| * * * * * * * * * * * * * * * * * * *
DIGI-PIN, LLC f/k/a DIGIPIN LLC * * * * * * * * * * * * * * * * * * * |
* * * * * * * * * |
CONSENT ORDER No. CO-08-7321-S |
PRELIMINARY STATEMENT
WHEREAS, the Banking 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 (the “Regulations”) promulgated under the Act;
WHEREAS, Digi-Pin, LLC f/k/a Digipin LLC (“Digi-Pin”) of 2415 Boston Post Road, Guilford, Connecticut is an issuer of securities, specifically limited liability company interests (“LLC Interests”) and promissory notes (“Notes”);and is engaged in the business of producing buttons with affixed compact discs;
WHEREAS, Digi-Pin was formed in September 2003;
WHEREAS, the Commissioner, through the Securities and Business Investments Division of the Department of Banking (the “Division”), has conducted an investigation pursuant to Section 36b-26 of the Act into the activities of Digi-Pin, its managing members, agents and representatives to ascertain whether they, or any of them, have violated or are about to violate any provision of the Act or any regulation or order under the Act, and to aid in the enforcement of the Act;
WHEREAS the Commissioner acknowledges that Digi-Pin and its managing members cooperated with the Division in providing requested information and documents in conjunction with such investigation;
WHEREAS, the Commissioner ascertained, as a result of such investigation that 1) at various times between 2004 and 2006, sales of the LLC Interests were effected by the issuer and certain selling security holders at a time when the LLC Interests were not registered under the Act nor the subject of an exemptive filing or a filing claiming covered security status; 2) at various times between 2003 and 2006, Digi-Pin sold the Notes in and from Connecticut at a time when the Notes were not registered under the Act nor the subject of an exemptive filing or a filing claiming covered security status; and 3) in June 2006, Digi-Pin solicited prospective investors by placing an advertisement in a Connecticut newspaper;
WHEREAS, Digi-Pin has represented to the Division that 1) since 2006, it has not made any additional sales of the LLC Interests or the Notes; 2) the sales of LLC Interests and Notes that did occur were confined to the families and friends of Digi-Pin’s managing members; 3) there have been no investor complaints with respect to sales of the LLC Interests or the Notes; 4) Digi-Pin has no future plans to raise capital through the offering of securities; 5) the majority of Digi-Pin’s note holders elected to convert their notes to LLC Interests of the issuer, and Digi-Pin has honored such election; and 6) Digi-Pin repurchased the securities of the one remaining non-converting note holder for $11,200;
WHEREAS, Digi-Pin neither admits nor denies any of the Commissioner’s allegations, but expressly consents to the Commissioner’s jurisdiction in this matter and to the entry of the sanctions in this Consent Order;
WHEREAS, Section 36b-27 of the Act authorizes the Commissioner to enter an order to cease and desist and to impose a fine after granting Digi-Pin an opportunity for a hearing;
WHEREAS, Section 36b-16 of the Act provides that: “No person shall offer or sell any security in this state unless (1) it is registered under sections 36b-2 to 36b-33, inclusive, (2) the security or transaction is exempted under section 36b-21, or (3) the security is a covered security provided such person complies with any applicable requirements in subsections (c), (d) and (e) of section 36b-21”;
WHEREAS an administrative proceeding initiated under Section 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, the Commissioner finds that 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;
CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, Digi-Pin, through its execution of this Consent Order, voluntarily waives the following rights:
| 1. |
To receive prior written notice within the meaning of Sections 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; |
FINDINGS OF THE COMMISSIONER AS TO EVIDENTIARY SUFFICIENCY TO INITIATE ADMINISTRATIVE PROCEEDINGS
WHEREAS, the Commissioner finds that sufficient grounds would exist to initiate administrative proceedings against Digi-Pin under Section 36b-27 of the Act, based on the following, all of which are more fully described above, after granting Digi-Pin an opportunity for a hearing:
| 1. | At various times commencing in 2003 and concluding in 2006, Digi-Pin and its managing members violated Section 36b-16 of the Act by selling LLC Interests and Notes in or from Connecticut at a time when such LLC Interests and Notes were not registered under the Act nor the subject of an exemptive filing or a filed claim of covered security status; and |
| 2. | In June 2006, Digi-Pin, violated Section 36b-16 of the Act by offering securities to the public via an advertisement and general solicitation appearing in a Connecticut newspaper. At the time of such solicitation, the securities of Digi-Pin were not registered under the Act nor the subject of an exemptive filing or a filed claim of covered security status; |
CONSENT TO ENTRY OF SANCTIONS AND REMEDIAL MEASURES
WHEREAS, Digi-Pin, through its execution of this Consent Order, consents to the Commissioner issuing an order imposing on it the following sanctions and remedial measures:
| 1. | Digi-Pin, its managing members, agents, employees, representatives and successors in interest shall not, directly or indirectly, under any name or names or through any corporate or other device, solicit or accept funds for investment purposes from public or private investors within or from Connecticut without (a) consulting with legal counsel experienced in state securities law as to the applicability of, and compliance with, the securities laws of the state; and (b) notifying the Division in writing of such proposed activities at least thirty days prior to such solicitation or acceptance of funds, whichever first occurs. This Consent Order and the matters underlying its entry shall not, in and of themselves, operate to invoke the disqualification in Section 36b-31-21b-9b(f) of the Regulations, provided that Digi-Pin complies with the provisions of paragraph 1.(a) hereof. Nothing in this paragraph shall preclude the Commissioner from applying such disqualification based on disciplinary events occurring subsequent to the entry of this Consent Order; |
| 2. | If Digi-Pin or its successors in interest should make future securities sales to offerees or purchasers qualifying as “accredited investors” within the meaning of Section 501(a) of Regulation D under the Securities Act of 1933, Digi-Pin or its successors in interest shall maintain records, open to the Division upon request, documenting the issuer’s due diligence in establishing investor suitability; |
| 3. | Digi-Pin, its managing members, agents, employees, representatives and successors in interest shall refrain, directly or indirectly, from engaging in conduct constituting or which would constitute a violation of the Act or any regulation or order under the Act, including, without limitation, offering or selling securities absent compliance with Section 36b-16 of the Act; |
| 4. |
Nothing in this Consent Order shall preclude Digi-Pin or its successors in interest, upon a showing of good cause, from applying in writing for relief from the provisions of paragraph 1. of these Sanctions and Remedial Measures after five (5) years have elapsed from the entry of this Consent Order. The grant of such relief shall be in the sole discretion of the Commissioner; |
ORDER
THE COMMISSIONER HEREBY ORDERS THAT:
| 1. |
The Sanctions and Remedial Measures 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 Digi-Pin, its managing members, agents, employees, representatives or successors in interest based upon a violation of this 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 made by or on behalf of Digi-Pin and reflected herein is subsequently determined to be untrue; and |
| 3. | This Consent Order shall become final when issued. |
________/s/_________
Howard F. Pitkin
Banking Commissioner
So ordered at Hartford, Connecticut
this 12th day of September 2008.
CONSENT TO ENTRY OF ORDER
I, Al Leone, state on behalf of Digi-Pin, LLC, 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 Digi-Pin, LLC; that Digi-Pin, LLC agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Digi-Pin, LLC voluntarily consents to the entry of this Consent Order expressly waiving any rights it may have to a hearing on the matters described herein.
Digi-Pin, LLC
By
________/s/_______________
Al Leone
Manager
On this 28th day of August 2008, personally appeared Al Leone, 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 Digi-Pin, LLC, a limited partnership, and acknowledged the same to be his free act and deed, before me.
____________/s/___________________
Commissioner of the Superior Court