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IN THE MATTER OF: PROSPER MARKETPLACE, INC. * * * * * * * * * * * * * * * * * * |
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CONSENT ORDER No. CO-12-7987-S |
I. PRELIMINARY STATEMENT
WHEREAS, the 2010 Consent Order provided that:
In the event that PMI fails to abide by the terms and conditions of this Consent Order, PMI consents to the immediate entry of a stop order and/or the imposition of a One Hundred Thousand Dollar ($100,000) fine, knowingly, willfully and voluntarily waiving its right to notice and an administrative hearing in conjunction therewith; provided that, prior to invoking this paragraph, the Commissioner shall provide PMI with an informal opportunity to demonstrate its compliance with this Consent Order. |
WHEREAS, PMI, through its General Counsel, Chief Compliance Officer and Secretary, and its Connecticut counsel, met with members of the Division to demonstrate PMI’s compliance with the 2010 Consent Order and to provide the Division with additional information requested by the Division;
II. CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, PMI, through its execution of this Consent Order, voluntarily waives the following rights, to the extent they have not been previously waived pursuant to the terms of the 2009 Consent Order and the 2010 Consent Order, whose terms PMI agrees remain in effect:
1. | To be afforded notice and an opportunity for a hearing within the meaning of Section 36b-20(c) of the Act, Section 36b-27(a) of the Act, Section 36b-27(d)(2) of the Act, and Section 4-177(a) of the General Statutes of Connecticut; |
2. | To present evidence and argument and to otherwise avail itself of Section 36b-20(c) of the Act, Section 36b-27(a) of the Act, Section 36b-27(d)(2) of the Act, and. Section 4-177c(a) of the General Statutes of Connecticut; |
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. |
III. ACKNOWLEDGEMENT OF THE COMMISSIONER'S ALLEGATIONS
WHEREAS, PMI, through its execution of this Consent Order, acknowledges and admits the following allegation of the Commissioner: From at least October 13, 2011 to November 17, 2011, PMI sold unregistered securities in violation of Section 36b-16 of the Act and the 2010 Consent Order, which forms a basis for the entry of a stop order denying effectiveness to PMI’s securities registration pursuant to Section 36b-20(a) of the Act, an order to cease and desist against PMI pursuant to Section 36b-27(a) of the Act and the imposition of a fine against PMI pursuant to Section 36b-27(d) of the Act;
WHEREAS, PMI, through its execution of this Consent Order, acknowledges the following allegations of the Commissioner, without admitting or denying them:
1. | In notifying Connecticut investors of its inability to continue to offer the notes, PMI misrepresented to Connecticut note holders that the Department had “asked [PMI] to pause [PMI’s] activity until renewal.” PMI made that statement to Connecticut note holders without input from the Department and on its own initiative; |
2. | PMI misrepresented to the public, through a press release issued by PMI on or about January 25, 2012, that the services provided by Ashland Partners & Company LLP (“Ashland”) confirmed that the rate of return received on the PMI notes was the best within the P2P industry when, in fact, the services provided by Ashland confirmed the rate of return on the PMI notes, but did not confirm rates of return on the notes of any other issuer in the P2P industry. PMI admitted that it relied solely on the publicly-disclosed return information of other known industry participants rather than on Ashland’s services in making its assertions about its returns being the best in the industry; and |
3. | The conduct described in paragraphs 1 and 2 above violated Section 36b-4 of the Act which forms a basis for the entry of a stop order denying effectiveness to PMI’s securities registration pursuant to Section 36b-20(a) of the Act, an order to cease and desist against PMI pursuant to Section 36b-27(a) of the Act and the imposition of a fine against PMI pursuant to Section 36b-27(d) of the Act. |
AND WHEREAS, the Commissioner would have the authority to enter findings of fact and conclusions of law after granting PMI an opportunity for a hearing.
IV. CONSENT TO ENTRY OF SANCTIONS
WHEREAS, PMI, through its execution of this Consent Order, consents to the Commissioner’s entry of a Consent Order imposing on it the following sanctions:
1. | PMI shall cease and desist from engaging in conduct constituting or which would constitute a violation of the Act or any regulation, rule or order adopted or issued under the Act, including but not limited to, offering and selling securities in violation of Section 36b-16 of the Act, and the 2009 and 2010 Consent Orders and engaging in conduct that would violate the antifraud provisions in Section 36b-4 of the Act; |
2. | No later than the date this Consent Order is entered by the Commissioner, PMI shall remit to the Department, by cashier’s check, certified check or money order made payable to “Treasurer, State of Connecticut”, the sum of forty thousand dollars ($40,000) as an administrative fine; |
3. | PMI its affiliates and successors in interest shall retain Connecticut legal counsel sufficiently experienced in state and federal securities law compliance and not unacceptable to the Division Director to evaluate PMI’s compliance with the Act or any regulation, rule or order adopted or issued under the Act. The scope of legal review contemplated by this paragraph shall include, without limitation, securities registration and disclosure obligations as well as registration requirements for any individual or entity, regardless of title or designation, performing securities-related services on behalf of PMI, its affiliates or successors in interest. PMI shall identify such Connecticut legal counsel in writing to the Division Director prior to the Commissioner’s entry of this Consent Order; |
4. | For three years from the date this Consent Order is entered by the Commissioner, PMI, its affiliates and successors in interest shall consult with such Connecticut legal counsel at least once each calendar year, provided nothing herein shall preclude more frequent consultations should the need arise. PMI shall record and maintain written minutes of each meeting held with its Connecticut legal counsel, which shall be open to review by the Division; |
5. | By December 31st of each year to which the obligations described in paragraphs 3 and 4 of Section IV of this Consent Order extend, PMI shall file with the Division Director an annual sworn affidavit verifying that it has fully discussed its Connecticut compliance responsibilities with Connecticut legal counsel and that, in connection therewith, PMI, its affiliates and successors in interest are complying with the Act, the Regulations, this Consent Order and with the advice of counsel. The first affidavit shall be filed no later than December 31, 2012, the second affidavit shall be filed no later than December 31, 2013, and the final affidavit shall be filed no later than December 31, 2014; and |
6. | Should PMI, its affiliates or successors in interest sever their relationship with the Connecticut legal counsel identified to the Division Director, PMI, its affiliates or successors in interest shall apprise the Division Director in writing of the reasons for such severance within thirty (30) days following such severance, and shall identify the successor attorney engaged to perform the services described in paragraphs 3 and 4 of Section IV of this Consent Order. |
V. 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 PMI 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 PMI and reflected herein are subsequently discovered to be untrue; |
3. | Contemporaneously with the Commissioner’s entry of this Consent Order, the securities registration of PMI shall be made effective under the Act; and |
4. | This Consent Order shall become final when entered. |
So ordered at Hartford, Connecticut, | _______/s/_________ | |
this 10th day of April, 2012. | Howard F. Pitkin | |
Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, Sachin Adarkar, state on behalf of Prosper Marketplace, 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 Prosper Marketplace, Inc.; that Prosper Marketplace, Inc., agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Prosper Marketplace, Inc. consents to the entry of this Consent Order, expressly waiving any right to a hearing on the matters described herein.
Prosper Marketplace, Inc. | |
By: | __________/s/__________________ |
Sachin Adarkar | |
General Counsel and Secretary |
State of: California
County of: San Francisco
On this the 6 day of April 2012 before me, Michelle Donnelly, the undersigned officer, personally appeared Sachin Adarkar, who acknowledged himself to be the General Counsel and Secretary of Prosper Marketplace, Inc., a corporation, and that he, as such General Counsel and Secretary, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as General Counsel and Secretary.
_____/s/_________________________
Notary Public
Date Commission Expires: Feb. 6, 2016