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GROSVENOR PARTNERS, LTD.,
("Respondent")
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ORDER TO CEASE AND DESIST AND NOTICE OF RIGHT TO HEARING DOCKET NO. CF-2010-7661-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 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 Act, as amended by Public Act 10-141, the Commissioner, through the Securities and Business Investments 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 an order to cease and desist against Respondent pursuant to Section 36b-27(a) of the 2010 Supplement to the General Statutes (“2010 Supplement”), as amended by Public Act 10-141. |
| 5. |
As a result of the Investigation, the Commissioner has the authority to impose a fine against Respondent pursuant to Section 36b-27(d) of the Act as it existed prior to October 1, 2003. |
II. RESPONDENT
| 6. |
Respondent is a Florida limited partnership with its principal place of business last known to the Commissioner at 223 Coral Lane, Palm Beach, Florida 33480. |
III. STATEMENT OF FACTS
| 7. | From at least June, 1995, to the present, Respondent has been an issuer of securities in the form of limited partnership interests (“Grosvenor Interests”). |
| 8. | During all relevant periods, the general partner of Respondent was Mayfair Ventures, G.P. (“Mayfair”), a Florida general partnership with its principal place of business last known to the Commissioner at 223 Coral Lane, Palm Beach, Florida 33480. Frank J. Avellino (“Avellino”) is the general partner of Mayfair. |
| 9. | On November 17, 1992, the United States Securities and Exchange Commission (“SEC”) filed a civil action against Avellino which alleged, inter alia, that from 1962 until at least July 1992 Avellino’s partnership had acted as an unregistered investment adviser, and that Avellino had sold unregistered securities, guaranteeing rates of return from 13.5% to 20% to investors by investing funds with Bernard L. Madoff (“Madoff”). |
| 10. | On November 18, 1992, upon submission by the SEC, the United States District Court for the Southern District of New York issued an Order of Preliminary Injunction and Other Equitable Relief on Consent (“Order”) which preliminarily enjoined Avellino and his partnership from selling securities without a registration statement, making offers to sell or buy securities without a registration statement, and from acting as an investment adviser in violation of applicable law (See Securities and Exchange Commission v. Avellino & Bienes, et. al., No. 92-CV-8314 (S.D.N.Y.)). Avellino and the other defendants consented to the Order and waived any rights to challenge or appeal the Order. |
| 11. | On or about June 9, 1995, Respondent offered and sold Grosvenor Interests to at least one Connecticut investor (“Investor”), notwithstanding the fact that the Investor had no knowledge and experience in financial and business matters and was incapable of evaluating the merits and risks of the Grosvenor Interests. |
| 12. | On or about June 16, 1995, Respondent filed a Rule 506 exemptive filing under then Section 36b-21(b)(9) of the Act for an offering of limited partnership interests in Respondent, which exemptive filing was deemed complete on June 16, 1995 (“Exemptive Filing”). |
| 13. | Notwithstanding the Exemptive Filing, the Grosvenor Interests that were offered and sold by Respondent were never properly registered in Connecticut, nor did they meet the criteria for an exemption under Rule 506 of Regulation D. |
| 14. | In connection with the offer and sale of the Grosvenor Interests, Respondent failed to disclose, inter alia, that all of the Investor’s funds would be placed with Madoff; the risk of loss of the entire investment; any risk factors related to the investment; any financial information on Respondent or its businesses; and any description as to how the funds would be invested with Madoff. Moreover, in connection with the offer and sale of the Grosvenor Interests, Respondent failed to disclose that its general partner, Avellino, had been the subject of prior sanctions procured by the SEC in the form of the Order for selling unregistered investments related to Madoff. Each of these omitted items was material to investors and prospective investors of the Grosvenor Interests. |
IV. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST
AND ORDER IMPOSING FINE AGAINST RESPONDENT
a. Violation of Section 36b-16 of the Act –
Offer and Sale of Unregistered Securities
| 15. | Paragraphs 1 through 14, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 16. |
Respondent offered and sold unregistered securities to at least one Connecticut investor, as more fully described in paragraphs 7 and 11, which securities were not registered in Connecticut under the Act, as more fully described in paragraph 13. The offer and sale of such securities absent registration constitutes a violation of Section 36b-16 of the Act, as amended by Public Act 10-141, which forms a basis for an order to cease and desist to be issued against Respondent under Section 36b-27(a) of the 2010 Supplement, as amended, and for the imposition of a fine against Respondent under Section 36b-27(d) of the Act as it existed prior to October 1, 2003. |
b. Violation of Section 36b-4(a) of the Act –
Fraud in Connection with the Offer and Sale of any Security
| 17. | Paragraphs 1 through 16, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 18. |
The conduct of Respondent, as more fully described in paragraphs 7 through 14, inclusive, constitutes, in connection with the offer, sale or purchase of any security, 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 2010 Supplement, which forms a basis for an order to cease and desist to be issued against Respondent under Section 36b-27(a) of the 2010 Supplement, as amended, and for the imposition of a fine against Respondent under Section 36b-27(d) of the Act as it existed prior to October 1, 2003. |
V. ORDER TO CEASE AND DESIST, 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, as amended, and at least one violation of Section 36b-4(a) of the 2010 Supplement;
WHEREAS, the Commissioner further finds that the issuance of this Order to Cease and Desist and the imposition of a fine 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 Ten Thousand Dollars ($10,000) per violation;
AND WHEREAS, pursuant to Section 36b-27 of the 2010 Supplement, as amended, Respondent will be afforded an opportunity for a hearing on the allegations set forth above.
THE COMMISSIONER THEREFORE ORDERS that Respondent CEASE AND DESIST from directly or indirectly violating the provisions of the Act, including without limitation, (1) offering and selling unregistered securities, and (2) in connection with the offer, sale or purchase of any security, 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.
THE COMMISSIONER FURTHER ORDERS that a hearing will be granted to Respondent if a written request for a hearing is received by the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, within fourteen (14) days following Respondent’s receipt of this Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing. The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address. If 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 of Connecticut State Agencies.
If a hearing is requested, the hearing will be held on August 19, 2010, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut. Any such hearing will be held in accordance with the provisions of Chapter 54 of the General Statutes of Connecticut. At any such hearing, 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 Respondent if Respondent 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 Respondent if Respondent fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
| Dated at Hartford, Connecticut, | ________/s/________ | |
| this 24th day of June 2010. | Howard F. Pitkin | |
| Banking Commissioner |
CERTIFICATION
I hereby certify that on this 25th day of June 2010, 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 Grosvenor Partners, Ltd., a/k/a Aster Associates, c/o Frank Avellino, General Partner, 223 Coral Lane, Palm Beach, Florida 33480, certified mail no. 7008 1140 0002 4974 3527.
_______/s/_________
Jesse B. Silverman
Prosecuting Attorney