confirmed that the LLCs never disclosed to LLC Note investors any of the 36

specific MCA funding companies with whom they were dealing, either in

33

discussions with them or in the PPMs, because they considered that information a

trade secret.32 See R.R. at 261a-262a, 437a-438a, 450a-481a.

The Department properly found that the LLCs withheld the MCA

funding company names from the LLC Note investors.33 See FOF 135. The

Department found, as stated above, that: Goldberg advertised on his LinkedIn page

that the LLC Notes “offer[ed] attractive returns of 6% to 20% annually to investors

by participating in cash advances to small businesses[,]” FOF 150; Goldberg

previously encouraged investors to purchase Global Notes and Global thereafter

filed for bankruptcy and defaulted on investor payments, see FOFs 16-18, 21-23;

and, despite the LLC Note PPMs’ suggestion that prospective investors

independently determine whether the LLC Notes were suitable investments for

them, see FOF’s 88-91, they could not research the MCA funding firms without

knowing their identities, see FOF 135. In that context, the Department concluded

that “[t]he operating histories of the MCA [f]unding [f]irms are deemed to be facts

a reasonable [] LLC Note [P]urchaser would want to know before purchasing the

[LLC N]otes[,]” Final Order at 54-55, and, by withholding that information purely

to protect their bottom line, the Goldberg Entities omitted material facts necessary

to correct misleading statements in their offer and sales of the LLC Notes in violation

32

Goldberg explained:

I spent a lot of time cultivating and doing my due diligence on these

funders. This is really my trade secret. If I put this in a PPM,

anybody can go and take advantage of the work that I do. So while

I do say in my PPM that I vet these funders, I did not feel that I

needed to disclose them only because it would impact the business

if my competitors got a hold of it.

R.R. at 438a.

33

Goldberg speculated that revealing such information would allow competitors to affect

the Goldberg Entities’ businesses, and suggested that if a prospective Note investor felt

uncomfortable purchasing an LLC Note without the MCA funder identities, he/she could have

declined to make the purchase. See R.R. at 261a, 438a; see also Goldberg Entities’ Br. at 37.

34

of Section 401(b) of the Act. Because the Department’s conclusion was based on

factual findings supported by substantial record evidence and the law, this Court will

not disturb it.

Failure to Disclose LLC Management Fee Consequences

Goldberg explained that the LLCs technically operated at losses

because of the management fees owed, so he only took those fees when necessary.

See R.R. at 267a-269a, 287a-289a, 497a. However, Goldberg claimed that none of

the LLCs were insolvent at any point, nor did they default on any P&I payments to

the Note holders, and he always stood ready to voluntarily inject capital if and when

necessary. See R.R. at 481a-483a, 499a-500a. Goldberg admitted that he included

financial statements with the PPMs so that investors could see the value of the

entities to which they were loaning money and make educated investment decisions.

See R.R. at 261a. Goldberg recalled that he initially named the financial statements

balance sheets, but after being informed that they were not actually balance sheets,

he renamed them metrics, but he did not correspondingly change their balance sheet-

like format, or notify investors that the documents were not, in fact, balance sheets.

See R.R. at 261a-263a, 484a, 489a, 500a-503a.

The Department found, based on Goldberg’s admissions, that Goldberg

was entitled to management fees as the sole member and manager of the LLCs, but

that he did not always withdraw his full compensation because, if he had, the LLCs

would have operated at a loss. See FOFs 136-137, 139-142, 167-168. Substantial

record evidence supports the Department’s finding that the Goldberg Entities did not

specifically disclose that fact to potential LLC Note investors.34 See Final Order at

34

The Goldberg Entities insisted that potential LLC Note investors could discern based on

the fact that Goldberg was the LLCs’ sole owner and member that he was entitled to management

fees, and they were not required to disclose that Goldberg might decline to collect some of his fees

for whatever reason.

35

55-56. In addition, the Department found that Goldberg was under no legal

obligation to inject additional capital into the LLCs to financially sustain them. See

FOF 169. The Department concluded that, under those circumstances, a reasonable

investor would want to know that their funds could be in jeopardy if Goldberg

collected all the management fees to which he was entitled, see Final Order at 55-

56, and, by withholding that information, the Goldberg Entities omitted a material

fact necessary to correct misleading statements in their offer and sales of the LLC

Notes in violation of Section 401(b) of the Act. Because the Department’s

conclusion was based on factual findings supported by substantial record evidence

and the law, this Court will not disturb it.

4. Section 401(c) of the Act

The Goldberg Entities also argue that the Department erred by

concluding that the Bureau’s expert testimony supported the allegations brought

under Section 401(c) of the Act. They specifically contend that Yother’s

unsubstantiated testimony and report did not support the Bureau’s claims related to

1931’s July 2019 financial statement, where the financial metric labeled as a balance

sheet bore no connection to 1931’s general ledger used for internal cash management

purposes and it did not affect 1931’s solvency evaluation.

Section 401(c) of the Act makes it unlawful for any person, in

connection with the offer, sale, or purchase of any security in this state, directly or

indirectly “[t]o engage in any act, practice[,] or course of business which operates or

would operate as a fraud or deceit upon any person.” 70 P.S. § 1-401(c). Based on

the plain text of that provision and Mimi Investors, the Department determined that

the Bureau did not have to prove scienter under Section 401(c) of the Act. The

Department concluded that a reasonable investor would want to review accurate and

properly identified financial information when deciding whether to purchase the

36

LLC Notes, the evidence supported a finding that Goldberg made false entries on at

least one of 1931’s financial statements, and the Bureau met its burden of proving

that the Goldberg Entities, “in connection with the offer, sale[,] or purchase of []

securit[ies] in this [s]tate, directly or indirectly engaged in an act, practice[,] or

course of business which operates or would operate as a fraud or deceit upon [] any

person in violation of Section 401(c) of the Act.” Final Order at 58.

The Bureau offered, without objection, Yother as an expert in

accounting, solvency evaluations, and U.S. generally accepted accounting

procedures (GAAP). See R.R. at 307a-308a. Yother testified that he conducted

solvency evaluations for 442, 567, and 1931. See R.R. at 308a-309a. He specifically

recalled that he reviewed 1931’s December 31, 2018 general ledger which had been

audited by an independent professional accounting service and, based thereon,

determined that because there was a deficit of $284,657.00, 1931 was not solvent at

that time. See R.R. at 322a. However, because he could not reconcile the numbers

with the records Goldberg supplied to the Bureau, he did not have confidence in

1931’s unaudited July 31, November 30, and December 31, 2019 and July 31, 2020

general ledgers, and could not render decisions as to whether 1931 was solvent or

insolvent at those times. See R.R. at 323a-344a. Notably, 1931’s PPM included a

July 31, 2019 balance sheet Goldberg shared with investors showing 1931 assets

totaling $5,256,082.00, while 1931’s internal general ledger reflected that its assets

were only $4,036,622.28 (a $1,219,459.72 difference) and, in July 2020, 1931

showed a negative asset number of $17,687,143.31. See R.R. at 328a-329a, 341a.

Regarding 442, Yother stated that he could not reconcile the numbers

and, thus, did not have confidence in 442’s unaudited October 31, 2018 and

November 30, 2019 general ledgers, so he could not render a determination as to

whether 442 was solvent or insolvent at those times. See R.R. at 344a-353a.

However, making the assumptions that the intercompany management fee is an

37

expense item, and the MCA participation and payments as assets, he was able to

determine that 442 was solvent as of December 31, 2018. See R.R. at 348a. Yother

also concluded based on 442’s July 31, 2020 general ledger that 442 was insolvent

at that time. See R.R. at 353a-356a.

Yother recalled relative to his review of 567 that he again could not

reconcile the numbers and he did not have confidence in 567’s unaudited December

31, 2019 general ledger, so he could not render a determination as to whether 567

was solvent or insolvent at that time. See R.R. at 357a-359a. He opined based on

567’s July 31, 2020 general ledger that 567 was insolvent at that time. See R.R. at

359a-361a.

Yother, overall, observed four departures from GAAP in the LLCs’

financial statements: (1) (with the exception of 1931) the financial statements were

not prepared using a full accrual method as required when they are being

disseminated to third parties and the LLCs did not disclose that fact; (2) there were

discrepancies in the accounting of potential gains of future MCAs for which he could

not determine how or why they were recorded; (3) management fees were

unsubstantiated and did not receive proper accounting treatment (i.e., when they

probably were expenses, they were reported as assets on some financial statements

without a corresponding liability); and (4) the inconsistent accounting treatment of

the MCA participation accounts, where they were reported as expense line items yet

were not listed on the balance sheets, which is inconsistent with how MCA

participation and payments have been historically treated. See R.R. at 362a-372a.

Yother represented that he rendered all his conclusions with a reasonable degree of

professional certainty. See R.R. at 342a, 362a.

Yother recalled that the Goldberg Entities used a cash basis for

accounting, which he explained was an acceptable accounting basis - most often

used by small businesses and sole proprietors - to which the GAAP does not apply.

38

See R.R. at 317a, 377a-380a. Yother articulated that the accounting method a

company uses is driven by its particular needs for management purposes only, not

for dissemination to third-party users. See R.R. at 381a-382a. Yother added that his

difficulty assessing the LLCs’ solvency stemmed from the documentation Goldberg

supplied - some of which included numbers whose sources were not evident - not

the LLCs’ cash accounting method. See R.R. at 386a-389a.

Yother testified and the Department observed, that the July 31, 2019

balance sheet Goldberg shared with 1931’s investors reflected that 1931 had

$1,219,459.72 more assets than 1931’s internal general ledger. See R.R. at 328a-

329a, 341a. Goldberg did not explain why the July 31, 2019 balance sheet numbers

were inflated; rather, he merely asserted that he did not share the internal general

ledger information with investors. See R.R. at 449a. Moreover, despite that he

claimed to have provided financial statements with the 1931 PPMs so that investors

could see the value of the entities to which they were loaning money and make

educated investment decisions, see R.R. at 261a, Goldberg admitted that the

financial information he included with 1931’s PPMs were not actually balance

sheets, and after he modified the titles thereof, he did not notify 1931 investors that

the documents were not balance sheets. See R.R. at 261a-263a, 484a, 489a.

Giving the Bureau the benefit of all reasonable and logical inferences

to be drawn from the evidence, as this Court must, see Hauck, because substantial

record evidence supported the Department’s findings regarding Yother’s testimony

about 1931’s July 2019 financial statement, this Court will not disturb them. See

Alsyrawan.

5. Damages

The Goldberg Entities contend that because the LLC Note holders have

received all the P&I they were promised and, thus, they did not suffer any damages,

39

this Court must reverse the Department’s conclusion that they violated Section

401(b) and (c) of the Act. However, as stated above, Section 401(b) of the Act

makes it unlawful in connection with the offer, sale, or purchase of any security “[t]o

make any untrue statement[s] of [] material fact or to omit” material facts. 70 P.S.

§ 1-401(b). Section 401(c) of the Act makes it unlawful in connection with the offer,

sale, or purchase of any security “[t]o engage in any act, practice[,] or course of

business which operates or would operate as a fraud or deceit upon any person.” 70

P.S. § 1-401(c). The plain language of both subsections makes clear that the

violation exists if there was an act or omission in the offer or sale of a security, not

whether damages resulted therefrom. In addition, Section 602.1(c)(1) of the Act,35

which sets forth the amount of acceptable assessments the Department may impose,

does not reference injuries or damages. See 70 P.S. § 1-602.1(c)(1). Finally, Section

602.1(c)(2) of the Act, which authorizes the Department, when determining the

amount of administrative assessments to impose, to consider such things as: the

circumstances, nature, seriousness, and willfulness of the violative conduct; the

scope of the violation, including number of persons affected; the amount of

compensation the violator earned; past and concurrent violator conduct; and such

other factors the Department deems appropriate to protect investors. See 70 P.S. §

1-602.1(c)(2). Accordingly, the fact that LLC Note holders may not have sustained

any damages is not a basis on which this Court may reverse the Department’s

conclusion that the Goldberg Entities violated Section 401(b) and (c) of the Act.

6. Constitutional Rights

Finally, the Goldberg Entities argue that the Department abrogated their

constitutional rights to due process, to a jury trial, and to be free of excessive fines.

35

Added by Section 3 of the Act of May 4, 1993, P.L. 4.

40

Due Process

The Goldberg Entities aver that since the Bureau and the Department

were judge, jury, and prosecutor, the record is rife with prejudgment bias and,

therefore, the Department violated their due process rights.

“It is well[ ]settled that ‘the constitutional guarantees of due process

apply equally to proceedings before administrative tribunals,’ and that ‘[t]he basic

requirements of due process are notice and an opportunity to be heard.’” Fisler, 78

A.3d at 41 (quoting Gow v. Dep’t of Educ., 763 A.2d 528, 533 (Pa. Cmwlth. 2000));

see also Section 504 of the Administrative Agency Law, 2 Pa.C.S. § 504. Certainly,

[a] fair trial conducted in a fair tribunal is a basic and

fundamental requirement of due process. Fairness of

course requires an absence of actual bias in the trial of

cases. Courts have recognized that “the mere potential for

bias or the appearance of non-objectivity may be sufficient

to constitute a violation” of due process. Kuszyk v. Zoning

Hearing B[d.] of Amity T[wp.], 834 A.2d 661, 665 (Pa.

Cmwlth. 2003) . . . . A question of due process reasonably

involves an inquiry into the nature of the process actually

provided. Lyness v. State B[d.] of Med[.], . . . 605 A.2d

1204 ([Pa.] 1992); Stone [&] Edwards Ins[.] Agency, Inc.

v. Dep[’t] of Ins[.], . . . 636 A.2d 293, 297 [(Pa. Cmwlth.)],

aff’d, . . . 648 A.2d 304 ([Pa.] 1994).

HYK Constr. Co., Inc. v. Smithfield Twp., 8 A.3d 1009, 1018 (Pa. Cmwlth. 2010).

This Court acknowledges that Pennsylvania courts have held that the due process

right to a fair and impartial tribunal under article I of the Pennsylvania Constitution

is violated when members of a board that make a decision to bring an enforcement

action also participate in the final adjudication thereof. See Lyness; see also HYK

Constr. However, the Stone & Edwards Court clarified that a single administrative

agency may exercise prosecutorial and adjudicative functions if there are walls of

division that clearly separate those functions. See id.; see also HYK Constr.

41

In the instant matter, the Goldberg Entities do not specify whether or

how the Bureau and the Department may have violated commingling safeguards, nor

further developed such argument in their brief.36 Moreover, the Goldberg Entities

were

afforded all the process to which [they were] due. The

original [OTSC] clearly listed all the charges against

[them], and [they were] given adequate time to respond.

The hearing notice sent by the [Bureau] explicitly stated

that witnesses could be called and that [the Goldberg

Entities] could call [their] own witnesses in [their]

defense. [See Certified Record, Item 19.] Moreover,

counsel represented [the Goldberg Entities] during the

hearing; any concerns [they] had regarding witnesses and

evidence should have been discussed with [their] counsel

at that time. There is nothing in the record to suggest that

the hearing was not conducted in accordance with [the

GRAPP], and [the Goldberg Entities] had every

opportunity to be heard.

Schwalm v. Pa. Sec. Comm’n, 965 A.2d 326, 330 (Pa. Cmwlth. 2009). Accordingly,

the Department did not violate the Goldberg Entities’ procedural due process rights.

36

In its Brief Opposing Exceptions, the Bureau declared:

The Pennsylvania Supreme Court has long held “that if more than

one function is reposed in a single administrative entity, walls of

division must be construed to eliminate the threat or appearance of

bias.” Off[.] of Disciplinary Couns[.] v. Duffield, 644 A.2d 1186,

1188 (Pa. 1994). That standard was clearly satisfied here. While

the Bureau made the decision to investigate and file formal charges

against [the Goldberg Entities], the Hearing Officer that was

appointed to oversee this proceeding was from a different state

agency entirely and played no role whatsoever in the Bureau’s

investigation or charging decisions. The [Department] is also

walled off and separate from the Bureau and played absolutely no

role in those decisions. “This procedure does not involve

commingling of prosecutorial and adjudicative functions. Due

process is therefore not violated.” Id.

R.R. at 860a-861a.

42

Jury Trial

The Goldberg Entities further contend that the Department deprived

them of their right to a jury trial on the Bureau’s claims that they violated Section

401 of the Act. They assert that the landmark case of Securities & Exchange

Commission v. Jarkesy, 603 U.S. 109 (2024), settled their rights to be adjudged by

a neutral judge and jury under the Seventh Amendment to the U.S. Constitution

(Seventh Amendment)37 and, by extension, article I, section 6 of the Pennsylvania

Constitution.38

Indeed, “[t]he right to a jury trial in a civil action is a fundamental

aspect of our system of law.” Bruckshaw v. Frankford Hosp. of City of Phila., 58

A.3d 102, 109 (Pa. 2012). To that end, article I, section 6 of the Pennsylvania

Constitution declares, in pertinent part: “Trial by jury shall be as heretofore, and the

right thereof remain inviolate.” PA. CONST. art. I, § 6. However, Pennsylvania law

“is well[ ]settled that, unlike the Sixth Amendment to the [U.S.] Constitution’s rights

to a jury trial in criminal cases,[39] the Seventh Amendment jury trial guarantee in

civil cases has not been applied to the states by incorporation into the Fourteenth

Amendment [to the U.S. Constitution (Fourteenth Amendment)].”40 Tewell v.

Unemployment Comp. Bd. of Rev., 279 A.3d 644, 655 (Pa. Cmwlth. 2022) (quoting

Bensinger v. Univ. of Pittsburgh Med. Ctr., 98 A.3d 672, 676 n.6 (Pa. Super. 2014)).

Therefore, Jarkesy does not control in this instance.

37

U.S. CONST. amend. VII (“In [s]uits at common law, where the value in controversy shall

exceed [$20.00], the right of trial by jury shall be preserved, and no fact tried by a jury, shall be

otherwise re-examined in any Court of the [U.S.], than according to the rules of the common

law.”).

38

PA. CONST. art. I, § 6.

39

U.S. CONST. amend. XVI (“In all criminal prosecutions, the accused shall enjoy the right

to a speedy and public trial[] by an impartial jury of the [s]tate and district wherein the crime shall

have been committed . . . .”).

40

U.S. CONST. amend. XIV, § 1 (“[N]or shall any [s]tate deprive any person of life, liberty,

or property without due process of law.”).

43

Rather, the Pennsylvania Supreme Court has ruled that article I, section

6 of the Pennsylvania Constitution as adopted in 1790 “preserves the right to trial by

jury in cases where that right existed at common law.” Blum by Blum v. Merrell

Dow Pharm., Inc., 626 A.2d 537, 543 (Pa. 1993); see also Mishoe v. Erie Ins. Co.,

824 A.2d 1153 (Pa. 2003); Wertz v. Chapman Twp., 741 A.2d 1272 (Pa. 1999). This

is because

[t]he constitutional guarantee of a trial by jury does not . . .

prevent the legislature from creating or providing modes

or tribunals other than the jury trial for the determination

or adjustment of rights and liabilities which were not in

existence prior to the adoption of the state constitution.

Tax Rev[.] B[d.] of Phila[.] v. Weiner, . . . 157 A.2d 879

([Pa.] 1960); Premier Cereal & Beverage Co. v. P[a.]

Alcohol Permit B[d.], . . . 140 A. 858 ([Pa.] 1928). The

legislature may withhold trial by jury from new judicial

proceedings created by statute and clothed with no

common law jurisdiction. W.J. Dillner Transfer Co. v.

P[a.] Pub[.] Util[.] Comm[’n], . . . 155 A.2d 429 ([Pa.

Super.] 1959).

Grant v. GAF Corp., 608 A.2d 1047, 1058 (Pa. Super. 1992), aff’d sub nom.,

Gasperin v. GAF Corp., 639 A.2d 1170 (Pa. 1994).

Consequently, the Pennsylvania Supreme Court has prescribed that, in

order to determine whether one is entitled to a jury trial under the Pennsylvania

Constitution, Pennsylvania courts must determine: (1) whether the General

Assembly included a right to a jury trial in the relevant statute; (2) in the absence of

a statutory basis, whether a jury trial right existed for the particular cause of action

when the Pennsylvania Constitution was adopted;41 and, if it did, (3) whether there

41

According to the Mishoe Court, article I, section 6 of the Pennsylvania Constitution

has remained essentially unchanged since the Constitution of 1790

was adopted. See Wertz, 741 A.2d at 1275-76. The Constitution of

1776 generally provided that, in civil suits, “the parties have a right

to trial by jury, which ought to be held sacred,” PA. CONST. (1776)

44

was a common law (rather than statutory) basis for the proceeding.42, 43 See Wertz;

see also Tewell; Fazio v. Guardian Life Ins. Co. of Am., 62 A.3d 396 (Pa. Super.

2012).

ch. 1, cl. 11, and that “[t]rials shall be by jury as heretofore,” id., ch.

2, § 25. The Constitution of 1790 provided “[t]hat trial by jury shall

be as heretofore, and the right thereof remain inviolate.” PA. CONST.

(1790) art. 9, § 6. The wording of this provision has not changed

since 1790, although in 1874 it was moved to a different section

within the Constitution. See PA. CONST. (1838) art. 9, § 6; PA.

CONST. (1874) art. [I], § 6; PA. CONST. (1968) art. [I], § 6.

Mishoe, 824 A.2d at 1160 n.10.

42

“The term ‘common law basis’ does not . . . mean that the action originated at common

law . . . . Rather, ‘common law basis’ refers to the nature of the proceeding in common law courts

such as the Court of Exchequer, but not courts of Admiralty or Chancery.” Commonwealth v. One

(1) 1984 Z-28 Camaro Coupe, 610 A.2d 36, 39 (Pa. 1992).

43

The Pennsylvania Supreme Court explained in response to an argument that federal

decisional law entitles those in the Goldberg Entities’ position to a jury trial:

[F]ederal cases regarding the right to a jury trial are based upon the

Seventh Amendment . . . . Although worded differently, the federal

constitutional amendment is analogous to its Pennsylvania

counterpart. Both provisions retain the right to jury trial in civil

cases where it existed at common law. Despite the similarities, this

[C]ourt has made clear that in interpreting a provision of the

Pennsylvania Supreme Court which interpret similar federal

constitutional provisions. More importantly, . . . this [C]ourt has

viewed the proper analysis under the Pennsylvania Constitution to

consist of, inter alia, an inquiry into whether the [sic] a jury trial

existed for the cause of action at common law at the time of the

adoption of our Constitution. Conversely, federal case law

examines whether the statutory cause of action is analogous to a

common law claim for which there was a right to trial by jury, with

focus . . . on the relief provided. . . . [T]his inquiry is simply not our

[C]ourt’s focus. . . . [T]his [C]ourt has eschewed a focus on the

remedy sought and has embraced a view which looks to the cause of

action in determining the right of a jury trial pursuant to [a]rticle I,

[s]ection 6 of our Constitution. Thus, we find the federal decisions

predicting a finding of the right to a jury trial to be unpersuasive and

decline [the a]ppellant’s suggestion that we adopt an analysis similar

to that utilized by our federal colleagues. Accord Hoy [v. Angelone],

720 A.2d [745,] 745 [(Pa. 1998)] (federal decisions not binding

45

Here, the Act does not include an express right to a jury trial.44 This

Court further observes that, although fraud was a cause of action at common law for

which a jury trial right attached when the Pennsylvania Constitution was adopted in

1790, see Fazio, the first state attempt to specifically regulate securities transactions

occurred when Kansas enacted the first state securities law (blue sky law) in the

nation in 1911,45 and the Pennsylvania legislature appears to have enacted its first

blue sky law in 1923.46 Further, although the bulk of the Act makes it clear, Section

102 of the Act also specifies that the terms fraud, deceit, and defraud as used in the

Act “are not limited to common law fraud or deceit.” 70 P.S. § 1-102(h). Therefore,

RIA and securities registration, fiduciary responsibilities, and related securities

mandates applied to the Goldberg Entities in this litigation did not exist in 1790. See

Mishoe (although juries were empaneled in trials regarding generic insurance

policies in 1790, there is no right to a jury trial for insurer bad faith claims brought

under Section 8371 of the Judicial Code);47 Wertz (there is no right to a jury trial in

Pennsylvania Human Relations Act48 discrimination cases because sexual

harassment and discrimination were foreign and unknown in common law when the

upon this [C]ourt as final arbiter of state law; reliance upon federal

decisions predicting a finding of punitive damages misplaced).

Wertz, 741 A.2d at 1278 (citations omitted). Accordingly, Jarkesy does not control the instant

case.

44

Where the Act is silent regarding the right to a jury trial, this Court may presume the

legislature did not intend such right to apply to Act violations. See Wertz. Moreover, merely

“because the [Act] allows for legal relief [in the form of monetary damages] does not necessarily

translate into a legislative intent to provide for a jury trial.” Wertz, 741 A.2d at 1276.

45

See Sec. & Exch. Comm’n v. C. M. Joiner Leasing Corp., 320 U.S. 344, 353 (1943)

(“Since 1911, all states except Nevada have enacted some type of ‘[b]lue [s]ky [l]aw.’”); see also

Brenner v. Oppenheimer & Co. Inc., 44 P.3d 364, 371 (Kan. 2002) (“Kansas passed the first blue

sky laws in the nation in 1911.”).

46

See N. R. Bagley Co. v. Cameron, 127 A. 311 (Pa. 1925) (refers to the Securities Act,

Act of June 14, 1923, P.L. 779).

47

42 Pa.C.S. § 8371.

48

Act of October 27, 1955, P.L. 744, as amended, 43 P.S. §§ 951-963.

46

Pennsylvania Constitution was adopted); Bensinger (there is no right to a jury trial

under the Whistleblower Law49 because there was no common law analogue to a

whistleblower claim that encompassed a right to a jury trial in 1790); Fazio

(although common law fraud existed as a cause of action when the Pennsylvania

Constitution was adopted, there is no right to a jury trial for private causes of action

under the Unfair Trade Practices and Consumer Protection Law50 where such claims

are not grounded solely in common law fraud).

Accordingly, neither the Act nor the Pennsylvania Constitution

afforded the Goldberg Entities the constitutional right to a jury trial for civil

violations of Section 401 of the Act.

Excessive Fines

The Goldberg Entities also urge this Court to find the Department’s

administrative assessment scheme unconstitutional under article I, section 13 of the

Pennsylvania Constitution.51 They specifically assert that since assessments are the

Bureau’s primary source of income, its goal is to impose high assessments. The

Goldberg Entities add that the $931,000.00 assessment in this case ($7,000.00

multiplied by 133 claims) was arbitrary and capricious52 and excessive in light of

mitigating circumstances as to the Global Notes and because the LLC Note holders

neither complained nor were harmed.

49

Act of December 12, 1986, P.L. 1559, as amended, 43 P.S. §§ 1421-1428.

50

Act of December 17, 1968, P.L. 1224, as amended, 73 P.S. §§ 201-1 - 201-10.

51

PA. CONST. art. I, § 13 (“Excessive bail shall not be required, nor excessive fines

imposed, nor cruel punishments inflicted.”).

52

The Goldberg Entities raise as an example the Department’s willingness to drop the

Section 401 of the Act antifraud claims related to the LLC Notes and the entirety of the Global

Note claims and focus solely on the RIA/LLC custody claims if the Goldberg Entities agreed to

pay a $1,000,000.00 assessment. The Goldberg Entities objected to the custody claims and agreed

to offer full recission to Note holders, but not to pay the $1,000,000.00 assessment. The

Department declined the counteroffer and the matter proceeded to the hearing.

47

Article I, section 13 of the Pennsylvania Constitution prohibits the

imposition of excessive fines.53 See PA. CONST. art. I, § 13. That proscription

“applies to a ‘civil penalty’ if the penalty is designed, at least in part, to serve ‘either

retributive or deterrent purposes.’” HIKO Energy, LLC v. Pa. Pub. Util. Comm’n,

163 A.3d 1079, 1088 (Pa. Cmwlth. 2017), aff’d, 209 A.3d 246 (Pa. 2019) (quoting

Austin v. United States, 509 U.S. 602 (1993)). However, “[t]o be unconstitutional,

the fine must be grossly disproportionate to the gravity of the offense.” Blue Pilot

Energy, LLC v. Pa. Pub. Util. Comm’n, 241 A.3d 1254, 1271 (Pa. Cmwlth. 2020).

[T]his Court explained:

[A]dministrative bodies having expertise in

specific professional areas are to be entrusted to

fashion administrative remedies that are fair and

appropriate. [ ] Remedies and accompanying

sanctions will not be disturbed on appeal absent a

showing of a manifest and flagrant abuse of

discretion or purely arbitrary execution of the

agency’s duties or functions. [ ] If a sentence

imposed is within the statutory limits, there is no

abuse of discretion unless the sentence is

manifestly excessive so as to inflict too severe a

punishment. [ ] Finding no proof of fraud,

collusion, bad faith or abuse of power, a reviewing

court will not substitute judicial discretion for

administrative discretion.

Eckhart v. Dep’t of Agric., 8 A.3d 401, 407 (Pa. Cmwlth.

2010) (internal citations omitted).

53

“The Pennsylvania Supreme Court has held article I, section 13 [of the Pennsylvania

Constitution] to be coextensive with the Eighth Amendment [to the U.S. Constitution,]” Penn Film

Grp. LLC v. State Ethics Comm’n, 297 A.3d 455 (Pa. Cmwlth. 2023), which states that

“[e]xcessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual

punishments inflicted.” U.S. CONST. amend. VIII. “The Eighth Amendment is made applicable

to the states through the Fourteenth Amendment.” Commonwealth v. Real Prop. & Improvements

Commonly Known as 5444 Spruce St., 832 A.2d 396, 399 (Pa. 2003).

48

Burkholder v. Dep’t of Agric., 265 A.3d 863, 866 (Pa. Cmwlth. 2021); see also

Gombach v. Dep’t of State, Bureau of Comm’ns, Elections & Legis., 692 A.2d 1127

(Pa. Cmwlth. 1997) (Pennsylvania courts review civil fines to determine whether the

assessing agency abused its discretion). Where an agency calculates its penalties

based on the applicable law, they are not excessive, unreasonable, or

disproportionate to the severity of the offenses. See Eckhart.

Pertinent here, Section 602.1(c)(1) of the Act54 provides, in relevant

part:

The [D]epartment . . . may impose the administrative

assessments set forth below. . . .

(i) In issuing an order against any broker-dealer, agent,

investment adviser[,] or [IAR] registered under [S]ection

301 [of the Act] . . . , the [D]epartment may impose a

maximum administrative assessment of up to one hundred

thousand dollars ($100,000[.00]) for each act or omission

that constitutes a violation of the [A]ct . . . or that

constitutes a dishonest or unethical practice in the

securities business, taking unfair advantage of a customer,

or failure to reasonably supervise its agents or employes.

If any of the victims of the person’s violative conduct

were individuals aged 60 or more, the [D]epartment

also may impose a special administrative assessment in

addition to the foregoing amounts of up to fifty thousand

dollars ($50,000[.00]).

(ii) In issuing an order against a person for wil[l]ful

violation of [S]ection 401 . . . (c) [or] 404 [of the

Act] . . . , the [D]epartment may impose a maximum

administrative assessment of up to one hundred thousand

dollars ($100,000[.00]) for each act or omission that

constitutes a violation of any of those sections. In addition

to the foregoing assessment, the [D]epartment also may

impose a special administrative assessment of up to fifty

thousand dollars ($50,000[.00]) for each of the provisions

54

Added by Section 3 of the Act of May 4, 1993, P.L. 4.

49

described as follows that the [D]epartment determines are

applicable:

....

(B) The person’s violative conduct involved individuals

aged 60 or more.

....

(iii) In issuing an order against a person for wil[l]ful

violation of [S]ection 401(b) . . . [of the Act], the

[D]epartment may impose an administrative assessment

of up to fifty thousand dollars ($50,000[.00]) for each of

the criteria described in subclause (ii)(A) and (C) that the

[D]epartment determines are applicable. No assessment

shall be imposed under this subclause if the person is

subject to an administrative assessment imposed under

any other provision of this subsection.

70 P.S. § 1-602.1(c)(1) (emphasis added). Section 602.1(c)(2) of the Act, 70 P.S. §

1-602.1(c)(2), authorizes the Department, when determining the amount of

administrative assessments to impose, to consider such things as: the circumstances,

nature, seriousness, and willfulness of the violative conduct; the scope of the

violation (i.e., number of persons affected); the amount of compensation the violator

has earned; and such other factors the Department deems appropriate to protect

investors.

Here, the Department recognized that it could have imposed

$14,700,000.00 in administrative assessments against the Goldberg Entities pursuant

to Section 602.1(c) of the Act. See Final Order at 68 (R.R. at 689a). However, the

Department considered mitigating factors and assessed only $931,000.00 against

them. The Department reasoned, and substantial evidence supports, that despite

Goldberg’s 17 years of knowledge of the Act and the Department’s Regulations, he

placed Goldberg Entities’ clients at risk of financial harm. See id. at 69-70 (R.R. at

690a-691a).

50

Moreover,

[a]s the proponent[s] of the constitutional challenge, it was

incumbent on [the Goldberg Entities] to develop, advance,

and support the challenge. See Pa.R.A.P. 2119 (relating to

argument section of appellate brief); In re Condemnation

ex rel. Dep’t of Transp., 76 A.3d 101, 106 n.8 (Pa.

Cmwlth. 2013) (“A party’s failure to develop an issue in

the argument section of its brief constitutes waiver of the

issue.”). [The Goldberg Entities], however, fail[ed] to

offer any analysis to support its contention that the civil

penalty levied against it in this matter is either (a) grossly

disproportionate to the gravity of the offenses it committed

or (b) grossly disproportionate to the civil fines assessed

on similarly situated [persons]. Accordingly, [this Court]

cannot conclude that the civil penalty imposed in this case

is unconstitutionally excessive under [] the Pennsylvania

Constitution . . . .

Blue Pilot Energy, 241 A.3d at 1271.

Where substantial record evidence supported that the Goldberg Entities

committed the charged violations, and the Department’s administrative assessments

were within ranges the Act authorized for those violations, this Court concludes that

the assessments were not excessive or an abuse of discretion and, thus, the

Department did not violate article I, section 13 of the Pennsylvania Constitution.

Conclusion

Based on the foregoing, this Court affirms the Department’s Final

Order.

_________________________________

ANNE E. COVEY, Judge

51

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Goldata Computer Services, Inc. :

d/b/a Goldata Financial, Elliot :

Mitchell Goldberg, 1931 Funding, LLC, :

442 Funding, LLC, 567 Funding, LLC, :

803 Funding, LLC, and Legs 1, LLC, :

Petitioners :

:

v. :

:

Department of Banking and :

Securities, : No. 328 C.D. 2024

Respondent :

ORDER

AND NOW, this 9th day of December, 2025, the Department of

Banking and Securities’ February 28, 2024 final order is AFFIRMED.

_________________________________

ANNE E. COVEY, Judge