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GROVE ELECTRONICS, LLC ("Respondent") * * * * * * * * * * * * * * * * * |
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ORDER TO CEASE AND DESIST NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING DOCKET NO. CF-10-7745-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, 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 it 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.
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| 5. |
As a result of the Investigation, the Commissioner has the authority to impose a fine on Respondent pursuant to Section 36b-27(d) of the 2010 Supplement, as amended by Public Act 10-141. |
II. RESPONDENT
| 6. | Grove Electronics, LLC is a Massachusetts limited liability company with its principal place of business last known to the Commissioner at 197 Main Street, Suite 206, North Reading, Massachusetts. |
III. STATEMENT OF FACTS
| 7. | James Fowler Hickman a/k/a Jay Hickman (Central Registration Depository number 2191116) (“Hickman”) is currently registered as a broker-dealer agent under the Act and has been employed in the securities industry since at least 1992. |
| 8. | On May 6, 2008, Hickman formed Aquinnah Investments, LLC as a Massachusetts limited liability company for the purpose of directly or indirectly investing in, purchasing or otherwise acquiring, holding, trading, exchanging, selling, transferring and disposing of, or otherwise realizing upon securities and other investments. |
| 9. | From at least September 2009, to the present, Respondent has been an issuer of securities in the form of promissory notes (“Grove Electronics Notes”). |
| 10. | During September 2009, Hickman and Aquinnah Investments, LLC, on behalf of Respondent, effected the sale of Grove Electronics Notes to at least two Connecticut investors. |
| 11. |
On October 5, 2009, the Division received from Respondent a Regulation D Rule 506 notice filing pursuant to Section 36b-21(e) of the Act. Such notice filing disclosed that Respondent would pay sales commissions to Aquinnah Investments for the sale of Grove Electronics Notes, and that Aquinnah Investments, LLC would solicit investors in Connecticut, Illinois, Massachusetts and New York. |
| 12. | Hickman has never been registered in Connecticut as an agent of Respondent. |
| 13. | At the time the Connecticut sales of the Grove Electronics Notes were made, Aquinnah Investments, LLC was not registered as a broker-dealer or in any other capacity under the Act. |
| 14. | The two Connecticut investors only received the first two or three monthly interest payments provided for in the Grove Electronics Notes before Respondent defaulted on the notes. Respondent failed to pay the two Connecticut investors any of the payments that were required to be paid in 2010. |
| 15. | Pursuant to a June 26, 2010 Consent Order, Hickman refunded to those Connecticut investors who purchased Grove Electronics Notes in 2009 the pro rata share of the sales commission earned by Hickman, or any entity under the control of Hickman, and attributable to such Connecticut note sales. |
IV. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST
AND ORDER IMPOSING FINE AGAINST RESPONDENT
a. Violation of Section 36b-6 of the Act –
Unregistered Agent Activity
| 16. | Paragraphs 1 through 15, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 17. |
Respondent employed Hickman as an agent of issuer on at least two occasions, absent registration, as more fully described in paragraphs 7 though [sic] and 15, inclusive. Such conduct constitutes a violation of Section 36b-6(b) of the Act, as amended by Public Act 10-141, which forms a basis for an order to cease and desist to be issued to 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 2010 Supplement, as amended. |
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 two violations of Section 36b-6(b) of the Act, as amended;
WHEREAS, the Commissioner further finds that the issuance of this Order to Cease and Desist and the imposition of a fine against Respondent 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 One Hundred Thousand Dollars ($100,000) per violation;
WHEREAS, the Commissioner ORDERS that Respondent CEASE AND DESIST from directly or indirectly violating the provisions of the Act, including without limitation, employing an agent of issuer absent registration;
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 FURTHER ORDERS that a hearing will be granted to Respondent if a written request for a hearing is received by the Department of Banking, Securities Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800 within fourteen (14) days following Respondent’s receipt of this Order. 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 January 25, 2011, 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 General Statutes of Connecticut. At 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 23rd day of November 2010. | Howard F. Pitkin | |
| Banking Commissioner |
CERTIFICATION
I hereby certify that on this 23rd day of November 2010, the foregoing Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing was sent by certified mail, return receipt requested, to Grove Electronics, LLC d/b/a Chip Partners LLC at 197 Main Street, Suite 206, North Reading, Massachusetts 01864, certified mail no. 7010 0290 0002 7489 7907; and to Brian O’Donnell, Respondent’s corporate agent of record in Massachusetts, at 1 Whitcomb Way, North Reading, Massachusetts 01864-2833, certified mail no. 7010 0290 0002 7489 7914.
____/s/__________
Paul A. Bobruff
Prosecuting Attorney