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SOUTHRIDGE INVESTMENT ("Respondent") * * * * * * * * * * * * * * * |
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ORDER TO CEASE NOTICE OF INTENT AND NOTICE OF RIGHT TO HEARING DOCKET NO. RCF-2009-7741-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”). Section 36b-26(a) of the Act, provides, in pertinent part:
The commissioner may, subject to the provisions of the Freedom of Information Act . . . (1) [m]ake such public or private investigations within or outside of this state as the commissioner deems necessary to determine whether any person has violated, is violating or is about to violate any provision of sections 36b-2 to 36b-33, inclusive, or any regulation or order thereunder . . . . |
| 3. | As a result of the Investigation by the Division, the Commissioner has reason to believe that Respondent has violated certain provisions of the Act. |
| 4. | As a result of the Investigation by the Division, the Commissioner has the authority to issue a cease and desist order against Respondent pursuant to Section 36b-27(a) of the Act, which provides, in pertinent part:
Whenever it appears to the commissioner after an investigation that any person has violated, is violating or is about to violate any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation . . . adopted . . . under said sections, or that the further sale or offer to sell securities would constitute a violation of said sections or any such regulation, . . . or that any person has engaged in a dishonest or unethical practice in the securities . . . business within the meaning of sections 36b-31-15a to 36b-31-15d, inclusive, of the regulations of Connecticut state agencies, the commissioner may, in the commissioner’s discretion, order (1) the person . . . to cease and desist from the violations . . . of the provisions of said sections or of the regulations . . . thereunder, or from the further sale or offer to sell securities constituting or which would constitute a violation of the provisions of said sections or of the regulations . . . thereunder, or from further engaging in such dishonest or unethical practice and to take or refrain from taking such action that in the opinion of the commissioner will effectuate the purposes of sections 36b-2 to 36b-33, inclusive. After such an order is issued, the person named in the order may, within fourteen days after receipt of the order, file a written request for a hearing. Any such hearing shall be held in accordance with the provisions of chapter 54. |
| 5. | As a result of the Investigation by the Division, the Commissioner brings this administrative action pursuant to Section 36b-15(a) of the Act, as amended by Public Act 09-160, and Section 4-182(c) of the General Statutes of Connecticut to revoke the broker-dealer registration of Respondent, as set forth herein. Section 36b 15(a) of the Act, as amended, provides, in pertinent part:
The commissioner may, by order, . . . revoke any registration . . . if the commissioner finds that (1) the order is in the public interest, and (2) the . . . registrant or, in the case of a broker-dealer . . . any partner, officer, or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the broker-dealer . . . (B) has wilfully violated or wilfully failed to comply with any provision of sections 36b 2 to 36b-33, inclusive, . . .or any regulation . . . under said sections . . . ; (H) has engaged in fraudulent, dishonest or unethical practices in the securities . . . , investment, . . . [or] finance . . . business . . . (K) has failed reasonably to supervise: (i) The agents . . . of such . . . registrant, if the . . . registrant is a broker-dealer . . . ; or (ii) the agents of a broker-dealer . . . , if such . . . registrant . . . is or was an agent . . . or other person charged with exercising supervisory authority on behalf of a broker-dealer . . . ; (L) in connection with any investigation conducted pursuant to section 36b-26 or any examination under subsection (d) of section 36b-14, has made any material misrepresentation to the commissioner or upon request made by the commissioner, has withheld or concealed material information from, or refused to furnish material information to the commissioner, provided, there shall be a rebuttable presumption that any records, including, but not limited to, written, visual, audio, magnetic or electronic records, computer printouts and software, and any other documents, that are withheld or concealed from the commissioner in connection with any such investigation or examination are material, unless such presumption is rebutted by substantial evidence . . . . Section 4-182(c) of the General Statutes of Connecticut provides, in pertinent part: No revocation . . . of any license is lawful unless, prior to the institution of agency proceedings, the agency gave notice by mail to the licensee of facts or conduct which warrant the intended action, and the licensee was given an opportunity to show compliance with all lawful requirements for the retention of the license. |
| 6. | As a result of the Investigation by the Division, the Commissioner has the authority to impose a fine on Respondent pursuant to Section 36b-27(d) of the Act, as amended by Public Act 09-160, which provides, in pertinent part:
(1) Whenever the commissioner finds as the result of an investigation that any person has violated any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation . . . adopted . . . under said sections, the commissioner may send a notice to (A) such person . . . by registered or certified mail, return receipt requested . . . . The notice shall be deemed received by the person on the earlier of the date of actual receipt or the date seven days after the date on which such notice was mailed or sent. Any such notice shall include: (i) A reference to the title, chapter, regulation, rule or order alleged to have been violated; (ii) a short and plain statement of the matter asserted or charged; (iii) the maximum fine that may be imposed for such violation; (iv) a statement indicating that such person may file a written request for a hearing on the matters asserted not later than fourteen days after receipt of the notice; and (v) the time and place for the hearing. (2) If a hearing is requested within the time specified in the notice, the commissioner shall hold a hearing upon the charges made unless such person fails to appear at the hearing. Any such hearing shall be held in accordance with the provisions of chapter 54. After the hearing if the commissioner finds that the person has violated, caused a violation or materially aided in the violation of any of the provisions of sections 36b 2 to 36b-33, inclusive, or any regulation . . . adopted . . . under said sections, the commissioner may, in the commissioner’s discretion and in addition to any other remedy authorized by said sections, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person. If such person fails to appear at the hearing, the commissioner may, as the facts require, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person. The commissioner shall send a copy of any order issued pursuant to this subsection by registered or certified mail, return receipt requested, . . . to any person named in such order. |
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II. RESPONDENT | |
| 7. | Respondent is a limited liability company with its principal place of business at 90 Grove Street, 2nd Floor, Ridgefield, Connecticut 06877. |
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III. STATEMENT OF FACTS | |
| 8. | From at least January 27, 1999 to the present, Respondent has been registered in Connecticut under the Act as a broker-dealer. |
| 9. | Michael Byl (Central Registration Depository (“CRD”) No. 1204677) (“Byl”) is President and an operating principal of Respondent. |
| 10. | Stephen Murray Hicks (CRD No. 1248222) (“Hicks”), through certain corporate entities, is the beneficial owner of Respondent. Likewise, through certain corporate entities, Hicks is the beneficial owner of Southridge Capital Management LLC (CRD No. 138267) (“SCM”), an unregistered investment adviser whose principal place of business is 90 Grove Street, 2nd Floor, Ridgefield, Connecticut. Likewise, through certain corporate entities, Hicks is the beneficial owner of Southridge Asset Management LLC (CRD No. 136707) (“SAM”), a registered investment adviser whose principal place of business is 90 Grove Street, 2nd Floor, Ridgefield, Connecticut. Likewise, through certain corporate entities, Hicks is the beneficial owner of the building in which Respondent, SCM and SAM maintain their principal place of business. |
| 11. | On November 22, 2004, Respondent filed a Form U4 (Uniform Application for Securities Industry Registration) (“U4”) on behalf of Hicks to register Hicks as an agent of Respondent. At that time, Hicks lacked the current qualifying exams to become registered. On January 25, 2005, Respondent filed a Form U5 (Uniform Termination for Securities Industry Registration) (“U5”) on behalf of Hicks which stated that Hicks voluntarily decided not to join the firm. |
| 12. | Hicks, however, on behalf of Respondent, continued to negotiate deals with investors and potential investors. |
| 13. | Hicks maintained access to Respondent’s restricted stock list and stock watch list, as well as other non-public information. |
| 14. | Further, Hicks shares office space with Respondent, reviews and negotiates employment contracts of proposed and existing employees of Respondent, directs certain employee compensation, approves certain employee vacation schedules, approves certain employee seating charts, determines certain employee job functions, determines and negotiates certain third party contracts on behalf of Respondent and receives the monthly brokerage account statements of Respondent. |
| 15. | Respondent has not provided evidence that Hicks has taken and successfully passed a current examination as principal given by the United States Securities and Exchange Commission or by a securities self-regulatory organization. |
| 16. | Between March 2004 and January 2008, Respondent filed certain amendments to the U4 (“U4 Amendments”) on behalf of Byl. Respondent, however, failed to disclose Byl’s outside business affiliation with the Magenta Fund and Biomega Laboratories on the U4 Amendments, despite such affiliations. |
| 17. | On or about July 28, 2004, Respondent filed a U4 on behalf of David Stefansky (CRD No. 2687939) (“Stefansky”) and on July 29, 2004, Respondent filed a U4 on behalf of Richard Rosenblum (CRD No. 1408613) (“Rosenblum”). Respondent, however, failed disclose Stefansky’s and Rosenblum’s outside business affiliation with Redwood Capital LTD and Harborview Master Fund LTD on the U4, and failed to amend their respective U4 to reflect that information, despite such affiliations. |
| 18. | On or about November 5, 2003, Respondent filed a U4 on behalf of Jennifer Rasmussen (CRD No. 4728757) (“Rasmussen”). On or about May 4, 2004, the November 5, 2003, application was purged from the CRD. On or about May 11, 2004, Respondent filed another U4 on behalf of Rasmussen. On or about November 8, 2004, the May 11, 2004, application was also purged from the CRD. Respondent, however, failed to disclose Rasmussen’s outside business affiliation with SCM on the U4, and failed to amend her U4 to reflect that information, despite such affiliation. |
| 19. | On or about January 13, 2004, Respondent filed a U4 on behalf Brooke Michelle Rodgerson (CRD No. 4732832) (“Rodgerson”). Respondent, however, failed to disclose Rodgerson’s outside business affiliation with SCM on the U4, and failed to amend her U4 to reflect that information, despite such affiliation. |
| 20. | On or about January 7, 2003, Respondent filed a U4 on behalf of Christopher Stala (CRD No. 2277010) (“Stala”). Respondent, however, failed to disclose Stala’s outside business affiliation with Fifth Avenue Investment Partners on the U4 and failed to amend his U4 to reflect that information, despite such affiliation. |
| 21. | Respondent allowed Erika Magnussen, an employee of both Respondent and SCM, access to certain financial books and records of the Respondent. At no time did Respondent submit the fingerprints of such person to the Attorney General of the United States or its designee for identification and appropriate processing. |
| 22. | Respondent allowed Linda Marie Carlsen (CRD No. 1795633), an employee of both Respondent and SAM, access to certain financial books and records of the Respondent. At no time did Respondent submit the fingerprints of such person to the Attorney General of the United States or its designee for identification and appropriate processing. |
| 23. | Respondent allowed Renee Reves, an employee of both Respondent and SAM, access to certain financial books and records of the Respondent. At no time did Respondent submit the fingerprints of such person to the Attorney General of the United States or its designee for identification and appropriate processing. |
| 24. | Respondent allowed Lori Cipot, an employee of both Respondent and SCM, access to certain financial books and records of the Respondent. At no time did Respondent submit the fingerprints of such person to the Attorney General of the United States or its designee for identification and appropriate processing. |
| 25. | From at least September 2004 until at least March 2006, Respondent allowed Brittany Moss (CRD No. 4990910) (“Moss”), an employee of Respondent, access to certain financial books and records of the Respondent. Respondent submitted the fingerprints of such person to the Attorney General of the United States or its designee for identification and appropriate processing in or about September 2005, however in January 2006, the September 2005, submission was terminated. In or about March 2006, Respondent again submitted the fingerprints of Moss notwithstanding the fact that such person routinely handled the financial books and records of Respondent since at least September 2004. |
| 26. | On or about January 18, 2005, Respondent offered and sold securities from Connecticut in the form of 125,000 shares of common stock issued by Markland Technologies, Inc. (“Markland Stock”). |
| 27. | The Markland Stock that was offered and sold by Respondent was never registered in Connecticut, nor was it exempt from registration, nor was it a covered security. |
| 28. | During the course of the Investigation, the Division requested numerous books and records from Respondent, including, inter alia, copies of certain E-mails and correspondence of Stefansky and Rosenblum, employees of Respondent. These books and records are required to be kept and preserved pursuant to Section 36b-14(a)(2) of the Act. |
| 29. | Pursuant to the Investigation, Respondent provided the Division with a copy of Respondent’s “Written Supervisory Procedures” manual (“Supervisory Manual”). The Supervisory Manual required, inter alia, the retention and review of correspondence of all employees in the conduct of their business as employees of Respondent and the fingerprinting of all individuals with access to the books and records of Respondent. |
| 30. | During the Investigation, the Division discovered that Respondent allowed both Stefansky and Rosenblum to utilize non-approved E-mail addresses to conduct the business of Respondent. |
| 31. | As a result of this use of non-approved E-mail addresses, Respondent was unable to preserve originals of all communications received and copies of all communications sent by both Stefansky and Rosenblum relating to their business as employees of Respondent and was unable to provide copies of the correspondence of Stefansky and Rosenblum to the Division. Furthermore, certain other requested documents and E-mails were provided to the Division in redacted and/or illegible form. |
| 32. | The Supervisory Manual also required the protection of all material, non-public information and provided for systems such as, inter alia, “Chinese Walls” designed to protect the flow of such restricted information. Respondent, however, failed to adhere to the policies of the Supervisory Manual by allowing, inter alia, certain employees of SCM and Hicks access to such restricted information. |
| 33. | On November 18, 2008, the Commissioner gave Respondent written notice pursuant to Section 4-182(c) of the General Statutes of Connecticut that it may have engaged in conduct which would constitute a basis for the revocation of its broker-dealer registration in Connecticut, and gave Respondent the opportunity to show compliance with all lawful requirements for the retention of its broker-dealer registration in Connecticut. By letter dated February 11, 2009, Respondent responded to the November 18, 2008, notice. |
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IV. STATUTORY AND REGULATORY BASIS FOR ORDER TO a. Wilful Violation of Section 36b-16 of the Act - | |
| 34. | Paragraphs 1 through 33, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 35. | Respondent effected the offer and sale of Markland Stock, as more fully described in paragraph 26, which securities were not registered in Connecticut under the Act, as more fully described in paragraph 27. The offer and sale of such securities absent registration constitutes a wilful violation of Section 36b-16 of the Act, and such wilful violation forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act, the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended, and for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the Act, as amended. |
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b. Wilful Violation of Section 36b-31-6f of the Regulations - | |
| 36. | Paragraphs 1 through 35, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 37. | Respondent’s allowance of Hicks to act as a supervisor, as more fully described in paragraph 14, constitutes a wilful violation of Section 36b-31-6f of the Regulations. Such wilful violation forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act, the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended, and for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the Act, as amended. |
| 38. | Respondent’s failure to protect its material, non-public information, as more fully described in paragraphs 13 and 21 through 25, inclusive, in contradiction of its Supervisory Manual, as more fully described in paragraph 32, constitutes a wilful violation of Section 36b-31-6f of the Regulations. Such wilful violation forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act, the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended, and for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the Act, as amended. |
| 39. | Respondent’s failure to maintain the business E-mails of Stefansky and Rosenblum as well as certain other business records, as more fully described in paragraphs 30 and 31, in contradiction of its Supervisory Manual, as more fully described in paragraph 29, constitutes a wilful violation of Section 36b-31-6f of the Regulations. Such wilful violation forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act, the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended, and for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the Act, as amended. |
| 40. | Respondent’s failure to submit fingerprints to the Attorney General of the United States or its designee for identification and appropriate processing, as more fully described in paragraphs 21 through 25, inclusive, in contradiction of its Supervisory Manual, as more fully described in paragraph 29, constitutes a wilful violation of Section 36b-31-6f of the Regulations. Such wilful violation forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act, the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b 15(a) of the Act, as amended, and for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the Act, as amended. |
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c. Wilful Violation of Section 36b-31-15a of the Regulations – | |
| 41. | Paragraphs 1 through 40, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 42. | Respondent’s conduct in allowing Hicks to operate as an unregistered principal of Respondent, as more fully described in paragraphs 12 through 14, inclusive, constitutes a dishonest or unethical practice in the securities business within the meaning of Section 36b-31-15a of the Regulations, in that it is conduct proscribed by National Association of Securities Dealers’ Registration Rule 1021 and Financial Industry Regulatory Authority, Inc.’s, Conduct Rule 2110. Such a dishonest and unethical practice in the securities business by Respondent constitutes a wilful violation of Section 36b-31-15a of the Regulations and forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act, the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended, and for the imposition of a fine against Respondent pursuant to Section 36b- 27(d) of the Act, as amended. |
| 43. | Respondent’s failure to protect its material, non-public information, as more fully described in paragraphs 13 and 21 through 25, inclusive, in contradiction of its Supervisory Manual, as more fully described in paragraph 32, constitutes a dishonest or unethical practice in the securities business within the meaning of Section 36b-31-15a of the Regulations, in that it is conduct which demonstrates a failure to establish a system for applying written supervisory procedures which can reasonably be expected to prevent and detect violations of the Act. Such a dishonest and unethical practice in the securities business by Respondent constitutes a wilful violation of Section 36b-31-15a of the Regulations and forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act, the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended, and for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the Act, as amended. |
| 44. | Respondent’s failure to maintain the business E-mails of Stefansky and Rosenblum, as more fully described in paragraphs 30 and 31, in contradiction of its Supervisory Manual, as more fully described in paragraph 29, constitutes a dishonest or unethical practice in the securities business within the meaning of Section 36b-31-15a of the Regulations, in that it is conduct which demonstrates a failure to establish a system for applying written supervisory procedures which can reasonably be expected to prevent and detect violations of the Act. Such a dishonest and unethical practice in the securities business by Respondent constitutes a wilful violation of Section 36b-31-15a of the Regulations and forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act, the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended, and for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the Act, as amended. |
| 45. | Respondent’s failure to submit fingerprints to the Attorney General of the United States or its designee for identification and appropriate processing, as more fully described in paragraphs 21 through 25, inclusive, in contradiction of its Supervisory Manual, as more fully described in paragraph 29, constitutes a dishonest or unethical practice in the securities business within the meaning of Section 36b-31-15a of the Regulations, in that it is conduct which demonstrates a failure to establish a system for applying written supervisory procedures which can reasonably be expected to prevent and detect violations of the Act. Such a dishonest and unethical practice in the securities business by Respondent constitutes a wilful violation of Section 36b-31-15a of the Regulations and forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act, the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended, and for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the Act, as amended. |
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d. Wilful Violation of Section 36b-14 of the Act and Section 36b-31-14a of the Regulations – Failure to Maintain Books and Records | |
| 46. | Paragraphs 1 through 45, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 47. | Respondent’s failure to maintain complete and accurate books and records, as more fully described in paragraph 31, constitutes a wilful violation of Section 36b-14 of the Act and Section 36b-31-14a of the Regulations. Such wilful violation forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act, the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended, and for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the Act, as amended. |
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e. Wilful Violation of Section 36b-14 of the Act and | |
| 48. | Paragraphs 1 through 47, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 49. | Respondent’s failure to provide copies or computer printouts of records when so requested, as more fully described in paragraphs 28 and 31, constitutes a wilful violation of Section 36b-14 of the Act and Section 36b-31-14f of the Regulations. Such wilful violation forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act, the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended, and for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the Act, as amended. |
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f. Wilful Violation of Section 36b-31-15e of the Regulations – Allowing Unregistered Managers of the Broker-dealer Business | |
| 50. | Paragraphs 1 through 49, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 51. | Respondent’s behavior in allowing Hicks to act as a manager of Respondent, as more fully described in paragraphs 12 through 14, inclusive, without providing evidence that Hicks had currently taken and successfully passed an examination as principal given by the United States Securities and Exchange Commission, as more fully described in paragraph 15, constitutes a wilful violation of Section 36b-31-15e of the Regulations. Such wilful violation forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act, the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended, and for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the Act, as amended. |
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g. Wilful Violation of Section 36b-23 of the Act - | |
| 52. | Paragraphs 1 through 51, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 53. | The certain U4 Amendments filed with the Commissioner, as more fully described in paragraphs 16 through 20, inclusive, were, at the time and in light of the circumstances under which they were made, false or misleading in a material respect. The making of such filings constitute a wilful violation of Section 36b-23 of the Act, and such wilful violations forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act, the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended, and for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the Act, as amended. |
V. ORDER TO CEASE AND DESIST AND NOTICE OF RIGHT TO HEARING
AS A RESULT OF THE INVESTIGATION BY THE DIVISION, THE COMMISSIONER FINDS that, with respect to the activity described herein, Respondent has violated Sections 36b-14, 36b-16 and 36b-23 of the Act and Sections 36b-31-6f, 36b-31-15a, 36b-31-14a, 36b-31-14f and 36b-31-15e of the Regulations.
THE COMMISSIONER FURTHER FINDS that the issuance of this Order 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.
THE COMMISSIONER THEREFORE ORDERS that Respondent CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations.
THE COMMISSIONER FURTHER ORDERS that, pursuant to Section 36b-27(a) of the Act, Respondent will be afforded an opportunity for a hearing on the allegations set forth above.
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 December 8, 2009, 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 shall remain in effect and become permanent against Respondent if it does not request a hearing within the prescribed time period.
VI. NOTICE OF INTENT TO REVOKE REGISTRATION AS
BROKER-DEALER AND NOTICE OF RIGHT TO HEARING
WHEREAS, the Commissioner has reason to believe that Respondent has engaged in acts or conduct that, pursuant to Section 36b-15 of the Act, as amended, constitute grounds for revoking Respondent’s registration as a broker-dealer in Connecticut;
WHEREAS, the Commissioner believes that the issuance of an order revoking Respondent’s registration as a broker-dealer in Connecticut would be in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act;
AND WHEREAS, Section 36b-15(f) of the Act provides, in pertinent part, that “[n]o order may be entered under this section . . . without (1) appropriate prior notice to the . . . registrant . . . , (2) opportunity for hearing, and (3) written findings of fact and conclusions of law”.
NOW THEREFORE, notice is hereby given to Respondent that its registration as a broker-dealer in Connecticut shall be revoked, subject to its right to request a hearing on the allegations set forth above.
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 its receipt of this notice. 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 December 8, 2009, 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.
If Respondent does not request a hearing within the prescribed time period, the Commissioner shall issue an order revoking its registration as a broker-dealer in Connecticut.
VII. NOTICE OF INTENT TO FINE RESPONDENT AND NOTICE OF HEARING
WHEREAS, the Commissioner finds as a result of an investigation by the Division that Respondent has committed one violation of Section 36b-16 of the Act, two violations of 36b-14 of the Act and one violation of 36b-23 of the Act;
WHEREAS, the Commissioner finds as a result of an investigation by the Division that Respondent has committed four violations of Section 36b-31-6f of the Regulations, four violations of Section 36b-31-15a of the Regulations and one violation of Section 36b-31-15e of the Regulations;
WHEREAS, the Commissioner believes that the imposition of a fine upon Respondent would be in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act;
AND WHEREAS, notice is hereby given to Respondent that the Commissioner may impose a fine not to exceed One Hundred Thousand Dollars ($100,000) per violation, and may impose a maximum fine of One Million Three Hundred Thousand Dollars ($1,300,000) on Respondent.
NOW THEREFORE, 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 its receipt of this notice. The notice shall be deemed received by the person on the earlier of the date of actual receipt or the date seven days after the date on which such notice was mailed or sent. 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 December 8, 2009, 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.
If Respondent fails to request a hearing or fails to appear at such hearing, the Commissioner may order that the maximum fine be imposed upon such Respondent.
________/s/_________
Howard F. Pitkin
Banking Commissioner
Dated at Hartford, Connecticut,
this 20th day of October 2009.
CERTIFICATION
I hereby certify that on this 20th day of October 2009, the foregoing Order to Cease and Desist, Notice of Intent to Revoke Registration as Broker-dealer, Notice of Intent to Fine and Notice of Right to Hearing was sent by registered mail, return receipt requested, to Southridge Investment Group, LLC, 90 Grove Street, 2nd Floor, Ridgefield, Connecticut 06877, registered mail no. RB027869444US.
______/s/__________
Jesse B. Silverman
Prosecuting Attorney