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IN THE MATTER OF: STEPHEN ROY DESIDERIO ("Respondent") * * * * * * * * * * * * * * * |
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ORDER TO CEASE AND DESIST NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING DOCKET NO. CF-2006-7250-S |
I. PRELIMINARY STATEMENT
| 1. | The Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (“Act”), and the regulations promulgated thereunder (Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies) (“Regulations”). |
| 2. |
Pursuant to Section 36b-26(a) of the 2006 Supplement to the General Statutes, 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 he has violated, is violating or is about to violate provisions of the Act or Regulations. Section 36b-26(a) of the 2006 Supplement to the General Statutes provides, in pertinent part:
The commissioner may, subject to the provisions of the Freedom of Information Act . . . (1) [m]ake such public or private investigations within or outside of this state as the commissioner deems necessary to determine whether any person has violated, is violating or is about to violate any provision of sections 36b-2 to 36b-33, inclusive, or any regulation or order thereunder . . . . |
| 3. | As a result of the investigation by the Division, the Commissioner has reason to believe that Respondent has violated certain provisions of the Act. |
| 4. |
As a result of the investigation by the Division, the Commissioner has the authority to issue a cease and desist order against Respondent pursuant to Section 36b-27(a) of the 2006 Supplement to the General Statutes, which provides, in pertinent part:
Whenever it appears to the commissioner after an investigation that any person has violated, is violating or is about to violate any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation . . . adopted . . . under said sections, . . . or that any person has engaged in a dishonest or unethical practice in the securities . . . business within the meaning of sections 36b-31-15a to 36b-31-15d, inclusive, of the regulations of Connecticut state agencies, the commissioner may, in the commissioner’s discretion, order (1) the person . . . to cease and desist from the violations . . . of the provisions . . . of the regulations, . . . or from further engaging in such dishonest or unethical practice. After such an order is issued, the person named in the order may, within fourteen days after receipt of the order, file a written request for a hearing. Any such hearing shall be held in accordance with the provisions of chapter 54. |
| 5. |
As a result of the investigation conducted by the Division, the Commissioner has the authority to impose a fine on Respondent pursuant to Section 36b-27(d) of the 2006 Supplement to the General Statutes, which provides, in pertinent part:
(1) Whenever the commissioner finds as the result of an investigation that any person has violated any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation . . . adopted . . . under said sections, the commissioner may send a notice to (A) such person . . . by registered mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt. Any such notice shall include: (i) A reference to the title, chapter, regulation, rule or order alleged to have been violated; (ii) a short and plain statement of the matter asserted or charged; (iii) the maximum fine that may be imposed for such violation; and (iv) the time and place for the hearing. Any such hearing shall be fixed for a date not earlier than fourteen days after the notice is mailed.
(2) The commissioner shall hold a hearing upon the charges made unless such person fails to appear at the hearing. Any such hearing shall be held in accordance with the provisions of chapter 54. After the hearing if the commissioner finds that the person has violated . . . of any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation . . . adopted . . . under said sections, the commissioner may, in the commissioner’s discretion and in addition to any other remedy authorized by said sections, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person. If such person fails to appear at the hearing, the commissioner may, as the facts require, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person. The commissioner shall send a copy of any order issued pursuant to this subsection by registered mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt, to any person named in such order. |
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II. RESPONDENT | |
| 6. | Respondent is an individual whose address last known to the Commissioner is 64 Monahan Avenue, Staten Island, New York 10314. |
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III. STATEMENT OF FACTS | |
| 7. | From at least July 1, 2004 through May 24, 2005, Respondent was registered in Connecticut as an agent of Independent Securities Investors Corporation (“Independent”), a corporation whose principal place of business is in Chipley, Florida. |
| 8. |
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| 9. | On or about October 2004, Respondent participated in a private placement of Ionic Water Technologies (“Ionic”) stock by meeting with Ionic’s personnel, facilitating the consummation of an investment banking agreement between Ionic and Charter One Capital Holding, Inc. (“Charter One”), a holding company that owned and operated a branch of Independent located in New York (“NY Branch”), participating in a meeting of Ionic personnel and Independent’s agents at the NY Branch during which private placement memoranda were distributed, and attempting to find potential investors for Ionic. No money was raised as a result of the agreement between Ionic and Charter One. |
| 10. | Prior to commencing employment with Independent in June 2004, Respondent met with David R. Mortenson (“Mortenson”), the founder of O-2 Solutions, Inc., a company that was looking for funding. Respondent subsequently introduced Mortensen to Steven Gray (“Gray”), the principal of Charter One, for the purpose of conducting a private placement and also so that Gray could talk to him about investing money in Charter One. |
| 11. | As a result of Respondent’s efforts, Charter One sold a security in the form of a promissory note (“Note”) to a company that Mortenson represented. |
| 12. | The sale of the Note was a transaction that was outside the regular course or scope of Respondent’s employment with Independent. The transaction did not go through the books and records of Independent and Respondent did not provide Independent written notice describing in detail the proposed transaction, his proposed role in the transaction and stating whether he had received or would receive compensation in connection with the transaction. |
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IV. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST
AND ORDER IMPOSING FINE AGAINST RESPONDENT Wilful Violation of Section 36b-31-6e of the Regulations – Participation in a Private Securities Transaction | |
| 13. | Paragraphs 1 through 12, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 14. |
Respondent’s participation in the offer and sale of the Note, as more fully described in paragraphs 10 through 12, inclusive, constitutes participation in a private transaction in violation of Section 36b-31-6e of the Regulations and a dishonest or unethical business practice under Section 36b-31-15b(a)(2) of the Regulations, which constitutes a basis for an order to cease and desist to be issued against Respondent under Section 36b-27(a) of the 2006 Supplement to the General Statutes, and for the imposition of a fine against Respondent under Section 36b-27(d) of the 2006 Supplement to the General Statutes.
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V. ORDER TO CEASE AND DESIST AND NOTICE OF RIGHT TO HEARING
AS A RESULT OF THE INVESTIGATION BY THE DIVISION, THE COMMISSIONER FINDS that, with respect to the activity described herein, Stephen Roy Desiderio has violated Section 36b-31-6e of the Regulations and engaged in a dishonest and unethical business practice under Section 36b-31-15b(a)(2) of the Regulations;
THE COMMISSIONER FURTHER FINDS that the issuance of this Order 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.
THE COMMISSIONER THEREFORE ORDERS that Stephen Roy Desiderio CEASE AND DESIST from directly or indirectly violating the provisions of the Act and the Regulations, including without limitation, participating in private securities transactions;
THE COMMISSIONER FURTHER ORDERS that, pursuant to Section 36b-27(a) of the 2006 Supplement to the General Statutes, Stephen Roy Desiderio will be afforded an opportunity for a hearing on the allegations set forth above.
A hearing will be granted to Stephen Roy Desiderio if a written request for a hearing is received by the Department of Banking, Legal Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, within fourteen (14) days following his receipt of this Order. The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address. If Stephen Roy Desiderio 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 Connecticut General Statutes and Section 36a-1-21 of the Regulations of Connecticut State Agencies. If a hearing is requested, the hearing will be held on July 18, 2006, 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 Connecticut General Statutes. At such hearing, Stephen Roy Desiderio 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 shall remain in effect and become permanent if Stephen Roy Desiderio does not request a hearing within the prescribed time period.
VI. NOTICE OF INTENT TO FINE RESPONDENT AND NOTICE OF HEARING
WHEREAS, the Commissioner finds as a result of an investigation by the Division that Respondent has violated Section 36b-31-6e of the Regulations;
WHEREAS, the Commissioner believes that the imposition of a fine upon Respondent would be in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act;
AND WHEREAS, notice is hereby given to Respondent that the Commissioner intends to impose a fine not to exceed One Hundred Thousand Dollars ($100,000) per violation, or a maximum fine of One Hundred Thousand Dollars ($100,000).
NOW THEREFORE, a hearing will be held in accordance with Section 36b-27(d)(2) of the 2006 Supplement to the General Statutes and Chapter 54 of the Connecticut General Statutes.
The hearing will be held on July 18, 2006, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
At the hearing, Respondent will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law relating to the allegations stated herein. If Respondent fails to appear at such hearing, the Commissioner may order that the maximum fine be imposed upon Respondent.
Dated at Hartford, Connecticut
this 27th day of April 2006. ________/s/_________
John P. Burke
Banking Commissioner
CERTIFICATION
I hereby certify that on this 28th day of April 2006, the foregoing Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing was sent by registered mail, return receipt requested, to Stephen Roy Desiderio, 64 Monahan Avenue, Staten Island, New York 10314, registered mail no. RB028032958US.
________/s/_________
Nirja Savill
Prosecuting Attorney