WA DFI v. Winston Felix - Securities Enforcement Final Decision

FINAL DECISION AND ORDER AFFIRMING 1 DEPARTMENT OF FINANCIAL INSTITUTIONS STATE OF WASHINGTON DEPARTMENT OF FINANCIAL INSTITUTIONS IN THE MATTER OF DETERMINING Whether there has been a violation of the Securities Act of Washington by: Winston Felix, Respondent. ) ) ) ) ) ) ) ) DFI No.: S-24-3791-26-FO01 OAH No.: 05-2025-DFI-00191 FINAL DECISION & ORDER AFFIRMING INITIAL ORDER ON SUMMARY JUDGMENT MOTION THIS MATTER has come before the Director (“Director”) of the Washington State Department of Financial Institutions (“Department”) for entry of the Director’s Final Decision & Order pursuant to RCW 34.05.464. 1.0 PROCEDURAL HISTORY On January 30, 2025, the Director, through Securities Administrator William M. Beatty, entered a Statement of Charges and Notice of Intent to Issue Order to Cease and Desist, to Suspend Registrations, to Impose a Fine, and to Charge Costs, S-24-3791-25-SC01, (“Statement of Charges”) against Winston Felix (“Respondent’). The Statement of Charges, together with a Notice of Opportunity for Hearing, and an Application for Adjudicative Hearing, were served on Respondent Winston Felix by certified mail on February 4, 2025. Respondent Winston Felix, on or about February 25, 2025, submitted an Application for Adjudicative Hearing. On May 19, 2025, the Department made a request to the Office of Administrative Hearings (“OAH”) to assign an Administrative Law Judge (“ALJ”) to schedule and conduct a hearing on the Statement of Charges. On May 30, 2025, OAH issued a Notice of Prehearing Conference from ALJ Russ Mikow scheduling a prehearing conference on June 9, 2025, at 9 a.m.

FINAL DECISION AND ORDER AFFIRMING 2 DEPARTMENT OF FINANCIAL INSTITUTIONS On June 9, 2025, Respondent and a representative for the Division attended a telephonic prehearing conference. The prehearing conference was continued to June 26, 2025, at 1 p.m. to give the Respondent additional time to prepare. On June 26, 2025, Respondent and a representative for the Division attended a telephonic prehearing conference. On October 27, 2025, the Division filed a Motion for Summary Judgment. The Respondent did not file a response. On December 1, 2025, ALJ Russ Mikow held a hearing on the Department’s Motion for Summary Judgment, at which the Department was represented by counsel. The Respondent did not appear. On December 23, 2025, ALJ Russ Mikow issued an Initial Order on Summary Judgment Motion (“Initial Order”). On December 23, 2025, OAH served the Initial Order on Respondent by first class mail. In the Initial Order, ALJ Russ Mikow granted the Department’s Motion for Summary Judgment, finding that no genuine issue of fact remained that Respondent violated Chapter 21.20 RCW as set out in the Statement of Charges. The Initial Order also ordered that Respondent cease and desist from any further violations of RCW 21.20.702, Respondent’s registration as an investment adviser representative is suspended for 90 days, Respondent pay a fine of $10,000.00, and Respondent pay investigative costs of $3,281.25. Pursuant to RCW 34.05.464 and WAC 10-08-211, Respondent had twenty (20) days from the date of service of the Initial Order to file a Petition for Review with the Director of the Department. Respondent did not file a Petition for Review during the statutory period. 2.0 RECORD ON REVIEW The record presented to the Director for his review and for entry of a Final Decision & Order was the entire record on review from OAH, including the following: 2.1 Statement of Charges, with documentation of service;

FINAL DECISION AND ORDER AFFIRMING 3 DEPARTMENT OF FINANCIAL INSTITUTIONS 2.2 Application for Adjudicative Hearing for Winston Felix; 2.3 Request to OAH for Assignment of Administrative Law Judge; 2.4 Notice of Prehearing Conference, dated May 30, 2025, with certificate of service; 2.5 Order Granting Continuance and Notice of Prehearing Conference, dated June 10, 2025, with certificate of service; 2.6 Department’s Motion for Summary Judgment; 2.7 Declaration of Anna Harkness in Support of Department’s Motion for Summary Judgment with accompanying Exhibits 1-7; and 2.8 Initial Order on Summary Judgment Motion, with documentation of service. 3.0 DIRECTOR’S CONSIDERATIONS The Director reviews the record in each matter calling for entry of a final decision and order, even in the absence of a petition for review. The Director has made a review of the Statement of Charges in relation to the language of the Initial Order and finds (1) that the Statement of Charges sets forth claims upon which relief can be granted as pleaded, (2) that the Facts for Purpose of Summary Judgment and Conclusions of Law in the Initial Order are consistent with what the Securities Division pleaded in the Statement of Charges, and (3) that the sanctions, fines, and costs imposed are not in excess of the prayer for relief in the Statement of Charges. On this basis, the Director affirms the Initial Order of ALJ Russ Mikow. 4.0 FINDINGS OF FACT AND CONCLUSIONS OF LAW 4.1 Findings of Fact. The Director affirms Section 3.0 of this Order and Paragraphs 4.1 through 4.25, inclusive, of the Initial Order. 4.2 Conclusions of Law. The Director affirms Section 3.0 of this Order and Paragraphs 5.1 through 5.27, inclusive, of the Initial Order.

FINAL DECISION AND ORDER AFFIRMING 4 DEPARTMENT OF FINANCIAL INSTITUTIONS 4.3 Affirmation of Initial Order. The Director affirms Paragraphs 6.1 through 6.7, inclusive, of the Initial Order. 5.0 FINAL DECISION & ORDER Based upon the foregoing, and the Director having considered the record and being otherwise fully advised, NOW, THEREFORE, IT IS HEREBY ORDERED: 5.1 Respondent cease and desist from any further violations of RCW 21.20.702 pursuant to RCW 21.20.390(1). 5.2 Respondent’s investment adviser representative and registered representative registrations are suspended for a period of 90 days. 5.3 Respondent is liable for and shall pay a fine of $10,000.00. 5.4 Respondent is liable for and shall pay costs of $3,281.25 for the investigation of their violations of the Securities Act of Washington, chapter 21.20. RCW. 6.0 RECONSIDERATION Pursuant to RCW 34.05.470, Respondent has the right to file a Petition for Reconsideration stating the specific grounds upon which relief is requested. The Petition must be filed in the Office of the Director of the Department of Financial Institutions by courier at 150 Israel Road SW, Tumwater, Washington 98501, or by U.S. Mail at P.O. Box 41200, Olympia, Washington 98504-1200, within ten (10) days of service of the Final Decision & Order upon Respondent. The Petition for Reconsideration shall not stay the effectiveness of this order nor is a Petition for Reconsideration a prerequisite for seeking judicial review in this matter. A timely Petition for Reconsideration is deemed denied if, within twenty (20) days from the date the petition is filed, the agency does not (a) dispose of the petition or (b) serve the parties with a written notice specifying the date by which it will act on a petition.

FINAL DECISION AND ORDER AFFIRMING 5 DEPARTMENT OF FINANCIAL INSTITUTIONS 7.0 STAY OF ORDER The Director has determined not to consider a Petition to Stay the effectiveness of this order. Any such requests should be made in connection with a Petition for Judicial Review made under chapter 34.05 RCW and RCW 34.05.550. 8.0 JUDICIAL REVIEW Respondent has the right to petition the superior court for judicial review of this agency action under the provisions of chapter 34.05 RCW. For the requirements for filing a Petition for Judicial Review, see RCW 34.050.510 and sections following. 9.0 NON-COMPLIANCE WITH ORDER If Respondent does not comply with the terms of this order, the Department may seek its enforcement by the Office of the Attorney General to include the collection of fines and fees imposed herein. Failure to comply with this Final Decision & Order may also prompt additional actions against Respondent by the Department as permitted by the Securities Act of Washington, Chapter 21.20 RCW, for failure to comply with a lawful order of the Department. 10.0 SERVICE For purposes of filing a Petition for Reconsideration or a Petition for Judicial Review, service is effective upon deposit of this order in the U.S. mail with a declaration of service attached hereto. DATED this 4th day of March 2026. STATE OF WASHINGTON DEPARTMENT OF FINANCIAL INSTITUTIONS CHARLES E. CLARK, Director Washington State Department of Financial Institutions

FINAL DECISION AND ORDER AFFIRMING 6 DEPARTMENT OF FINANCIAL INSTITUTIONS CERTIFICATE OF MAILING This is to certify that the above FINAL DECISION AND ORDER has been served upon the following parties on March 4, 2026, by depositing a copy of same by one or more of the following: First Class Mail, Certified Mail, Hand Delivery via Messenger, Campus Mail, Facsimile, or by Email. WASHINGTON STATE DEPARTMENT OF FINANCIAL INSTITUTIONS By: Jeanette Baluyut Executive Assistant 17763 15th Ave NE Apt 204 Shoreline, WA 98155 Respondent ☒ First Class Mail ☒ Certified Mail, Return Receipt ☐ Email Julia Eisentrout, AAG Office of the Attorney General PO Box 40100 Olympia, WA 98504 Agency Representative ☐ First Class Mail ☐ Certified Mail, Return Receipt ☒ E-mail Julia.Eisentrout@atg.wa.gov Tina.Bert@atg.wa.gov GCEEF@atg.wa.gov Anna Harkness Department of Financial Institutions Division of Securities PO Box 41200 Olympia, WA 98504 Agency Contact ☐ First Class Mail ☐ Certified Mail, Return Receipt ☒ Email Anna.Harkness@dfi.wa.gov Brian Guerard Department of Financial Institutions Division of Securities PO Box 41200 Olympia, WA 98504 Agency Contact ☐ First Class Mail ☐ Certified Mail, Return Receipt ☒ Email Brian.Guerard@dfi.wa.gov

Docket No. 05-2025-DFI-00191 Page 1 of 19 8412-SCP WASHINGTON STATE OFFICE OF ADMINISTRATIVE HEARINGS In the matter of: Winston Felix, Respondent. Docket No. 05-2025-DFI-00191 INITIAL ORDER ON SUMMARY JUDGMENT MOTION Agency: Department of Financial Institutions Program: Securities Agency No. S-24-3791-25-SC01 1. ISSUES 1.1. Did Winston Felix violate Revised Code of Washington (RCW) 21.20.702 by recommending to a Washington customer the sale of securities to effectuate tax-loss harvesting without first making a reasonable inquiry to determine whether the recommendation was suitable, as alleged in the Statement of Charges and Notice of Intent to Enter an Order to Cease and Desist, to Suspend Registrations, to Impose a Fine, and to Charge Costs #S-24-3791-25-SC01 issued on January 30, 2025? 1.2. Did Mr. Felix engage in dishonest or unethical practices as defined by Washington Administrative Code (WAC) 460-20C-220(7) by recommending to a Washington customer the sale of securities to effectuate tax-loss harvesting without first making a reasonable inquiry to determine whether the recommendation was suitable, as alleged in the Statement of Charges and Notice of Intent to Enter an Order to Cease and Desist, to Suspend Registrations, to Impose a Fine, and to Charge Costs #S-24-3791-25-SC01 issued on January 30, 2025? 1.3. Did Mr. Felix engage in dishonest or unethical practices as defined by WAC 460-20C-220(9) by recommending to a Washington customer a security transaction or investment strategy involving securities that does not comply with the Care Obligation of the Securities and Exchange Commission’s Regulation Best Interest, as alleged in the Statement of Charges and Notice of Intent to Enter an Order to Cease and Desist, to Suspend Registrations, to Impose a Fine, and to Charge Costs #S-24-3791-25-SC01 issued on January 30, 2025? 1.4. If so, what are the appropriate sanctions?

Docket No. 05-2025-DFI-00191 Page 2 of 19 8412-SCP /// /// 2. ORDER SUMMARY 2.1. Yes. Starting in July 2022, Felix recommended a retail client sell a large number of securities as part of a tax-loss harvesting strategy without first making a reasonable inquiry to determine whether the recommendation was suitable in violation of RCW 21.20.702(1). His actions constitute dishonest or unethical practices as defined by WAC 460-20C-220(7) and WAC 460-20C-220(9) in violation of RCW 21.20.110(1)(g) and SEC Regulation Best Interest 17 C.F.R. § 240.15l-1. 2.2. The Washington State Department of Financial Institutions’ (DFI) unopposed Motion for Summary Judgment filed on October 27, 2025, is GRANTED. 2.3. DFI’s Statement of Charges and Notice of Intent to Enter an Order to Cease and Desist, to Suspend Registrations, to Impose a Fine, and to Charge Costs #S-24-3791-25-SC01 issued on January 30, 2025, is AFFIRMED. 2.4. Felix is ordered to cease and desist from committing further violations of RCW 21.20.702 pursuant to RCW 21.20.390(1). 2.5. Felix’s registration as an investment adviser representative is suspended for 90 days pursuant to RCW 21.20.110(1)(g). 2.6. Felix must pay a $10,000 fine to DFI pursuant to RCW 21.20.395(1) for his violations of RCW 21.20.110 and RCW 21.20.702. 2.7. Felix must reimburse costs to DFI in the amount of $3,281.25 related to its investigation and enforcement action pursuant to RCW 21.20.110(7) and RCW 21.20.390(5). 3. SUMMARY JUDGMENT MOTION HEARING 3.1. Hearing Date: December 1, 2025 3.2. Administrative Law Judge: Russ Mikow 3.3. Respondent: Winston Felix did not appear. 3.4. Agency: Department of Financial Institutions (DFI) 3.5. Representative: Julia Eisentrout, Assistant Attorney General 3.6. I considered the following documents: Doc. No. Document Name Doc. Date No. Pages

Docket No. 05-2025-DFI-00191 Page 3 of 19 8412-SCP Statement of Charges and Notice of Intent to Enter an Order to Cease and Desist, to Suspend Registrations, to Impose a Fine, and to Charge Costs #S-24-3791-25-SC01 01/30/25 Mr. Felix’s Application for Adjudicative Hearing 02/25/25 Department’s Motion for Summary Judgment 10/27/25 Declaration of Anna Harkness in Support of Department’s Motion for Summary Judgment with accompanying Exhibits 1-7 10/22/25 4. UNCONTESTED FACTS FOR PURPOSE OF SUMMARY JUDGMENT On a motion for summary judgment, the decision maker only considers those facts for which the parties establish “no genuine issue as to any material fact”. “Summary judgment is appropriate only where the undisputed facts entitle the moving party to judgment as a matter of law.” Only evidence in the record and inferences from that evidence establish facts. If evidence in the record points to more than one possible finding of fact, then summary judgment may not rest on the moving party’s version of that fact. Admissions, stipulations, procedural history, and uncontested declarations and affidavits establish facts for summary judgment. So, the record here supports the following facts for the purposes of summary judgment: Jurisdiction 4.1. DFI issued Statement of Charges and Notice of Intent to Enter an Order to Cease and Desist, to Suspend Registrations, to Impose a Fine, and To Charge Costs #S-24-3791-25-SC01 (Statement of Charges) to Winston Felix on January 30, 2025. Washington Administrative Code (WAC) 10-08-135. In Superior Court matters, Civil Rule (CR) 56 governs summary judgment. Where the relevant procedural rules do not conflict with CR 56, it and the cases interpreting it serve as persuasive authority in the management of summary judgment under WAC 10-08-135. Verizon NW, Inc. v. Employment Sec. Dep’t, 164 Wn.2d 909, 916 (2008), citing Alpine Lakes Prot. Soc’y v. Dep’t of Natural Res., 102 Wn. App. 1, 14 (1999). Verizon NW, 164 Wn.2d 916. Document 1; Copy of neither the Statement of Charges nor Mr. Felix’s Application for Adjudicative Hearing (hearing request) were submitted as exhibits in support of the MSJ but they were included in DFI’s Request for Hearing packet sent to OAH on May 19, 2025, and are part of OAH’s agency record for this case.

Docket No. 05-2025-DFI-00191 Page 4 of 19 8412-SCP 4.2. The Respondent, Mr. Felix, requested a hearing on February 25, 2025. 4.3. DFI sent a Request for Hearing to the Office of Administrative Hearings (OAH) on May 19, 2025. Summary Judgment 4.4. DFI filed a Motion for Summary Judgment on October 27, 2025. The Motion was supported by the Declaration of Anna Harkness in Support of Department’s Motion for Summary Judgment with accompanying Exhibits 1- 7. 4.5. Mr. Felix did not file a response. 4.6. Felix, who lives in Shoreline, Washington, was a registered investment adviser representative and a registered representative of Edward D. Jones & Co., LP (Edward Jones) from October 14, 2019 to February 19, 2025, to February 24, 2025. His Central Registration Depository (CRD) number is 7183135. 4.7. During this period, Felix worked at two Edward Jones branch offices (CRD numbers 379393 and 693132) in Seattle, Washington. 4.8. Felix has not received any training or certifications as an accountant. Further, he has never been employed as an accountant. 4.9. Felix spoke with his client, Leslie Serling (Client) in July 2022 about using a tax harvesting strategy after reviewing her account and discovering unrealized losses. He discussed the strategy with her a second time on November 4, 2022, where he recommended consulting a tax professional to determine whether tax harvesting was suitable for her specific financial situation. In response, the Client asked that Felix speak directly with her accountant. Doc. 2 (agency record). Agency record. Doc. 3. Doc. 4. Agency record. Harkness Decl., Ex. 1 at 3. Harkness Decl., ¶ 5; Ex. 1 at 2. Harkness Decl., ¶ 5; Ex. 1 at 5. Harkness Decl., Ex. 4 at 1. Harkness Decl., Ex. 4 at 2. Harkness Decl., ¶ 7; Ex. 4. Harkness Decl., Ex. 4 at 5. Harkness Decl., ¶ 9; Ex. 6 at 42. Harkness Decl., Ex. 4 at 4, 6.

Docket No. 05-2025-DFI-00191 Page 5 of 19 8412-SCP 4.10. Felix referred the Client to her accountant because, as he later explained in a written response to FINRA dated June 26, 2023: 4.11. Ten days later, Felix spoke with the Client’s Certified Public Accountant (CPA), Alan Shevins, on November 14, 2022. However, he did not ask for material information necessary to determine the appropriateness of the planned tax-loss harvesting such as the amount of gains the Client needed to offset. As later explained by his employer, Edward Jones, in a Letter of Warning issued to Felix, this information is crucial: “It is also our understanding that at the client's request, you spoke with her CPA about this strategy, and they were in favor but never specified an amount of gains the client needed to off-set. This is a crucial piece of information because tax laws only allow for a certain amount of losses to be used each year.” 4.12. Also, during these conversations, Felix did not ask the Client or CPA whether any other capital losses from prior tax years existed that could be carried over to the 2022 tax year. 4.13. Prior to implementing the tax harvesting strategy, Felix conducted a final Zoom video meeting with the Client where he presented the tax harvesting strategy plan involving almost 50 transactions. However, he did not discuss the specific details of each trade individually with the Client; instead, he only showed her a single document listing the securities that would be bought and sold. Harkness Decl., Ex. 4 at 4. Harkness Decl., Ex. 4 at 5. Harkness Decl., ¶ 9; Ex. 6 at 42. Harkness Decl., ¶ 7; Ex. 2 at 1. Harkness Decl., Ex. 2 at 1 (emphasis added). Harkness Decl., ¶ 9; Ex. 4 at 5; see also Exhs. 2, 6. Harkness Decl., ¶ 10; Ex. 2 at 1; Ex. 4 at 12-32.

Docket No. 05-2025-DFI-00191 Page 6 of 19 8412-SCP 4.14. Following this Zoom meeting, Felix bought and sold the listed securities. He earned gross commissions in the amount of $4,257 from these transactions which resulted in more than $120,000 in capital losses for the Client. 4.15. On January 13, 2023, the Client contacted her accountant after becoming concerned about the losses generated by the many transactions. The accountant “quickly determined that the sales made were highly excessive and unnecessary with only $3,000 being an advantage to [the Client’s] 2022 taxes.” Edward Jones Internal Investigation 4.16. On January 18, 2023, the Client emailed a written complaint about Felix’s conduct to Edward Jones. Following an investigation, Edward Jones issued Felix a Letter of Warning on August 23, 2023, detailing its conclusion that he violated the Securities and Exchange Commission’s (SEC’s) Regulation Best Interest by making an unsuitable recommendation to the Client. The employer based its findings on the following reasons: 4.16.1. The trades executed as part of the strategy “generated over $120,000 in losses which in the current tax environment, could take almost 40 years for the client to reap the benefits.” 4.16.2. Felix failed to ask the Client’s accountant for information about the amount of gains that needed to be offset. According to Edward Jones’s written investigation results: “The missing question to the CPA was how many gains the client needed to off-set. Given the value of losses generated and not knowing if there were gains to off-set, this becomes a violation of Regulation Best Interest – Care Obligation – Client Specific Best Interest policy. If the CPA had given you a specific dollar amount to off-set, harvesting losses slightly above or below would be suitable. Since we didn't know, the recommendation is excessive and not suitable.” DFI Statement of Charges Harkness Decl., Ex. 4 at 12-32. Harkness Decl., ¶ 6; Ex. 2 at 1; Exhs. 4, 5. Harkness Decl., ¶ 11; Ex. 3. Harkness Decl., ¶ 11; Ex. 3. Harkness Decl., ¶ 11; Ex. 2. Harkness Decl., ¶ 11; Ex. 2. Harkness Decl., ¶ 11; Ex. 2.

Docket No. 05-2025-DFI-00191 Page 7 of 19 8412-SCP 4.17. Following the Edward Jones internal investigation, DFI’s Securities Division began its own investigation which was assigned to Anna Harkness, a DFI Financial Legal Examiner. 4.18. Based on the results of Harness’s investigation, DFI issued Statement of Charges and Notice of Intent to Enter an Order to Cease and Desist, to Suspend Registrations, to Impose a Fine, and To Charge Costs #S-24-3791-25-SC01, to Mr. Felix on January 30, 2025. The Statement of Charges alleged that Felix engaged in the following violations: 4.18.1. That he “violated RCW 21.20.702 by recommending to a Washington customer the sale of securities to effectuate tax-loss harvesting without first making a reasonable inquiry to determine whether the recommendation was suitable.” 4.18.2. That he “engaged in dishonest or unethical practices as defined by WAC 460-20C-220(7) in violation of RCW 21.20.110(1)(g) by recommending to a Washington customer the sale of securities to effectuate tax-loss harvesting without first making a reasonable inquiry to determine whether the recommendation was suitable.” 4.18.3. That he “engaged in dishonest or unethical practices as defined by WAC 460-20C-220(9) by recommending to a Washington customer a security transaction or investment strategy involving securities that does not comply with the Care Obligation of the Securities and Exchange Commission’s Regulation Best Interest.” 4.19. As detailed in the Statement of Charges, DFI seeks to impose the following sanctions on Felix for these alleged violations: 4.19.1. Issuance of an order pursuant to RCW 21.20.390(1) directing Felix to cease and desist from committing further violations of RCW 21.20.701. 4.19.2. Suspension of Felix’s investment adviser representative and registered representative registrations for 90 days pursuant to RCW 21.20.110(1)(g). Harkness Decl., ¶ 4. Doc. 1 at 4, lines 3-5. Doc. 1 at 4, lns. 8-11. Doc. 1 at 4, lns.13-16. Doc. 1 at 4, lns. 19-22 (Notice of Intent to Order the Respondent to Cease and Desist); DFI MSJ at 9-10. Doc. 1 at 5, lns. 1-4 (Notice of Intent to Suspend Registration); DFI MSJ at 10, lns. 5-12.

Docket No. 05-2025-DFI-00191 Page 8 of 19 8412-SCP 4.19.3. Order Felix to pay a fine in the amount of $10,000 pursuant to RCW 21.20.110(1) and RCW 21.20.395(1) for knowingly and recklessly violating the Securities Act of Washington (chapter 21.20 RCW). 4.19.4. An order that Felix “shall be liable for and shall pay the costs, fees, and other expenses incurred in the administrative investigation and hearing of this matter, in an amount not less than $3,281.25.” 4.20. Harkness spent 71 hours investigating the Complaint and preparing this case for administrative hearing. DFI believes the rate that could be charged for a financial legal investigator with her experience and skill is $214 per hour. This amount equals $15,194 for the investigator’s fees. DFI incurred costs in pursuing the investigation and administrative proceedings in the amount of $3,281.25. 4.21. Felix disagreed with DFI’s decision and filed an Application for Adjudicative Hearing to appeal the Statement of Charges on February 25, 2025. DFI’s Arguments in Support of Summary Judgment Unsuitable Recommendation 4.22. DFI contends that Felix violated RCW 21.20.702 by recommending the tax-loss harvesting plan to the Client without first making a reasonably inquiry into whether the recommendation was suitable. Whether a recommendation is suitable depends on a specific client’s individual financial circumstances and goals. Specifically, he failed to ask either the Client or CPA about the amount of current capital gains that needed to be offset or “whether the Client had capital losses from prior years that could be carried forward to the 2022 tax year.” 4.23. DFI argues that without this information, Felix’s recommendation of the tax-loss harvesting plan to the Client was unreasonable because she incurred over $120,000 in losses from the trades which could take up to 40 years to obtain the full benefits from the offsets. Dishonest or Unethical Practices Doc. 1 at 5, lns. 5-8 (Notice of Intent to Impose Fines); DFI MSJ at 10, lns. 13-20. Doc. 1 at 5, lns. 9-13 (Notice of Intent to Charge Costs); DFI MSJ at 10-11. Harkness Decl., ¶ 12. Harkness Decl., ¶¶ 7, 9, Ex. 6; see also Exhs. 2, 4; DFI MSJ at 6, lns. 11-17. DFI MSJ at 6, lns. 18-20 citing Ives v. Ramsden, 142 Wn. App. 369, 394 (2008). Harkness Decl., ¶¶ 7, 9; Ex. 6; see also Exhs. 2, 4; DFI MSJ at 6, lns. 11-17. DFI MSJ at 7, lns. 1-5 citing Harkness Decl., ¶ 6, Ex. 3.

Docket No. 05-2025-DFI-00191 Page 9 of 19 8412-SCP 4.24. DFI contends that Felix engaged in dishonest or unethical practices, as defined by WAC 460-20C-220(7) in violation of RCW 21.20.110(1)(g) when he failed to “complete a reasonable inquiry into the Client’s financial situation and needs, objectives, and more specifically, the Client’s tax status. Instead, Felix recommended a number of trades without consideration or any knowledge of the Client’s tax status and how many gains the Client could offset.” DFI further argues that without this information, “Felix could not determine whether the proposed tax-loss harvesting strategy that included a number of sales and purchases was actually suitable for the client.” Finally, he did not adequately explain all of the transactions involved to the Client; therefore, he could not “determine whether they were consistent with the Client’s risk tolerance and financial needs.” 4.25. Finally, DFI alleges that Felix’s failure to comply with the SEC’s Regulation Best Interest, 17 C.F.R. 240.15l-1, is additional evidence that he engaged in dishonest or unethical practices prohibited by WAC 460-20C-220(9). More specifically, the agency argues that he did not exercise reasonable diligence, as required, to determine that the tax-loss harvesting strategy was in the Client’s best interest. DFI points to his failure to determine the Client’s tax status and obtain information about the gains to be offset before making the recommendation as evidence of violation: “Felix had no way of knowing whether the number of losses generated outpaced the gains that could be offset, as demonstrated when the Client incurred $120,000 in losses from which it could take 40 years for the Client to benefit. [ . . .] Additionally, the Client did not understand the strategy completely as Felix did not explain each proposed transaction. [. . .] The Client was surprised to learn how many transactions Felix executed, and after meeting with their accountant determined that only $3000 would be to the Client’s advantage. [. . .] The Client’s complaint indicates that the tax-loss harvest strategy implemented by Felix was not consistent with the Client’s financial objectives.” 5. CONCLUSIONS OF LAW Based upon the facts above, I make the following conclusions: Jurisdiction DFI MSJ at 7, lns. 17-20. DFI MSJ at 7, lns. 23-25. DFI MSJ at 8, lns. 1-2 citing Harkness Decl., ¶ 10, Ex. 2; see also Ex. 4. DFI MSJ at 9, lns. 3-10 (internal citations omitted); see also Harkness Decl., ¶ 6, Ex. 2.

Docket No. 05-2025-DFI-00191 Page 10 of 19 8412-SCP 5.1. I have jurisdiction over the persons and subject matter in this case under chapter 34.05 RCW (Washington Administrative Procedure Act), RCW 34.05.425(1)(c), RCW 34.05.437, chapter 10-08 WAC (Model Rules of Procedure), and WAC 208-08-055. /// Summary Judgment 5.2. RCW 34.05.437 and WAC 10-08-135, as well as the Prehearing Conference Order in this matter, allow for the filing of dispositive motions in administrative proceedings, including motions for summary judgment. Summary judgment is a procedural device designed to avoid the time and expense of a trial when no trial is necessary. 5.3. Washington CR 56(c) and WAC 10-08-135 provide that a motion for summary judgment may be granted and an order issued if the written record shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. 5.4. A material fact is one upon which the outcome of the litigation depends. 5.5. In making this determination the court will consider any evidence and inferences therefrom in a light most favorable to the non-moving party. 5.6. The party moving for summary judgment has the burden of showing the absence of any issue of material fact. Once the moving party meets its burden, the burden shifts to the nonmoving party to present admissible evidence demonstrating the existence of a genuine issue of material fact. 5.7. This nonmoving party cannot satisfy its burden resting on mere allegations, argumentative assertions, speculation, or denials. Summary judgment should be granted if reasonable minds could reach only one conclusion based on the facts in evidence. Applicable Law and Regulations The Securities Act of Washington See Hudesman v. Foley, 73 Wn.2d 880 (1968); Karl B. Tegland, 4 Wash. Prac., Rules Practice Court Rule (CR) 56. See also Kruse v. Hemp, 121 Wn.2d 715, 722 (1993). Hudesman, 73 Wn.2d at 886. Hood Canal Sand & Gravel, LLC v. Goldmark, 195 Wn. App. 284, 297-98 (2016). Pacific NW Shooting Park Ass’n v. City of Sequim, 158 Wn.2d 342, 350 (2006). Pacific NW Shooting Park Ass’n, 158 Wn.2d at 351. White v. State, 131 Wn.2d 1, 9 (1997).

Docket No. 05-2025-DFI-00191 Page 11 of 19 8412-SCP 5.8. The Securities Act of Washington (the Act), chapter 21.20 RCW, governs the events in this case. 5.9. As a registered investment adviser representative, Mr. Felix is subject to many obligations governing his recommendations to clients. For instance, RCW 21.20.702, Suitability of recommendation—Reasonable grounds required, states that: “(1) In recommending to a customer the purchase, sale, or exchange of a security, a broker-dealer, salesperson, investment adviser, or investment adviser representative must have reasonable grounds for believing that the recommendation is suitable for the customer upon the basis of the facts, if any, disclosed by the customer as to his or her other security holdings and as to his or her financial situation and needs. (2) Before the execution of a transaction recommended to a noninstitutional customer, other than transactions with customers where investments are limited to money market mutual funds, a broker-dealer, salesperson, investment adviser, or investment adviser representative shall make reasonable efforts to obtain information concerning: (a) The customer's financial status; (b) The customer's tax status; (c) The customer's investment objectives; and (d) Such other information used or considered to be reasonable by the broker-dealer, salesperson, investment adviser, or investment adviser representative in making recommendations to the customer.” 5.10. RCW 21.20.900 states that chapter 21.20 RCW “shall be so construed as to effectuate its general purpose to make uniform the law of those states which enact it and to coordinate the interpretation and administration of this chapter with the related federal regulation.” 5.11. WAC 460-20C-220’s preamble mentions that salespeople who are registered under RCW 21.20.040, such as Felix, “must observe high standards of commercial honor and just and equitable principles of trade in conducting [. . .] business.” 5.12. WAC 460-20C-220 also defines, with examples provided, the “phrase ‘dishonest or unethical practices’ as used in RCW 21.20.110(1)(g) and as applied to salespersons includes, but is not limited to, any of the following: WAC 460-20C-220.

Docket No. 05-2025-DFI-00191 Page 12 of 19 8412-SCP . . . Recommending to a customer the purchase, sale, or exchange of any security without reasonable grounds to believe that such transaction or recommendation is suitable for the customer based upon reasonable inquiry concerning the customer's investment objectives, financial situation and needs, age, other investments, tax status, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other relevant information known by the broker-dealer; . . . Making a recommendation of any security transaction or investment strategy involving securities (including account recommendations) to a retail customer if the recommendation does not comply with Regulation Best Interest (17 C.F.R. 240.12l-1 as amended effective September 10, 2019)[.]” SEC’s Regulation Best Interest 5.13. As a registered investment adviser representative, Mr. Felix must follow the Securities and Exchange Commission’s (SEC) Regulation Best Interest (Regulation). The Regulation’s best interest obligation states that: “A broker, dealer, or a natural person who is an associated person of a broker or dealer, when making a recommendation of any securities transaction or investment strategy involving securities (including account recommendations) to a retail customer, shall act in the best interest of the retail customer at the time the recommendation is made, without placing the financial or other interest of the broker, dealer, or natural person who is an associated person of a broker or dealer making the recommendation ahead of the interest of the retail customer.” 5.14. According to the Regulation, 17 C.F.R. § 240.15l-1(a)’s best interest obligation is satisfied when (in relevant part): 5.14.1. “The broker, dealer, or natural person who is an associated person of a broker or dealer, prior to or at the time of the recommendation, provides the retail customer, in writing, full and fair disclosure of: (A) All material facts relating to the scope and terms of the relationship with the retail customer [. . .].” WAC 460-20C-220(7). WAC 460-20C-220(9). 17 C.F.R. § 240.15l-1. 17 C.F.R. § 240.15l-1(a). 17 C.F.R. § 240.15l-1(a)(2)(i)(A)(1)-(3) (the disclosure obligation).

Docket No. 05-2025-DFI-00191 Page 13 of 19 8412-SCP 5.14.2. “The broker, dealer, or natural person who is an associated person of a broker or dealer, in making the recommendation, exercises reasonable diligence, care, and skill to: (A) Understand the potential risks, rewards, and costs associated with the recommendation, and have a reasonable basis to believe that the recommendation could be in the best interest of at least some retail customers; (B) Have a reasonable basis to believe that the recommendation is in the best interest of a particular retail customer based on that retail customer’s investment profile and the potential risks, rewards, and costs associated with the recommendation and does not place the financial or other interest of the broker, dealer, or such natural person ahead of the interest of the retail customer; (C) Have a reasonable basis to believe that a series of recommended transactions, even if in the retail customer’s best interest when viewed in isolation, is not excessive and is in the retail customer’s best interest when taken together in light of the retail customer’s investment profile and does not place the financial or other interest of the broker, dealer, or such natural person making the series of recommendations ahead of the interest of the retail customer.” Potential Penalties 5.15. RCW 21.20.110(1)(g) grants the DFI Director broad enforcement powers: “(1) The director may by order deny, suspend, revoke, restrict, condition, or limit any application or registration of any broker-dealer, salesperson, investment adviser representative, or investment adviser; or censure or fine the registrant or an officer, director, partner, or person performing similar functions for a registrant; if the director finds that the order is in the public interest and that the applicant or registrant or, in the case of a broker-dealer or investment adviser, any partner, officer, director, or person performing similar functions: . . . Has engaged in dishonest or unethical practices in the securities or commodities business.” 5.16. RCW 21.20.390(1) authorizes the DFI Director to issue cease and desist orders to anyone who has engaged in practices determined to violate chapter 21.20 RCW. 17 C.F.R. § 240.15l-1(a)(2)(ii)(A)-(C) (the care obligation) (emphasis added).

Docket No. 05-2025-DFI-00191 Page 14 of 19 8412-SCP 5.17. When the DFI Director finds that it is in the public interest, they can issue an order suspending the registration of any investment adviser representative, such as Felix, who has “engaged in dishonest or unethical practices in the securities or commodities business[.] 5.18. The DFI Director can also “charge the costs, fees, and other expenses incurred by the director in the conduct of any administrative investigation, hearing, or court proceeding against any person found to be in violation of any provision of this section or any rule or order adopted under this section [chapter 21.20 RCW].” 5.19. Further, any person found during an administrative proceeding to have “knowingly or recklessly violated any provision of this chapter [21.20 RCW], or any rule or order under this chapter, may be fined, after notice and opportunity for hearing, in an amount not to exceed [$10,000] for each violation. Analysis 5.20. Here, Felix did not file a response in opposition to DFI’s MSJ. Therefore, he did not contest its allegations. When I view the evidence in the light most favorable to him, there is no genuine issue of material fact that he violated RCW 21.20.702(1) by recommending the tax-lost harvesting strategy without first making a reasonable inquiry whether it was suitable to the Client’s financial situation and needs. He did not first obtain information about the amount of gains the Client needed to offset before executing the large number of transactions which produced more than $120,000 in losses that might take up to 40 years to attain the full benefit. 5.21. Further, there is no genuine issue of material fact that Felix’s failure to first make a reasonable inquiry into the suitability of the tax-loss harvesting recommendation for the Client constitutes dishonest or unethical practices according to RCW 21.20.110(1)(g) and WAC 460-20C-220(7). He recommended the large number of transactions without first asking about the Client’s tax status or the amount of gains to be offset. This means that he made the recommendation without knowing whether it was suitable. 5.22. Finally, there is no genuine issue of material fact that Felix’s recommendation violated the Regulation Best Interest, 17 C.F.R. 240.15l-1, because he did not exercise the requisite reasonable diligence, care and skill to determine whether the recommendation was in the best interest of the Client, a retail customer. He also arguably put his own financial self-interest ahead of the RCW 21.20.110(1)(g). RCW 21.20.110(7); see also RCW 21.20.390(5). RCW 21.20.395(1) (emphasis added).

Docket No. 05-2025-DFI-00191 Page 15 of 19 8412-SCP Client’s interest in light of the fees generates from the sales. Therefore, he engaged in dishonest or unethical practices as defined by WAC 460-20C-220(9). 5.23. Accordingly, DFI’s unopposed MSJ filed October 27, 2025, is GRANTED, and the Statement of Charges and Notice of Intent to Enter an Order to Cease and Desist, to Suspend Registrations, to Impose a Fine, and to Charge Costs #S-24-3791-25-SC01 issued on January 30, 2025, is AFFIRMED. 5.24. DFI properly issued a cease and desist order to Felix pursuant to RCW 21.20.390(1) requiring him to cease and desist from committing further violations of RCW 21.20.702. 5.25. DFI properly imposed a 90-day suspension of Felix’s registration as an investment adviser representative pursuant to RCW 21.20.110(1)(g). 5.26. DFI properly ordered Felix to pay a $10,000 fine pursuant to RCW 21.20.395(1) for these violations of RCW 21.20.110 and RCW 21.20.702. 5.27. Felix must repay costs to DFI in the amount of $3,281.25 incurred during its investigation and administrative enforcement action pursuant to RCW 21.20.110(7) and RCW 21.20.390(5). 6. INITIAL ORDER IT IS HEREBY ORDERED THAT: 6.1. DFI’s Statement of Charges and Notice of Intent to Enter an Order to Cease and Desist, to Suspend Registrations, to Impose a Fine, and to Charge Costs #S-24-3791-25-SC01 dated January 30, 2025, is AFFIRMED. 6.2. DFI’s unopposed MSJ filed October 27, 2025, is GRANTED. The evidentiary hearing scheduled for January 26, 2026, and all other deadlines outlined in the case schedule, are STRICKEN. 6.3. Starting in July 2022, Felix recommended the Client sell a large number of securities as part of a tax-loss harvesting strategy without first making a reasonable inquiry to determine whether the recommendation was suitable in violation of RCW 21.20.702(1). His actions constitute dishonest or unethical practices as defined by WAC 460-20C-220(7) and WAC 460-20C-220(9) in violation of RCW 21.20.110(1)(g) and SEC Regulation Best Interest 17 C.F.R. § 240.15l-1. 6.4. Felix is ordered to cease and desist from committing further violations of RCW 21.20.702 pursuant to RCW 21.20.390(1). 6.5. Felix’s registration as an investment adviser representative is suspended for 90 days pursuant to RCW 21.20.110(1)(g).

Docket No. 05-2025-DFI-00191 Page 16 of 19 8412-SCP 6.6. Felix must pay a $10,000 fine to DFI pursuant to RCW 21.20.395(1) for his violations of RCW 21.20.110 and RCW 21.20.702. 6.7. Felix must reimburse costs to DFI in the amount of $3,281.25 related to its investigation and administrative enforcement action pursuant to RCW 21.20.110(7) and RCW 21.20.390(5). SERVED on the date of mailing. Russ Mikow Administrative Law Judge Office of Administrative Hearings CERTIFICATE OF SERVICE IS ATTACHED

Docket No. 05-2025-DFI-00191 Page 17 of 19 8412-SCP NOTICE OF APPEAL RIGHTS PETITION FOR REVIEW Either party may appeal this Initial Order to the Director of Financial Institutions by filing a Petition for Review. You must file your petition within 20 days of the day OAH mails you the Initial Order. Your Petition for Review must be sent to the: Director of Financial Institutions PO Box 41200 Olympia, WA 98504-1200 The petition is filed the day it is received by the Director of Financial Institutions. A Petition for Review must specify those conclusions of law and findings of fact that you disagree with, and must refer to the evidence in the record that supports the petition. The petitioner must serve a copy of the petition on all other parties or their representatives at the time the petition is filed. Any party may file a reply to a Petition for Review within 10 days of the date of service of the petition. The reply must be filed with the Director of Financial Institutions with a copy served on all other parties or their representatives. After the time for filing a petition for review has elapsed, the Director of Financial Institutions will issue a Final Order, subject to appeal rights that will be explained at that time. PETITION FOR RECONSIDERATION, AND MOTION FOR DISCRETIONARY REVIEW Within 10 days of the service of this order, any party may file a petition for reconsideration with the Office of Administrative Hearings at the following address: Office of Administrative Hearings P.O. Box 42489 Olympia, WA 98504-2489 253-476-6888 (phone) 253-593-2200 (fax) Revised Code of Washington (RCW) 34.05.464. Washington Administrative Code (WAC) 10-08-211. WAC 10-08-110(1). WAC 10-08-211(3). WAC 10-08-211(2). WAC 10-08-211(4).

Docket No. 05-2025-DFI-00191 Page 18 of 19 8412-SCP The petition is filed the day it is received by the Office of Administrative Hearings at the address above. Filing papers with the Office of Administrative Hearings by fax, or electronically via the participant portal, is also permitted under the conditions set forth in WAC 10-08-110. The petition for reconsideration must be served on all parties of record or their representatives at the time the petition is filed. Service by mail of the petition for reconsideration is completed when deposited in the U.S. Mail. Within 10 days of service of the written order on petition for reconsideration, either party may file a motion for discretionary review with the Director of the Department of Financial Institutions at: Personal Service/Overnight Delivery: U.S. Mail: Director of Financial Institutions Director of Financial Institutions 150 Israel Road SW PO Box 41200 Tumwater, WA 98501 Olympia, WA 98504-1200 The motion must state the specific grounds upon which relief is requested, including the specific portions of the decision to which exception is taken, and the evidence on record relied upon in support of such exception. The motion for discretionary review must be served on all parties of record or their representatives at the time the motion is filed. Service by mail of the motion for discretionary review is completed when deposited in the U.S. Mail. WAC 10-08-110(1)(a). WAC 208-08-160(3)(b). WAC 10-08-110(2)(c). WAC 208-08-160(4). WAC 208-08-160(4)(c). WAC 10-08-110(2)(c).

Docket No. 05-2025-DFI-00191 Page 19 of 19 8412-SCP CERTIFICATE OF SERVICE FOR OAH DOCKET NO. 05-2025-DFI-00191 I certify that true copies of this document were served on those listed below, from Spokane, Washington via Consolidated Mail Services by one of the following: First Class Mail, Certified Mail, or by Email. 17763 15th Ave NE Apt 204 Shoreline, WA 98155 Respondent ☒ First Class Mail ☐ Certified Mail, Return Receipt ☐ E-mail Julia Eisentrout, AAG Office of the Attorney General PO Box 40100 Olympia, WA 98504 Agency Representative ☐ First Class Mail ☐ Certified Mail, Return Receipt ☒ E-mail Julia.Eisentrout@atg.wa.gov Tina.Bert@atg.wa.gov GCEEF@atg.wa.gov Anna Harkness, Legal Examiner Department of Financial Institutions Securities Division PO Box 9033 Olympia, WA 98507 Agency Contact ☐ First Class Mail ☐ Certified Mail, Return Receipt ☒ E-mail Anna.Harkness@dfi.wa.gov Brian Guerard, Chief of Enforcement Department of Financial Institutions Securities Division PO Box 9033 Olympia, WA 98507 Agency Contact ☐ First Class Mail ☐ Certified Mail, Return Receipt ☒ E-mail Brian.Guerard@dfi.wa.gov Date: Tuesday, December 23, 2025 OFFICE OF ADMINISTRATIVE HEARINGS Tamara Roberson Legal Assistant 2