Nancy Ayers Keough v. Securities Division of the Office of the Secretary of the Commonwealth. ( 2023 )

NOTICE: Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule
23.0, as appearing in 97 Mass. App. Ct. 1017 (2020) (formerly known as rule 1:28,
as amended by 73 Mass. App. Ct. 1001 [2009]), are primarily directed to the parties
and, therefore, may not fully address the facts of the case or the panel's
decisional rationale. Moreover, such decisions are not circulated to the entire
court and, therefore, represent only the views of the panel that decided the case.
A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25,
2008, may be cited for its persuasive value but, because of the limitations noted
above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260
n.4 (2008).
COMMONWEALTH OF MASSACHUSETTS
APPEALS COURT
22-P-1140
NANCY AYERS KEOUGH
vs.
SECURITIES DIVISION OF THE OFFICE OF THE SECRETARY OF THE
COMMONWEALTH.
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
Nancy Ayers Keough appeals from a Superior Court judgment
affirming a final order of the Securities Division of the Office
of the Secretary of the Commonwealth (division) in which the
division concluded that Keough violated the Massachusetts
Uniform Securities Act (act), G. L. c. 110A. We affirm.
Background. Inofin, Inc. was a Massachusetts corporation
engaged in the provision of sub-prime auto financing. To
capitalize its business, Inofin engaged in the sale of
unregistered and non-exempt securities to investors recruited
via a compensated referral scheme, whereby private individuals
would refer investors to Inofin in exchange for a certain
percentage of those investments. Between 2004 and 2009, Keough
received $368,430.15 in compensation from Inofin identified as
"[r]eferral [f]ees" or sales commissions. During that time,
Keough was not registered as a broker-dealer or an agent of a
broker-dealer in the Commonwealth.
The United States Securities and Exchange Commission (SEC)
interviewed Keough under oath on June 8, 2010. During that
interview, Keough admitted to advising friends and family to
invest with Inofin in exchange for compensation. In April of
2011, the SEC sued Keough as a "relief defendant" in United
States District Court for the District of Massachusetts for
violations of Federal securities law because it contended that
she received funds from Inofin sales commissions. The SEC
sought to recover commissions paid to Nancy deriving from
activity by Nancy, her husband, and a third person in violation
of Federal "securities law." Her husband and others also were
defendants. On the same date, the division's enforcement
section filed an administrative complaint against Keough, her
husband, and another based on their participation in the Inofin
referral scheme alleging violations of G. L. c. 110A, §§ 201 (a)
and 301. In a 2012 deposition with the SEC, Keough denied the
veracity of her June 8, 2010 statements. No portion of Keough's
June 8, 2010 statements were used in the Federal action.
The enforcement section filed a motion for summary decision
arguing that there was no genuine dispute of a material fact as
to whether Keough had violated the act. Keough opposed and in
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support of her opposition, referred to portions of her own 2012
deposition testimony. The acting director of the division found
that there was no genuine dispute of material fact and granted
summary decision with respect to the alleged violations. In so
holding, the acting director relied on evidence submitted by the
enforcement section, including the SEC's statement of facts from
the Federal proceedings and Keogh's June 8, 2010, pre-suit
interview with the SEC.
Discussion. We review a decision of the division to
determine if it violates the standards set forth in G. L.
c. 30A, § 14 (7). See Silvia v. Securities Div., 61 Mass. App.
Ct. 350, 358 (2004). Under the statute, we may set aside a
decision if it is not supported by substantial evidence and the
substantial rights of any party have been prejudiced. G. L.
c. 30A, § 14 (7) (e). Evidence is substantial for purposes of
§ 14 where it is "such evidence as a reasonable mind might
accept as adequate to support a conclusion." G. L. c. 30A, § 1
(6).
Keough argues on appeal that the division erred in basing
its decision on the SEC's statement of facts submitted in
support of its motion for summary judgment in the Federal
District Court, which did not rely on Keough's June 8, 2010
sworn testimony, and that pre-suit interview. Keough asserts
that the SEC statement of facts merely establishes that she
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received commissions based on the solicitation efforts of her
husband. Further, Keough contends that the discrepancy between
admissions in her June 8, 2010 testimony and denials in her
August 8, 2012, SEC deposition created a material issue of fact
such that summary decision was improper.
Under G. L. c. 110A, § 201 (a), a person is prohibited from
acting as a broker-dealer while unregistered in the
Commonwealth. A broker-dealer is defined as "any person engaged
in the business of effecting transactions in securities for the
account of others." G. L. c. 110A, § 401 (c). Further, under
§ 301 of the act, a person may not transact or attempt to
transact in business securities without registering or seeking
exemptions for said securities.
The division had ample evidence to support findings that
Keough, by her own admission, "brought" the "opportunity" to
invest in Inofin to between seventy-five and one hundred
friends. At no point during the relevant period was Keough
registered as a broker-dealer or agent in Massachusetts, nor
were Inofin securities registered or exempted under State law.
Keough received compensation for investments in Inofin totaling
over $300,000. Those admissions and the documentary evidence
which supports them are sufficient to prove violations of § 201
and § 301 of the act.
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Keough could not create a dispute of fact by relying on her
post-suit deposition to contradict her pre-suit sworn interview.
See Doe v. Harbor Schs., Inc., 446 Mass. 245, 261 (2006)
(plaintiff failed to raise genuine dispute of material fact
based on contradictory testimony alone where plaintiff's self-
defeating testimony carried more force and detail); O'Brien v.
Analog Devices, Inc., 34 Mass. App. Ct. 905, 906 (1993) (party
cannot create disputed issue of fact by offering affidavit
contradicting statements previously made under oath at
deposition). It matters not that here the later contradictory
statements were in a deposition, which also is a sworn
statement. Mass. R. Civ. P. 30 (f) (1), as appearing in 489
Mass. 1407 (2022) (deposition witness must be sworn); Psy–Ed
Corp. v. Klein, 62 Mass. App. Ct. 110, 114 (2004).
Judgment affirmed.
By the Court (Henry, Grant &
Brennan, JJ. 1),
Clerk
Entered: October 16, 2023.
1 The panelists are listed in order of seniority.
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