Initial Decision Release No. 1346

Administrative Proceeding

File No. 3-18129

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

In the Matter of

Brian Michael Berger

Initial Decision of Default

February 5, 2019

Appearance: Andrew O. Schiff for the Division of Enforcement,

Securities and Exchange Commission

Before: James E. Grimes, Administrative Law Judge

Summary

I grant the Division of Enforcement’s motion for default and sanctions. 

Respondent Brian Michael Berger is barred from associating with a 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.

Procedural Background

The Securities and Exchange Commission initiated this proceeding in 

August 2017, when it issued an order instituting proceedings (OIP) under 

Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the 

Investment Advisers Act of 1940.

1 This is a follow-on proceeding based on a 

final judgment entered in February 2017 after Berger pleaded guilty to three 

counts of wire fraud.

2 The Division alleges that Berger admitted that from 

 

1 OIP at 1; see 15 U.S.C. §§ 78o(b), 80b-3(f).

2 See United States v. Berger, No. 9:16-cr-80167 (S.D. Fla.).
2

April 2013 through September 2015 he perpetrated a scheme to defraud 

three of his clients and engaged in misconduct with client accounts. 

A different administrative law judge originally presided over this 

proceeding and issued an initial decision of default.

3 But the Commission 

vacated that decision following the Supreme Court’s decision in Lucia v. 

SEC,

4 and the matter was reassigned to me to provide Berger with the 

opportunity for a new hearing.5 Berger was directed to propose how further 

proceedings should be conducted,6 but he never submitted a proposal or filed 

an answer.7 I ordered Berger to show cause why the proceeding should not be 

determined against him due to his failure to answer the OIP or otherwise 

defend the proceeding.8 Only the Division of Enforcement participated in the 

telephonic prehearing conference that I held on November 29, 2018.9 The 

Division then filed a motion for default and sanctions, supported by five

exhibits.

10 Berger did not file an opposition to the Division’s motion. In 

conducting this proceeding and considering the Division’s motion, I gave no 

weight to the opinions, orders, or rulings issued by the prior administrative 

law judge.11

 

3 Brian Michael Berger, Initial Decision Release No. 1203, 2017 SEC 

LEXIS 3399 (ALJ Oct. 25, 2017).

4 138 S. Ct. 2044 (2018); see Pending Admin. Proc., Securities Act of 1933 

Release No. 10536, 2018 SEC LEXIS 2058, at *2–3 (Aug. 22, 2018).

5 Pending Admin. Proc., Admin. Proc. Rulings Release No. 5955, 2018 SEC 

LEXIS 2264, at *2–3 (ALJ Sept. 12, 2018).

6 Brian Michael Berger, Admin. Proc. Rulings Release No. 6001, 2018 SEC 

LEXIS 2419, at *1 (ALJ Sept. 18, 2018).

7 Brian Michael Berger, Admin. Proc. Rulings Release No. 6246, 2018 SEC 

LEXIS 2950, at *1 (ALJ Oct. 23, 2018).

8 Id.

9 Brian Michael Berger, Admin. Proc. Rulings Release No. 6378, 2018 SEC 

LEXIS 3377, at *1 (ALJ Nov. 30, 2018).

10 The exhibits are cited as “Div. Ex. _” using the documents’ internal 

pagination.

11 See Pending Admin. Proc., 2018 SEC LEXIS 2058, at *4.
3

Findings of Fact

The findings and conclusions in this initial decision are based on the 

record and on facts officially noticed.12 Because Berger is in default, I have

deemed true the allegations in the OIP and, consistent with Commission 

precedent, will rely on those allegations in conjunction with other evidence in 

the record developed since the proceeding was reassigned to me.

13 That other 

evidence includes the stipulated factual proffer in support of Berger’s plea. In 

making the findings below, I have applied preponderance of the evidence as 

the standard of proof.14 

Berger was a financial advisor for fifteen years, holding multiple 

Financial Industry Regulatory Authority, Inc. (FINRA), licenses.15 He was 

also registered with the Commission as an investment adviser for about one 

year.16

During the period covered by the OIP, a client of Berger’s noticed that 

money was missing from the account at Wells Fargo the client held in trust 

for his grandmother and for which Berger was the account representative 

and financial advisor. Wells Fargo discovered that the money had been 

transferred to Berger’s personal credit card, without his client’s knowledge or 

consent. Wells Fargo reimbursed the client for the missing $102,500, plus 

interest.17

 

12 17 C.F.R. § 201.323. 

13 See Pending Admin. Proc., 2018 SEC LEXIS 2058, at *4; see also 17 

C.F.R. § 201.155(a); David E. Lynch, Exchange Act Release No. 46439, 2002 

WL 1997953, at *1 & n.12 (Aug. 30, 2002) (instructing that, “if additional 

evidence is adduced in a proceeding against a respondent” who is in default, 

“the decisionmaker properly should consider that evidence in the 

determination of the proceeding”).

14 See John Francis D’Acquisto, Advisers Act Release No. 1696, 1998 WL 

34300389, at *2 (Jan. 21, 1998).

15 Div. Ex. 5 at 2; see Brian Michael Berger BrokerCheck, FINRA, 

https://brokercheck.finra.org/individual/summary/3208127.

16 Brian Michael Berger (CRD# 3208127), Investment Adviser Public 

Disclosure, SEC, https://www.adviserinfo.sec.gov/IAPD/IAPDIndvlSummary

.aspx?INDVL_PK=3208127.

17 Div. Ex. 5 at 2–3.
4

Another client of Berger’s followed him from brokerage to brokerage, 

ultimately also moving his account to Wells Fargo. In 2014, Wells Fargo 

notified the client that Berger had diverted nearly $175,000 of the client’s 

money to pay his own credit card account. Wells Fargo reimbursed this client 

for the stolen funds plus interest. After these incidents, Wells Fargo fired 

Berger.18 Despite the firing, this client followed Berger to MetLife after 

Berger convinced him the missing money was not Berger’s fault. 

A third client also followed Berger to multiple brokerages.19 In 2015, 

Berger approached that client with an investment opportunity outside their 

relationship through MetLife. But no such opportunity existed. Instead, 

Berger kept $25,000 for his personal use.20 Berger was eventually fired by 

MetLife as well.21

In November 2016, Berger pleaded guilty to three counts of wire fraud.

22

He was sentenced in January 2017 to eighteen months in prison and to pay

restitution of $372,643.

23

Conclusions of Law

The Exchange Act gives the Commission authority to impose collateral 

and penny stock bars24 against Berger if, as is relevant here, (1) he was 

associated with or seeking to become associated with a broker or dealer at the

time of his misconduct; (2) he was convicted within ten years before the 

issuance of the OIP of an offense “involv[ing]” a violation 18 U.S.C. § 1343; 

and (3) imposing a bar is in the public interest.25 The Advisers Act gives the 

 

18 Id. at 3.

19 Id. at 4.

20 Id. at 4–5.

21 Id. at 5.

22 Div. Ex. 3 at 1.

23 Div. Ex. 4 at 2, 5.

24 A collateral bar, also referred to as an industry bar, is a bar that 

prevents an individual from participating in the securities industry in 

capacities in addition to those in which the person was participating at the 

time of his or her misconduct. See Toby G. Scammell, Advisers Act Release 

No. 3961, 2014 WL 5493265, at *1 & n.1 (Oct. 29, 2014).

25 15 U.S.C. § 78o(b)(4)(B)(iv), (b)(6)(A)(ii).
5

Commission similar authority with respect to a person associated with or 

seeking to be associated with an investment adviser, but only to impose a 

collateral bar, not a penny stock bar.26 

The first element is satisfied because, according to Berger’s stipulated 

proffer and his FINRA BrokerCheck report, he was associated with brokerdealers and investment advisers during the time of his misconduct.27 He was 

associated with three different brokerages during that time, and indeed the 

people he defrauded were clients at those brokerages.

As to the second element, Berger’s guilty plea was entered less than ten 

years before the Commission issued the OIP.28 All three of the counts to 

which Berger pleaded guilty involved a violation of 18 U.S.C. § 1343, thus 

meeting the requirements of both Exchange Act Section 15(b) and Advisers 

Act Section 203(f).29

That leaves the public interest. To determine whether to impose a bar, I 

must consider the public-interest factors discussed in Steadman v. SEC.

30 

The public-interest factors include: 

the egregiousness of the respondent’s actions, the 

isolated or recurrent nature of the infraction, the degree 

of scienter involved, the sincerity of the respondent’s 

assurances against future violations, the respondent’s 

recognition of the wrongful nature of his conduct, and 

 

26 15 U.S.C. § 80b-3(e)(2)(D), (f).

27 Div. Ex. 5 at 2.

28 15 U.S.C. §§ 78o(b)(4)(B); see Div. Ex. 3.

29 The Advisers Act defines convicted to include a plea of guilty. See 15 

U.S.C. § 80b-2(a)(6). The Commission applies this definition for purposes of 

the Exchange Act. See Delegation of Authority to the Secretary of the 

Commission, 67 Fed. Reg. 30,326, 30,326 n.5 (May 6, 2002); see also 

Alexander Smith, Exchange Act Release No. 3785, 1946 WL 24891, at *6 

(Feb. 5, 1946) (holding that a plea of guilty constitutes a conviction for 

purposes of Exchange Act Section 15(b)).

30 603 F.2d 1126, 1140 (5th Cir. 1979), aff’d on other grounds, 450 U.S. 91 

(1981); see Scammell, 2014 WL 5493265, at *5. 
6

the likelihood that the respondent’s occupation will 

present opportunities for future violations.31

The Commission also considers the deterrent effect of administrative 

sanctions.32 This public interest inquiry is “flexible ... and no one factor is 

dispositive.”33 Before imposing a bar, an administrative law judge must 

specifically determine why the Commission’s interests in protecting the 

investing public would be served by imposing an industry bar.

34

In considering the public interest, I am mindful that “in most” cases 

involving fraud, the public-interest analysis will weigh in favor of a “severe 

sanction.”35 And because “[t]he securities industry presents continual 

opportunities for dishonesty and abuse,” it “depends heavily on the integrity 

of its participants and on investors’ confidence.”36

Turning to the Steadman factors, it is evident that the public interest 

and the Commission’s interest in protecting the public weigh in favor of an 

industry bar. Berger’s conduct was egregious. He diverted two clients’ funds 

 

31 David R. Wulf, Exchange Act Release No. 77411, 2016 WL 1085661, at 

*4 (Mar. 21, 2016).

32 Peter Siris, Exchange Act Release No. 71068, 2013 WL 6528874, at *11 

n.72 (Dec. 12, 2013), pet. denied, 773 F.3d 89 (D.C. Cir. 2014). Although 

relevant, general deterrence is not determinative in assessing whether the 

public interest weighs in favor of imposing a bar. PAZ Sec., Inc. v. SEC, 494 

F.3d 1059, 1066 (D.C. Cir. 2007).

33 Gary M. Kornman, Exchange Act Release No. 59403, 2009 WL 367635, 

at *6 (Feb. 13, 2009) (quoting David Henry Disraeli, Securities Act Release 

No. 8880, 2007 WL 4481515, at *15 (Dec. 21, 2007), pet. denied, 334 F. App’x 

334 (D.C. Cir. 2009)), pet. denied, 592 F.3d 173 (D.C. Cir. 2010).

34 Mark Feathers, Exchange Act Release No. 73634, 2014 WL 6449870, at 

*1 (Nov. 18, 2014); see Ross Mandell, Exchange Act Release No. 71668, 2014 

WL 907416, at *2 (Mar. 7, 2014), vacated in part on other grounds, Exchange 

Act Release No. 77935, 2016 WL 3030883 (May 26, 2016).

35 Siris, 2013 WL 6528874, at *11 n.71 (quoting Jeffrey L. Gibson, 

Exchange Act Release No. 57266, 2008 WL 294717, at *7 (Feb. 4, 2008), pet. 

denied, 561 F.3d 548 (6th Cir. 2009)).

36 Feathers, 2014 WL 6449870, at *3 (alteration in original) (quoting 

Tzemach David Netzer Korem, Exchange Act Release No. 70044, 2013 WL 

3864511, at *6 & n.53 (July 26, 2013)).
7

to his personal credit card for his own personal use, causing loss to his 

employer who reimbursed the clients. Berger induced a third client to give 

him $25,000 outside of their formal relationship for an investment that never 

existed. The egregious nature of his conduct is underscored by the $372,643

in restitution for which he is liable and his term of imprisonment. Berger’s 

conduct was also recurrent, as he took advantage of three clients over twoand-a-half years. 

Berger’s conduct showed a high degree of scienter. His clients’ funds did 

not end up in his account by mistake. Further, he lied to a client about the 

reason he was fired from Wells Fargo and lied to another client about a 

purported investment opportunity. Furthermore, the wire fraud offense to 

which he pleaded guilty necessarily involved intent to defraud.

37

Berger’s guilty plea shows some recognition of wrongdoing. However, he 

has not appeared in this proceeding to express any remorse or give

assurances as to his future conduct. Moreover, his firing from Wells Fargo did 

little to deter his later misconduct at MetLife. Given Berger’s violations, the 

egregiousness of those violations, the level of scienter shown by his conduct, 

his relatively short period of incarceration, and his lack of any assurances 

against future violations, if Berger remains in the securities industry, it is 

likely he will engage in future misconduct.38

Finally, imposing a bar will serve the Commission’s interest in deterring 

others from engaging in similar misconduct. 

In sum, Berger’s egregious conduct harmed investors and if he were 

allowed to remain in the industry, he would have the opportunity to cause 

additional harm. The Commission’s interest in protecting the investing public 

would be served by imposing an industry and penny stock bar.

 

37 See 18 U.S.C. § 1343; United States v. Caldwell, 560 F.3d 1202, 1207 

(10th Cir. 2009); Div. Exs. 1–3.

38 See Korem, 2013 WL 3864511, at *6 n.50 (“[T]he existence of a violation 

raises an inference that it will be repeated.” (alteration in original) (quoting 

Geiger v. SEC, 363 F.3d 481, 489 (D.C. Cir. 2004))); cf. John A. Carley, 

Securities Act Release No. 8888, 2008 WL 268598, at *22 (Jan. 31, 2008) 

(determining whether to impose a cease-and-desist order and holding that 

“[o]ur finding that a violation is egregious ‘raises an inference that [the 

misconduct] will be repeated’” (quoting Geiger v. SEC, 363 F.3d at 489)), 

remanded on other grounds sub nom. Zacharias v. SEC, 569 F.3d 458 (D.C. 

Cir. 2009).
8

Order

The Division of Enforcement’s motion for default and sanctions is 

GRANTED. 

Under Section 15(b) of the Securities Exchange Act of 1934 and Section 

203(f) of the Investment Advisers Act of 1940, Brian Michael Berger is 

BARRED from associating with a broker, dealer, investment adviser, 

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

recognized statistical rating organization.

Under Section 15(b) of the Securities Exchange Act of 1934, Brian 

Michael Berger is BARRED from participating in an offering of penny stock, 

including acting as a promoter, finder, consultant, agent, or other person who 

engages in activities with a broker, dealer, or issuer for purposes of the 

issuance of trading in any penny stock, or inducing or attempting to induce 

the purchase or sale of any penny stock.

This initial decision will become effective in accordance with and subject 

to the provisions of Rule 360.39 Under 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 111.40 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 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 occurs, the initial decision shall not 

become final as to that party.

Berger may move to set aside a default. Rule 155(b) permits the 

Commission, at any time, to set aside a default for good cause, in order to 

prevent injustice and on such conditions as may be appropriate.41 A motion to 

set aside a default shall be made within a reasonable time, state the reasons 

 

39 See 17 C.F.R. § 201.360.

40 See 17 C.F.R. § 201.111.

41 17 C.F.R. § 201.155(b).
9

for the failure to appear or defend, and specify the nature of the proposed 

defense in the proceeding. Such motion, if filed, should be directed to the 

Commission, as the hearing officer may only set aside a default “prior to the 

filing of the initial decision.”42

_______________________________

James E. Grimes

Administrative Law Judge

 

42 Id.