| * * * * * * * * * * * * * * * * * * *
IN THE MATTER OF: * * * * * * * * * * * * * * * * * * * |
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
|
CONSENT ORDER |
I. PRELIMINARY STATEMENT
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, Bridgewater Communications Group LLC (“Bridgewater”) is a dissolved Nevada limited liability company whose address at all times relevant hereto was 635 Danbury Road, Ridgefield, Connecticut 06877;
WHEREAS, The Exchange, LLC (“The Exchange”), is a Nevada limited liability company whose address at all times relevant hereto was 635 Danbury Road, Ridgefield, Connecticut 06877;
WHEREAS, Peter Adam Schur (“Schur”) is an individual who was registered under the Act as a broker-dealer agent at various times from July 30, 1990 to February 9, 1996;
WHEREAS, at all times relevant hereto, Schur was the sole managing member, owner and control person of Bridgewater and The Exchange;
WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking (“Department”), conducted an investigation pursuant to Section 36b-26(a) of the Act into the activities of Respondents to determine if they had violated, were violating or were about to violate any provision of the Act or Regulations (“Investigation”);
WHEREAS, as a result of such Investigation, the Division asserts that it obtained evidence showing that at various times from approximately October 2013 to approximately December 2014, Bridgewater: (1) transacted business as an unregistered investment adviser; (2) engaged one or more unregistered investment adviser agents; (3) made investment recommendations containing untrue statements of material fact or omitted to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (4) engaged in dishonest or unethical practices in the securities business by failing to disclose to a client in writing before any advice was rendered any material conflict of interest relating to the investment adviser or any of its investment adviser agents, representatives or employees which could reasonably be expected to impair the rendering of unbiased and objective advice;
WHEREAS, as a result of such Investigation, the Division asserts that it obtained evidence showing that at various times from approximately October 2013 to approximately December 2014, The Exchange: (1) transacted business as an unregistered broker-dealer; and (2) employed one or more unregistered broker-dealer agents;
WHEREAS, as a result of such Investigation, the Division asserts that it obtained evidence showing that at various times from approximately October 2013 to approximately December 2014, Schur: (1) transacted business as an unregistered investment adviser agent of Bridgewater; and (2) transacted business as an unregistered broker-dealer agent of The Exchange;
WHEREAS, as a result of the Investigation, the Division has reason to believe that Respondents have violated certain provisions of the Act and Regulations, and that such violations would support administrative proceedings against Respondents under Section 36b-27 of the Act;
WHEREAS, Section 36b-31(a) of the Act provides, in relevant part, that “[t]he commissioner may from time to time make . . . such . . . orders as are necessary to carry out the provisions of sections 36b-2 to 36b-34, inclusive”;
WHEREAS, Section 36b-31(b) of the Act provides, in relevant part, that “[n]o . . . order may be made . . . unless the commissioner finds that the action 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 sections 36b-2 to 36b-34, inclusive”;
WHEREAS, an administrative proceeding initiated under Section 36b-27 of the Act would constitute a “contested case” within the meaning of Section 4-166(4) of the General Statutes of Connecticut, as amended by Public Act 15-61;
WHEREAS, Section 4-177(c) of the General Statutes of Connecticut and Section 36a-1-55(a) of the Regulations provide that a contested case may be resolved by consent order, unless precluded by law;
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 Respondents reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
WHEREAS, Respondents expressly consent to the Commissioner’s jurisdiction under the Act and to the terms of this Consent Order;
WHEREAS, the issuance of this Consent Order 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;
AND WHEREAS, Respondents, through their execution of this Consent Order, specifically assure the Commissioner that none of the violations alleged in this Consent Order shall occur in the future.
II. CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, Respondents, through their execution of this Consent Order, voluntarily waive the following rights:
| 1. | To be afforded notice and an opportunity for a hearing within the meaning of Section 36b-27 of the Act and Section 4-177(a) of the General Statutes of Connecticut; |
| 2. | To present evidence and argument and to otherwise avail themselves of Section 36b-27 of the Act and Section 4-177c(a) of the General Statutes of Connecticut; |
| 3. |
To present their position in a hearing in which each 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 or otherwise challenge or contest the validity of this Consent Order. |
III. ACKNOWLEDGEMENT OF THE COMMISSIONER'S ALLEGATIONS
WHEREAS, Respondents, through their execution of this Consent Order, acknowledge the following allegations of the Commissioner, and do not admit or deny these allegations, but agree there is evidence that would support the Commissioner’s initiation of administrative proceedings under Sections 36b-27(a) and 36b-27(d) of the Act:
| 1. | Bridgewater violated Section 36b-6(c)(1) of the Act by transacting business as an unregistered investment adviser; | |
| 2. | Bridgewater violated Section 36b-6(c)(3) of the Act by engaging one or more unregistered investment adviser agents; | |
| 3. | Bridgewater violated Section 36b-5(a)(2) of the Act by making untrue statements of material fact or omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; | |
| 4. | Bridgewater engaged in dishonest or unethical practices in the securities business within the meaning of Section 36b-31-15c(a)(10) of the Regulations by failing to disclose to a client in writing before any advice was rendered any material conflict of interest relating to the investment adviser or any of its investment adviser agents, representatives or employees which could reasonably be expected to impair the rendering of unbiased and objective advice; | |
| 5. | The Exchange violated Section 36b-6(a) of the Act, as amended by Public Act 16-65, by transacting business as an unregistered broker-dealer; | |
| 6. | The Exchange violated Section 36b-6(b) of the Act by employing one or more unregistered broker-dealer agents; | |
| 7. | Schur violated Section 36b-6(a) of the Act, as amended, by transacting business as an unregistered broker-dealer agent; and | |
| 8. | Schur violated Section 36b-6(c)(2) of the Act by transacting business as an unregistered investment adviser agent. |
WHEREAS, the Commissioner would have the authority to enter findings of fact and conclusions of law after granting Respondents an opportunity for a hearing;
AND WHEREAS, Respondents, wishing to avoid the burden and expense of an administrative hearing, acknowledge the possible consequences of an administrative hearing and voluntarily agree to the terms of this Consent Order as described below.
IV. CONSENT TO ENTRY OF SANCTIONS
WHEREAS, Respondents, through their execution of this Consent Order, consent to the Commissioner’s entry of a Consent Order imposing the following sanctions:
| 1. | Respondent Bridgewater shall refrain 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 person, organization or other device, including without limitation, engaging in any activity in or from Connecticut that violates Sections 36b-6(c)(1), 36b-6(c)(3), and 36b-5(a)(2) of the Act, and engaging in dishonest or unethical business practices within the meaning of Section 36b-31-15c(a)(10) of the Regulations; |
| 2. | Respondent The Exchange shall refrain 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 person, organization or other device, including without limitation, engaging in any activity in or from Connecticut that violates Section 36b-6(a) of the Act, as amended, and Section 36b-6(b) of the Act; |
| 3. | Respondent Schur shall refrain 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 person, organization or other device, including without limitation, engaging in any activity in or from Connecticut that violates Section 36b-6(a) of the Act, as amended, and Section 36b-6(c)(2) of the Act; |
| 4. | No later than the date this Consent Order is entered by the Commissioner, Respondents shall jointly and severally remit to the Department by cashier’s check, certified check or money order made payable to “Treasurer, State of Connecticut,” the sum of seven thousand five hundred dollars ($7,500), which shall constitute an administrative fine against Respondents; |
| 5. | For five (5) years, commencing on the date this Consent Order is entered by the Commissioner, Respondents and their affiliates and successors in interest shall not directly or indirectly solicit or accept funds for investment purposes from public or private investors in or from Connecticut absent compliance with this paragraph. Specifically, prior to such activity, Respondents and their affiliates and successors in interest, as the case may be, shall each: (a) retain legal counsel experienced in the area of state securities regulation under the Act and not unacceptable to the Division Director to provide advice on compliance with the securities laws of Connecticut and other jurisdictions (“Retained Counsel”), including compliance with agent of issuer registration requirements; (b) provide the Division Director, through Retained Counsel, with at least thirty (30) days advance written notice of the proposed issuance, offer or sale of securities to public or private investors; (c) direct Retained Counsel to prepare and submit all required filings and fees to the Commissioner and to provide the Division Director with a signed opinion of counsel setting forth the basis for any claim of exemption or covered security status under Section 36b 21 of the Act, as amended by Public Act 16-65, at least thirty (30) days prior to the commencement of the offering; and (d) refrain from offering or selling securities in or from Connecticut to public or private investors prior to receiving a written acknowledgement by Retained Counsel that the Commissioner has declared the registration of such securities effective in writing or that the Division Director has acknowledged in writing the issuer’s claim of exemption or covered security status under Section 36b-21 of the Act, as amended; and |
| 6. | Notwithstanding paragraph 5 above, Respondents, their affiliates and successors in interest may introduce or act as an intermediary between prospective buyers and sellers as potential parties to the transfer of a business, such as a merger or acquisition, if, prior to engaging in such activity, Respondents retain legal counsel experienced in state securities regulation to advise Respondents on whether such activity is in compliance with the Act, including, as applicable, provisions governing agents of issuer, broker-dealers, broker-dealer agents, investment advisers and investment adviser agents. Such obligation to consult with legal counsel shall remain in place for a period of five (5) years following the Commissioner’s entry 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 Respondents based upon a violation of this Consent Order or the matters underlying its entry, if, after an opportunity to be heard, the Commissioner determines that compliance with the terms herein is not being observed or if any representations made by Respondents and reflected herein are subsequently discovered to be untrue; |
| 3. | Nothing in this Consent Order shall be construed as limiting the Commissioner’s ability to take enforcement action against Respondent based upon evidence of which the Division was unaware on the date hereof relating to a violation of the Act or any regulation or order under the Act; |
| 4. | Respondents shall not take any action or make or permit to be made any public statement, including in regulatory filings, any proceeding in any forum or otherwise, denying, directly or indirectly, any allegation referenced in this Consent Order or create the impression that this Consent Order is without factual basis; |
| 5. | Respondents shall not take any position in any proceeding brought by or on behalf of the Commissioner, or to which the Commissioner is a party, that is inconsistent with any part of this Consent Order. However, nothing is this provision affects Respondents’ testimonial obligations or right to take a legal or factual position in litigation or other legal proceeding in which the Commissioner is not a party; and |
| 6. | This Consent Order shall become final when entered. |
| So ordered at Hartford, Connecticut, | ____/s/___________ | |
| this 3rd day of August 2016. | Jorge L. Perez | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, Peter Adam Schur, state on behalf of Bridgewater Communications Group 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 Bridgewater Communications Group LLC; that Bridgewater Communications Group LLC agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Bridgewater Communications Group LLC consents to the entry of this Consent Order.
| Bridgewater Communications Group LLC | |
| By: | _____/s/_________________________ |
| Peter Adam Schur | |
| Former Managing Member |
____/s/________________________
Notary Public
CONSENT TO ENTRY OF ORDER
I, Peter Adam Schur, state on behalf of The Exchange, 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 The Exchange, LLC; that The Exchange, LLC agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that The Exchange, LLC consents to the entry of this Consent Order.
| The Exchange, LLC | |
| By: | _____/s/_________________________ |
| Peter Adam Schur | |
| Managing Member |
____/s/_________________________
Notary Public
CONSENT TO ENTRY OF ORDER
I, Peter Adam Schur, state that I have read the foregoing Consent Order; that I know and fully understand its contents; that I agree freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that I consent to the entry of this Consent Order.
| _____/s/________ |
| Peter Adam Schur |
State of: Connecticut
On this the 1st day of Aug. 2016, before me, the undersigned officer, personally appeared Peter Adam Schur, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained.
____/s/_________________________
Date Commission Expires: 4/20/2020