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BASIC INVESTORS INC. * * * * * * * * * * * * * * * * * * * |
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CONSENT ORDER CO-2008-7534-S |
PRELIMINARY STATEMENT
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, Basic Investors Inc. (“Basic”) is a broker-dealer registered in Connecticut under the Act since April 4, 2000, and has its principal office located at 510 Broadhollow Road, Suite 306, Melville, New York;
WHEREAS, the Commissioner, through the Securities and Business Investments Division (the “Division”) of the Department of Banking, conducted an examination of Basic’s records pursuant to Section 36b-14(d) of the Act and 36b-31-14f of the Regulations, and a related investigation under Section 36b-26 of the Act to determine whether Basic had violated, was violating or was about to violate any provision of the Act or any regulation or order under the Act (the “Investigation and Examination”);
WHEREAS, as a result of the Investigation and Examination, the Division obtained evidence that, from at least October 2005, 1) Basic charged its Connecticut customers a per transaction fee in addition to a commission and/or markup or markdown, which fee was categorized as “Other” on customer trade confirmations and which ranged from $4.50 to $49.50 and varied depending on which Basic agent effected the transaction; and 2) the “Other” fee charged by Basic, an introducing broker-dealer, included the ticket charge assessed by Basic’s clearing firm for execution of the trade, postage expense, and profit to Basic and/or its affected agents;
WHEREAS, Basic has provided the Division with proof that 1) it has reimbursed its Connecticut customers the difference between the amount of the “Other” fee paid by its Connecticut customers for each transaction and the actual amount of Basic’s ticket and clearing charge and the postage fee assessed by its clearing firm; 2) it has reimbursed its Connecticut customers approximately $9,000 for the “Other” fee payment on approximately 400 transactions which had been executed by its agents since October 2005; and 3) it had sent correspondence to its Connecticut customers who received the reimbursement explaining that the “Other” fee reimbursement was a result of an examination conducted by the Division;
WHEREAS, through its execution of this Consent Order, Basic represents that it has worked with its clearing firm to amend customer trade confirmations to provide Basic’s customers with a detailed breakdown of the “Other” fee appearing on the trade confirmations;
WHEREAS, the foregoing conduct would support the initiation of administrative proceedings under Section 36b-15 of the Act to suspend or revoke Basic’s broker-dealer registration under the Act or to restrict or impose conditions on the securities activities that the firm may perform in this state; and/or proceedings under Section 36b-27 of the Act seeking the entry of an order to cease and desist and/or an order imposing an administrative fine against Basic;
WHEREAS, an administrative proceeding under Sections 36b-15 and 36b-27 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 Chapter 54 of the Connecticut General Statutes provides that"[u]nless precluded by law, a contested case may be resolved by stipulation, agreed settlement, or consent order or by the default of a party";
WHEREAS, Section 36b-31(a) of the Act provides, in part, that: "The Commissioner may from time to time make, amend and rescind such ... orders as are necessary to carry out the provisions of Sections 36b-2 to 36b-33, inclusive [of the Connecticut Uniform Securities Act]";
WHEREAS, without holding a hearing and without trial or adjudication of any issue of fact or law, and prior to the initiation of any formal proceeding, the Commissioner and Basic reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
WHEREAS, Basic, without admitting or denying any of the Commissioner’s allegations or findings, expressly consents to the Commissioner’s jurisdiction under the Act and to the terms of this Consent Order; and
WHEREAS, Basic, through its execution of this Consent Order, represents and agrees that none of the violations alleged in this Consent Order shall occur in the future;
CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, Basic, through its execution of this Consent Order, voluntarily waives the following rights:
| 1. |
To receive prior written notice within the meaning of Sections 36b-15(f), 36b-27(a), 36b-27(d) and 4-177(b) of the Connecticut General Statutes; |
| 2. |
To present evidence and argument and to otherwise avail itself of 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; |
CONSENT TO ENTRY OF FINDINGS
WHEREAS, Basic, through its execution of this Consent Order, accepts and consents to the entry of the following Findings by the Commissioner:
| 1. | The entry of this Consent Order is appropriate, in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act; |
| 2. | From January 24, 2007 to October 24, 2007, Basic violated Section 36b-6(b) of the Act by employing as an agent at least one individual who effected at least one transaction for a Connecticut customer at a time when such individual was not registered as an agent of Basic under the Act; |
| 3. | Between November 1, 2005 and April 18, 2007, Basic violated Section 36b-16 of the Act by offering and selling securities to one or more Connecticut residents at a time when such securities were not registered under Sections 36b-17, 36b-18 or 36b-19 of the Act nor the subject of an exemptive claim or claim of covered security status under Section 36b-21 of the Act; |
| 4. | Basic, by failing to itemize and disclose to its Connecticut clients the fee classified as “Other” on the trade confirmations, which fee ranged from $4.50 to $49.50 per transaction and varied depending on which Basic agent effected the transaction, engaged in conduct which would support proceedings under Section 36b-15(a)(2)(H) of the Act; |
| 5. | In contravention of Section 36b-31-6f(b) of the Regulations, Basic failed to establish, enforce, and maintain a system for supervising the activities of its agents that was reasonably designed to achieve compliance with applicable securities laws and regulations; |
CONSENT TO ENTRY OF SANCTIONS
WHEREAS, Basic, through its execution of this Consent Order, consents to the Commissioner issuing an order imposing on it the following sanctions:
| 1. | Basic, its representatives, agents, employees, affiliates, assigns, successors in interest, and those persons in active concert or participation with them shall cease and desist from engaging in conduct constituting or which would constitute a violation of the Act or any regulation or order under the Act, either directly or through any organizational or other device; |
| 2. | No later than the date this Consent Order is entered by the Commissioner, Basic shall remit to the Department of Banking, via certified bank check, payable to "Treasurer, State of Connecticut", the sum of twenty-one thousand five hundred dollars ($21,500) as an administrative fine; and |
| 3. | Basic shall reimburse the Department of Banking for the costs associated with one or more future examinations of any of Basic’s offices to be conducted by the Division within twenty-four (24) months following the Commissioner’s entry of this Consent Order, such amount not to exceed three thousand five hundred dollars ($3,500) in total. Amounts due under this paragraph shall be remitted to the Commissioner via check, payable to “Treasurer, State of Connecticut,” within thirty (30) days following the completion of the examination(s); |
CONSENT ORDER
NOW THEREFORE, the Commissioner enters the following:
| 1. |
The Sanctions 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 action against Basic based upon a violation of this Consent Order or the matters underlying its entry if the Commissioner determines that compliance with the terms herein is not being observed or if any representations made by Basic and reflected herein are subsequently discovered to be untrue; and |
| 3. | This Consent Order shall become final when entered. |
________/s/_________
Howard F. Pitkin
Banking Commissioner
So ordered at Hartford, Connecticut
this 22nd day of September 2008.
CONSENT TO ENTRY OF ORDER
I, Thomas W. Laundrie, state on behalf of Basic Investors, Inc. that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of Basic Investors, Inc., that Basic Investors, Inc. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Basic Investors, Inc. voluntarily consents to the entry of this Consent Order, expressly waiving any right to a hearing on the matters described herein.
Basic Investors, Inc.
By
________/s/_______________
Thomas W. Laundrie
President
On this 9th day of September 2008, personally appeared Thomas W. Laundrie, signer of the foregoing Consent Order, who, being duly sworn, did acknowledge to me that he was authorized to execute the same on behalf of Basic Investors, Inc., a corporation, and acknowledged the same to be his free act and deed, before me.
____________/s/___________________
Notary Public
Date Commission Expires: Nov. 13, 2009