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ISRAEL A. ENGLANDER & CO., INC.
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CONSENT ORDER No. CO-09-7494-S |
WHEREAS, the Banking Commissioner (the “Commissioner”) is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (the “Act”), and Sections 36b-31-2 et seq. of the Regulations of Connecticut State Agencies promulgated under the Act (the “Regulations”);
WHEREAS, Israel A. Englander & Co., Inc. (“IAE”), a broker-dealer registered with the Securities and Exchange Commission (“SEC”) since August 28, 1985 and located at 666 Fifth Avenue, 9th Floor, New York, New York, filed with the Commissioner an application for registration as a broker-dealer pursuant to Sections 36b-7 and 36b-32 of the Act;
WHEREAS, Israel Alexander Englander (CRD number 1267326) is a vice-president and a control person of IAE;
WHEREAS, the Commissioner, through the Securities and Business Investments Division (the “Division”) of the Department of Banking has conducted an investigation of IAE pursuant to Section 36b-8 of the Act;
WHEREAS, (1) on April 27, 2009, the Financial Industry Regulatory Authority (“FINRA”) censured IAE and fined it $17,500 for late reporting of last sale reports and for supervisory deficiencies concerning trade reporting (Acceptance, Waiver and Consent; Case No. 2008013099001); and (2) on August 18, 2008, FINRA censured and fined the firm $7,500 for failing to submit reportable order events to the Order Audit Trail System in a timely manner (Acceptance, Waiver and Consent; Case No. 20060063527-01);
WHEREAS, on February 25, 2008, the American Stock Exchange censured the firm, fined it $100,000 and directed it to revise its written supervisory procedures (Case No. AMXC08005) following allegations that the firm entered equity and options orders into the Exchange’s Booth Automated Routing System after the execution of the order;
WHEREAS, on August 7, 2007, the Chicago Board Options Exchange (“CBOE”) censured IAE and fined it $35,000 (Case No. 07-0031) for improperly allowing an IAE floor broker to misrepresent a proprietary account order as being executed on behalf of a customer;
WHEREAS, on December 1, 2005, Israel Alexander Englander consented to the entry of a cease and desist order and the imposition of a $30 million civil money penalty by the Securities and Exchange Commission (Release No. 33-8639; Administrative Proceeding File No. 3-12116) following allegations that he wilfully violated the antifraud provisions in Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder by engaging in improper market timing trades of mutual fund shares and structuring trading so as to avoid detection by the affected mutual funds;
WHEREAS, on October 21, 2002, the American Stock Exchange censured IAE and fined it $160,000 (Case No. 02-01) for failing to appropriately identify orders completely and accurately, and for failing to establish adequate supervisory procedures;
WHEREAS, on December 20, 2000, CBOE fined the firm $20,000 (File No. 00-0029) following allegations that the firm caused another floor broker to trade a solicited order without giving other members of the trading floor an opportunity to assert priority over the solicited order;
WHEREAS, Section 36b-15(a) of the Act provides, in part, that: “The commissioner may, by order, deny . . . any registration or, by order, restrict or impose conditions on the securities or investment advisory activities that an applicant or registrant may perform in this state if the commissioner finds that (1) the order is in the public interest, and (2) the applicant . . . or in the case of a broker-dealer . . . any . . . officer, or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the broker-dealer . . . (F) is the subject of any of the following sanctions that are currently effective or were imposed within the past ten years . . . (iii) a suspension, expulsion or other sanction issued by a national securities exchange or other self-regulatory organization registered under federal laws administered by the Securities and Exchange Commission or the Commodity Futures Trading Commission if the effect of the sanction has not been stayed or overturned by appeal or otherwise . . . [or] (v) a cease and desist order entered by the Securities and Exchange Commission . . . . ”;
WHEREAS, the Commissioner believes, as a result of such investigation, that a basis exists under Sections 36b-15(a)(2)(F)(iii) and 36b-15(a)(2)(F)(v) of the Act for denying IAE’s registration under the Act or for restricting or imposing conditions on the securities activities that IAE may perform in this state;
WHEREAS, an administrative proceeding initiated under Section 36b-15 of the Act would constitute a “contested case” within the meaning of Section 4-166(2) of the Connecticut General Statutes;
WHEREAS, Section 4-177(c) of the Connecticut General Statutes provides, in relevant part, that “[u]nless precluded by law, a contested case may be resolved by . . . consent order”;
WHEREAS, Section 36b-31(a) of the Act, provides, in relevant part, that “[t]he commissioner may from time to time make . . . such . . . orders as are necessary to carry out the provisions of sections 36b-2 to 36b-33, inclusive”;
WHEREAS, IAE, through its legal counsel and in conjunction with its broker-dealer registration application, has represented and undertaken to the Commissioner in writing that it does not do a general retail business, that it does not have individual retail clients, and that it does not solicit, advertise or canvas for individual retail clients;
CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, IAE through its execution of this Consent Order Conditioning Registration as a Broker-dealer (the “Consent Order”), voluntarily waives the following rights:
| 1. | To receive prior written notice within the meaning of Sections 36b-15(f) and 4-177(b) of the Connecticut General Statutes; |
| 2. | To present evidence and argument and to otherwise avail itself of Section 36b-15(f) of the Act and Section 4-177c(a) of the Connecticut General Statutes; |
| 3. | To present its position in a hearing in which it is represented by counsel; |
| 4. | To have a written record of the hearing made and a written decision issued by a hearing officer; and |
| 5. | To seek judicial review of, or otherwise challenge or contest, the matters described herein, including the validity of this Consent Order. |
ACKNOWLEDGEMENT OF THE ENTRY OF FINDINGS
WHEREAS, IAE, through its execution of this Consent Order, and without admitting or denying that the Commissioner would have a basis for initiating administrative proceedings under Section 36b-15 of the Act, accepts and consents to the entry of the following findings by the Commissioner:
| 1. | The entry of this Consent Order is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of the Act. |
| 2. | The sanctions imposed against IAE and Israel Alexander Englander as more fully described herein provide a basis for denying IAE’s registration as a broker-dealer in Connecticut or for restricting or imposing conditions on the securities activities that IAE may perform in this state pursuant to Sections 36b-15(a)(2)(F)(iii) and 36b-15(a)(2)(F)(v) of the Act; |
CONSENT TO ENTRY OF ACTIVITY RESTRICTIONS
WHEREAS, IAE, through its execution of this Consent Order, consents to the Commissioner's entry of a Consent Order imposing on it the following restrictions:
| 1. | Absent the express written consent of the Division Director, IAE shall not transact securities business in or from Connecticut for the account of 1) any natural person; or 2) any entity that does not qualify as an “accredited investor” as that term is defined in Rule 501(a) of federal Regulation D, 17 C.F.R. Section 230.501(a). IAE shall maintain records, open to Division inspection, documenting its due diligence in establishing an entity’s status as an “accredited investor”; |
| 2. | IAE shall ensure that, during the term of his association with IAE, Israel Alexander Englander shall refrain from (A) supervising or training any broker-dealer agents with respect to securities business transacted in or from Connecticut; (B) acting as a finder for compensation, receiving or splitting commissions or similar remuneration and/or receiving referral fees in conjunction with the offer, sale or purchase of securities effected in or from Connecticut; and (C) acting in any capacity that would require Israel Alexander Englander to be registered under the Act; |
| 3. | For three years, commencing on the date this Consent Order is entered by the Commissioner, IAE shall notify the Division Director in writing 1) within five business days following any change in IAE’s officers, control persons or individuals having responsibility for supervising the firm’s securities operations in or from Connecticut; and 2) within five business days following the commencement or termination of business activity at any Connecticut office, regardless of whether such office constitutes a “branch office” as defined in Section 36b-3(4) of the Act. The notice concerning Connecticut office activity shall include the address and telephone number of the location, the supervisor assigned to the location and the names of all individuals who act, have acted or will act as agents from the location. Such notice may be provided electronically through the Central Registration Depository System unless the changes and information relate to Connecticut supervisory personnel or Connecticut offices that do not fall within, or are specifically excluded from, the definition of “branch office” in Section 36b-3(4) of the Act; |
| 4. | For three years, commencing on the date this Consent Order is entered by the Commissioner, IAE and/or its successors in interest shall notify the Division Director promptly concerning any reportable disciplinary items, including, without limitation, pending regulatory investigations and inquiries initiated against IAE or any of its officers, directors, control persons, agents, employees or representatives. IAE shall provide such notification by filing the appropriate amendments to the firm’s Form BD or the Form U-4 and/or Form U-5 of the affected individual(s) as required by rules of the Securities and Exchange Commission, the Financial Industry Regulatory Authority (“FINRA”), and/or the provisions of the Act and the Regulations. Concurrently with such notification, IAE shall file with the Division Director a copy of any sales-related securities complaints or other reportable actions involving the firm, its successors in interest or any of its officers, directors, control persons, agents, employees or representatives. In addition, IAE shall concurrently file with the Division Director a copy of any securities-related written reprimands, censures or warnings issued by the firm to its officers, directors, control persons, agents, employees or representatives; |
| 5. | IAE, its officers, directors, control persons, agents, employees, representatives and successors in interest shall refrain from engaging in conduct constituting or which would constitute a violation of the Act or any regulation or order under the Act. |
| 6. | IAE shall establish, maintain, and implement such supervisory procedures and monitoring practices as are necessary to ensure that it adheres to the restrictions imposed in this Consent Order. On the first anniversary hereof but in no event later than December 31, 2010, IAE shall submit to the Division Director a written certification that IAE, its officers, directors, agents and representatives are in all respects in compliance with the terms of this Consent Order; |
| 7. | IAE shall keep its books and records open to inspection by the Commissioner as required by Section 36b-14 of the Act and Section 36b-31-14f of the Regulations thereunder; |
| 8. | IAE shall reimburse the Department of Banking for the costs associated with one or more future examinations of any of its offices by the Division, such amount not to exceed two thousand five hundred dollars ($2,500) in total. Such examination(s) shall be conducted in accordance with state travel regulations within twenty-four (24) months following the Commissioner's entry of this Consent Order. Amounts due under this paragraph shall be made payable to “Treasurer, State of Connecticut” and shall be remitted within 30 days following completion of the respective examination; |
| 9. | Nothing in this Consent Order shall preclude IAE, upon a showing of good cause, from applying in writing for relief from any of the provisions of this Consent Order after twenty four (24) months have elapsed from the entry of this Consent Order. The grant of such relief shall be in the sole discretion of the Division Director; |
CONSENT ORDER
NOW THEREFORE, the Commissioner enters the following:
| 1. | The Findings and Activity Restrictions set forth above be and are hereby entered; |
| 2. | Entry of this Consent Order by the Commissioner is without prejudice to the right of the Commissioner to take enforcement against IAE, its officers, directors, control persons, agents, employees, representatives or successors in interest based upon a violation of this Conditioning Consent Order or the matters underlying its entry, if the Commissioner determines that compliance is not being observed with the terms hereof or if any representation or undertaking made by IAE in connection with its application for registration is subsequently discovered to be untrue or unfulfilled; |
| 3. | Entry of this Consent Order shall not be deemed a waiver or estoppel on the part of the Commissioner from proceeding in individual actions against any person who may have violated the Act or proceeding with respect to any transaction not currently known to the Commissioner at the time this Consent Order is entered; |
| 4. | Contemporaneously with the entry of this Consent Order by the Commissioner, the name “Israel A. Englander & Co., Inc.” shall be entered on the register of broker-dealers in accordance with Section 36b-8 of the Act; and |
| 5. | This Consent Order shall become final when entered. |
________/s/_________
Howard F. Pitkin
Banking Commissioner
So ordered at Hartford, Connecticut
this 16th day of November 2009.
CONSENT TO ENTRY OF ORDER
I, Stephen R. Tobias, state on behalf of Israel A. Englander & Co., Inc. that I have read the foregoing Consent Order Conditioning Registration as a Broker-dealer; that I know and fully understand its contents; that I am authorized to execute this Consent Order Conditioning Registration as a Broker-dealer on behalf of Israel A. Englander & Co., Inc.; that Israel A. Englander & Co., Inc. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Israel A. Englander & Co., Inc. consents to the entry of this Consent Order Conditioning Registration as a Broker-dealer, expressly waiving any right to a hearing on the matters described herein.
Israel A. Englander & Co., Inc.
By _________/s/_________________
Stephen R. Tobias
President
On this 10 day of November, 2009, personally appeared Stephen R. Tobias, signer of the foregoing Consent Order Conditioning Registration as a Broker-dealer, who, being duly sworn, did acknowledge to me that he was authorized to execute the same on behalf of Israel A. Englander & Co., Inc., a corporation, and acknowledged the same to be his free act and deed, before me.
____________/s/__________________
Notary Public
My Commission Expires: Nov. 28, 2013