| Securities and Business Investments Division | |
|
Securities Bulletin | |
| Vol. XIV No. 2 | Summer 2000 |
Features:
- A Word from the Banking Commissioner
- Series 65 Exam Waiver for Holders of Chartered Financial Consultant
(ChFC) and Chartered Life Underwriter (CLU) Designations - October 2nd Securities Forum Promises Varied Panels
- Updated Questions and Answers on Testing Requirements for
Investment Adviser Firms and Investment Adviser Agents - Second Quarter Statistical Summary
Enforcement Highlights:
- Ralph Lambiase, Division Director
- Cynthia Antanaitis, Assistant Director and Bulletin Editor
- Eric Wilder, Assistant Director
- Marge Kagan, Subscription Coordinator
- Cynthia Antanaitis, Assistant Director and Bulletin Editor
Contributors:
A WORD FROM THE BANKING COMMISSIONER
The federal Gramm-Leach-Bliley Act now allows banks, insurance companies and securities firms to affiliate with far less restriction than previously permitted. As a result, change will continue to be a constant in our financial services marketplace, as firms consider new business opportunities and consumers benefit from more choices.
In recognition of this blending of financial services activity, the Department of Banking is continuing its policy of granting discretionary relief to qualified professionals interested in registering as investment adviser agents - i.e., individuals who solicit business for investment advisers or who render securities advice to clients and who directly or indirectly receive compensation for doing so.
An order featured in this Bulletin edition waives the Uniform Investment Adviser Law Exam (Series 65) for investment adviser agent applicants who hold the professional designation Chartered Financial Consultant (ChFC) or Chartered Life Underwriter (CLU). (Connecticut is one of only four states to grant such discretionary relief to CLUs).
We believe these waivers, which supplement those previously granted to Chartered Investment Counselors (CIC), Chartered Financial Analysts (CFA), Personal Financial Specialists (PFS) and Certified Financial Planners (CFP), reflect well on Connecticut's business friendly environment. At the same time, the Securities Division remains vigilant in its responsibility to protect Connecticut investors.
The department's twelfth annual Securities Forum conference will be held on Monday, October 2nd at the Radisson Hotel and Conference Center in Cromwell, Connecticut. As noted elsewhere in this Bulletin, the Securities Forum will again focus on practical, timely issues of special interest to you. In fact, we want you to set the agenda for one of the presentations - an open, freewheeling "Q & A" session with senior staff, unhampered by panelist prepared remarks.
We've assembled an exceptional Securities Forum 2000 program schedule, featuring an outstanding group of expert speakers, so we hope to see you in Cromwell in October. Persons interested in complete conference program and registration information can visit our web site later this summer.
John P. Burke
Banking Commissioner
ORDER EXEMPTING HOLDERS OF
THE CHARTERED FINANCIAL CONSULTANT DESIGNATION
AND THE CHARTERED LIFE UNDERWRITER DESIGNATION
FROM THE SERIES 65 EXAMINATION REQUIREMENT FOR INVESTMENT ADVISER AGENTS 
WHEREAS the Commissioner of Banking (the "Commissioner") is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act, as amended by P.A. 00-61, (the "Act") and Sections 36b-31-2 et seq. of the Regulations of Connecticut State Agencies (the "Regulations") promulgated under the Act;
WHEREAS Section 36b-31(a) of the Act provides, in part, that: "The commissioner may from time to time make ... such ... orders as are necessary to carry out the provisions of sections 36b-2 to 36b-33, inclusive, including ... orders governing ... applications ... and defining any terms, whether or not used in said sections, insofar as the definitions are not inconsistent with the provisions of said sections. For the purpose of ... orders, the commissioner may classify securities, persons and matters within his jurisdiction, and prescribe different requirements for different classes";
WHEREAS Section 36b-31(b) of the Act adds that: "In prescribing ... orders the commissioner may cooperate with the securities administrators of the other states ... with a view to effectuating the policy of ... [the Act] to achieve maximum uniformity in the form and content of ... applications ... wherever practicable";
WHEREAS Section 36b-31(b) of the Act also provides that: "No … 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-33, inclusive";
WHEREAS the Commissioner 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 policy and provisions of the Act;
WHEREAS Section 36b-15(b)(6) of the Act provides that "the commissioner may by regulation provide for an examination, which may be written or oral or both, to be taken by any class of or all applicants, as well as persons who represent or will represent an investment adviser in doing any of the acts which make him an investment adviser";
WHEREAS pursuant to the authority granted under Section 36b-15(b)(6) of the Act, the Commissioner promulgated Section 36b-31-15e(e) of the Regulations which requires that, effective October 1, 1994, "each applicant for registration as an investment adviser agent ... supply evidence to the commissioner that such applicant has taken and successfully passed the [Series 65] Uniform Investment Adviser Law Examination or such other examination determined by the commissioner to be acceptable in lieu thereof";
WHEREAS the North American Securities Administrators Association, Inc. (NASAA), an association of state and Canadian securities regulators, has been instrumental in developing a modified version of the Series 65 examination designed to test investment advisory competency (the "Modified Series 65 Examination"), which Modified Series 65 Examination was made available on and after January 1, 2000;
WHEREAS by Order originally dated December 2, 1999 and amended and restated on March 28, 2000, the Commissioner deemed the Modified Series 65 examination or the Series 66 examination to be an acceptable substitute in fulfillment of the Section 36b-31-15e(e) examination requirement for new investment adviser agent applicants;
WHEREAS Section 36b-31-31c of the Regulations provides that: "The commissioner may exempt a person ... from a specified provision of ... the regulations upon a finding that such exemption is in the public interest";
WHEREAS the Commissioner finds that granting the related exemptive relief set forth in this Order is in the public interest;
NOW THEREFORE THE COMMISSIONER ORDERS AS FOLLOWS:
| 1. | Pursuant to Section 36b-31-31c of the Regulations, and effective upon entry of this Order by the Commissioner, the Commissioner may waive the Modified Series 65 examination requirement for individual investment adviser agent applicants who provide written evidence that they hold the designation Chartered Financial Consultant ("ChFC") or Chartered Life Underwriter ("CLU") as awarded by the American College, Bryn Mawr, Pennsylvania, and who are subject to, and in compliance with, continuing education requirements prescribed by the American College and the Society of Financial Service Professionals. Notwithstanding the provisions of this paragraph, the Commissioner may require that the holder of any such designation take the Modified Series 65 examination if taking such examination is necessary in light of the individual's disciplinary history, limited areas of knowledge or expertise and/or failure to fulfill continuing education requirements; | |
| 2. | Nothing in this Order shall preclude the Commissioner from imposing such additional conditions on registration as may be necessary in the public interest. | |
| 3. | The terms and conditions of this Order shall become effective upon entry of this Order, and shall remain in effect until modified, superseded or vacated by the Commissioner or other lawful authority. | |
| ||
| So ordered at Hartford, Connecticut this 15th day of August, 2000. | John P. Burke Banking Commissioner |
SECURITIES FORUM 2000 TAKES CENTER STAGE
UPDATED QUESTIONS AND ANSWERS ON TESTING REQUIREMENTS
FOR INVESTMENT ADVISER FIRMS AND INVESTMENT ADVISER AGENTS
1. Q: Are there any special testing requirements for investment advisory firms as such?
A: No. However, effective October 1, 1994, applicants for investment adviser agent registration must pass the Uniform Investment Adviser Law Exam (Series 65) or the Series 66 examination.
2. Q: What is an investment adviser agent?
A: Under C.G.S. § 36b-3(11), an investment adviser agent is one of the following:
- An individual (including an officer, partner or director of the investment adviser) who is employed, appointed, authorized or associated with an investment adviser to solicit business for the investment adviser. The individual must directly or indirectly receive compensation or other remuneration for the solicitation activity to be considered an "investment adviser agent."
- A partner, officer, or director of the investment adviser, or an individual employed, appointed, authorized or associated with the investment adviser, who makes any recommendation or otherwise renders securities advice to clients and who directly or indirectly receives compensation or other remuneration for the advisory services.
3. Q: Our firm is registered as an investment adviser with the Securities and Exchange Commission and therefore exempt from Connecticut registration under C.G.S. § 36b-6(e)(1), although we do make an annual notice filing with Connecticut. Would those individuals who represent our firm be considered "investment adviser agents" under Connecticut law?
A: If the representatives are "supervised persons" as defined in Section 202(a)(25) of the federal Investment Advisers Act of 1940, they would not be considered "investment adviser agents" under Connecticut law. Section 202(a)(25) of the Investment Advisers Act of 1940 defines "supervised person" to mean "any partner, officer, director (or other person occupying a similar status or performing similar functions), or employee of an investment adviser, or other person who provides investment advice on behalf of the investment adviser and is subject to the supervision and control of the investment adviser." However, if the "supervised person" is an "investment adviser representative", as defined in Securities and Exchange Commission Rule 203A-3, 17 CFR 275.203A-3, then he or she would be deemed an "investment adviser agent" in Connecticut.
4. Q: I am a sole proprietor investment adviser. Must I take the Series 65 or Series 66 exam?
A: No, unless you transact business as an investment adviser agent of another investment adviser or the department determines that the examination is warranted in light of your background and experience.
5. Q: I represent a partnership that is a state-registered investment adviser. Must all partners take the Series 65 or Series 66 exam?
A: If they directly or indirectly are compensated for solicitation activity or for giving securities-related investment advice, they must register as investment adviser agents, and, unless eligible for an exemption, take the Series 65 or Series 66 exam.
6. Q: After January 1, 2000, I applied for investment adviser agent registration in Connecticut. I had not been registered as an investment adviser agent in the state before. Are there any new requirements of which I should be aware?
A: Yes. Effective January 1, 2000, the Modified Series 65 examination, which is designed to focus on investment advisory competency, will fulfill the examination requirement in Section 36b-31-15e(e) of the Regulations. Passing the Series 66 examination will also suffice. (See Question 7.)
7. Q: After January 1, 2000, I applied for investment adviser agent registration in Connecticut and passed the Series 66 examination. Do I still have to pass the Modified Series 65 Competency Examination?
A: No. The Series 66 examination is an acceptable substitute.
8. Q: I am a sole proprietor financial planner. On January 1, 2000, I renewed my investment advisory registration in Connecticut. I am now almost ready to retire, and wish to work for someone else's investment advisory firm as an investment adviser agent. Must I take the Modified Series 65 Competency Examination?
A: No. By Order dated December 2, 1999, the Commissioner waived the Modified Series 65 Competency Examination for individuals who were registered as investment advisers on January 1, 2000.
9. Q: On January 1, 2000, I renewed my registration as agent of an investment advisory firm in Connecticut. Must I satisfy the new Modified Series 65 Competency Examination requirement?
A: No. By Order dated December 2, 1999, the Commissioner waived the Modified Series 65 Competency Examination requirement for individuals registered as investment adviser agents on January 1, 2000.
10. Q: I passed the old Series 65 examination several years ago. My business associate passed the Series 66 examination in 1997. Both of us have been continuously registered as investment adviser agents in another state for the immediately preceding two years. We now want to register as investment adviser agents in Connecticut. Must both of us pass the Modified Series 65 Competency Examination?
A: No. By Order dated December 2, 1999, the Commissioner "grandfathered" from the Modified Series 65 Competency Examination any individual who has passed the previous version of the Series 65 or the Series 66 examination and who has been continuously registered as an investment adviser agent or as an investment adviser in any other state for the immediately preceding two years.
11. Q: I have never been registered as an investment adviser agent in Connecticut but did become registered as an investment adviser agent in another state one year ago. For the past couple of years, I have earned two industry designations. Although I would not be "grandfathered" from having to pass the Modified Series 65 Competency Examination, what designations would qualify me for an examination waiver once I apply for investment adviser registration in Connecticut?
A: Several: 1) The Chartered Investment Counselor (CIC) designation conferred by the Investment Counsel Association of America (ICAA); 2) the Chartered Financial Analyst (CFA) designation conferred by the Association for Investment Management and Research; 3) the Certified Financial Planner (CFP) designation conferred by the Certified Financial Planner Board of Standards, Inc.; 4) the Personal Financial Specialist (PFS) designation conferred by the American Institute of Certified Public Accountants; and 5) the Chartered Financial Consultant (ChFC) and Chartered Life Underwriter (CLU) designations awarded by the American College, Bryn Mawr, Pennsylvania where the designation holder is subject to, and in compliance with, continuing education requirements prescribed by the American College and the Society of Financial Service Professionals.
12. Q: I am a certified public accountant who applied for Connecticut investment adviser agent registration after January 1, 2000. I had never applied for registration before. The CPA down the street told me that the Modified Series 65 Examination had been waived for him since he had earned the Personal Financial Specialist (PFS) designation conferred by the American Institute of Certified Public Accountants. I have not earned the designation but I am a CPA. Do I qualify for a waiver?
A: No.
13. Q: Although I am a CPA who has never applied for Connecticut investment adviser agent registration before, I have a doctorate in economic theory; have taught courses in market analysis at a major university; and have written an authoritative treatise on investment principles. Must I still take the Modified Series 65 Competency Examination? I do not hold the PFS designation.
A: Not necessarily. The Commissioner has discretion to waive the examination based upon a comprehensive evaluation of the applicant's prior employment, educational background, professional designations and disciplinary history.
14. Q: On June 1, 1994, I became registered as an investment adviser agent in Connecticut and remained registered until the end of 1994. I was "grandfathered" from having to pass the old Series 65 examination because I had been associated with a registered investment adviser on October 1, 1994. In January, 1995, I took a sabbatical from the investment advisory industry and did not earn any designations, pursue any academic courses or work in the industry. In February, 2000, I applied for investment adviser registration in Connecticut. Would I be "grandfathered" from having to pass the Modified Series 65 Competency Examination?
A: No. The "grandfather" provision in Section 36b-31-15e(i) of the Regulations only applies to the old Series 65 examination.
Enforcement Highlights
Ameritel Payphone Distributors, Inc. (CRD # 43129) Fined $10,000 for Violating Business Opportunity Investment Act
On June 20, 2000, the Banking Commissioner entered an Order Imposing Fine (Docket No. CF-2000-739-B) against Ameritel Payphone Distributors, Inc. of 11098 Biscayne Boulevard, Suite 201, North Miami, Florida. The respondent had been the subject of a February 28, 2000 Order to Cease and Desist which became permanent on April 10, 2000 in light of the respondent's withdrawal of its hearing request. The Order to Cease and Desist was based on allegations that from at least 1995, the respondent sold unregistered pay phone business opportunities to at least six Connecticut purchaser-investors.
In imposing a fine of $10,000, the agency found that Ameritel Payphone Distributors, Inc. sold unregistered business opportunities in violation of Section 36b-67(1) of the Connecticut Business Opportunity Investment Act.
Home Buyers of America, Inc.; First Resource, Inc. a/k/a First Financial Resource, Inc.; Home Buyers Training Corporation a/k/a National Home Buyers Training Corporation; and Robert A. Blair Fined $10,000 Jointly and Severally for Unregistered Business Opportunity Sales
On June 20, 2000, the Banking Commissioner entered an Order Imposing Fine (Docket No. CF-2000-747-B) against First Resource, Inc. of 55 Skyline Drive, Suite 2200, Lake Mary, Florida; and Home Buyers of America, Inc., Home Buyers Training Corporation and Robert A. Blair, all of 445 West Colonial Drive, Orlando, Florida. The respondents had been the subject of a February 28, 2000 Order to Cease and Desist alleging that they had 1) sold unregistered business opportunities that would enable purchasers to start their own real estate investment business; and 2) failed to inform prospective purchasers that the program was not registered under the Connecticut Business Opportunity Investment Act. The Order to Cease and Desist was made permanent as to respondents Home Buyers of America, Inc., Homebuyers Training Corporation and Robert A. Blair on March 21, 2000 in light of their failure to request a hearing. Similarly, the Order to Cease and Desist was uncontested by respondent First Resources, Inc. and was made permanent on April 5, 2000 as a result.
In fining the respondents $10,000 jointly and severally, the agency found that the respondents sold unregistered business opportunities in violation of Section 36b-67(1) of the Connecticut Business Opportunity Investment Act.
Wellrich & Company (CRD # 43459) and Daryle Ragsdale Each Fined $30,000 for Securities Violations
On June 20, 2000, the Banking Commissioner entered an Order Imposing Fine (Docket No. CF-2000-5342-S) against Wellrich & Company of 1660 Hotel Circle North, Suite 205, San Diego, California and Daryle Ragsdale of the same address. The respondents had been the subject of a January 27, 2000 Order to Cease and Desist which, being uncontested, was made permanent on February 21, 2000. The Order to Cease and Desist had claimed that from at least March 1999, Wellrich & Company 1) transacted business as a broker-dealer absent registration under the Connecticut Uniform Securities Act; 2) employed respondent Ragsdale as an agent while respondent Ragsdale was not registered in that capacity; 3) offered unregistered non-exempt securities of Geenx Corp. to one or more Connecticut customers in alleged violation of Section 36b-16 of the Act; and 4) violated the antifraud provisions of the Act by misrepresenting customer holdings of Geenx securities, the worth of the securities and the incipient nature of a Geenx merger. The Order to Cease and Desist had also alleged that respondent Ragsdale transacted business as an unregistered agent of Wellrich & Company, offered unregistered non-exempt securities of Geenx to at least one Connecticut customer; and violated statutory antifraud provisions by misrepresenting the status of a pending Geenx merger, the amount of Geenx securities held by the customer and the worth of those securities.
In fining respondent Wellrich & Company $30,000, the agency found that the corporation had failed to observe statutory broker-dealer registration, agent registration and securities registration requirements. In fining respondent Ragsdale $30,000, the department found that he violated the antifraud provisions in Section 36b-4(a)(2) of the Connecticut Uniform Securities Act; that he transacted business as an agent absent registration in violation of Section 36b-6(a) of the Act; and that he violated the securities registration requirements in Section 36b-16 of the Act.
First Providence Financial Group, LLC (CRD # 39469) - Amended Notice of Intent to Revoke Registration as Broker-dealer, Amended Order Summarily Suspending Registration as Broker-dealer and Amended Notice of Intent to Fine Issued
On April 17, 2000, the Banking Commissioner issued an Amended Notice of Intent to Revoke Registration as Broker-dealer; Amended Order Summarily Suspending Registration as Broker-dealer and Amended Notice of Intent to Fine (Docket No. SS-5482-S) in the matter of First Providence Financial Group, LLC of 90 Broad Street, 10th Floor, New York, New York. The amended Notices and Order superseded the agency's December 14, 1999 Notice of Intent to Revoke Registration as Broker-dealer, Order Summarily Suspending Registration as Broker-dealer and Notice of Intent to Fine with respect to the firm. During the pendency of proceedings on the revocation issue, the respondent's broker-dealer registration was summarily suspended in Connecticut.
The amended Notices and Order alleged that during the course of an agency examination and investigation, the firm, through its Chief Executive Officer Kenneth Klein, concealed material information from department staff by deleting approximately 20 files from its computer system after receiving a request to maintain the integrity of the information. The amended Notices and Order also claimed that the firm had engaged in dishonest or unethical practices by employing "cold callers" who were not registered with the National Association of Securities Dealers. In addition, the amended Notices and Order alleged that the firm employed at least two unregistered agents in violation of Section 36b-6(b) of the Connecticut Uniform Securities Act; allegedly violated the antifraud provisions of the Act by misrepresenting or omitting material information in telephone conversations and through the use of sales scripts; refused to provide the agency with access to its books and records during the course of a department examination; and failed to enforce and maintain adequate supervisory procedures reasonably designed to achieve regulatory compliance.
A hearing on the amended Notices and the Order was held. The hearing decision remains pending.
First Global Securities, Inc. (CRD # 28612) Ordered to Cease and Desist from Regulatory Violations; Notice of Intent to Deny Broker-dealer Registration and to Fine Issued
On May 8, 2000, the Banking Commissioner entered an Order to Cease and Desist, Notice of Intent to Deny Registration as Broker-dealer and Notice of Intent to Fine (Docket No. CF-2000-5550-S) with respect to First Global Securities, Inc. of 790 East Colorado Boulevard, Suite 500, Pasadena, California. The agency's action was based on allegations that the firm 1) withheld material information concerning its past trading activity from the department; 2) filed a materially incomplete application for broker-dealer registration; and 3) wilfully transacted business as a broker-dealer in Connecticut absent registration under the Connecticut Uniform Securities Act. In addition, the agency claimed that the firm was the subject of an October 5, 1999 NASD fine predicated on the firm's failure to maintain minimum net capital and designate a registered financial operations principal. A further basis for action was the NASD's October 5, 1999 suspension of the firm's president, Noble Trenham.
A hearing on the Notice of Intent to Fine has been scheduled for July 11, 2000. Respondent First Global Securities, Inc. was also afforded an opportunity to request a hearing on the Order to Cease and Desist and the initiation of proceedings to deny its broker-dealer registration. Since no hearing was requested on the Order to Cease and Desist, that order became permanent on May 27, 2000.
Lawrence Helfant, Inc. (CRD # 32829) Assessed $17,300 for Unregistered Activity
On June 5, 2000, the Banking Commissioner entered a Consent Order (File No. CO-00-5585-S) with respect to Lawrence Helfant, Inc. of 30 Broad Street, 45th Floor, New York, New York. The Consent Order alleged that from approximately 1993 through 1999, the firm transacted business as a broker-dealer in violation of Section 36b-6(a) of the Connecticut Uniform Securities Act and employed unregistered agents in violation of Section 36b-6(b) of the Act.
The Consent Order assessed the firm $17,300. Of that amount, $15,000 constituted an administrative fine, $1,300 represented reimbursement of past due registration fees and $1,000 represented reimbursement for agency investigative costs. In addition, the Consent Order required that affected current and ex-customers of the firm receive a commission credit or refund for trades placed during the period of unregistered activity. The Consent Order also mandated that the firm implement revised supervisory and compliance procedures, and that it provide quarterly reports to the department for two years describing any securities-related complaints, actions or proceedings involving Connecticut residents.
The firm became registered in Connecticut on June 5, 2000.
Gilford Securities, Inc. (CRD # 08076) Fined $50,000; Assessed Costs of $10,000 for Violating Agency Consent Order
On May 26, 2000, the Banking Commissioner entered a Consent Order (Docket No. NSCF-99-5499-S) with respect to Gilford Securities, Inc., a securities broker-dealer located at 850 Third Avenue, 14th Floor, New York, New York. The Consent Order resolved allegations in the agency's January 5, 2000 Notice of Intent to Suspend Registration as a Broker-dealer, Notice of Intent to Impose Conditions on Broker-dealer Activities and Notice of Intent to Fine issued against the firm. The Notices had claimed that the firm violated a July 10, 1996 department Consent Order by selling securities of C2i Solutions, Inc. to the public without distributing at least 30 percent of the issue to one or more unaffiliated selling groups. Gilford Securities, Inc. had served as sole underwriter for the initial public offering of C2i Solutions, Inc. securities as well as market maker.
The May 26, 2000 Consent Order fined the firm $50,000 and required that it reimburse the agency an additional $10,000 for investigative costs. The Consent Order also mandated that, for three years, the firm not sell to any Connecticut client any new issue for which the firm acted as sole underwriter and market maker in an initial public offering occurring after the date of the Consent Order unless 1) the firm distributed at least 30 percent of the issue to one or more unaffiliated selling groups or 2) the security or transaction was exempt from registration under the Connecticut Uniform Securities Act and the exemptive claim was supported by an opinion of counsel. The Consent Order also required that the firm file quarterly complaints for two years describing any securities-related complaints, actions or proceedings involving Connecticut residents, and that the firm pay the costs, not to exceed $3,500, of one or more examinations to be conducted by the agency within 24 months. In entering the Consent Order, the department acknowledged that the firm had agreed not to execute solicited Connecticut orders for Bulletin Board or Pink Sheet securities, and that the firm had voluntarily contributed an additional $15,000 to the agency's enforcement activities and investor education programs.
Track Securities Corporation (CRD # 14178) Fined $25,000 for Unregistered Activity
On April 13, 2000, the Banking Commissioner entered a Consent Order Conditioning Registration as a Broker-dealer (File No. CO-00-5490-S) with respect to Track Securities Corporation of 1800 Corporate Boulevard, Suite 303, Boca Raton, Florida. The Consent Order was based on allegations that 1) from at least March 1999, the firm had transacted business as a broker-dealer absent registration under the Connecticut Uniform Securities Act and had employed unregistered agents; and 2) on two occasions that firm had provided inaccurate information to the department concerning its prior securities activity in the state.
The Consent Order fined the firm $25,000 and directed it to cease and desist from regulatory violations. In addition, the Consent Order restricted the firm's Connecticut business to government issued securities; investment company offerings; exchange listed securities; securities listed on the National Market System of NASDAQ; and NASDAQ Small Cap Market or OTC Bulletin Board securities only where the transactions were for "accredited investors" or unsolicited in nature. The Consent Order also required that the firm retain an independent consultant to review its supervisory and compliance procedures and that the firm report back to the division concerning its implementation of the consultant's recommendations. Other provisions in the Consent Order mandated that the firm submit quarterly reports to the division for two years describing any complaints, actions or proceedings involving Connecticut customers, and that the firm reimburse the agency for up to $2,500 in expenses associated with an examination of the firm or its affiliated broker-dealer(s) conducted within 18 months.
Track Securities Corporation became registered as a broker-dealer in Connecticut on April 13, 2000.
Wall Street Management Corporation (CRD # 7186) Fined $5,000 and Assessed Costs
On April 13, 2000, the Banking Commissioner entered a Consent Order (File No. CO-00-5544-S) with respect to Wall Street Management Corporation, an applicant for broker-dealer registration located at 230 Park Avenue, Suite 1635, New York, New York. The Consent Order claimed that from approximately May, 1997 through 1999, the firm transacted business for clients of an affiliated investment adviser while unregistered and that the firm employed unregistered agents in purported violation of Section 36b-6(b) of the Connecticut Uniform Securities Act.
The Consent Order assessed the firm $6,400. Of that amount, $5,000 constituted an administrative fine, $400 represented reimbursement of past due registration fees; and $1,000 constituted reimbursement for division investigative costs. In addition, the Consent Order required that the firm offer to credit affected customers for the amount of commissions earned during the period of unregistered activity. The Consent Order also required that the firm submit quarterly reports to the division for two years describing any complaints, actions or proceedings involving Connecticut residents and that it take steps to improve its compliance procedures, particularly in the area of state licensing.
Boutros Fouad Mansour a/k/a Pierre Mansour (CRD # 2426615) Charged With Securities Fraud
On May 30, 2000, Chief State's Attorney John M. Bailey announced that Boutros Fouad Mansour a/k/a Pierre Mansour of Manchester, Connecticut had been arrested and charged with Larceny in the First Degree, Fraud in Connection with the Sale of Securities and Sale of Unregistered Securities. Mansour reportedly faced a maximum possible sentence of 32 years in prison if convicted on all charges. The charges stemmed from Mansour's alleged role in soliciting clients to invest in a hedge fund or arbitrage trading program. Investor losses purportedly exceeded $40,000. A June 7, 2000 arraignment date has been set in the Superior Court at G.A. #12 in Manchester, Connecticut.
Mansour had been the subject of an April 15, 1999 Order to Cease and Desist issued by the Banking Commissioner (Docket No. CD-99-5340-S). Mansour elected not to contest the Order to Cease and Desist which became permanent on June 29, 1999 as a result. The Order to Cease and Desist had claimed that Mansour, an ex-broker-dealer agent of Securities America, Inc., sold unregistered arbitrage or hedge investments for $51,470 in the aggregate to at least five Connecticut purchasers starting in March 1997, and had allegedly guaranteed purchasers that their funds would be returned within 30 days upon request. The Order to Cease and Desist had further claimed that Mansour violated the antifraud provisions of the Connecticut Uniform Securities Act since he did not, in actuality, purchase any investments for the Connecticut purchasers nor did he return any of the sums invested with him. In addition, the Order to Cease and Desist had alleged that Mansour violated Section 36b-31-6e of the Regulations under the Act by engaging in private securities transactions without notice to Securities America, Inc. with whom he was associated at the time.
| Licensing At A Glance June 30, 2000 | |
| Broker-dealers Registered | 2,526 |
| Broker-dealer Agents Registered | 112,167 |
| Broker-dealer Branch Offices Registered | 1,508 |
| Investment Advisers Registered | 397 |
| SEC Registered Advisers Filing Notice | 949 |
| Investment Adviser Agents Registered | 4,572 |
| Investment Advisory Branch Offices Registered | 511 |
| SEC Advisers Filing Branch Notice | 195 |
| Agents of Issuer Registered | 163 |
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Year to Date | |
|---|---|---|---|---|---|
| Examinations | |||||
| Broker-dealers | 20 | 37 | 57 | ||
| Investment Advisers | 51 | 7 | 58 | ||
| |||||
| Securities Investigations | |||||
| Opened | 79 | 63 | 142 | ||
| Closed | 70 | 57 | 127 | ||
| Ongoing as of June 30, 2000 | 85 | 91 | |||
| Subpoenas issued | 11 | 17 | 28 | ||
| Cases referred from Attorney General | 1 | 2 | 3 | ||
| Cases referred from Other Agencies | 4 | 2 | 6 | ||
| Securities Enforcement | |||||
| Administrative Actions | |||||
| Notices of Intent to Deny (Licensing) | 0 | 1 | 1 | ||
| Notices of Intent to Suspend (Licensing) | 1 | 0 | 1 | ||
| Notices of Intent to Revoke (Licensing) | 1 | 1 | 2 | ||
| Denial Orders (Licensing) | 0 | 0 | 0 | ||
| Suspension Orders (Licensing) | 1 | 1 | 2 | ||
| Revocation Orders (Licensing) | 0 | 0 | 0 | ||
| Notices of Intent to Fine | 5 | 1 | 6 | ||
| Orders Imposing Fine | 0 | 2 | 2 | ||
| Cease and Desist Orders | 9 | 1 | 10 | ||
| Notice of Intent to Condition Registration | 1 | 0 | 1 | ||
| Notices of Intent to Issue Stop Order | 0 | 0 | 0 | ||
| Stop Orders | 0 | 0 | 0 | ||
| Vacating Orders | 2 | 0 | 2 | ||
| Settlements | |||||
| Consent Orders | 5 | 4 | 9 | ||
| Stipulation and Agreements | 0 | 0 | 0 | ||
| Activity Restrictions/Bars | 1 | 2 | 3 | ||
| Monetary Relief | |||||
| Monetary Sanctions | $80,500 $30,000 (adj from prior year) |
$168,700 | $279,200 | ||
| Voluntary Restitution | $352,839 | $357,993 | $710,832 | ||
| Securities Referrals | |||||
| Criminal (Chief State's Attorney) | 0 | 1 | 1 | ||
| Criminal (Other) | 0 | 0 | 0 | ||
| Civil (Attorney General) | 1 | 0 | 1 | ||
| Other Agency Referrals | 0 | 0 | 0 | ||
The Securities and Business Investments Division is also charged with
administering the Connecticut Business Opportunity Act.
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Year to Date | |
|---|---|---|---|---|---|
| Business Opportunities | |||||