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IN THE MATTER OF: (Collectively "Respondents") * * * * * * * * * * * * * * * * * * |
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CONSENT ORDER
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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 promulgated under the Act (“Regulations”);
WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, 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 provisions of the Act or Regulations;
WHEREAS, on November 6, 2012, the Commissioner, acting pursuant to Section 36b-27 of the Act, issued an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Revoke Registration as an Investment Adviser, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-12-8048-S) (collectively “Notice”) against Respondents, which Notice is incorporated by reference herein;
WHEREAS, on January 3, 2013, Respondents requested a hearing on the matters alleged in the Notice;
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(2) of the General Statutes of Connecticut;
WHEREAS, Section 36b-27(f) of the Act provides, in relevant part, that “[a]ny time after the issuance of an order or notice provided for in subsection (a), (b) . . . or subdivision (1) of subsection (d) of this section, the commissioner may accept an agreement by any respondent named in such order or notice to enter into a written consent order in lieu of an adjudicative hearing”;
WHEREAS, Section 4-177(c) of the General Statutes of Connecticut and Section 36a-1-55(a) of the Regulations of Connecticut State Agencies provide that a contested case may be resolved by consent order, unless precluded by law;
WHEREAS, Respondents and the Commissioner now desire to resolve the matters alleged in the Notice without the need for further administrative proceedings;
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;
WHEREAS, Respondents agree that the Notice may be used in construing the terms of this Consent Order, and agree to the language in this Consent Order;
WHEREAS, Respondents specifically assure the Commissioner that none of the violations alleged in the Notice shall occur in the future;
WHEREAS, Respondents have executed a Limited Release and a General Release, dated March 30, 2013 and April 2, 2013, respectively, and a General Release, dated May 1, 2013, with the individuals described in the Notice as “Investor One” and “Investor Two”, to make payment in good funds and resolve the securities claims involving Investor One and Investor Two described in the Notice, and have provided the Division with copies of such Settlement Agreements and Releases;
WHEREAS, Respondents have represented to the Division that the aforementioned payments in good funds to Investor One and Investor Two have been made or will be made on or before June 30, 2013;
AND WHEREAS, Respondents have provided documentation to the Division evidencing that, subsequent to making the aforementioned payments to Investor One and Investor Two, Respondents will be financially unable to pay the fine that otherwise would have been assessed against them pursuant to the Notice and this Consent Order;
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 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 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, Respondents, through their execution of this Consent Order, acknowledge the following allegations of the Commissioner, and do not admit or deny these allegations, but admit sufficient evidence exists for the Commissioner to issue an order to cease and desist, an order to make restitution, and/or an order imposing a maximum administrative fine of one hundred thousand dollars ($100,000) per violation of the Act, or any regulation, rule or order adopted or issued under the Act:
| 1. |
Greco violated Section 36b-6(c)(2) of the Act by transacting business as an unregistered investment adviser agent; |
| 2. | Greco violated Section 36b-4(a) of the Act by, in connection with the offer, sale or purchase of any security, directly or indirectly omitting to state material facts 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; |
| 3. | Greco violated Section 36b-4(b) of the Act by, in connection with the offer, sale or purchase of any security, directly or indirectly engaging in a dishonest or unethical practice; |
| 4. | Greco violated section 36b-23 of the Act by making a statement to the Division during an investigation that was, at the time and in the light of the circumstances under which it was made, false or misleading in a material respect; |
| 5. | DFS Capital Management, LP violated Section 36b-6(c)(3) of the Act by engaging an unregistered investment adviser agent; |
| 6. | DFS Capital Management, LP violated Section 36b-4(a) of the Act by, in connection with the offer, sale or purchase of any security, directly or indirectly omitting to state material facts 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; |
| 7. | DFS Capital Management, LP violated Section 36b-4(b) of the Act by, in connection with the offer, sale or purchase of any security, directly or indirectly engaging in a dishonest or unethical practice; |
| 8. | DFS Capital Management, LP, through the actions of Greco, violated section 36b-23 of the Act by making a statement to the Division during an investigation that was, at the time and in the light of the circumstances under which it was made, false or misleading in a material respect; |
| 9. | DFS Capital Management, LP violated Section 36b-14(d) of the Act and Section 36b-31-14f of the Regulations by failing to make its required books and records available to the Commissioner when so requested; and |
| 10. | DFS Fund, Limited Partnership violated Section 36b-4(a) of the Act by, in connection with the offer, sale or purchase of any security, directly or indirectly omitting to state material facts 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[.] |
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 acknowledge the possible consequences of an administrative hearing and voluntarily consent to the entry of the sanctions 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 on them the following sanctions:
| 1. | For a period of ten (10) years commencing on the date this Consent Order is entered by the Commissioner, Greco and DFS Capital Management, LP, either directly or through any person, organization, entity or other device, shall be BARRED from (a) transacting business in or from Connecticut as a broker-dealer, agent, investment adviser or investment adviser agent, as such terms are defined in the Act, and notwithstanding any definitional exclusion or exemption that might otherwise be available under the Act; (b) directly or indirectly soliciting or accepting funds for investment purposes from public or private investors in or from Connecticut; and (c) directly or indirectly engaging in any activity not included in subparagraphs (a) or (b) of Paragraph 1 of Section IV of this Consent Order which would require either Greco or DFS Capital Management, LP, to register under the Act; | ||||||||||||
| 2. | Respondents, their representatives, agents, employees, affiliates, assigns, or successors in interest shall CEASE AND DESIST 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; | ||||||||||||
| 3. | Greco and DFS Capital Management, LP shall retain Connecticut legal counsel (“Counsel”) sufficiently experienced in state and federal investment advisory and securities law to perform a regulatory compliance evaluation to ascertain whether Greco and DFS Capital Management, LP are conducting any business activities that would require compliance with state and federal securities laws, including, without limitation, laws governing investment advisory activities and the raising of capital through securities offerings. The regulatory compliance evaluation shall include an assessment of whether Greco and DFS Capital Management, LP are in compliance with this Consent Order, the Act and the Regulations thereunder. Counsel shall perform the evaluations according to the following schedule, provided Counsel does not determine that more frequent consultations are necessary:
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| 4. | Greco and DFS Capital Management, LP shall file with the Division Director, on or before the following dates, a sworn affidavit verifying that each has discussed their respective business activities with Counsel, and that each is in compliance with the terms of this Consent Order, the Act and the Regulations thereunder, and has followed the advice of Counsel:
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| 5. | Respondents shall make available to the Commissioner and the Division any and all records described in Section 36b-14(a) of the Act for examination and inspection. Upon request by the Commissioner or the Division, Respondents shall provide copies of any requested records forthwith. In the event of noncompliance with this Paragraph 5 of Section IV of this Consent Order, Respondents will automatically forfeit any existing license(s) or registration(s) that the Respondents maintain with the Department of Banking at that time, knowingly, willfully and voluntarily waiving their right to notice and an administrative hearing in conjunction therewith. |
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 the Commissioner determines that compliance with the terms herein is not being observed; |
| 3. | After seven years have elapsed from the date the Consent Order is entered, Greco and/or DFS Capital Management, LP may request that the Commissioner relieve him or it from the bar contained in Paragraph 1 of Section IV of this Consent Order by filing a written application with the Division Director setting forth the basis for the request. The Division Director shall review the request and make a decision based on the Director’s review. The Division Director may, in his/her sole discretion, grant, deny or condition the relief sought pursuant to this paragraph; |
| 4. | In the event of nonperformance or violation by Respondents of any term or condition set forth in this Consent Order, including, without limitation, Respondents’ contractual obligation to repay Investor One and Investor Two in good funds as specified in the Limited Release and General Release, dated March 30, 2013 and April 2, 2013, respectively, and the General Release, dated May 1, 2013, respectively, (“Releases”), as more fully described in the Preliminary Statement of this Consent Order, Respondents consent to the immediate entry and imposition of a One Hundred Thousand Dollar ($100,000) fine, knowingly, willfully and voluntarily waiving their right to notice and an administrative hearing in conjunction therewith. Any modification or extension by Respondents of the Releases absent prior written authorization from, and prior review by, the Commissioner, shall be construed by the Commissioner as a violation of this Consent Order; |
| 5. | In the event of nonperformance or violation by Respondents of any term or condition set forth in this Consent Order, including, without limitation, Respondents’ contractual obligation to repay Investor One and Investor Two in good funds, as specified in the Releases, on or before June 30, 2013, as more fully described in the Preliminary Statement of this Consent Order, Respondents consent to the immediate entry and imposition of an order of full restitution to Investor One and Investor Two by the Commissioner, knowingly, willfully and voluntarily waiving their right to notice and an administrative hearing in conjunction therewith; |
| 6. | In the event of nonperformance or violation by Respondents of any term or condition set forth in this Consent Order, including, without limitation, Respondents’ contractual obligation to repay Investor One and Investor Two in good funds, as specified in the Releases, on or before June 30, 2013, as more fully described in the Preliminary Statement of this Consent Order, all of the allegations in the Notice are deemed admitted by Respondents, knowingly, willfully and voluntarily waiving their right to notice and an administrative hearing in conjunction therewith; |
| 7. | Nothing in this Consent Order shall be construed as limiting the Commissioner’s ability to take enforcement action against Respondents 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; |
| 8. | If Respondents violate any provision of this Consent Order, including, without limitation, Respondents’ obligation to repay Investor One and Investor Two in good funds no later than June 30, 2013 as described herein, the Commissioner may, in accordance with Section 36b-27(e) of the Act, bring an action in the Superior Court for the Judicial District of Hartford to obtain injunctive relief, a writ of attachment, court-ordered restitution or such other judicial remedies as the Commissioner deems appropriate; and |
| 9. | This Consent Order shall become final when entered. |
| So ordered at Hartford, Connecticut, | ______/s/__________ | |
| this 1st day of May, 2013. | Howard F. Pitkin | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, John Vincent Greco, 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/________ |
| John Vincent Greco |
State of: CT
County of: Hartford
On this the 1st day of May 2013, before me, Amy B. Grillo, the undersigned officer, personally appeared John Vincent Greco, 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: 2/28/1[8]
CONSENT TO ENTRY OF ORDER
I, John Vincent Greco, state on behalf of DFS Capital Management, LP, 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 DFS Capital Management, LP; that DFS Capital Management, LP agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that DFS Capital Management, LP consents to the entry of this Consent Order.
| DFS Capital Management, LP | |
| By: | ______/s/________________ |
| John Vincent Greco | |
| President |
State of: CT
County of: Hartford
On this the 1st day of May 2013, before me, Amy B. Grillo, the undersigned officer, personally appeared John Vincent Greco, who acknowledged himself to be the President of DFS Capital Management, LP, and that he, as such President, being authorized to do so, executed the foregoing instrument for the purposes therein contained, by signing the name of the limited partnership by himself as President.
_____/s/______________________
Notary Public
Date Commission Expires: 2/28/1[8]
CONSENT TO ENTRY OF ORDER
I, John Vincent Greco, state on behalf of DFS Fund, Limited Partnership, 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 DFS Fund, Limited Partnership; that DFS Fund, Limited Partnership agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that DFS Fund, Limited Partnership consents to the entry of this Consent Order.
| DFS Fund, Limited Partnership | |
| By: | ______/s/________________ |
| DFS Capital Management, LP | |
| Its General Partner | |
| By: | ______/s/________________ |
| John Vincent Greco | |
| Its President |
State of: CT
County of: Hartford
On this the 1st day of May 2013, before me, Amy B. Grillo, the undersigned officer, personally appeared John Vincent Greco, who acknowledged himself to be the President of DFS Capital Management, LP, the General Partner of DFS Fund, Limited Partnership, and as such, being authorized to do so, executed the foregoing instrument for the purposes therein contained, by signing the name of the limited partnership by himself as the President of DFS Capital Management, LP, the General Partner of DFS Fund, Limited Partnership.
_____/s/______________________
Notary Public
Date Commission Expires: 2/28/1[8]