[Cite as Ohio Div. of Securities v. Treece, 2022-Ohio-3267.]

IN THE COURT OF APPEALS OF OHIO

SIXTH APPELLATE DISTRICT

LUCAS COUNTY

Ohio Division of Securities Court of Appeals No. L-21-1191

Appellee Trial Court No. CI0202003770

 

v.

Dock Douglas Treece, et al.

DECISION AND JUDGMENT

Appellant Decided: September 16, 2022

* * * * *

Dave Yost, Ohio Attorney General, and Chad M. Kohler, 

Senior Assistant Attorney General, for appellee.

Neil S. McElroy, for appellant.

* * * * *

PIETRYKOWSKI, J.

{¶ 1} Appellant, Dock Douglas Treece (“Treece”), appeals from a judgment

entered by the Lucas County Court of Common Pleas, affirming an order that was issued 

by appellee, the Ohio Department of Commerce, Division of Securities (“the Division”).

1

 

For the reasons that follow, we affirm the judgment of the trial court.

1 The notice of appeal that was filed in this matter identifies Treece, Treece Investment 

Advisory Corporation (“Treece Advisory”) and Treece Financial Services Corporation 
2.

Factual and Procedural Background

{¶ 2} Appellant and his two companies, Treece Financial and Treece Advisory 

operate as for-profit entities. Treece Financial is a securities dealer licensed with the 

Division and with the Financial Industry Regulatory Authority (FINRA). Appellant has 

maintained his license as a securities salesperson through his affiliation with Treece 

Financial. Treece Advisory is licensed as an investment adviser with the Division, and it 

is separate and distinct from Treece Financial. Appellant is licensed as an Ohio 

investment adviser representative with Treece Advisory. Appellant is the President of 

both Treece Financial and Treece Advisory.

{¶ 3} According to the Division, a routine examination of appellant and the two 

investment businesses that he controlled and operated led to a subsequent, in-depth 

investigation, which resulted in the Division issuing a notice of hearing to Treece and to 

his businesses notifying them of the Division’s intent to suspend or revoke their 

respective securities licenses.

{¶ 4} The Division conducted an administrative hearing, after which the hearing 

officer issued a report and recommendation recommending that the securities licenses for 

(“Treece Financial”) as “Defendants-Appellants.” But the appellate brief that Treece’s 

counsel filed with this court identifies only Treece as an appellant. Treece’s brief makes 

no arguments on behalf of the two companies, and no additional briefs were filed by, or

on behalf of, those companies. Thus, only Treece’s arguments are before this court. The 

appeals pertaining to Treece Advisory and to Treece Financial are therefore dismissed, 

pursuant to 6thDist.Loc.App.R. 5(B). See 6thDist.Loc.App.R. 5(B) (“If the 

appellant/cross-appellant fails to timely file the assignments of error and brief, the court 

may dismiss the appeal/cross-appeal without prior notice.”).
3.

Treece and his investment businesses be revoked. Treece and his businesses filed written 

objections to the report and recommendation. The Division, after considering those 

objections, issued a final order concluding that Treece and his companies had violated 

their suitability obligations and fiduciary duties to their customers. And on the basis of 

those conclusions, the Division revoked the securities licenses belonging to Treece and to 

his businesses.

{¶ 5} Appellants filed an appeal from the order in the Lucas County Common 

Pleas Court. The trial court affirmed, finding that the Division’s order was supported by 

reliable, probative, and substantial evidence and was made in accordance with the law.

{¶ 6} Treece and his businesses subsequently filed timely notice of appeal in this 

court.

Assignments of Error

{¶ 7} Appellant asserts the following assignments of error on appeal:

I. The trial court erred in failing to address some of the due process claims raised 

by the appellant on appeal.

II. The trial court erred in affirming the Commissioner’s finding that the appellant 

breached his suitability obligations.

III. The trial court erred in affirming the Commissioner’s finding that the appellant 

breached his fiduciary duties to his clients.
4.

IV. The trial court erred in affirming the Commissioner’s finding that appellant 

lacked a good business repute.

Analysis

{¶ 8} “In an administrative appeal under R.C. 119.12, the common pleas court 

reviews the entire record and determines whether the agency’s order is supported by 

reliable, probative, and substantial evidence and is in accordance with law.” Mocznianski 

v. Ohio Dept. of Job & Family Servs., 6th Dist. Lucas No. L-19-1076, 2020-Ohio-1161, ¶

21, citing Capital Care Network of Toledo v. Ohio Dept. of Health, 153 Ohio St.3d 362, 

2018-Ohio-440, 106 N.E.3d 1209, ¶ 24. “‘Reliable’ evidence is dependable or 

trustworthy; ‘probative’ evidence tends to prove the issue in question and is relevant to 

the issue presented; and ‘substantial’ evidence carries some weight or value.” Id., citing 

Ohio Civ. Rights Comm. v. Case W. Reserve Univ., 76 Ohio St.3d 168, 178, 666 N.E.2d 

1376 (1996). Where the agency’s decision is “supported by sufficient evidence and the 

law, the common pleas court lacks authority to review the agency’s exercise of discretion 

* * *.” Mocznianski at ¶ 21, citing Capital Care Network at ¶ 25.

{¶ 9} In contrast to the common pleas court, this court’s review of a subsequent 

appeal under R.C. 119.12 “is much narrower.” Mocznianski at ¶ 22. The appeals court 

reviews the common pleas court’s decision only for an abuse of discretion. Id., citing 

Rossford Exempted Village School Dist. Bd. of Edn. v. State Bd. of Edn., 63 Ohio St.3d 

705, 707, 590 N.E.2d 1240 (1992). “Unlike the court of common pleas, a court of 
5.

appeals does not determine the weight of the evidence.” Byrd v. Auditor of State, 10th 

Dist. Franklin No. 10AP-560, 2011-Ohio-3306, ¶ 12. “Where, however, questions of law 

are raised on appeal from an administrative agency, both the common pleas court and the 

court of appeals exercise plenary powers of review.” Mocznianski at ¶ 23 (internal 

citation and quotation omitted). Thus, “[a]bsent an abuse of discretion on the part of the 

trial court, a court of appeals may not substitute its judgment for [that of an 

administrative agency] or a trial court. Instead, the appellate court must affirm the trial 

court’s judgment.” Fehrman v. Ohio Dept. of Commerce, Div. of Securities, 141 Ohio 

App.3d 503, 507, 751 N.E.2d 1089 (10th Dist.2001) (brackets in original), quoting Pons 

v. Ohio State Med. Bd., 66 Ohio St.3d 619, 621, 614 N.E.2d 748 (1993).

{¶ 10} “A trial court abuses its discretion where its decision is unreasonable, 

arbitrary, or unconscionable.” Mocznianski at ¶ 22, citing Blakemore v. Blakemore, 5 

Ohio St.3d 217, 219, 450 N.E.2d 1140 (1983). “An unreasonable decision is one that 

lacks sound reasoning to support the decision.” Moczinianski at ¶ 22 (citation omitted). 

“‘An arbitrary decision is one that lacks adequate determining principle and is not 

governed by any fixed rules or standard.’” Id., quoting Porter, Wright, Morris & Arthur, 

LLP v. Frutta del Mondo, Ltd., 10th Dist. Franklin No. 08AP-69, 2008-Ohio-3567. ¶ 11. 

“And an unconscionable decision is one that affronts the sense of justice, decency, or 

reasonableness.” Moczinianski at ¶ 22 (internal quotations and citations omitted).

{¶ 11} Appellant claims in his first assignment of error that the trial court erred in 

failing to address certain due process claims that were raised by the appellant as part of
6.

that appeal. According to appellant, “violations” that the trial court failed to address 

include: 1) “the right to a fair hearing;” 2) “the preclusion of certain documents and 

testimony;” 3) “failure to consider certain evidence admitted at the hearing;” and 4) “a 

failure to allow for acquisition of documents needed to defend the allegations.” Without 

any additional argument explaining how the trial court may have abused its discretion 

when overruling his due process objections, and without citing any legal authority

whatsoever, appellant asks this court to remand the matter to the lower court “so that the 

court may fully and completely address the issues raised as part of this appeal.” 

{¶ 12} App.R. 12 (A)(2) states that an appellate court “may disregard an 

assignment of error presented for review if the party raising it fails to identify in the 

record the error on which the assignment of error is based or fails to argue the assignment 

separately in the brief, as required under App.R. 16(A).” At most, appellant refers this 

court generally to pages 50-59 of the brief that he submitted to the trial court. However, 

“[i]t is well-established that ‘the Rules of Appellate Procedure do not permit parties to 

“incorporate by reference” arguments from other sources.’” Ebbing v. Lawhorn, 12th 

Dist. Butler No. CA2011-07-125, 2012-Ohio-3200, ¶ 3. Moreover, “[i]t is not the duty of 

an appellate court to search the record for evidence to support an appellant’s argument as 

to an alleged error.” Id., citing Cireddu v. Cireddu, 8th Dist. Cuyahoga No. 76784, 2000 

WL 1281253, *9 (Sept. 7, 2000). 

{¶ 13} Similarly, App.R. 16(A)(7) requires an appellant’s brief to include “[a]n 

argument containing the contentions of the appellant with respect to each assignment of 
7.

error presented for review and the reasons in support of the contentions, with citations to 

the authorities, statutes, and parts of the record on which appellant relies.” As indicated 

above, appellant does not cite any legal authority in support of his first assignment of 

error – not a single case, statute, or rule. “According to App.R. 12(A)(2) [an appellate 

court] may disregard an assignment of error if an appellant fails to cite to any legal 

authority in support of an argument a required by App.R. 16(A)(7),” Huffer v. Brown, 

10th Dist. Franklin No. 12AP-1086, 2013-Ohio-4384, ¶ 12 (citations omitted). 

{¶ 14} On these grounds, alone, appellant’s first assignment of error is properly 

dismissed.

{¶ 15} Even if we were to consider appellant’s first assignment of error, we find 

that his request for remand is misplaced. This court recognizes that “[generally], if [a] 

trial court fails to rule on a motion or objection, an appellate court will presume that the 

objection or motion was overruled.” Syslo v. Syslo, 6th Dist. Lucas Nos. L-06-1016, L06-1122, 2006-Ohio-6053, ¶ 30. The inquiry then turns to whether the trial court abused 

its discretion in overruling the objection. See, e.g., id. at ¶ 30-35 (presuming for purposes 

of review that an objection to the introduction of certain evidence was overruled, and 

then holding that the trial court did not abuse its discretion in denying the objection). 

Accordingly, remand is not an appropriate remedy here. 

{¶ 16} Assuming, arguendo, that appellant’s due process claims are properly 

before this court, we find no abuse of discretion on the part of the trial court in overruling 

the due process objections that appellant raised below.
8.

{¶ 17} We begin with appellant’s suggestion that the trial court abused its 

discretion in affirming the hearing officer’s exclusion of certain exhibits that appellant 

attempted to introduce at the hearing. Under R.C. 119.09, state agencies “shall pass on 

the admissibility of evidence” presented at hearing. The Ohio Supreme Court has held 

that administrative agencies “must have at least some minimal authority to control those 

hearings, subject to a duty to maintain fairness and impartiality.” Clayton v. Ohio Bd. of 

Nursing, 147 Ohio St.3d 114, 2016-Ohio-643, 62 N.E.3d 132, ¶ 34. “Generally speaking, 

a hearing officer has broad discretion in conducting administrative hearings.” 

Holzhauser v. State Med. Bd., 10th Dist. Franklin No. 06AP-1031, 2007-Ohio-5003, ¶ 17. 

The hearing officer has the discretion to determine the admissibility of evidence, and a 

court’s review is limited to whether the administrative tribunal abused its discretion. In 

re Waste Technologies Industries, 132 Ohio App.3d 145, 152, 724 N.E.2d 819 (10th 

Dist.1998). Notably, “[s]trict and technical rules of criminal or civil judicial hearings do 

not apply to [administrative hearings].” Clayton at ¶ 34.

{¶ 18} Specifically, appellant argued to the trial court that the hearing officer 

improperly excluded Exhibits H, I, X, and OO from evidence. 

{¶ 19} Exhibit H is a blank “form” document, titled “Account Update Form,” 

which bears on its face the Treece Advisory logo. Appellant attempted to introduce 

Exhibit H by showing it to Attorney Analiese Hinchcliffe during cross-examination. 

When Hinchcliffe testified that she had never seen the document before, the Division

objected to appellant asking Hinchcliffe questions about it. The hearing officer sustained 
9.

the objection. Appellant never referred to this document again during his case-in-chief to 

explain what it was or how it was relevant to the case. 

{¶ 20} The trial court did not err in dismissing appellant’s arguments about a 

document that was never properly authenticated and, thus, was properly excluded from 

evidence. 

{¶ 21} Exhibit I is another blank investor form that was never introduced the 

hearing. At the end of the hearing, the parties discussed the admission of exhibits. In 

objecting to the admission of Exhibits H and I, the Division pointed out that “they were 

both brought up for [Attorney Hinchcliffe], because these were things that were objected 

to and they were never reintroduced, so there was no testimony at all regarding either of 

these.” As with Exhibit H, the record shows that appellant never referred to Exhibit I 

during his case-in-chief in order to explain what it was or how it was relevant to the case.

{¶ 22} Again, the trial court did not err in dismissing appellant’s arguments about 

a document that was never properly authenticated and, thus, was properly excluded from 

evidence.

{¶ 23} Appellant represented that Exhibit X reveals a history of trades that 

appellant executed for his clients from 1979 to 2018. Appellant questioned Hinchcliffe 

about this exhibit, and she explained that she had not seen the exact form, but had seen a 

version of the first page of that form. The Division objected to the admission of Exhibit 

X on the grounds that most of the transactions that were recorded in the document were 

outside the “relevant” time period of January 1, 2013 through February 12, 2018, which 
10.

was the time period reflected in the notice that the Division provided to appellant when it 

initially notified him of the charges against him. The trial court’s silence concerning the 

exclusion of this document suggests its agreement that Exhibit X was not relevant to the 

time period at issue in the case.

{¶ 24} Exhibit OO is a settlement letter sent to the Division from the counsel who 

represented appellant prior to the beginning of the administrative hearing. Under Evid. 

R. 408, the letter would be inadmissible as an offer of compromise. To the extent that 

appellant wanted to use the exhibit “to identify mistakes in the NOI,” appellant 

acknowledged at the hearing both his ability and intention to introduce the desired

evidence by alternative means. 

{¶ 25} Upon our review of the record, we conclude that the trial court did not 

abuse its discretion in affirming the hearing officer’s exclusion of the various exhibits 

that appellant attempted to introduce at the hearing.

{¶ 26} Appellant also argued to the trial court that the hearing officer violated 

appellant’s due process rights by “ignoring” certain evidence that was admitted at the 

hearing. The general rule in an administrative appeal is that the trial court should not 

substitute its judgment for that of the agency. “[A] common pleas court reviewing the 

factual findings of an administrative agency pursuant to R.C. 119.12 should defer to the 

administrative resolution of evidentiary conflicts.” Dublin Corp. v. Ohio Dept. of 

Commerce, Div. of Secs., 10th Dist. Franklin No. 90AP-600, 1991 WL 38768, *3 (Mar. 

19, 1991), citing Univ. of Cincinnati v. Conrad, 63 Ohio St.2d 1087, 111. “[A]n 
11.

agency’s findings of fact are presumed to be correct and must be deferred to by a 

reviewing court unless that court determines that the agency’s findings are internally 

inconsistent, impeached by evidence of a prior inconsistent statement, rest upon improper 

inferences, or are otherwise unsupportable.” Ohio Historical Soc. v. State Emp. Relations 

Bd., 66 Ohio St.3d 466, 471, 613 N.E.2d 591 (1993). 

{¶ 27} In the instant case, we find nothing in the record to suggest that the trial 

court abused its discretion in rejecting appellant’s arguments regarding the hearing 

officer’s evidentiary decisions.

{¶ 28} Finally, appellant argued to the trial court that the hearing officer violated 

his due process rights by unlawfully prohibiting him from gathering evidence needed to 

defend the allegations against him. Specifically, appellant complained that the hearing 

officer attempted to block appellant from receiving records by way of a public records 

request and through the use of subpoenas.

{¶ 29} This court recognizes that “the civil rules pertaining to discovery do not 

apply to proceedings conducted pursuant to R.C. Chapter 119.” Leake v. Ohio State Bd. 

of Psychology, 6th Dist. Sandusky No. 5-92-32, 1993 WL 235826 (Jun. 30, 1993). Even 

without discovery available to him, prior to the administrative hearing appellant obtained 

copies of the Division’s investigatory files relating to him by means of a public records 

request made pursuant to R.C. 149.43. While the Division ultimately produced certain 

documents in response to the request, the parties were unable to come to an agreement as 

to certain other documents that appellant sought. As a result, appellant filed a complaint 
12.

with the Ohio Court of Claims seeking to compel the production of the remaining 

documents. 

{¶ 30} With the court of claims case remaining outstanding, appellant filed a 

request for a postponement of the administrative hearing. The hearing officer denied the 

request. Ohio law does not require a hearing to be postponed on the basis that a 

respondent has not received a response to a public records request from an agency, and 

appellant could point to no statute requiring the release of the Division’s investigatory 

file prior to the start of an R.C. Chapter 119 hearing. 

{¶ 31} Whatever error appellant may try to assign to the postponement denial was 

arguably rendered moot when on April 2, 2019 – thirteen days prior to the 

commencement of the administrative hearing – the court of claims special master issued 

his report and recommendation finding that appellant’s remaining requests were 

ambiguous and overly broad, and that R.C. 1707.12(B) prevented the release of the 

Division’s investigatory file. The court of claims adopted the special master’s report and 

recommendation in its entirety on April 25, 2019. 

{¶ 32} Under the circumstances of this case, appellant cannot convincingly claim 

that his due process rights were violated when the hearing officer denied appellant’s 

postponement request for public records that were not required to be produced. 

{¶ 33} Equally dubious is appellant’s argument that the hearing officer denied him 

due process by quashing a subpoena that appellant served seeking the Division’s 

investigatory files. The Ohio Supreme Court, in Clayton v. Ohio Bd. of Nursing, 147 
13.

Ohio St.3d 114, 2016-Ohio-643, 62 N.E.3d 132, affirmed an agency’s ability to limit or 

quash subpoenas requested in an R.C. Chapter 119 hearing, stating:

Without the ability to quash or limit subpoenas that seek the production of 

unreasonable, privileged, or irrelevant information or witness testimony, a 

hearing examiner would be powerless to control the procedure of the 

adjudication hearing pursuant to R.C. 119.09. Thus, the authority to quash 

or limit subpoenas flows from the authority to issue them in an adjudicative 

hearing. 

Accordingly, we hold that a hearing examiner has the discretion to limit or 

quash subpoenas requested during adjudication hearings for the purpose of 

conducting a fair and efficient hearing.

Id. at ¶ 35-36.

{¶ 34} In Clayton, the court affirmed that a hearing officer’s decision to limit or 

quash a subpoena should be reviewed under an abuse of discretion standard. Id. at ¶ 37 

(the question is whether the hearing examiner’s decision to limit or quash a subpoena 

“was so arbitrary that it constituted an abuse of discretion or denied [the licensee] her 

due-process right to the opportunity to be heard in a meaningful manner”). 

{¶ 35} Appellant’s subpoena requested: (1) Division examination files relating to 

appellant from 2008 to 2017; (2) Division email messages and correspondence that 

referenced or mentioned appellant from 2013 to 2018; and (3) all complaints of any kind 

about appellant from 2013 to 2018. 
14.

{¶ 36} The Division moved to quash the subpoena on the grounds that the request 

sought attorney-client privileged communications and that R.C. 1707.12 exempted the 

Division’s investigatory files from disclosure. 

{¶ 37} R.C. 1707.12(B) provides in relevant part:

Information obtained by the division * * * through any investigation shall 

be retained by the division and shall not be available to inspection by 

persons other than those having a direct economic interest in the 

information or the transaction under investigation, or by law enforcement 

agencies, state agencies, federal agencies, and other entities as set forth by 

rules adopted by the division.

Id. (Emphasis added.) As stated by the Ohio Supreme Court in Dublin Securities, 68 

Ohio St.3d 426, 627 N.E.2d 993, “it was hardly the legislative intent of R.C. 1707.12 to 

place investigatory files in the hands of a subject under investigation.” Id. at ¶ 16. Thus, 

R.C. 1707.12(B) completely exempts the Division’s investigatory file from disclosure, 

regardless of whether it contains trial preparation material or law enforcement records. 

See Clayton, 147 Ohio St.3d 114, 2016-Ohio-643, 62 N.E.3d 132, at ¶ 19 (finding that 

because R.C. 1707.12(B) exempted the entire investigatory file from disclosure, 

alternative arguments regarding trial preparation material and law enforcement records 

did not need to be addressed). 

{¶ 38} In the instant case, the hearing officer properly exercised his discretion by 

following the plain language of R.C. 1707.12(B) and Ohio Supreme Court precedent in 
15.

quashing appellant’s subpoena, and the trial court did not abuse its discretion when it

affirmed the Division’s action.

{¶ 39} For all of the foregoing reasons, appellant’s first assignment of error is 

found not well-taken.

{¶ 40} Appellant argues in his second assignment of error that the trial court erred 

in affirming the Divisions’ determination that appellant breached his suitability 

obligations. Under Ohio law, securities salespersons are required to make a reasonable 

inquiry into clients’ “investment objectives, financial situation and needs, and any other 

relevant information known to the dealer or salesperson” prior to recommending or 

executing any securities sales or purchases. Ohio Adm.Code 1301:6-3-19(A)(5). 

{¶ 41} Similarly, under FINRA Rule 2111(a), promulgated by the Financial 

Industry Regulatory Authority:

[A FINRA-regulated broker] must have a reasonable basis to believe that a 

recommended transaction or investment strategy involving a security or 

securities is suitable for the customer, based on the information obtained 

through the reasonable diligence of the [broker] to ascertain the customer’s 

investment profile.

Id. Appellant, as an employee of a FINRA-member firm, was required under R.C. 

1707.142(A) to comply with all FINRA rules, including FINRA Rule 2111(a). 

{¶ 42} In its review, the trial court properly observed that “[t]here is little evidence 

of record that is disputed as far as Treece’s intake or onboarding of clients, including that 
16.

the prospective investor form used by Treece and Treece Financial did not include data 

concerning liquidity needs, assets, other investments, and investment experience.” 

Indeed, the evidence before the trial court showed that appellant maintained very little 

written documentation about his clients’ investment profiles. Aside from some very 

limited and basic information regarding client’s liquid assets maintained on two singlepage investor forms, appellant testified that while he might ask clients about liquid assets, 

he does not normally memorialize that information. Appellant also admitted that he did 

not make efforts to personally remember most other client information. 

{¶ 43} The trial court also observed that “[t]here was nothing in the record with 

regard to management of clients’ ongoing situations, or their needs as investors * * *

after they became appellant’s clients.” It is undisputed that after clients invested with 

appellant, they rarely heard from him or met with him again, except through his monthly 

newsletter, which contained his views and opinions of the economy as a whole. 

Appellant never offered personalized investment advice on an annual basis to his clients. 

He did not hold annual meetings with clients and he did not have annual personal contact 

with them. Neither did he set clients up on a schedule to call them on a specific 

timeframe, such as on a six-month or a yearly schedule. Instead, he would invite his 

clients annually, through his newsletter, simply to update their mailing address, their 

contact information, and their employment information. 

{¶ 44} As to his clients’ individual holdings, the record before the trial court 

showed that appellant used a “one-size-fits-all” approach, regardless of each client’s 
17.

unique investment profile. Nearly every single client was invested in the same two 

mutual funds, and in identical proportions. The trial court reasonably observed that, 

“[g]iven Treece’s aforementioned lack of memorialization as evidenced by the Division’s 

investigation, along with omitted investment profile factors, it is unlikely and illogical 

that the exact same investment strategy is suitable for all of [Treece’s] clients.” 

{¶ 45} Several of appellant’s clients testified at the administrative hearing. Their 

testimony showed that appellant’s clients had vastly different investment goals and 

varying levels of investment sophistication and experience. For example, one client, who 

was a school teacher, had very different liquidity needs from another client, who owned a 

Mercedes dealership and had various accounts with other financial advisors. According 

to the trial court, the client testimony “demonstrates the diverse needs of the clients (all of 

which were kept in the same investment portfolio) as well as [the] clients’ lack of 

understanding of Treece’s business model and the overall investment strategy.”

{¶ 46} Based on the record that was before it, we find that the trial court did not 

abuse its discretion when affirming the Division’s order. Accordingly, appellant’s 

second assignment of error is found not well-taken.

{¶ 47} Appellant argues in his third assignment of error that the trial court erred in 

affirming the Division’s determination that appellant breached his fiduciary duties to his 

clients. The relationship between a financial advisor and his or her clients is clearly

fiduciary in nature. S.E.C. v. Capital Gains Research Bur., Inc., 375 U.S. 180, 194, 84 

S.Ct. 275, 11 L.Ed.2d 237 (1963); see also, Mathias v. Rosser, 10th Dist. Franklin No. 
18.

01AP-768, 2002-Oiho-2772, ¶ 28, citing Byrley v. Nationwide Life Ins. Co., 94 Ohio 

App.3d 1, 18, 640 N.E.2d 187 (6th Dist.1994). A fiduciary relationship is “a relationship 

in which one party to the relationship places a special confidence and trust in the integrity 

and fidelity of the other party to the relationship, and there is a resulting position of 

superiority or influence, acquired by virtue of the special trust.” Mathias at ¶ 28. 

“Courts have imposed on a fiduciary an affirmative duty of ‘utmost good faith, and full 

and fair disclosure of all material facts,’ as well as an affirmative obligation ‘to employ 

reasonable care to avoid misleading his clients.’” Capital Gains Research Bur. at 194. 

In Ohio, it is unlawful for an investment adviser and investment adviser representative to 

“engage, or attempt to engage, in any act or practice constituting a breach of fiduciary 

duty.” Ohio Adm.Code 1301:6-3-44(E)(1)(f). It is undisputed that appellant, as an 

investment adviser, acted as a fiduciary and therefore owed these heightened duties to his 

clients as a matter of law.

{¶ 48} The evidence in the record established that appellant breached his fiduciary 

duties to his clients in several ways, including: (1) charging investment advisory fees for 

services that were not rendered (also known as “reverse churning”); and (2) failing to 

properly and adequately disclose certain inherent conflicts of interest to his clients. 

{¶ 49} “Reverse churning” is “based on the theory that – by charging expensive, 

asset-based fees for investments with low trading activity and no need for ongoing 

monitoring or advice – the fiduciaries [are] able to limit the time they spent on customer 

service and investment advice and focus on recruiting additional customers.” Pizzaro v. 
19.

The Home Depot, Inc., N.D.Ga. No. 1:18-CV-01566-WMR, 2019 WL 11288656, at *1 

(Sep. 20, 2019). 

{¶ 50} In written disclosures that appellant provided to his clients, appellant stated 

that his firm’s advisory services were “designed, among other things, to assist the client 

in determining which mutual fund or funds are most appropriate to each client’s financial 

condition and objectives.” For these services, appellant billed his clients as much as 2% 

annually for managing their investments. Between January 1, 2013 and September 30, 

2017, appellant billed his clients at least $2,539,504.44 in investment advisory fees. 

{¶ 51} Despite this significant compensation, the evidence before the trial court 

established that appellant did not manage his clients’ investments in any meaningful way. 

As discussed above, appellant put his clients in the same two mutual funds, in the same 

percentages, and rarely made changes to these allocations. And he seldom, if ever, 

communicated with his clients individually, on a personalized basis. 

{¶ 52} The trial court concluded in its summation of the evidence before it that 

“based on the number of clients and the utter lack of activity within these accounts as 

evidenced by the Divisions’ investigation, it would seem that [Treece ] collected high 

fees for little service over the course of six years.” The trial court’s conclusion was 

reasonable and in no way constituted an abuse of discretion.

{¶ 53} Next, we address the additional determination by the trial court that 

appellant failed to disclose certain inherent conflicts of interest to his clients. As 

indicated previously, appellant recommended that all of his clients invest in the same two 
20.

mutual funds and, further, all of the mutual fund purchases were made through Treece 

Financial, the broker-dealer that appellant operated. The evidence in the record 

additionally showed that appellant’s clients were charged both upfront sales charges of 

5.75% on the mutual fund purchases and ongoing 12b-1 fees of 0.25%. 

{¶ 54} At the hearing, Attorney Hinchcliffe testified that appellant’s clients could 

have avoided paying all of these charges and fees if the investments had been purchased 

outside of Treece Financial. Hinchcliffe also testified that appellant did not adequately

disclose this inherent conflict of interest to his clients. 

{¶ 55} Notably, none of the five clients who testified at the hearing understood 

that Treece Advisory and Treece Financial were separate companies.

{¶ 56} The trial court concluded that “[t]he Division established an intentional 

funneling of investments through Treece Financial without benefit or justification to 

clients,” and “[t]here is reliable, probative and substantive evidence that the disclosure 

does not adequately notify clients” of the “clear conflict of interest[s]” at issue. We find 

that the trial court did not abuse its discretion in reaching this conclusion.

{¶ 57} Appellant’s third assignment of error is found not well-taken.

{¶ 58} Finally, appellant argues in his fourth assignment of error that the trial 

court erred in its determination that appellant lacked good business repute. Under R.C. 

1707.19(A)(1), the Division may suspend or revoke the license of a dealer, salesperson, 

investment adviser, or investment adviser representative if it finds that the licensee is “not 

of good business repute.” Fehrman v. Ohio Dept. of Commerce, 141 Ohio App.3d 503, 
21.

507, 751 N.E.2d 1089 (10th Dist.2001). Although the definition of “good business 

repute” is not provided in the statute, R.C. 1707.20(A) authorizes the Division to adopt 

rules defining terms, as long as the definitions are not inconsistent with R.C. 1707.01 to 

1707.50. See id. (citing a former version of R.C. 1707.20(A)). In determining “good 

business repute,” Ohio Adm. Code 1301:6-3-19(D)(8) states that the Division shall 

consider whether the licensee “has violated any provision of Chapter 1707. of the 

Revised Code or any rule promulgated thereunder.” (Emphasis added.)

{¶ 59} Thus, the Division has the authority to find that a licensee lacks good 

business repute if the Division also finds that the licensee has violated provisions of R.C. 

1707. Here, the division found that appellant breached his suitability obligations in 

violation of R.C. 1707.142(A) and Ohio Adm.Code 1301:6-3-19(A)(5), and that 

appellant breached his fiduciary duties, in violation of Ohio Adm.Code 1301:6-3-

44(E)(1)(f). Standing alone, each of these two breaches is a violation of R.C. Chapter 

1707 and, therefore, each subjects the licensee to a finding that the licensee is not of good 

business repute.

{¶ 60} As the trial court noted, because it upheld the Division’s findings as to both 

suitability obligations and fiduciary duties, it was compelled to affirm the finding of a 

lack of good business repute, inasmuch as a violation of R.C. Chapter 1707 constitutes 

prima facie proof of a lack of good business repute, and because the Division’s sanction –

to wit, the revocation of appellant’s licenses and the issuance of a cease and desist order -

- is authorized under R.C. 1707.19 and R.C. 1707.23. Accordingly, the trial court did not 
22.

abuse its discretion in affirming the Division’s finding of a lack of good business repute. 

Appellant’s fourth assignment of error is therefore found not well-taken.

{¶ 61} For all of the foregoing reasons, the trial court did not abuse its discretion 

when it found that the Division’s order was supported by reliable, probative, and 

substantial evidence, and was made in accordance with the law. The judgment of the 

Lucas County Court of Common Pleas is affirmed. Appellant is ordered to pay the costs 

of this appeal pursuant to App.R. 24.

Judgment affirmed.

A certified copy of this entry shall constitute the mandate pursuant to App.R. 27. 

See also 6th Dist.Loc.App.R. 4.

Mark L. Pietrykowski, J. ____________________________

JUDGE

Gene A. Zmuda, J. 

____________________________

Myron C. Duhart, P.J. JUDGE

CONCUR. 

____________________________

JUDGE

This decision is subject to further editing by the Supreme Court of

Ohio’s Reporter of Decisions. Parties interested in viewing the final reported

version are advised to visit the Ohio Supreme Court’s web site at:

http://www.supremecourt.ohio.gov/ROD/docs/.