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IN THE MATTER OF: ("Respondent") * * * * * * * * * * * * * * * * * * |
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ORDER TO CEASE AND DESIST ORDER TO MAKE RESTITUTION AND NOTICE OF RIGHT TO HEARING DOCKET NO. CRF-15-8175-S |
I. PRELIMINARY STATEMENT
| 1. | 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. |
| 2. | Pursuant to Section 36b-26(a) of the Act, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, has conducted an investigation into the activities of Respondent to determine if Respondent has violated, is violating or is about to violate provisions of the Act or Regulations (“Investigation”). |
| 3. |
As a result of the Investigation, the Commissioner has reason to believe that Respondent has violated certain provisions of the Act. |
| 4. | As a result of the Investigation, the Commissioner has the authority to issue a cease and desist order against Respondent pursuant to Section 36b-27(a) of the Act. |
| 5. |
As a result of the Investigation, the Commissioner has the authority to order that Respondent make restitution pursuant to Section 36b-27(b) of the Act. |
| 6. | As a result of the Investigation, the Commissioner has the authority to impose a fine upon Respondent pursuant to Section 36b-27(d) of the Act. |
II. RESPONDENT
| 7. |
James E. Neilsen (“Neilsen”) is an individual whose address last known to the Commissioner is 121 Murray Street, Norwalk, Connecticut 06851. Neilsen was previously registered under the Act as a broker-dealer agent of Tradition Asiel Securities Inc. (“Tradition”) (CRD No. 28269) from December 17, 2004 to July 2, 2007, and Sound Securities, LLC (“Sound Securities”) (CRD No. 122677) from August 7, 2008 to December 9, 2009. In addition, Neilsen has had a qualified Certified Public Accountant Certificate with the Connecticut State Board of Accountancy (CPAC No. 0006559) since October 9, 1986. At all times relevant hereto, Neilsen performed tax and accounting services as a sole proprietorship from his office at 124 East Avenue, Norwalk, Connecticut 06851. |
| 8. | Neilsen has been doing business as Neilsen Financial Services since approximately September 2011. |
III. STATEMENT OF FACTS
9.
Neilsen was a founding member, chief financial officer and treasurer of Ulysses Partners, LLC (“Ulysses”), a now defunct Illinois limited liability company that had its principal place of business at 124 East Avenue, Norwalk, Connecticut 06851. On January 9, 2014, the Commissioner, acting pursuant to Section 36b-27 of the Act, issued an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-13-8014-S), against Neilsen and Ulysses (“Notice”), which Notice was amended on February 18, 2014 to expand the time frame of the alleged activity (“Amended Notice”). The Amended Notice alleged that from approximately November 2005 to September 2011, Neilsen sold unregistered securities in the form of notes and investment agreements to Connecticut investors, the majority of whom were accounting clients of Neilsen and that Neilsen made misrepresentations and omissions of fact to the investors regarding the investments.
10.
Neilsen and Ulysses requested a hearing on the matters alleged in the Notice, which hearing was held on April 22, 2014 and June 17, 2014.
11.
On November 13, 2014, based on evidence presented at the hearing, the Commissioner entered Findings of Fact, Conclusions of Law and Order (“Order”) against Neilsen and Ulysses. The Order found that, between 2005 and 2012, Ulysses and Neilsen violated Section 36b-16 of the Connecticut Uniform Securities Act by selling unregistered securities and that Ulysses, through Neilsen, violated the antifraud provisions of the Act. The Order rendered the cease and desist and restitution orders against Neilsen and Ulysses permanent, and ordered a $25,000 fine to be imposed on Neilsen and Ulysses jointly and severally. To date, such restitution order and fine remains unpaid.
| 12. | In approximately February 2012, Neilsen entered into at [sic] an agreement, entitled “Investment Agreement”, with at least two individuals (“Investors”). The conduct occurred subsequent to the activity described in the Amended Notice. In exchange for entering into the Investment Agreements, the Investors gave Neilsen at least $243,000 in total. The Investment Agreements, on their face, represented that Neilsen would invest the investment proceeds into Company A, an entity that was in the business of acting as an intermediary between prime brokers and investors (“Company A”). |
| 13. | Neilsen induced the Investors to enter the Investment Agreements by representing that the investment would generate a nine percent (9%) return. Neilsen also represented to at least one of the Investors that the Investor would not incur any loss. |
| 14. | The Investment Agreements constitute securities, which securities were not registered in Connecticut under Section 36b-16 of the Act, nor were they exempt from registration under Section 36b-21 of the Act, nor were they the subject of a filed exemption claim or claim of covered security status. |
| 15. | In connection with the offer and sale of the Investment Agreements, Neilsen failed to provide the Investors with any offering document or other written disclosure describing the risks associated with the investment or the registration status of the Investment Agreements. |
| 16. | Despite Neilsen’s representations to the Investors, Neilsen spent a portion, if not all, of the investment proceeds on personal expenses. There is an outstanding balance owed to the Investors of at least $243,000. |
| 17. | In connection with the Division’s Investigation into Neilsen’s activities, the Division obtained on-the-record, sworn testimony from Neilsen, wherein Neilsen represented that he did not raise money from investors to invest in Company A, which representation was false. |
IV. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST,
ORDER TO MAKE RESTITUTION AND ORDER IMPOSING FINE
a. Violation of Section 36b-16 of the Act by Respondent –
Sale of Unregistered Securities
| 18. | Paragraphs 1 through 17, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 19. |
Respondent offered and sold securities in or from Connecticut to at least one investor, as more fully described in paragraphs 12 and 13, which securities were not registered in Connecticut under the Act, as more fully described in paragraph 14. The offer and sale of such securities absent registration constitutes a violation of Section 36b-16 of the Act, which forms a basis for an order to cease and desist to be issued against Respondent under Section 36b-27(a) of the Act, an order that Respondent make restitution under Section 36b-27(b) of the Act, and for the imposition of a fine upon Respondent under Section 36b-27(d) of the Act. |
b. Violation of Section 36b-4(a) of the Act by Respondent –
Fraud in Connection with the Offer, Sale or
Purchase of any Security
| 20. | Paragraphs 1 through 19, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 21. |
The conduct of Respondent, as more fully described in paragraphs 13 through 16, inclusive, constitutes, in connection with the offer, sale or purchase of any security, directly or indirectly employing a device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates as a fraud or deceit upon any person. Such conduct constitutes a violation of Section 36b-4(a) of the Act, which forms a basis for an order to cease and desist to be issued against Respondent under Section 36b-27(a) of the Act, an order that Respondent make restitution under Section 36b-27(b) of the Act, and for the imposition of a fine upon Respondent under Section 36b-27(d) of the Act. |
c. Violation of Section 36b-23 of the Act by Respondent –
Making a Statement in an Investigation that is
False or Misleading in a Material Respect
| 22. | Paragraphs 1 through 21, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 23. |
Neilsen’s statement to the Division, as more fully described in paragraph 17, was, at the time and in light of the circumstances under which it was made, false or misleading in a material respect, which constitutes a wilful violation of Section 36b-23 of the Act. Such violation forms a basis for an order to cease and desist to be issued against Neilsen under Section 36b-27(a) of the Act, and the imposition of a fine upon Neilsen under Section 36b-27(d) of the Act. |
NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Respondent has committed at least one violation of Section 36b-16 of the Act, at least one violation of Section 36b-4(a) of the Act and at least one violation of Section 36b-23 of the Act;
WHEREAS, the Commissioner further finds that the issuance of an Order to Cease and Desist, Order to Make Restitution and the imposition of a fine upon Respondent is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policies and provisions of the Act;
WHEREAS, notice is hereby given to Respondent that the Commissioner intends to impose a maximum fine not to exceed one hundred thousand dollars ($100,000) per violation upon each Respondent;
WHEREAS, the Commissioner ORDERS that JAMES E. NEILSEN D/B/A NEILSEN FINANCIAL SERVICES CEASE AND DESIST from directly or indirectly violating the provisions of the Act, including without limitation: (1) offering and selling unregistered securities in or from Connecticut; (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing a device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates as a fraud or deceit upon any person; and (3) making a statement to the Division, that is, at the time and in light of the circumstances under which it is made, false or misleading in a material respect;
WHEREAS, the Commissioner ORDERS that JAMES E. NEILSEN D/B/A NEILSEN FINANCIAL SERVICES MAKE RESTITUTION of any sums obtained as a result of his violations of Sections 36b-16 and 36b-4(a) of the Act, plus interest at the legal rate set forth in Section 37-1 of the General Statutes of Connecticut. Specifically, the Commissioner ORDERS that:
| 1. | Within thirty (30) days from the date this Order to Make Restitution becomes permanent, Respondent shall provide the Division with a written disclosure which contains (a) the name and address of each of the individuals who purchased securities from James E. Neilsen d/b/a Neilsen Financial Services from January 1, 2012 through the present, (b) the amount collected from each investor, (c) the date of each investment, and (d) the amount of any refunds of principal or purported interest payments made to each investor; |
| 2. | Within forty-five (45) days from the date this Order to Make Restitution becomes permanent, Respondent shall reimburse each investor the amount of funds collected from the investor plus interest, less funds returned in the form of purported refunds of principal and purported interest payments, with respect to each investor’s purchase of the Investment Agreements. Such restitution shall be made by certified check, and shall be sent by certified mail, return receipt requested, to each affected investor; and |
| 3. | Within ninety days (90) days from the date this Order to Make Restitution becomes permanent, Respondent shall provide the Division with proof in the form of copies of the certified checks and the return receipts required by paragraph 2 of Section V of this Order to Cease and Desist, Order to make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (collectively “Order”), that Respondent have [sic] reimbursed each investor the amount of funds collected from the investor plus interest, less funds returned in the form of purported refunds of principal and purported interest payments, with respect to each investor’s purchase of the Investment Agreements. |
THE COMMISSIONER FURTHER ORDERS THAT, pursuant to Section 36b-27 of the Act, each Respondent will be afforded an opportunity for a hearing on the allegations set forth above if a written request for a hearing is received by the Department of Banking, Securities and Business Investments Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800 within fourteen (14) days following each Respondent’s receipt of this Order. The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address. If any Respondent will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as “pro se”. Once a written request for a hearing is received, the Commissioner may issue a notification of hearing and designation of hearing officer that acknowledges receipt of a request for a hearing, designates a presiding officer and sets the date of the hearing in accordance with Section 4-177 of the General Statutes of Connecticut and Section 36a-1-21 of the Regulations. If a hearing is requested, the hearing will be held on May 5, 2015, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
The hearing will be held in accordance with the provisions of Chapter 54 of the General Statutes of Connecticut. At such hearing, the Respondent will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.
This Order to Cease and Desist shall remain in effect and become permanent against the Respondent if he fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
This Order to Make Restitution shall remain in effect and become permanent against the Respondent if he fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
The Commissioner may order that the maximum fine be imposed upon the Respondent if he fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
| Dated at Hartford, Connecticut, | ____/s/_____________ | |
| this 31 day of March 2015. | Jorge L. Perez | |
| Banking Commissioner |
CERTIFICATION
I hereby certify that on this 31st day of March 2015, the foregoing Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing was sent by certified mail, return receipt requested, to James E. Neilsen d/b/a Neilsen Financial Services, 121 Murray Street, Norwalk, Connecticut 06851, certified mail no. 7014 3490 0002 3525 8377.
| ____/s/___________ |
| Elena Zweifler |
| Prosecuting Attorney |