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MDS SECURITIES, LLC
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STIPULATED AGREEMENT No. ST-13-8103-S |
WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the General Statutes of Connecticut, the Connecticut Uniform Securities Act (“Act”), and Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies (“Regulations”) promulgated under the Act;
WHEREAS, on January 23, 2013, MDS Securities, LLC (“MDS”), a Pennsylvania limited liability company formed on August 25, 2011 and located at 409 Butler Road, Suite A, Kittanning, Pennsylvania 16201, filed with the Commissioner an application for registration as a broker-dealer pursuant to Sections 36b-7 and 36b-32 of the Act;
WHEREAS, prior to 2013, MDS has not been registered as a broker-dealer in any state;
WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking has conducted an investigation of MDS pursuant to Section 36b-8 of the Act;
WHEREAS, MDS’ application for broker-dealer registration indicated that its President, Secretary, and Managing Member and control person Jason Christopher Knapp (CRD No. 6057659) (“Knapp”) and its Chief Compliance Officer James Peter Curtis (CRD No. 1012223) (“Curtis”) would be the only active officers of MDS who exercised supervisory authority over MDS’ securities activities;
WHEREAS, MDS indicated in the business plan accompanying its application that its business activities would be confined to selling gas or oil interests, private placements of securities, tax shelters or limited partnerships in primary distributions;
WHEREAS, Curtis has been engaged in the securities business as an agent, spending a major portion of his working time in the securities business for at least three of the seven calendar years preceding the date of MDS’ broker-dealer application;
WHEREAS, Knapp, the firm’s President and control person, has not been engaged in the securities business as a broker-dealer or agent, spending a major portion of his working time in the securities business for at least three of the seven calendar years preceding the date of MDS’ broker-dealer application;
WHEREAS, Curtis and Knapp have no reported disciplinary history and have each passed the Series 7, 24, and 63 examinations;
WHEREAS, Section 36b-31-7a of the Regulations provides, in part, that:
| (a) | Each applicant for broker-dealer registration shall (1) have been engaged in the securities business as a broker-dealer or agent spending a major portion of his working time in the securities business for at least three years within the seven calendar years preceding the date of the application or (2) be otherwise qualified by knowledge and experience as determined by the commissioner. An attorney who has had at least three years of substantial experience in the practice of securities law, an accountant who has had at least three years of substantial experience in the sale of securities and any other person who can demonstrate equivalent knowledge and experience in the sale of securities may be deemed to have sufficient experience for purposes of this subsection. | ||
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| (d) | Persons acting as managers shall meet the experience requirements of subsection (a) of this section. For purposes of this subsection, ‘manager’ means . . . any person who supervises sales personnel either directly or indirectly . . . . |
WHEREAS, the Division believes that due to Knapp’s lack of securities-related experience, MDS has not fulfilled the requirements set forth in subsections (a) and (d) of Section 36b-31-7a of the Regulations;
WHEREAS, as a result of such investigation, the Division also believes that a basis exists under Section 36b-15(a)(2)(J) of the Act for restricting or imposing conditions on the securities activities that MDS may perform in this state;
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 . . . activities that an applicant . . . 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 partner, officer, or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the broker-dealer . . . (J) is not qualified on the basis of such factors as training, experience, and knowledge of the securities business, except as otherwise provided in subsection (b) of this section; |
WHEREAS, MDS represents through its execution of this Stipulated Agreement Conditioning Registration as a Broker-dealer (“Stipulated Agreement”) that it has read and has familiarized itself with the Act and the Regulations thereunder, particularly those provisions governing the compliance responsibilities of broker-dealers;
WHEREAS, MDS through its execution of this Stipulated Agreement, voluntarily waives any rights it may have to seek judicial review or otherwise challenge or contest the terms and conditions of this Stipulated Agreement;
AND WHEREAS, the issuance of this Stipulated Agreement 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.
NOW, THEREFORE, THE PARTIES HERETO DO AGREE AS FOLLOWS:
| 1. |
For two years, commencing on the date this Stipulated Agreement is signed by the Commissioner, MDS shall not engage in retail securities brokerage activities in or from Connecticut in connection with any primary or secondary distribution, but shall effect transactions in this state exclusively with or through other broker-dealers that are registered under the Act; |
| 2. | For two years, commencing on the date this Stipulated Agreement is signed by the Commissioner, and subject to paragraph (1) above, when MDS serves as dealer manager in an offering made pursuant to federal Regulation D, sales of the securities in or from Connecticut shall be restricted to individuals or entities who qualify as accredited investors within the meaning of Rule 501(a) of Regulation D, 17 C.F.R. § 230.501(a) promulgated under the Securities Act of 1933; |
| 3. |
For two years, commencing on the date this Stipulated Agreement is signed by the Commissioner, and subject to paragraph (1) above, when MDS serves as dealer manager in a public offering of oil and gas securities, MDS shall ensure that Connecticut purchasers of such securities who are natural persons, including, without limitation, general partners and limited partners, satisfy at least one of the following suitability criteria prior to purchase: (a) An individual net worth (or a joint net worth with spouse) of $330,000 or more, without regard to the investment being purchased and exclusive of home, home furnishings and automobiles, and a combined gross income of $150,000 or more for the current year and for each of the two preceding years; or (b) an individual net worth (or a joint net worth with spouse) in excess of $1 million, including home, home furnishings and automobiles; or (c) an individual net worth (or a joint net worth with spouse) in excess of $750,000, exclusive of home, home furnishings and automobiles; or (d) an annual “gross income” (or annual combined gross income with spouse) in excess of $200,000 in the current year and each of the two preceding years. For purposes of this subparagraph (d), “gross income” shall have the same meaning as in Section 61 of the Internal Revenue Code, 26 U.S.C. § 61; |
| 4. | For two years, commencing on the date this Stipulated Agreement is signed by the Commissioner, MDS shall disclose the limited nature of its Connecticut broker-dealer registration in the disclosure documents for any offering in which MDS is a participant; |
| 5. |
For two years, commencing on the date this Stipulated Agreement is signed by the Commissioner, MDS and/or its successors in interest shall notify the Division promptly regarding any material disciplinary actions involving the firm or any of its officers, directors, control persons, agents, employees or representatives, by (a) filing the appropriate amendments to the firm’s Form BD and/or to the affected individual’s Form U4 or Form U5, as required by rules of the Securities and Exchange Commission, FINRA, and/or provisions of the Act and the Regulations; and 2) concurrently filing a copy of any sales-related securities complaints and any dispositional documents directly with the Division Director; |
| 6. | MDS shall establish, maintain, and implement such supervisory procedures and monitoring practices as are necessary to ensure that it adheres to the restrictions and conditions imposed by paragraphs 1 through 5 above; |
| 7. | Nothing in this Stipulated Agreement shall preclude MDS from applying in writing to the Division Director for relief from one or more of the restrictions in paragraphs 1 through 6 above prior to the expiration of the two year period applicable to such restrictions, if MDS provides documentation that it has retained additional qualified individuals to serve as active officers or managers of MDS and MDS is otherwise in compliance with applicable law. The grant of such relief shall be in the discretion of the Division Director, who may consider such additional factors as disciplinary events involving MDS or its principals occurring subsequent to the execution of this Stipulated Agreement. As used in this paragraph, “qualified” shall mean meeting the experience requirements in Section 36b-31-7a of the Regulations; |
| 8. | Execution of this Stipulated Agreement by the Commissioner is without prejudice to the right of the Commissioner to take enforcement action against MDS based upon a violation of this Stipulated Agreement or the basis for its entry if the Commissioner determines that compliance is not being observed with the terms hereof or if any representation made by or on behalf of MDS in connection with its application for registration as a broker-dealer is subsequently discovered to be untrue; |
| 9. | Effective on the date this Stipulated Agreement is executed by the Commissioner, the name “MDS Securities, LLC” shall be entered on the Register of Broker-dealers pursuant to Section 36b-8 of the Act; and |
| 10. | This Stipulated Agreement shall become binding when executed by the parties hereto. |
IN WITNESS WHEREOF, the undersigned have executed this Stipulated Agreement Conditioning Registration as a Broker-dealer on the dates indicated.
| Dated at Hartford, Connecticut, | ______/s/____________ | |
| this 18th day of July 2013. | Howard F. Pitkin | |
| Banking Commissioner |
I, Jason Christopher Knapp, state on behalf of MDS Securities, LLC, that I have read the foregoing Stipulated Agreement Conditioning Registration as a Broker-dealer; that I know and fully understand its contents; that I am authorized to execute this Stipulated Agreement Conditioning Registration as a Broker-dealer on behalf of MDS Securities, LLC, and that MDS Securities, LLC agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein.
| MDS Securities, LLC | |
| By: | ______/s/________________ |
| Jason Christopher Knapp | |
| President, CEO, Sole Director |
State of: Pennsylvania
On this the 12th day of July 2013, before me, Mary J. May, the undersigned officer, personally appeared Jason Christopher Knapp, who acknowledged himself to be the President, CEO, and Sole Director of MDS Securities, LLC, and that he, as President, CEO, and Sole Director, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the limited liability company by himself as President, CEO, and Sole Director.
_____/s/________________________
Notary Public
Date Commission Expires: 2/08/2017