INITIAL DECISION RELEASE NO. 1408

INITIAL DECISION RELEASE NO. 1408

ADMINISTRATIVE PROCEEDING

FILE NO. 3-18422

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

In the Matter of

JOSHUA D. MOSSHART

APPEARANCES:

:

:

:

INITIAL DECISION

February 11, 2021

Gary Y. Leung for the Division of Enforcement,

Securities and Exchange Commission

Joshua D. Mosshart, pro se

BEFORE:

Carol Fox Foelak, Administrative Law Judge

SUMMARY

This Initial Decision suspends Joshua D. Mosshart from the securities industry for twelve

months. He was previously enjoined from violating the registration provisions of the federal securities

laws.

I. INTRODUCTION

A. Procedural Background

The Securities and Exchange Commission instituted proceedings against Respondent Joshua

D. Mosshart with an Order Instituting Proceedings, pursuant to Section 15(b) of the Securities

Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, on April 5, 2018.

The proceeding is a follow-on proceeding based on SEC v. Enviro Board Corp., No. 2:16-cv-6427

(C.D. Cal.), in which he was enjoined from violating the registration provisions of the federal securities

laws.

On August 22, 2018, in light of Lucia v. SEC, 138 S. Ct. 2044 (2018), the Commission

ordered a new hearing in each pending proceeding, including this one, before an administrative law

judge (ALJ) who had not previously participated in the proceeding, unless the parties expressly

agreed to alternative procedures, including agreeing that the proceeding remain with the previous

presiding ALJ. Pending Admin. Proc., Securities Act of 1933 Release No. 10536, 2018 SEC

LEXIS 2058, at *2-3. Accordingly, the proceeding was reassigned and then assigned to the

undersigned on March 18, 2019. Pending Admin. Proc., Admin. Proc. Rulings Release Nos. 5955,

2018 SEC LEXIS 2264 (C.A.L.J. Sept. 12, 2018); 6505, 2019 SEC LEXIS 512 (C.A.L.J. Mar. 18,

2019).

The parties filed motions for summary disposition, pursuant to 17 C.F.R. § 201.250(b), and

responsive pleadings. 1 The Division of Enforcement requested that Mosshart be barred from the

securities industry, arguing that his conduct underlying the injunction was egregious and recurrent.

Mosshart requested that the proceeding be dismissed, arguing that he did not engage in conduct that

violated the registration provisions. Accordingly, the undersigned resolved some, but not all, of the

allegations of the OIP. Joshua D. Mosshart, Admin. Proc. Rulings Release No. 6787, 2020 SEC

LEXIS 4145 (A.L.J. Sept. 10, 2020) (Summary Disposition Order). The Summary Disposition

Order concluded that neither party’s request could be granted on the then-current record, but that

there was no genuine issue with regard to a number of material facts within the meaning of Rule

250(b).2

The Summary Disposition Order concluded that there is no genuine issue with regard to

these material facts: Mosshart was enjoined from violating Section 5 of the Securities Act of 1933,

which makes unlawful the offer or sale of securities not registered with the Commission for which

no exemption is available, and from violating Section 15(a) of the Exchange Act, which makes it

unlawful for a person not associated with a registered broker or dealer to effect transactions in or

induce the purchase or sale of any security. Mosshart was associated with several registered brokerdealers between 1999 and 2012, most recently, LPL Financial LLC, which is also a Commissionregistered investment adviser, from July 2, 2004, until November 13, 2012, and was not so

associated thereafter. Enviro Board securities were not registered with the Commission and no

exemption was available. Mosshart provided information concerning Enviro Board securities to

several investors, referred them to the company’s founders, and was compensated when at least one

made an investment. These proven activities occurred in 2011 and 2012, and the proven amount of

such compensation was $40,000. The loss of $400,000 by one customer is also proven. The proven

activities occurred during Mosshart’s association with LPL; still at issue is whether or not LPL

knew of and approved them such that they were within the scope of his association with LPL during

the time he was so associated. Mosshart, who was employed as president of Enviro Board as of

January 1, 2012, for an annual salary of $120,000, also engaged in other activities on behalf of the

company, such as public relations, lobbying, and sales. Enviro Board paid a total of $553,355 for

Mosshart’s services between May 2011 and May 2013.

The parties were ordered to confer on further procedures. Mosshart requested the

undersigned to decide the proceeding based on the then-current record, and the Division requested

the opportunity to make a further evidentiary submission. The Division was given the opportunity

to submit further evidence by November 16, 2020, and Mosshart, to file a response by November

1

See Joshua D. Mosshart, Admin. Proc. Rulings Release Nos. 5716, 2018 SEC LEXIS 1084

(C.A.L.J. May 7, 2018); 6157, 2018 SEC LEXIS 2779 (A.L.J. Oct. 10, 2018) (amending briefing

schedule); 6422, 2018 SEC LEXIS 3628 (A.L.J. Dec. 21, 2018) (setting supplemental briefing

schedule); 6440, 2019 SEC LEXIS 82 (A.L.J. Feb. 4, 2019) (extending supplemental briefing

schedule); 6700, 2019 SEC LEXIS 4245 (A.L.J. Oct. 28, 2019) (construing Mosshart’s filings as a

cross-motion for summary disposition seeking dismissal of the proceeding and inviting responsive

pleadings). Division of Enforcement’s motion was filed on May 21, 2018.

Rule 250(b) provides for summary disposition based on “undisputed pleaded facts, declarations,

affidavits, documentary evidence or facts officially noticed pursuant to Rule 323.”

2

2

30, 2020. Joshua D. Mosshart, Admin. Proc. Rulings Release No. 6795, 2020 SEC LEXIS 4795

(A.L.J. Nov. 2, 2020). The Division submitted its Supplemental Submission on November 16, and

Mosshart submitted a letter in support of his request that the proceeding be dismissed. The

Division’s Supplemental Submission is supported by the Declaration of Gary Y. Leung, with

attached Exhibits 1-6. Mosshart did not file a response to the Supplemental Submission.

B. Allegations and Arguments of the Parties

The Division requests that Mosshart be barred from the securities industry, arguing that his

conduct underlying the injunction was egregious and recurrent. Mosshart seeks dismissal of the

proceeding, arguing that he did not engage in conduct that violated the registration provisions and

that the compensation he received from Enviro Board was for services such as sales and marketing.

II. PROCEDURAL ISSUES

A. Official Notice

Official notice pursuant to 17 C.F.R. § 201.323 is taken of the Commission’s public official

records and of the docket reports and court’s orders in SEC v. Enviro Board Corp., and of Financial

Industry Regulatory Authority, Inc. (FINRA), records as well. See Joseph S. Amundsen, Exchange

Act Release No. 69406, 2013 SEC LEXIS 1148, at *1 n.1 (Apr. 18, 2013), pet. denied, 575 F.

App’x 1 (D.C. Cir. 2014).

B. Collateral Estoppel

Mosshart is estopped from relitigating the judgment in SEC v. Enviro Board in this

proceeding. It is well established that the Commission does not permit a respondent to relitigate

issues that were addressed in a previous civil proceeding against the respondent, whether resolved

by consent, by summary judgment, or after a trial. See Jeffrey L. Gibson, Exchange Act Release

No. 57266, 2008 SEC LEXIS 236, at *10 (Feb. 4, 2008) (injunction entered by consent), pet.

denied, 561 F.3d 548 (6th Cir. 2009); John Francis D’Acquisto, Advisers Act Release No. 1696,

1998 SEC LEXIS 91, at *1-2 & n.1, *7 (Jan. 21, 1998) (injunction entered by summary judgment);

James E. Franklin, Exchange Act Release No. 56649, 2007 SEC LEXIS 2420, at *11 & nn.13-14

(Oct. 12, 2007) (injunction entered after trial), pet. denied, 285 F. App’x 761 (D.C. Cir. 2008);

Demitrios Julius Shiva, Exchange Act Release No. 38389, 1997 SEC LEXIS 561, at *5-6 & nn.6-7

(Mar. 12, 1997); see also Marshall E. Melton, Advisers Act Release No. 2151, 2003 SEC LEXIS

1767, at *2-10, *22-30 (July 25, 2003). However, an injunction entered by default, like the

injunction against Mosshart in SEC v. Enviro Board, without more, usually cannot be the basis for

sanctions in an administrative proceeding. Gary L. McDuff, Exchange Act Release No. 74803,

2015 SEC LEXIS 1657 (Apr. 23, 2015) (remanding proceedings to administrative law judge); Don

Warner Reinhard, Exchange Act Release No. 61506, 2010 SEC LEXIS 1010 (Feb. 4, 2010)

(remanding proceedings to administrative law judge); see also Gary L. McDuff, Exchange Act

Release No. 78066, 2016 SEC LEXIS 2121 at *29-30 (June 14, 2016) (noting the limited preclusive

effect of an injunction entered on default; that a respondent in a follow-on proceeding may

introduce evidence regarding the circumstances surrounding the underlying conduct to address

whether sanctions should be imposed in the public interest; and that an administrative law judge

must give careful scrutiny to any prior testimony that was not subject to cross-examination).

3

III. FINDINGS OF FACT

A. Findings of Fact Established Previously in the Summary Disposition Order

The following facts were found in the Summary Disposition Order:3

Mosshart has been in the securities industry since at least 1999; he was associated with

several registered broker-dealers between 1999 and 2012; and from July 2, 2004, to November 13,

2012, he was associated with LPL Financial LLC, a registered broker-dealer and Commissionregistered investment adviser and has not been associated with a registrant thereafter. He was

permitted to resign from LPL on November 13, 2012, and was barred, on consent, from association

with any FINRA member firm in any capacity.

In the underlying civil case, Mosshart was enjoined against violations of Section 5 of the

Securities Act and Section 15(a) of the Exchange Act, on default, and ordered to pay disgorgement of

$293,655 plus prejudgment interest of $30,240.41 and a civil penalty of $293,655. Although he failed

to respond to the summons, Mosshart participated in the proceeding, and the court denied his motion to

set aside the default. The court noted Mosshart’s arguments that he did not sell securities, that he only

provided arms-length referrals, and that his conduct was approved by his then-employer, LPL.

However, the court concluded that Mosshart failed to establish that he had a meritorious defense since,

to support his assertions, he provided declarations from only two investors, one of whom was his

father, while the complaint alleged that he had referred at least eighteen individuals to Enviro Board.

The court found that “Mosshart was put on notice that he was being sued in early September and chose

not to participate in the action for months despite conceding that he became aware of the lawsuit as

early as October 8, 2016.” Mosshart appealed the court’s denial of his motion to set aside the default;

the United States Court of Appeals for the 9th Circuit dismissed the appeal for failure to prosecute.

Enviro Board

The remaining defendants in SEC v. Enviro Board were Enviro Board, Glenn B. Camp, and

William J. Peiffer. Camp and Peiffer founded and controlled Enviro Board. A 2010 Private

Placement Memorandum represented that Enviro Board planned to develop a technology that would

allow it to manufacture low-cost, environmentally friendly building panels out of straw and other

agricultural waste fiber. The complaint alleged that the company never constructed a mill capable of

commercial manufacturing production and that Camp and Peiffer made false and misleading

statements about the status of commercialization efforts and financial projections to investors. 4

Enviro Board securities were not, and are not, registered with the Commission. Mosshart

does not argue that the securities were exempt from registration, and there is no evidence in the

3

Citations to the evidence on which the findings of fact are based are found in the Summary

Disposition Order. See Joshua D. Mosshart, 2020 SEC LEXIS 4145, at *8-14.

4

Enviro Board, Camp, and Peiffer settled. The court enjoined all three from violations of the

antifraud provisions of the securities laws and Enviro Board and Camp from violation of the

registration provisions; ordered an officer and director bar against Camp and Peiffer; and ordered each

of the three to pay a civil penalty and disgorgement.

4

record that an exemption was available. However, he believed that the securities were exempt from

such registration. Peiffer advised Mosshart and others in June 2011 that securities counsel had

advised Enviro Board that transactions in Enviro Board stock were not required to be registered,

pursuant to Section 4(2) of the Securities Act, and no SEC filing was necessary. While Securities

Act Section 5 is a strict liability statute that does not require any form of intent to violate,

Mosshart’s belief that the transactions were exempt is relevant to the sanctions analysis below.

Mosshart’s Activities for Enviro Board

Camp and Mosshart initially discussed Mosshart’s working for Enviro Board sometime in

2011, leading to Enviro Board’s January 1, 2012, agreement with Malia Ventures, Inc.,5 for the

services of Mosshart. Mosshart was engaged as president for an annual salary of $120,000, payable

in equal monthly installments, plus 10% of sales, subject to certain conditions. Mosshart’s activities

for the company included public relations, lobbying, and sales. The January 1, 2012, agreement

also provided that Enviro Board would pay Malia 10% of financing resulting from parties

introduced by Mosshart who made an investment of debt or equity capital. That agreement also

awarded Mosshart a stock option to acquire 150 shares for $1 at any time ninety-one days after the

date he made introductions resulting in the sale of $2,600,000. Likewise, the June 2013 agreement

between Enviro Board on the one hand and Mosshart and Malia on the other provided for Enviro

Board to pay Malia 10% of financing by parties introduced by Mosshart who made an investment of

debt or equity capital. Mosshart owned one share of Enviro Board stock as of April 13, 2011, and

an additional 150 shares as of November 7, 2012. 6 It is found that payments to Mosshart, including

the 150 shares, were payment for raising money. It is found as undisputed, based on the January

2012 agreement proffered by the Division and the June 2013 agreement proffered by Mosshart, that

Mosshart was to receive transaction-based compensation for investments made by parties whom he

referred to Peiffer and Camp.

The Division alleges that Mosshart referred to Enviro Board at least eighteen individuals

who purchased nearly $5 million of the company’s securities, beginning in May 2011. The material

under consideration establishes that Mosshart introduced four individuals – Tina Brodie, Ilona

5

Mosshart was the sole shareholder of Malia Ventures, Inc., f/k/a Malia Ventures LLC, of which

he was the manager and sole member. Mosshart and Malia received $553,355 from Enviro Board

between May 11, 2011, and May 9, 2013.

6

Mosshart claims that each share was valued at $20,000. He does not explain the basis for the

valuation, and Enviro Board was not listed on the Pink Sheets or elsewhere or otherwise publicly

quoted.

In March 2017, Mosshart reached an agreement with Enviro Board, Camp, and Peiffer regarding a

lawsuit in state court and SEC v. Enviro Board. Mosshart agreed to quitclaim all right, title, and

interest in Enviro Board stock and specified Enviro Board property rights and to dismiss all claims

against the other parties to the agreement. Enviro Board agreed to use its best efforts to settle SEC

v. Enviro Board, to obtain a dismissal in favor of Mosshart, and to obtain for Mosshart a dollar for

dollar credit for any payments by Enviro Board, Camp, and Peiffer of disgorgement and civil

penalties with the proviso that they would not indemnify Mosshart. Enviro Board also agreed to

execute a promissory note in favor of Mosshart in the amount of $222,655.

5

Chandler, Roy Christofferson, and Joseph Mavilia – for investments that totaled $430,000. Brodie

invested $400,000 on January 10, 2012, in an Enviro Board bond; the three others invested a total of

$30,000 in May and June 2011. Thus, based on the January 1, 2012, agreement, it is found that

Enviro Board paid Mosshart $40,000 – 10% of the Brodie investment. 7 Enviro Board paid

Mosshart, via Malia, $50,000 – $40,000 plus his $10,000 monthly salary – on January 12, 2012, the

same day that Brodie’s $400,000 check, dated January 10, 2012, was posted.

Brodie, recently widowed, met Mosshart in October 2011; he told her that he knew of a safe

investment for the proceeds of her husband’s life insurance, directed her to Enviro Board’s website,

and introduced her to Camp; she lost the entire $400,000 despite efforts to obtain payment,

including suing Enviro Board, which defaulted. Chandler, Christofferson, and Mavilia did not place

securities orders with Mosshart; Mosshart referred each one to Camp and provided information

about Enviro Board at his or her request.

Mosshart was associated with LPL, a registered-broker dealer, until November 13, 2012. At

issue is whether LPL knew of and approved Mosshart’s activities with regard to Brodie, Chandler,

Christofferson, and Mavilia. With reference to Exchange Act Section 15(a), which makes it

unlawful to operate as an unregistered broker, Mosshart maintains that LPL was aware of his

involvement with Enviro Board and approved it; he maintains that he informed LPL that his LPL

clients were interested in investing in Enviro Board. To the contrary, according to FINRA’s letter

regarding Mosshart’s acceptance, waiver, and consent (AWC), “[i]n May 2011, Mosshart sought

permission from LPL to be an Enviro Board sales representative. . . . Although LPL approved this

outside business activity, it specifically advised Mosshart that he was not to solicit any individuals

to invest in Enviro Board.” However, “[f]rom May 2011 through November 13, 2012, while

associated with LPL, Mosshart referred about 20 investors . . . to Enviro Board . . . [and] received

about $485,000 in referral fees.” While the conclusion of the AWC is that, as of and after May

2011, Mosshart was not acting as a registered representative associated with LPL when he solicited

any clients to invest in Enviro Board, he is not estopped from arguing the contrary in this

proceeding. He agreed that he “may not take any action or permit to be made any public statement,

including in regulatory filings or otherwise, denying, directly or indirectly, any finding in this AWC

or create the impression that the AWC is without factual basis. . . . [However, n]othing in this

provision affects [his] . . . right to take legal or factual positions in litigation or other legal

proceedings in which FINRA is not a party.”

B. Additional Findings of Fact

As stated in the Summary Disposition Order, still left open was whether it can be found, in

this proceeding, that Mosshart also violated Exchange Act Section 15(a), which depends on the

scope of his association with LPL. Further, even if it is established that he was not acting within the

scope of that association, it must be established that he was acting as an unregistered broker to

conclude that he violated Section 15(a).

Mosshart’s comment on the payment for Brodie’s investment was “Tina Brodie didn’t know

about my compensation for my services because we didn’t have her Life Insurance monies at

LPL[.] All of my clients get a consolidated monthly statement with fees and commission charges.

My employment agreement with Enviro Bard was separate from LPL.”

7

6

The Division’s November 16, 2020, Supplemental Submission is supported by the

Declaration of Gary Y. Leung, with attached exhibits. To avoid confusion with exhibits in previous

submissions, these will be referred to as “Third Suppl. Leung Decl. Ex __.” Where Bates numbers

are cited, leading zeros are omitted. Mosshart’s January 2019 “Supporting Evidence & Statement”

included numerous exhibits, which will be referred to as “Resp. Ex. _.” His November 16, 2020,

letter (2020 Letter) and June 2018 “Respondent’s Answer” (Opposition) did not include any

exhibits.

In his letter, Mosshart argues that the Division grossly misrepresented the facts. He argues

that he merely referred investors to Enviro Board – did not negotiate terms, sign contracts, or have

custody of funds – and, therefore, did not solicit them; thus, he was not selling away. See generally

2020 Letter. He also described his efforts to ensure that the clients were fully informed about the

investment, including advising them to consult their CPAs and bankers, and described his due

diligence concerning Enviro Board. Id. at 2. He also states, “I would never say I was paid

$501,056 in commission when I had an employment agreement with Enviro Board in which [I]

received $10,000 per month in salary [which] would account for over 2/3rd’s of the money earned.”

Id. at 2. This statement is inaccurate. Mosshart submitted a signed statement, dated May 16, 2013,

to FINRA in connection with its examination No. 20120351723. Third Supp. Leung Decl. Ex. 5.

In it he listed “the dates of all referrals and all fees and commissions paid to me.” Id. at F2130-31.

The commissions that he listed total $501,056: $373,369 in 2011, $119,187 in 2012 (including

$4,000 after November 13, when he was no longer associated with LPL, for two referrals), and

$8,500 in 2013 for three referrals. Id. He listed a total of more than thirty referrals to twenty-five

customers during 2011, 2012, and 2013. Id. Somewhat inconsistently, he now claims that he

referred fifteen investors in addition to Tina Brodie over three years. 2020 Letter at 2.

Mosshart had more than 100 household clients at LPL; he claims he discussed referrals with

“less than” five of them. Id. at 1. Brodie had been an existing client at LPL. Opp. at 6-7. Mosshart

did not negotiate terms of investments in Enviro Board, sign contracts, or have custody of funds.

Opp. at 2; 2020 Letter at 3-4.

Mosshart clearly received transaction-based compensation (“commissions”) and evidenced

other indications of broker status. There were more than a few isolated transactions (“referrals”).

The transactions included previous customers of his at LPL. As a long-time associated person of

broker-dealers, he had a history of selling securities of other issuers.

IV. CONCLUSIONS OF LAW

Mosshart has been permanently enjoined “from engaging in or continuing any conduct or

practice in connection with . . . the purchase or sale of any security” within the meaning of Sections

15(b)(4)(C) and 15(b)(6)(A)(iii) of the Exchange Act and Sections 203(e)(4) and 203(f) of the

Advisers Act. Some of the misconduct underlying the civil case occurred while Mosshart was

associated with a registered broker-dealer and investment adviser.

Specifically, Mosshart was enjoined, on default, from violating Securities Act Section 5(a)

and Exchange Act 15(a) and the evidence in this proceeding, in which he appeared and participated,

shows that he violated those provisions.

7

As concluded previously in the Summary Disposition Order, Mosshart violated Securities

Act Section 5 in advising Brodie concerning Enviro Board and referring her to Camp to make an

investment. His receipt of transaction-based compensation for that referral makes clear that his

conduct was an offer for sale of Enviro Board securities within the meaning of Section 5. Joshua

D. Mosshart, 2020 SEC LEXIS 4145, at *14.

Section 15(a)(1) of the Exchange Act makes it unlawful for any entity to effect transactions

in securities, by jurisdictional means, without registering as a broker or dealer. 15 U.S.C. §

78o(a)(1). “Broker” is defined in Section 3(a)(4) of the Exchange Act as “any person engaged in

the business of effecting transactions in securities for the account of others.” 15 U.S.C. §

78c(a)(4)(A). Scienter is not required to establish a violation of Section 15(a)(1). SEC v. Montana,

464 F. Supp. 2d 772, 785 (S.D. Ind. 2006).

Activities of a broker are characterized by “a certain regularity of participation in securities

transactions at key points in the chain of distribution.” Mass. Fin. Servs., Inc. v. Secs. Investor Prot.

Corp., 411 F. Supp. 411, 415 (D. Mass. 1976), aff’d, 545 F.2d 754 (1st Cir. 1976). Other relevant

factors include whether the alleged broker: “1) is an employee of the issuer; 2) received

commissions as opposed to salary; 3) is selling, or previously sold, the securities of other issuers; 4)

is involved in negotiations between the issuer and the investor; 5) makes valuations as to the merits

of the investment or gives advice; and 6) is an active rather than passive finder of investors.” SEC

v. Zubkis, No. 97-cv-8086, 2000 WL 218393, at *9 (S.D.N.Y. Feb. 23, 2000) (quoting SEC v.

Hansen, No. 83-cv-3692, 1984 WL 2413, at *10 (S.D.N.Y. Apr. 6, 1984)). Accord SEC v. George,

426 F.3d 786, 797 (6th Cir. 2005) (“[F]actors . . . includ[e] regular participation in securities

transactions, employment with the issuer of the securities, payment by commission as opposed to

salary, history of selling the securities of other issuers, involvement in advice to investors and active

recruitment of investors.”). However, “transaction-based compensation” is “one of the hallmarks of

being a broker-dealer.” SEC v. Kramer, 778 F. Supp. 2d 1320, 1334 (M.D. Fla. 2011) (quoting

Cornhusker Energy Lexington, LLC v. Prospect Street Ventures, No. 8:04-cv-586, 2006 WL

2620985, at *6 (D. Neb. Sept. 12, 2006)). “Activities that are indicative of being a broker include

holding oneself out as a broker-dealer, recruiting or soliciting potential investors, handling client

funds and securities, negotiating with issuers, and receiving transaction-based compensation.”

Anthony Fields, CPA, Securities Act Release No. 9727, 2015 SEC LEXIS 662, at *75 (Feb. 20,

2015).

It is concluded that Mosshart was acting as a broker in his activities “referring” investors to

Enviro Board. He received transaction-based compensation. While associated with LPL, where he

had a book of business of 100 clients, he sold the securities of other issuers. He was an active

finder of investors in that he referred some of his LPL clients, including Brodie, to Enviro Board.

On the other hand, he did not handle client funds and was only tangentially involved in negotiations

between the issuer and the investor when he referred potential investors to Peiffer and Camp.

Without regard for whether he was acting outside the scope of his association with LPL when he

was associated with LPL, by acting as a broker when he was no longer associated with a registered

broker-dealer, he violated Exchange Act Section 15(a).

V. SANCTION

A twelve-month suspension from the securities industry will be ordered.

8

A. Sanction Considerations

The Commission determines sanctions pursuant to a public interest standard. See 15 U.S.C.

§§ 78o(b)(6), 80(b)(3). The Commission considers factors including:

the egregiousness of the defendant’s actions, the isolated or recurrent nature of the

infraction, the degree of scienter involved, the sincerity of the defendant’s assurances

against future violations, the defendant’s recognition of the wrongful nature of his

conduct, and the likelihood that the defendant’s occupation will present opportunities

for future violations.

Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979) (quoting SEC v. Blatt, 583 F.2d 1325, 1334

n.29 (5th Cir. 1978)), aff’d on other grounds, 450 U.S. 91 (1981). The Commission also considers

the age of the violation and the degree of harm to investors and the marketplace resulting from the

violation. Marshall E. Melton, 2003 SEC LEXIS 1767, at *5. Additionally, the Commission

considers the extent to which the sanction will have a deterrent effect. Schield Mgmt. Co.,

Exchange Act Release No. 53201, 2006 SEC LEXIS 195, at *35 & n.46 (Jan. 31, 2006). The public

interest requires a severe sanction when a respondent’s past misconduct involves fraud because

opportunities for dishonesty recur constantly in the securities business. See Vladimir Boris

Bugarski, Exchange Act Release No. 66842, 2012 SEC LEXIS 1267, at *18 n.26 (Apr. 20, 2012);

Richard C. Spangler, Inc., Exchange Act Release No. 12104, 1976 SEC LEXIS 2418, at *34 (Feb.

12, 1976). When there is no genuine issue with regard to any material fact in a follow-on

proceeding like this one, the weighing of factors relating to the choice of the appropriate sanction is

an issue committed to the agency’s discretion and does not require a hearing. See Seghers v. SEC,

548 F. 3d 129, 134-36 (D.C. Cir. 2008).

The Commission rarely imposes an industry bar in a litigated administrative proceeding for

violating registration provisions absent an antifraud violation. 8 Such a sanction is typically imposed

where the respondent has also violated, or aided and abetted violation of, the antifraud provisions.

See David F. Bandimere, Securities Act Release No. 9972, 2015 SEC LEXIS 4472 (Oct. 29, 2015)

(violation of antifraud, broker-dealer registration, and securities registration provisions), set aside

on other grounds, 844 F.3d 1168 (10th Cir. 2016); Maria T. Giesige, Exchange Act Release No.

60000, 2009 SEC LEXIS 1756 (May 29, 2009) (violation of antifraud, broker-dealer registration,

8 To the extent that the Division cites to settlements to support its request for a bar, it goes without

saying that a settlement is not precedent, as the Commission has stressed many times. See Richard

J. Puccio, Exchange Act Release No. 37849, 1996 SEC LEXIS 2987, at *10-11 (Oct. 22, 1996)

(citing David A. Gingras, Exchange Act Release No. 31206, 1992 SEC LEXIS 2537, at *20 (Sept.

21, 1992), and cases cited therein); Robert F. Lynch, Exchange Act Release No. 11737, 1975 SEC

LEXIS 599, at *12 n.17 (Oct. 15, 1975) (citing Samuel H. Sloan, Exchange Act Release No. 11376,

1975 SEC LEXIS 1742, at *12 n.24 (Apr. 28, 1975); Haight & Co., Inc., Exchange Act Release No.

9082, 1971 SEC LEXIS 436, at *67-69 (Feb. 19, 1971), aff’d without opinion, (D.C. Cir. 1971);

Security Planners Assocs., Inc., Exchange Act Release No. 9421, 1971 SEC LEXIS 1035, at *13-14

(Dec. 17, 1971)); see also Mich. Dep’t of Natural Res. v. FERC, 96 F.3d 1482, 1490 (D.C. Cir.

1996), and cases cited therein (settlements are not precedent). Indeed, Commission settlement

orders contain a disclaimer to this effect: “The findings herein are made pursuant to [Respondent’s]

Offer of Settlement and are not binding on any other person or entity in this or any other

proceeding.”

9

and securities registration provisions); Paul Carroll Ferguson, Exchange Act Release No. 6009,

1959 SEC LEXIS 549 (July 7, 1959) (violation of antifraud, broker-dealer registration, and other

provisions; respondent’s registration as a broker-dealer revoked); Gregory & Co., Exchange Act

Release No. 5680, 1958 SEC LEXIS 251 (Apr. 18, 1958) (violation of antifraud, broker-dealer

registration, and other provisions; respondent’s application for registration as a broker-dealer

denied); The Whitehall Corp., Exchange Act Release No. 5667, 1958 SEC LEXIS 246 (Apr. 2,

1958) (violation of antifraud, broker-dealer registration, and other provisions; respondent’s

application for registration as a broker-dealer denied).

Even those few cases in which a respondent was barred in the absence of fraud involved

conduct that was much more serious, long-running, and otherwise harmful to the markets than

Mosshart’s conduct. See Ronald S. Bloomfield, Securities Act Release No. 9553, 2014 SEC LEXIS

698 (Feb. 27, 2014) (registered representatives sold large amounts of unregistered penny stocks on

behalf of highly questionable customers, and manager failed reasonably to supervise them with a

view toward detecting and preventing their registration violations; all aided and abetted and caused

broker-dealer’s failure to file Suspicious Activity Reports; registered representatives barred;

manager barred with a right to reapply in a non-proprietary, non-supervisory capacity after two

years), pet. denied, 649 F. App’x 546 (9th Cir. 2016). Lesser sanctions have been imposed for less

impactful violations in the absence of fraud. See Russo Secs., Inc., Exchange Act Release No.

44186, 2001 SEC LEXIS 2771 (Apr. 17, 2001) (broker-dealer violated net capital and related

recordkeeping and reporting provisions; chief financial officer suspended for one year; firm had

included in its net capital calculations stock that it did not even have and that had no ready market;

firm had negative net capital for three months).

B. Sanction

As described above, Mosshart’s conduct was recurrent, took place during a three-year

period, and involved about twenty-five customers. Although he is not charged with fraud, by acting

as a broker for transactions in unregistered securities and referring investors to Camp and Peiffer, he

facilitated the fraud as to those investors and their resulting losses. Scienter is not an element of

violation of Securities Act Section 5 or Exchange Act Section 15(a). Mosshart believed that the

Enviro Board securities were exempt from registration, but was at least negligent in his violation of

Exchange Act Section 15(a). His previous occupation in the securities industry, which included

twelve years as a registered representative associated with broker-dealers, would present

opportunities for future violations if he were allowed to continue that work in the future. Consistent

with a defense of the charges against him, he has not displayed a recognition of the wrongful nature

of his conduct or made assurances against future violations. His misconduct is no longer recent,

having ended in 2013. This consideration and the absence of a violation of the antifraud provisions

militate against a bar. A twelve month suspension is sufficient as a sanction and as a deterrent. A

“collateral” suspension from the industry is appropriate because the need for compliance with

statutes and regulations applies to all elements of the securities industry, even if the violative

conduct is limited to the professional capacity in which Mosshart was acting. Cf. John W. Lawton,

Advisers Act Release No. 3513, 2012 SEC LEXIS 3855, at *42-43 (Dec. 13, 2012), vacated in part

on other grounds, Advisers Act Release No. 4402, 2016 SEC LEXIS 1926 (May 27, 2016).

VI. ORDER

10

IT IS ORDERED that, pursuant to Section 15(b) of the Securities Exchange Act of 1934 and

Section 203(f) of the Advisers Act of 1940, JOSHUA MOSSHART IS SUSPENDED FOR A

PERIOD OF TWELVE MONTHS from associating with any broker, dealer, investment adviser,

municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical

rating organization and from participating in an offering of penny stock. 9

This Initial Decision shall become effective in accordance with and subject to the provisions

of Rule 360 of the Commission’s Rules of Practice, 17 C.F.R. § 201.360. Pursuant to that Rule, a

party may file a petition for review of this Initial Decision within twenty-one days after service of

the Initial Decision. A party may also file a motion to correct a manifest error of fact within ten

days of the Initial Decision, pursuant to Rule 111 of the Commission’s Rules of Practice, 17 C.F.R.

§ 201.111. If a motion to correct a manifest error of fact is filed by a party, then a party shall have

twenty-one days to file a petition for review from the date of the undersigned’s order resolving such

motion to correct a manifest error of fact. The Initial Decision will not become final until the

Commission enters an order of finality. The Commission will enter an order of finality unless a

party files a petition for review or a motion to correct a manifest error of fact or the Commission

determines on its own initiative to review the Initial Decision as to a party. If any of these events

occur, the Initial Decision shall not become final as to that party.

/S/ Carol Fox Foelak

Carol Fox Foelak

Administrative Law Judge

Served by email on both parties

9

Thus, Mosshart will be barred from acting as promoter, finder, consultant, or agent; or otherwise

engaging in activities with a broker, dealer, or issuer for purposes of the issuance or trading in any

penny stock, or inducing or attempting to induce the purchase or sale of any penny stock, pursuant

to Exchange Act Section 15(b)(6)(A), (C).

11