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, Hawthorne, a Connecticut limited liability company located at 5 Westbrook Road, Bloomfield, Connecticut 06002, was registered as an investment adviser under the Act from January 23, 2002 to December 31, 2011.  Heiden was registered as an investment adviser agent of Hawthorne under the Act from January 23, 2002 to December 31, 2011.  Heiden was also registered as a broker-dealer agent under the Act at various times from 1997 to October 31, 2005;

WHEREAS, Heiden is a managing member and control person of Hawthorne;

WHEREAS, Heiden is also the sole member of Hawthorne Holding LLC, a Connecticut limited liability company sharing the same business address as Hawthorne;

WHEREAS, Hawthorne and Heiden are not currently registered in any capacity under the Act;

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, as a result of the Investigation, the Division obtained evidence that Respondents 1) failed to disclose to a client in writing before any advice was rendered any material conflict of interest relating to the investment adviser or the investment adviser agent which could reasonably be expected to impair the rendering of unbiased and objective advice; and 2) alone or through an affiliated entity, borrowed money from investment advisory clients;

WHEREAS, in early November, 2011, a FINRA arbitration award (the “2011 Arbitration Award”) was issued against Heiden (In the Matter of the Arbitration Between:  Kenji Higuchi vs. Hawthorne Advisory Group, LLC, William David Heiden, Jr. and Sammons Securities Company, LLC; Case No. 09 06530).  The arbitration panel directed Heiden to pay the claimant $400,000 in compensatory damages plus interest at the rate of 18% per annum on $300,000 from April 4, 2008 until payment of the Award.  No timely motion to vacate or modify such award has been made pursuant to applicable law nor has such a motion been made and denied;

WHEREAS, on January 9, 2012, FINRA, a self-regulatory organization, suspended Heiden pursuant to Article VI, Section 3 of FINRA’s Bylaws and FINRA Rule 9554 for failing to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance (Case No. 09-06530).  Such suspension is currently effective and has not been stayed or overturned by appeal or otherwise;

WHEREAS, the Commissioner has reason to believe that the conduct described above violates certain provisions of the Act and Regulations, and would support administrative proceedings against Respondents under Sections 36b-15 and 36b-27 of the Act;

WHEREAS, Section 36b-15(a) of the Act provides, in part, that:

WHEREAS, Section 36b-31-15c(a) of the Regulations provides, in part, that:

WHEREAS, Section 36b-31-15d(a) of the Regulations adds that:

WHEREAS, Section 36b-5(f) of the Act provides that:

WHEREAS, Section 36b-15(e)(2) of the Act, provides, in relevant part, that “[i]f the registration of . . . [an] investment adviser or investment adviser agent expires due to the registrant’s failure to renew, within one year of such expiration, the commissioner may nevertheless institute a revocation or suspension proceeding or issue an order suspending or revoking the registration under subsection (a) of this section”;

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 Sections 36b-15 and 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 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, 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, without admitting or denying any of the Commissioner’s allegations or findings, 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;

WHEREAS, Respondents have provided documentation to the Division evidencing their financial inability to pay the fine that otherwise would have been assessed against them pursuant to this Consent Order;

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.

WHEREAS, Respondents, through their execution of this Consent Order, voluntarily waive the following rights:

WHEREAS, Respondents, through their execution of this Consent Order, consent to the Commissioner’s entry of a Consent Order imposing the following sanctions:

V. CONSENT ORDER

NOW THEREFORE, the Commissioner enters the following:

I, William D. Heiden, Jr., state on behalf of Hawthorne Advisory 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 Hawthorne Advisory Group, LLC; that Hawthorne Advisory Group, LLC, agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Hawthorne Advisory Group, LLC consents to the entry of this Consent Order.

_____/s/__________________________
Notary Public
Date Commission Expires:  May 31, 2016

I, William D. Heiden Jr., 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.

State of:  Connecticut

County of:  Hartford

On this the 21 day of May 2012, before me, Santerria Moore, the undersigned officer, personally appeared William D. Heiden Jr., 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.

In witness whereof I hereunto set my hand.

____/s/___________________________
Notary Public
Date Commission Expires:  May 31, 2016
 

Administrative Orders and Settlements