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IN THE MATTER OF: MANAGERS DISTRIBUTORS, INC. PETER MICHAEL LEBOVITZ THOMAS GRANT HOFFMAN * * * * * * * * * * * * * * * * * * |
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STIPULATION AND DOCKET NO. ST-2008-6959-S |
WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (“Act”), and Sections 36b-31-2 et seq. of the Regulations of Connecticut State Agencies (“Regulations”) promulgated under the Act;
WHEREAS, MDI is a broker-dealer registered under the Act. Managers Investment Group LLC (“MIG”) is a federally-registered investment adviser and MDI is the principal underwriter of The Managers Funds (“Funds”), an open-end management investment company registered under the Investment Company Act of 1940. MDI, MIG and the Funds each maintain an office at 800 Connecticut Avenue, Norwalk, Connecticut;
WHEREAS, at all times relevant hereto, Lebovitz was President of MDI, President and CEO of The Managers Funds LLC, the predecessor organization to MIG, a managing partner of MIG and a member of the Board of Trustees of the Funds. In addition, Lebovitz was registered as a broker-dealer agent of MDI under the Act from June 15, 1995 to February 1, 2007;
WHEREAS, at all times relevant hereto, Hoffman was Director of Investment Research of MIG. In addition, Hoffman was registered as a broker-dealer agent of MDI under the Act from Feburary [sic] 9, 1996 to January 31, 2008;
WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking conducted an investigation (“Investigation”) pursuant to Section 36b-26 of the Act into the activities of MDI, MIG, the Funds, their principals, officers, directors, agents, representatives and employees, including Lebovitz and Hoffman, to determine whether they, or any of them, have violated, are violating or are about to violate any provision of the Act or any Regulation or order under the Act;
WHEREAS, as a result of the Investigation, the Commissioner alleges that from approximately October 2000 to September 2002, Lebovitz and Hoffman failed to take appropriate managerial action reasonably designed to achieve compliance with firm directives concerning frequent trading in Fund securities and to ensure that related books and records were maintained by MDI, in violation of Section 36b-31-6f(e) of the Regulations. Such alleged violations, if proven, form a basis for revoking Hoffman's registration as an agent pursuant to Section 36b-15(a)(2)(B) of the Act, issuing a cease and desist order against both Lebovitz and Hoffman pursuant to Section 36b-27(a) of the 2008 Supplement to the General Statutes, and for the imposition of a fine upon both Lebovitz and Hoffman pursuant to Section 36b-27(d) of the Act;
WHEREAS, as a result of the Investigation, the Commissioner alleges that from approximately October 2000 to September 2002, MDI failed to enforce a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations and to keep written records concerning frequent trading in Fund securities with clients, including instructions relating to the frequency of those trades, in violation of Section 36b-14(a) of the Act and Section 36b-31-6f(b) of the Regulations. Such alleged violations, if proven, form a basis for revoking MDI's registration as a broker-dealer pursuant to Sections 36b-15(a)(2)(B) of the Act, issuing a cease and desist order against MDI pursuant to Section 36b-27(a) of the 2008 Supplement to the General Statutes, and for the imposition of a fine upon MDI pursuant to Section 36b-27(d) of the Act;
WHEREAS, MDI, Lebovitz and Hoffman have cooperated in the Investigation;
WHEREAS, MDI represents that substantial changes have been made to its compliance program and practices since the commencement of the Investigation, including: (1) an increased commitment of resources to legal and compliance matters and the designation of a Chief Compliance Officer; (2) implementation of written supervisory and compliance procedures and an expanded supervisory organization; (3) annual training for MDI staff relating to ethical business conduct and sales practices; (4) an annual risk assessment and annual compliance review and report, presented to MDI principals and the Funds’ Board of Trustees; and (5) development by MDI of procedures requiring more frequent and more detailed reporting to the Funds’ Board of Trustees on matters relating to MDI’s principals and overall operations;
WHEREAS, MDI, Lebovitz and Hoffman, through their execution of this Stipulation and Agreement, without either admitting or denying the Commissioner’s allegations set forth herein, voluntarily enter into this Stipulation and Agreement;
WHEREAS, MDI, Lebovitz and Hoffman, through their execution of this Stipulation and Agreement, voluntarily waive any rights each may have to seek judicial review or otherwise challenge or contest the terms and conditions of this Stipulation and Agreement;
AND WHEREAS, the parties hereto now desire to settle the matters described herein, in lieu of any court action or administrative proceeding that could be commenced by the Commissioner concerning the allegations described herein.
NOW THEREFORE, the parties hereto agree and stipulate as follows:
| 1. |
MDI, its principals, officers, directors, agents, representatives and employees will refrain from engaging in conduct which would constitute a violation of the Act or any regulation, rule or order under the Act, including without limitation, failing to enforce a supervisory system reasonably designed to achieve regulatory compliance in violation of Section 36b-31-6f(b) of the Regulations and failing to maintain required books and records in violation of Section 36b-14(a) of the Act; |
| 2. |
Lebovitz and Hoffman will refrain from engaging in conduct which would constitute a violation of the Act or any regulation, rule or order under the Act, including without limitation, failing to enforce a supervisory system reasonably designed to achieve regulatory compliance and failing to maintain required books and records in violation of Section 36b-31-6f(e) of the Regulations; |
| 3. |
No later than the date this Stipulation and Agreement is executed by the Commissioner, MDI will implement revised supervisory and compliance procedures reasonably designed to prevent and detect future violations of the Act and Regulations; |
| 4. |
No later than thirty (30) days following the date this Stipulation and Agreement is executed by the Commissioner, MDI will retain an experienced independent compliance consultant (“Compliance Consultant”) to conduct at least three annual risk assessments and compliance reviews of MDI’s internal procedures. No later than six months following the date that this Stipulation and Agreement is executed by the Commissioner, and annually thereafter for a period of two years, MDI will cause such compliance consultant to provide a written report of the results of the annual reviews to the Funds’ Board of Trustees and to the Division Director; |
| 5. |
No later than six months following the date this Stipulation and Agreement is executed by the Commissioner, and annually thereafter for a period of two years, MDI will provide a written certification to the Funds’ Board of Trustees and the Division Director that MDI’s supervisory and compliance procedures are reasonably designed to prevent and detect violations of the Act and Regulations; |
| 6. | No later than the date this Stipulation and Agreement is executed by the Commissioner, MDI will pay to the Department of Banking by cashier’s or certified check made payable to “Treasurer, State of Connecticut” the sum of Fifty Thousand Dollars ($50,000), constituting an administrative fine in the amount of Twenty-Five Thousand Dollars ($25,000) and reimbursement of investigative costs in the amount of Twenty-Five Thousand Dollars ($25,000); |
| 7. | MDI agrees to make a contribution to the State of Connecticut Department of Education for the purpose of promoting financial literacy in Connecticut public middle schools in the sum of Three Hundred Thousand Dollars ($300,000), payable in three equal installments of One Hundred Thousand Dollars ($100,000) as follows: MDI shall pay the first installment no later than thirty (30) days after the date this Stipulation and Agreement is entered by the Commissioner; the second installment no later than June 1, 2009; and the third installment no later than June 1, 2010. No later than thirty (30) days after payment of each installment, MDI shall submit to the Division Director written evidence of such payment; |
| 8. | Execution of this Stipulation and Agreement by the Commissioner is without prejudice to the right of the Commissioner to take enforcement action against Lebovitz, Hoffman and MDI and any of its principals, officers, agents, employees and representatives based upon a violation of this Stipulation and Agreement or if any representation made by MDI, Lebovitz or Hoffman and reflected herein is subsequently discovered to be untrue. For purposes of this paragraph, any violation of this Stipulation and Agreement shall be deemed to be a violation of an order of the Commissioner; and |
| 9. |
This Stipulation and Agreement shall become binding when executed by the Commissioner. |
Dated at Hartford, Connecticut
this 11th day of August 2008. __________/s/___________
Howard F. Pitkin
Banking Commissioner
I, John Streur, state on behalf of Managers Distributors, Inc., that I have read the foregoing Stipulation and Agreement; that I know and fully understand its contents; that I am authorized to execute this Stipulation and Agreement on behalf of Managers Distributors, Inc.; and that Managers Distributors, Inc. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Managers Distributors, Inc., voluntarily consents to the issuance of this Stipulation and Agreement, expressly waiving any right to a hearing on the matters described herein.
__________/s/___________
John Streur, President
Managers Distributors, Inc.
State of: Illinois
County of: Cook
On this the 4th day of August 2008, before me Mary Jane Jones, the undersigned officer, personally appeared John Streur, who acknowledged himself to be the President of Managers Distributors, Inc., a corporation, and that he, as such President, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as President.
In witness whereof I hereunto set my hand.
__________/s/___________
Notary Public
My Commission Expires: 09/17/10
I, Peter Michael Lebovitz, being duly sworn, state that I have read the foregoing Stipulation and Agreement; that I know and fully understand its contents; and that I agree freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Peter Michael Lebovitz voluntarily consents to the issuance of this Stipulation and Agreement, expressly waiving any right to a hearing on the matters described herein.
__________/s/___________
Peter Michael Lebovitz
State of: Maryland
County of: Prince George's
On this the 30th day of July 2008, before me, Patricia D. Smith, the undersigned officer, personally appeared Peter Michael Lebovitz, known to me (or satisfactorily proven) to be the person whose name Peter Michael Lebovitz 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
My Commission Expires: 12/1/2010
I, Thomas Grant Hoffman, being duly sworn, do state that I have read the foregoing Stipulation and Agreement; that I know and fully understand its contents; and that I agree freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Thomas Grant Hoffman voluntarily consents to the issuance of this Stipulation and Agreement, expressly waiving any right to a hearing on the matters described herein.
__________/s/___________
Thomas Grant Hoffman
State of: New York
County of: New York
On this the 1st day of August 2008, before me, Thomas Grant Hoffman [sic], the undersigned officer, personally appeared Thomas Grant Hoffman, known to me (or satisfactorily proven) to be the person whose name Thomas Grant Hoffman 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
My Commission Expires: June 4, 2010