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IN THE MATTER OF: RAYMOND MICHAEL MULLANEY (collectively "Respondents") * * * * * * * * * * * * * * * * * * * |
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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, Mullaney Management & Trust, LLC (“MMT”), a Connecticut limited liability company located at 1177 High Ridge Road, Stamford, Connecticut 06905, has been registered as an investment adviser under the Act since September 29, 2005;
WHEREAS, Raymond Michael Mullaney (“Mullaney”) was registered under the Act as an investment adviser agent of MMT from September 16, 2005 to December 31, 2007 and from January 2, 2008 to the present;
WHEREAS, at all times relevant hereto, Mullaney has been the President and Chief Investment Officer, as well as a control person, of MMT;
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 any provision of the Act or Regulations (“Investigation”);
WHEREAS, as a result of the Investigation, the Division obtained evidence that:
| 1. | MMT transacted business as a broker-dealer in this state without being registered under the Act by:
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| 2. | MMT offered and sold securities of AMI Resources Inc., Midasco Capital Corp. and Redstar Resources Corp., all of which are gold exploration companies, to at least one Connecticut investor, which securities were never registered in Connecticut under Section 36b-16 of the Act, nor were they exempt from registration under Section 36b-21 of the Act, nor were they the subject of a filed exemption claim or claim of covered security status; | |||||||||||||
| 3. | MMT, while acting as an investment adviser (a) failed to notify the Commissioner promptly in writing on MMT’s Form ADV that MMT had or may have had custody of client funds; and (b) failed to maintain client funds with a qualified custodian either in a separate account for each client under that client’s name, or in an account(s) that contains only MMT client funds and under the name of MMT as agent or trustee; | |||||||||||||
| 4. | In November 2010 and December 2010, Mullaney effected or attempted to effect the sales of shares in a private placement of AMI Resources Inc. (“AMI”) for approximately eight Connecticut investors without Mullaney being registered as an agent of issuer under the Act; and | |||||||||||||
| 5. | On or about December 21, 2010, MMT received a check for $9,922.50 and 66,150 units of AMI as finder’s options for introducing MMT’s investment advisory clients to AMI. MMT subsequently returned both the uncashed check for $9,922.50 and the units of AMI to AMI on May 31, 2011. |
WHEREAS, the Commissioner has reason to believe that the foregoing conduct 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-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 and [sic] 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;
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:
| 1. | To be afforded notice and an opportunity for a hearing within the meaning of Sections 36b-15 and 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 or otherwise challenge or contest 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, without admitting or denying them:
| 1. | MMT transacted business as a broker-dealer in this state, without registering as a broker-dealer under the Act, in violation of Section 36b-6(a) of the Act; | |
| 2. | MMT offered and sold securities to at least one Connecticut investor, which securities were not registered in Connecticut under Section 36b-16 of the Act, nor were they exempt from registration under Section 36b-21 of the Act, nor were they the subject of a filed exemption claim or claim of covered security status; | |
| 3. | MMT had custody of client funds within the definition of custody set forth in Section 1(a) of the “Order Updating Custody Requirements for State-Registered Investment Advisers,” entered by the Commissioner on February 4, 2005” (“Order”); | |
| 4. | MMT did not satisfy the conditions, set forth in Section 3 of the Order, which must be met in order for an investment adviser with custody of funds to be exempt from the custody requirements of Section 36b-31-5b(a) of the Regulations; | |
| 5. | MMT engaged in a fraudulent, deceptive or misleading act, practice or course of business within the meaning of Section 36b-31-5b(a)(2) of the Regulations because, while having custody of client funds, it (a) failed to maintain client funds in an account or accounts in the name of the investment adviser as agent or trustee for such clients; and (b) failed to maintain a separate record for each such account which shows the name and address of the bank where such account is maintained, the dates and amounts of deposits in and withdrawals from such account, and the exact amount of each client’s beneficial interest in such account; | |
| 6. | Mullaney transacted business as an agent of issuer in this state without registering as an agent of issuer under the Act, in violation of Section 36b-6(a) of the Act; and | |
| 7. | The evidence described above would support the initiation of administrative proceedings against Respondents under Sections 36b-15 and 36b-27 of the Act seeking the entry of an order to deny, suspend or revoke the Respondents’ registrations or restrict or impose conditions on the Respondents’ securities activities, an order to cease and desist and/or an order imposing an administrative fine of up to $100,000.00 per violation upon the Respondents. |
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 agree to the terms of this Consent Order as described below.
WHEREAS, Respondents, through their execution of this Consent Order, consent to the Commissioner’s entry of a Consent Order imposing the following sanctions:
| 1. | 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; | |||||||||
| 2. | No later than the date this Consent Order is entered by the Commissioner, Respondents shall remit to the Department by cashier’s check, certified check or money order made payable to “Treasurer, State of Connecticut,” the sum of ten thousand dollars ($10,000.00), which shall constitute an administrative fine. MMT and Mullaney are jointly and severally liable for the remittance of the administrative fine; | |||||||||
| 3. | MMT shall retain a regulatory consultant (“consultant”) sufficiently experienced in state and federal investment advisory legal and compliance issues and not unacceptable to the Division Director to perform on-site compliance reviews of MMT. MMT shall identify such consultant in writing to the Division Director no later than thirty (30) days from the date this Consent Order is entered by the Commissioner. The consultant’s on-site reviews shall include an evaluation of MMT’s investment advisory activities and compliance policies and procedures, including an evaluation of MMT’s activities relating to private placements and custody of client funds and/or securities, to ensure that MMT is in compliance with this Consent Order, the Act and the Regulations thereunder. The consultant shall perform the on-site reviews according to the following schedule, provided the consultant does not determine that more frequent consultations are necessary:
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| 4. | On or by the following dates, MMT shall file with the Division Director a sworn affidavit, signed by a representative of MMT, verifying that MMT is in compliance with both the terms of this Consent Order and the advice of the regulatory consultant:
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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 or if any representations made by Respondents and reflected herein are subsequently discovered to be untrue; and |
| 3. | This Consent Order shall become final when entered. |
| So ordered at Hartford, Connecticut, | _______/s/____________ | |
| this 22nd day of August 2012. | Howard F. Pitkin | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, Raymond Michael Mullaney, 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/__________ |
| Raymond Michael Mullaney |
State of: Rhode Island
On this the 15 day of August 2012, before me, William Begos, the undersigned officer, personally appeared Raymond Michael Mullaney, 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/________________________
Notary Public
Date Commission Expires: 04/06/2016
CONSENT TO ENTRY OF ORDER
I, Raymond Michael Mullaney, state on behalf of Mullaney Management & Trust, 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 Mullaney Management & Trust, LLC; that Mullaney Management & Trust, LLC agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Mullaney Management & Trust, LLC consents to the entry of this Consent Order.
| Mullaney Management & Trust, LLC | |
| By | ______/s/__________ |
| Raymond Michael Mullaney | |
| President |
County of: Washington
On this the 15 day of August 2012, before me, William Begos, the undersigned officer, personally appeared Raymond Michael Mullaney, who acknowledged himself to be the President of Mullaney Management & Trust, LLC, 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 limited liability company by himself as President.
In witness whereof I hereunto set my hand.
____/s/___________________________
Notary Public
Date Commission Expires: 04/06/2016