| * * * * * * * * * * * * * * * * * * IN THE MATTER OF: TDA ADVANTAGE TRUST ("TDA") THOMAS F. DESTEPH (Collectively "Respondents") * * * * * * * * * * * * * * * * * * |
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ORDER TO CEASE AND DESIST NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING DOCKET NO. CF-2008-7555-S |
I. PRELIMINARY STATEMENT
| 1. | The Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the Connecticut General Statutes, 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 Respondents to determine if they have violated, are violating or are about to violate provisions of the Act or Regulations. 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 Respondents have 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 Respondents 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 that the further sale or offer to sell securities would constitute a violation of said sections . . . 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 from the further sale or offer to sell securities constituting or which would constitute a violation of the provisions of said sections . . . . 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 has the authority to impose a fine on Respondents pursuant to Section 36b-27(d) of the Act, which prior to October 1, 2003, provided, in pertinent part:
(1) Whenever the commissioner finds as the result of an investigation that any person or persons have violated any of the provisions of sections 36b-2 to 36b-33, inclusive, . . . the commissioner may send a notice to such person or persons by registered mail, return receipt requested . . . . Any such notice shall include: (A) A reference to the title, chapter, regulation, rule or order alleged to have been violated; (B) a short and plain statement of the matter asserted or charged; (C) the maximum fine that may be imposed for such violation; and (D) the time and place for the hearing. Such hearing shall be fixed for a date not earlier than fourteen days after the notice is mailed.
(2) The commissioner shall hold a hearing upon the charges made unless such person or persons fail to appear at the hearing. Said hearing shall be held in accordance with the provisions of chapter 54. After the hearing if the commissioner finds that the person or persons have violated any of the provisions of sections 36b-2 to 36b-33, inclusive, . . . 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 ten thousand dollars per violation be imposed upon such person or persons. If such person or persons fail to appear at the hearing, the commissioner may, as the facts require, order that a fine not exceeding ten thousand dollars per violation be imposed upon such person or persons. The commissioner shall send a copy of any order issued pursuant to this subsection by registered mail, return receipt requested, . . . to any person or persons named in such order. |
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Section 36b-27(d) of the Act currently 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, . . . the commissioner may send a notice to (A) such person . . . by registered mail, return receipt requested . . . . 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; and (iv) the time and place for the hearing. Any such hearing shall be fixed for a date not earlier than fourteen days after the notice is mailed.
(2) 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 . . . any of the provisions of sections 36b-2 to 36b-33, inclusive, . . . 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 mail, return receipt requested, . . . to any person named in such order. |
II. RESPONDENTS
| 6. | TDA is a purported New Hampshire entity with its principal places of business last known to the Commissioner at 1 Dustin Lane, Jaffrey, New Hampshire 03452, and 4 Summit Road, Keene, New Hampshire 03431. |
| 7. |
Desteph is an individual whose addresses last known to the Commissioner are 1 Dustin Lane, Jaffrey, New Hampshire 03452, and 4 Summit Road, Keene, New Hampshire 03431. |
III. STATEMENT OF FACTS
| 8. | From at least March 10, 2003, to the present, TDA has been an issuer of securities in the form of promissory notes (“TDA Note”). |
| 9. |
On or about March 10, 2003, Desteph, on behalf of TDA, effected the sale of a TDA Note to at least one Connecticut investor. |
| 10. | The TDA Note that was offered and sold by Respondents was never registered in Connecticut, nor was it exempt from registration, nor was it a covered security. |
| 11. |
Desteph has never been registered in Connecticut as an agent of TDA, nor was he an associated person. |
IV. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST AND
ORDER IMPOSING FINE AGAINST RESPONDENTS
a. Violation of Section 36b-16 of the Act –
Offer and Sale of Unregistered Securities
| 12. | Paragraphs 1 through 11, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 13. |
Respondents offered and sold an unregistered security to at least one Connecticut investor, as more fully described in paragraph 9, which security was not registered in Connecticut under the Act, as more fully described in paragraph 10. The offer and sale of such security absent registration constitutes a violation of Section 36b-16 of the Act, which forms a basis for an order to cease and desist to be issued against Respondents under Section 36b-27(a) of the Act; and for the imposition of a fine against Respondents under Section 36b-27(d) of the Act in effect prior to October 1, 2003. |
b. Violation of Section 36b-6 of the Act –
Unregistered Agent Activity
| 14. | Paragraphs 1 through 13, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 15. | Desteph acted as an agent of issuer on at least one occasion, absent registration, as more fully described in paragraphs 9 and 11. Such conduct constitutes a violation of Section 36b 6(a) of the Act, which forms a basis for an order to cease and desist to be issued against Desteph under Section 36b-27(a) of the Act, and for the imposition of a fine against Desteph under Section 36b-27(d) of the Act in effect prior to October 1, 2003. |
| 16. |
TDA employed Desteph as an agent of issuer on at least one occasion, absent registration, as more fully described in paragraphs 9 and 11. Such conduct constitutes a violation of Section 36b-6(b) of the Act, which forms a basis for an order to cease and desist to be issued against TDA under Section 36b 27(a) of the Act, and for the imposition of a fine against TDA under Section 36b-27(d) of the Act in effect prior to October 1, 2003. |
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, TDA Advantage Trust and Thomas F. Desteph have violated Sections 36b-16 and 36b-6 of the Act;
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 TDA Advantage Trust CEASE AND DESIST from directly or indirectly violating the provisions of the Act, including without limitation, (1) offering and selling unregistered securities, and (2) employing an agent of issuer absent registration; and that Thomas F. Desteph CEASE AND DESIST from directly or indirectly violating the provisions of the Act, including without limitation, (1) offering and selling unregistered securities, and (2) acting as an agent of issuer absent registration;
THE COMMISSIONER FURTHER ORDERS that, pursuant to Section 36b-27(a) of the Act, TDA Advantage Trust and Thomas F. Desteph will be afforded an opportunity for a hearing on the allegations set forth above.
A hearing will be granted to TDA Advantage Trust and Thomas F. Desteph if a written request for a hearing is received by the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, within fourteen (14) days following each Respondent’s receipt of this Order. The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address. If TDA Advantage Trust and Thomas F. Desteph 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 Connecticut General Statutes and Section 36a-1-21 of the Regulations of Connecticut State Agencies. If a hearing is requested, the hearing will be held on May 20, 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 Connecticut General Statutes. At such hearing, TDA Advantage Trust and Thomas F. Desteph 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 TDA Advantage Trust if it does not request a hearing within the prescribed time period and against Thomas F. Desteph if he does not request a hearing within the prescribed time period.
VI. NOTICE OF INTENT TO FINE RESPONDENTS AND NOTICE OF HEARING
WHEREAS, the Commissioner finds as a result of an investigation by the Division that TDA and Desteph each committed at least one violation of Section 36b-16 of the Act and at least one violation of Section 36b-6 of the Act;
WHEREAS, the Commissioner believes that the imposition of a fine upon Respondents 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 Respondents that the Commissioner intends to impose a fine not to exceed Ten Thousand Dollars ($10,000) per violation that occurred prior to October 1, 2003, or a maximum fine against TDA of Twenty Thousand Dollars ($20,000) and a maximum fine against Desteph of Twenty Thousand Dollars ($20,000).
NOW THEREFORE, a hearing will be held in accordance with Section 36b-27(d)(2) of the Act and Chapter 54 of the Connecticut General Statutes.
The hearing will be held on May 20, 2009, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
At the hearing, Respondents will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law relating to the allegations stated herein. If any Respondent fails to appear at such hearing, the Commissioner may order that the maximum fine be imposed upon such Respondent.
Dated at Hartford, Connecticut
this 7th day of April 2009. ________/s/_________
Howard F. Pitkin
Banking Commissioner
CERTIFICATION
I hereby certify that on this 8th day of April 2009, the foregoing Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing was sent by registered mail, return receipt requested, to TDA Advantage Trust at 1 Dustin Lane, Jaffrey, New Hampshire 03452, registered mail no. RB027869121US; and 4 Summit Road, Keene, New Hampshire 03431, registered mail no. RB027869135US; and to Thomas F. Desteph at 1 Dustin Lane, Jaffrey, New Hampshire 03452, registered mail no. RB027869149US; and 4 Summit Road, Keene, New Hampshire 03431, registered mail no. RB027869152US.
________/s/_________
Jesse B. Silverman
Prosecuting Attorney