Nebraska regulators have been exonerated from taking to task an adviser for characterizing President Barack Obama as “evil” and a “communist” when they contacted LPL Financial regarding concerns about the adviser's unusual advertising – including offering new clients a $100 coupon for the purchase of a firearm. But the court's admonishment of the regulator's behavior has caused it to modify its code of ethics, and it will be more careful in the future to respect financial advisers' freedom of speech, according to the head of the state's financial office.
In a 2-1
decision on May 11, the 8th Circuit Court of Appeals affirmed the finding of a district court that the Nebraska Department of Banking and Finance did not do enough to violate the rights of adviser Bob Bennie Jr. when it targeted him in part because of his inflammatory comments about Mr. Obama in a February 2010 newspaper article.
The district court ruled in September that Nebraska regulators stopped short of “chilling” someone from speaking out.
Mr. Bennie does not agree.
“They were on a witch hunt because of my political beliefs,” said Mr. Bennie, who practices in Lincoln, Neb. “I never did anything wrong other than being a right-wing conservative. That's my crime.”
The court did criticize the conduct of Nebraska regulators, who cited Mr. Bennie's comments about Mr. Obama when they looked into advertising practices used by his firm, Bob Bennie Wealth Management, which was affiliated with LPL at the time. The regulators also were concerned about Mr. Bennie's solicitations for prospective client dinners and retirement seminars.
“For the state regulators to allow their apparent disagreement with or even distaste for what [Mr.] Bennie had to say politically, or how he said it, to influence how the department treated him and his employer was wholly inappropriate — and absolutely inconsistent with the First Amendment,” the court wrote.
Nebraska never took action against Mr. Bennie, but LPL terminated its relationship with him in late 2010. The firm declined to comment.
Mark Quandahl, director of the Nebraska Department of Banking and Finance, said the agency has added a line to its code of ethics explicitly stating it's never acceptable to take regulatory action against anyone as a result of his or her exercise of a constitutional right.
“We have learned some lessons from the way the court approached the matter, and we will take those lessons to heart,” Mr. Quandahl said in an interview. “Our reputation is quite good. That being said, we can always strive to do a better job.”
The regulator's contrition is no salve for Mr. Bennie, who is a Tea Party leader in Nebraska. He said he was “very disappointed” by the appeals court decision in what he said could be a “precedent-setting” case.
Mr. Bennie did not discover that Nebraska regulators took note of his comments about Mr. Obama until he made a public-records inquiry in 2011. He then slowed his political activity.
“Hell yes, I was chilled, [but] I wasn't completely shut down,” Mr. Bennie said.
Mr. Quandahl, a former Republican state legislator, was not in charge of the agency when Mr. Bennie filed his lawsuit in 2011. Mr. Quandahl was appointed by Nebraska Gov. Pete Ricketts, a Republican, in January 2015, shortly after Mr. Ricketts took office.
In his suit, Mr. Bennie named John Munn, the former head of the department who is now retired, Jack Herstein, who still serves as assistant director, and an investigator, Rodney Greiss.
Mr. Herstein, a former president of the North American Securities Administrators Association, did not respond to a request for comment.
Before drawing the attention of Nebraska regulators, Mr. Bennie had four disclosures on his Finra
BrokerCheck profile. Following his departure from LPL, Mr. Bennie's record shows three more client disputes. Of the seven total disclosures, two were settled, while the others were denied or closed without action.
Mr. Bennie, whose firm is now affiliated with Prospera Financial Services and features his past industry awards on its homepage, defends his practice.
“I have not been found guilty of any wrong doing,” Mr. Bennie said. “I haven't broken any [securities] rules or regulations. I would never do anything to harm a client.”
He remains a strident critic of Mr. Obama.
“I still think he's a communist and an evil man,” Mr. Bennie said. “I'll probably get in trouble for this.”
Like most Tea Party members, he places high value on the Constitution.
“If we let government employees, bureaucrats and regulators use their regulatory power to harass citizens for exercising their right to free speech, the whole country has a problem,” Mr. Bennie said.
