| Securities and Business Investments Division | |
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Securities Bulletin | |
| Vol. XIV No. 4 | Winter 2000 |
Features:
- A Word from the Banking Commissioner
- New Simplified Branch Office Registration Forms and Instructions
- Fourth 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
At our 12th annual Securities Forum, held in October, 2000, I asked the Securities Division to review by yearend its current practice of licensing branch offices with an eye towards reducing paperwork and improving our licensing process. I am pleased to report the results of that evaluation, and a broader look at our investment adviser licensing process, in this Bulletin.
As of February 1st, I will no longer require SEC-registered investment advisers to notify the agency of their in-state branch offices and pay an associated fee of $100 per branch office. This change is timely in light of revisions the SEC made to Form ADV.
At the same time, the Division has simplified and consolidated its former two branch office registration forms into one unitary form for branch offices that are joint broker-dealer and state investment adviser branches. Although those entities will still need to pay a total filing fee of $200 for each shared location ($100 for the broker-dealer branch registration; $100 for the investment adviser branch registration), I've proposed new legislation in the current General Assembly session that, if enacted, would allow me to grant further regulatory relief where the office location and the entity are the same.
The Securities Division has also simplified the investment adviser registration application and re-written the forms in plain English. A complete copy of the new Connecticut branch office registration form, and instructions, may be found in this Bulletin issue. You may also access the new investment adviser application on our web site or request a printed copy from the Division. (Please note that the investment adviser registration form is a PDF file that requires Adobe Acrobat Reader software to access). As a next step, I've asked the Division to similarly review our broker-dealer initial registration process, a task that should be completed by spring and should also result in a more simplified process.
SEC Chairman Arthur Levitt will leave office in February, foregoing the remainder of his term, to allow President Bush to appoint a successor. During his eight years at the SEC, in a time of unprecedented change, Mr. Levitt has championed the interests of individual investors. Together with Senator Christopher Dodd, I had the opportunity to join with Chairman Levitt in hosting an Investors' Town Meeting in Connecticut in 1997 which drew a crowd of over 800 people on a Monday morning. Mr. Levitt recognized that, as Americans increasingly turned to securities markets for their financial future, it was essential to ensure that they recognized the differences between saving and investing, and that the securities markets be fair and open for all investors. Arthur Levitt has done an admirable job in his regulatory tenure and he deserves genuine praise from investors and industry alike.
John P. Burke
Banking Commissioner
CONNECTICUT BRANCH OFFICE REGISTRATION INSTRUCTIONS
WHO MUST FILE
1. Broker-dealers having one or more Connecticut branch offices
2. State-regulated investment advisers having one or more Connecticut branch offices
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Investment Advisers Regulated by the Securities and Exchange Commission Need Not File for Connecticut Branch Office Registration (effective 2/1/01) |
WHAT IS A "BRANCH OFFICE"?
Section 36b-3(4) of the Connecticut Uniform Securities Act defines a "branch office" as "any location other than the main office, identified by any means to the public, customers or clients as a location at which a broker-dealer or investment adviser conducts a securities or investment advisory business." However, if a telephone directory line listing, a business card or letterhead is the sole means by which the location is so identified, we would not consider the location to be a "branch office" if 1) the telephone listing, business card or letterhead also gives the address and telephone number of a Connecticut office of the broker-dealer or investment adviser from which individuals conducting business from the identified location are directly supervised; and 2) no more than one agent or investment adviser agent transacts business from the identified location. If the location is identified as a brokerage or investment advisory office by any other means (signage; mass advertising), the branch office would have to be registered.
WHAT IS THE FEE?
Your branch office filing is good until you cease operations at the location. There is no "renewal" procedure. The non-refundable fee for making a branch office filing is $100 per branch office. Please make your check payable to "Treasurer, State of Connecticut."
WHAT TO FILE
| 1. | Branch Office Registration Application. Broker-dealers and state-regulated investment advisers should file a Connecticut branch office application directly with the Securities and Business Investments Division of the Department of Banking. | ||||
| 2. | Nonrefundable $100 Filing Fee Per Branch Office Payable to "Treasurer, State of Connecticut." A branch office that is both a broker-dealer and a state-regulated investment advisory branch would require a total fee payment of $200. | ||||
| 3. | Additional Requirements:
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WHEN TO AMEND YOUR FILING
Branch Manager Changes (reassignments; employment terminations): These must be filed promptly in writing and include the effective date of the change.
Branch Office Moves to Another Connecticut Location: Amend your filing to show that business has ceased at the former location. In addition, if the new location is not yet registered as a branch office, you must include information on the new location as well as a $100 fee for the new site payable to "Treasurer, State of Connecticut."
Branch Office Shuts Down
NEED HELP?
We will tell you if your filing is deficient. For filers other than SEC-registered investment advisers, note that a branch office registration is not effective until the branch's name has been entered on the Register of Branch Offices and you have received written notice of that fact from us. For more information, call us at (860) 240-8230 or visit our Web site.
[Web edition note: A facsimile of the printed form follows. The form may be also downloaded from this Web site.
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CONNECTICUT BRANCH OFFICE REGISTRATION AND AMENDMENT FORM
(Broker-dealers and State-Regulated Investment Advisers Only. I. NEW BRANCH OFFICE REGISTRATION ($100 fee per branch office) 1. Type of Branch Office: Broker-dealer ( ) State Regulated Investment Adviser ( ) Both ( ) 2. Name of broker-dealer firm doing business from this office (if applicable): ________________________________________________________________ 3. Name of state-regulated investment adviser doing business from this office (if applicable): ________________________________________________________________ 4. Branch Office Address: ___________________________________________________________ _________________________________________________________________ 5. If the Branch Office is located on the premises of a financial institution, name that financial institution. _________________________________________________________________ 6. Identify each manager of the branch office, providing the manager’s name, residence address, Manager Residence Activity CRD # ________________________________________________________ ________________________________________________________ ________________________________________________________ 7. Identify where branch office books and records will be maintained and open to inspection ______________________________________________ Location of broker-dealer records: _______________________________________________ 8. Workers’ Compensation Information (see instructions). Please check one of the following: [ ] The applicant will not be operating a business in Connecticut within the meaning [ ] The applicant will be operating a business in Connecticut within the meaning of
II. BRANCH OFFICE CLOSINGS (No fee unless a branch office moves to an 1. Type of Branch Office closing: Broker-dealer ( ) State Regulated Adviser ( ) Both ( ) 2a (If applicable) Name of the broker-dealer firm that did business from the closing Branch Office: _________________________________________________ 2b (If applicable) Name of the state-regulated investment adviser that did business from the closing _________________________________________________ 3. Address of the closing Branch Office: _________________________________________________ ______________________________________________________ 4. Date (month, day and year) operations ceased at the closing Branch Office: __________________ 5. Have you given affected clients or customers prior written notice that the office stopped Yes ( ) No ( ) III. ACQUIRING ANOTHER BROKER-DEALER’S OR STATE INVESTMENT
1. Entity acquiring the Branch Office Broker-dealer ( ) Investment Adviser ( ) Both ( ) 2. Name the broker-dealer or investment adviser acquiring the Branch Office: _______________________________________________ 3. Name the firm from whom the Branch Office was acquired 4. Address of the acquired Branch Office: _______________________________________________ _______________________________________________ 5. Telephone number of the acquired Branch Office: ________________________________________ IV. BRANCH OFFICE MANAGER CHANGES (No fee) 1. Branch office type supervised by manager: Broker-dealer ( ) Investment Adviser ( ) Both ( ) 2a (If applicable) Name and CRD number of the broker-dealer firm with whom the manager is or was associated: (If applicable) Name of the state-regulated investment advisory firm with whom the manager is or was associated: 3. For each Connecticut branch office impacted by a manager change, complete the following. You Name and CRD number of Manager: Branch office address where the manager was assigned: Reason for change (e.g. permanently left firm; reassigned to another branch): Date the change became effective: _________________________ Name and CRD number of replacement manager If applicable, new branch office to be supervised by former manager (give full address): _______________________________________________________________ V. EXECUTION SECTION (To be completed by an authorized officer of the
The undersigned, ___________________________ (print name of signatory) affirms under penalty of perjury that he/she has executed the foregoing filing for and on behalf of the filer named therein; that he/she is fully authorized to execute and make such filing on behalf of the filer; that he/she is familiar with such filing; and that to the best of his/her knowledge, information and belief the statements made in such filing are true. __________________________________ __________________________________ Rev. 1/2001 |
Enforcement Highlights
Hampton Securities, Inc. (CRD # 18305) Ordered to Cease and Desist from Regulatory Violations; Notice of Intent to Deny Registration as a Broker-dealer and to Fine Issued
On December 20, 2000, the Banking Commissioner entered an Order to Cease and Desist, Notice of Intent to Deny Registration as a Broker-dealer and Notice of Intent to Fine (Docket No. NDCDF-2000-6120-S) against Hampton Securities, Inc. of 3807 Wilshire Boulevard, Suite 1220, Los Angeles, California. The action alleged that from at least June 2000 forward, the firm had transacted business as a broker-dealer absent registration in violation of the Connecticut Uniform Securities Act and had employed one Timothy J. Pimentel as an unregistered broker-dealer agent. The action also alleged that Hampton Securities, Inc. violated Section 36b-16 of the Act by offering unregistered non-exempt preferred stock of playersworld.com over the Internet. In addition, the firm was purportedly the subject of an October 20, 1998 NASD suspension based upon the firm's failure to comply with formal written requests to submit financial information, and a December 6, 1999 NASD fine imposed jointly and severally upon the firm and its CEO Patrick A. Anthony based on a failure to transmit over $162,000 of customer funds to the issuer in an underwritten offering.
Respondent was afforded an opportunity to request a hearing on the Order to Cease and Desist and Notice of Intent to Deny Registration as a Broker-dealer. A hearing on the Notice of Intent to Fine has been scheduled for February 21, 2001.
Timothy J. Pimentel (CRD # 2634753) Ordered to Cease and Desist from Regulatory Violations; Notice of Intent to Deny Registration as Agent and to Fine Issued
On December 20, 2000, the Banking Commissioner entered an Order to Cease and Desist, Notice of Intent to Deny Registration as Agent and Notice of Intent to Fine (Docket No. NDCDF-2000-6157-S) against Timothy J. Pimentel, a pending broker-dealer agent of Hampton Securities, Inc. (CRD number 18305). The action alleged that from at least June 2000 forward, Pimentel transacted business as an agent of Hampton Securities, Inc. without being registered as such under the Connecticut Uniform Securities Act. The respondent was afforded an opportunity to request a hearing on the Order to Cease and Desist and Notice of Intent to Deny Registration. A hearing on the Notice of Intent to Fine has been scheduled for February 21, 2001.
Hearing Decision Rendered in the Matter of First Providence Financial Group, LLC (CRD # 39469) and Kenneth Michael Klein (CRD # 2080654); Appeal Filed
On November 27, 2000, the Banking Commissioner issued a Corrected Final Decision in proceedings involving First Providence Financial Group, LLC of 90 Broad Street, 10th Floor, New York, New York, and its Chief Executive Officer, Kenneth Michael Klein. Klein had been the subject of a January 27, 2000 Notice of Intent to Revoke Agent Registration and Summary Suspension (Docket number SS-2000-5528-S). First Providence Financial Group, LLC had been the subject of an April 17, 2000 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 number SS-2000-5528-S). The proceedings against Klein and the firm were consolidated, and a hearing held. The Commissioner found that respondent First Providence Financial Group, LLC violated Sections 36b-14(d) and 36b-6(b) of the Connecticut Uniform Securities Act; engaged in dishonest or unethical conduct supporting the suspension of its registration under Section 36b-15(a)(2)(H) of the Connecticut Uniform Securities Act; and violated Section 36b-31-6f(b) of the Regulations under the Act. Accordingly, the Commissioner fined the firm $30,000, and ordered that its registration be suspended for a period to run concurrently with the previously imposed summary suspension. The suspension would be lifted upon the firm's payment of the $30,000 fine. Based upon evidence adduced at the hearing, the suspension of respondent Klein's registration was lifted nunc pro tunc. On January 8, 2001, respondent First Providence Financial Group, LLC appealed the department's November 27, 2000 decision, and the Superior Court for the Judicial District of New Britain (Administrative Appeals Court) ordered that a hearing on the respondent's application for a stay be held on January 22, 2001. A summary of the November 27, 2000 decision follows.
Concealment Claim Against Klein Not Supported
The Final Decision ruled that, during the course of an agency examination, Klein placed certain documents into his computer's recycle bin and attempted to either delete them or to hide them, thus hindering their discovery and concealing them within the meaning of Section 36b-15(a)(2)(L) of the Connecticut Uniform Securities Act. However, since the documents were not material to the firm's business, grounds for action against Klein under Section 36b-15(a)(2)(L) of the Act could not be established.
Firm's Employment of Unregistered "Cold Callers" A Dishonest or Unethical Practice
The department had alleged that First Providence Financial Group, LLC had engaged in dishonest or unethical practices by employing "cold callers" who were not registered with the NASD. The Final Decision ruled that, in ascertaining whether a broker-dealer engaged in dishonest or unethical practices in the securities business, it was not necessary that the alleged misconduct be performed in Connecticut; rather, Connecticut registration established the requisite jurisdictional nexus. Noting that employing unregistered cold callers violated NASD Rule 1031, the Commissioner found that First Providence Financial Group, LLC engaged in dishonest or unethical practices within the meaning of Section 36b-15(a)(2)(H) of the Connecticut Uniform Securities Act. The Commissioner also found that the firm had employed unregistered agents in violation of Section 36b-6(b) of the Act.
Fraud Charges Against First Providence Financial Group, LLC
The department had claimed that First Providence Financial Group, LLC violated the antifraud prohibition in Section 36b-4(a)(2) of the Connecticut Uniform Securities Act by misrepresenting or omitting material information in telephone conversations and through the use of sales scripts. The Final Decision found that, although a broker made untrue telephonic statements to the effect that he was positioning all of his clients into large blocks of stocks; that the broker was one of the top producers; and that First Providence Financial Group, LLC was one of the most powerful investment banks in the country, the materiality of those statements was not established under the specific facts of the case. The Final Decision also found that inflated statements made by a broker concerning the amount of funds managed did not rise to the level of fraud where the statements were made to a prospect having a very high net worth and a high tolerance for risk. The Final Decision also ruled that, based on the evidence, representations that a broker would forego a commission were not material. In light of the above, the Commissioner found that the department did not meet its burden of proving a violation of Section 36b-4(a)(2) of the Connecticut Uniform Securities Act.
Firm Violated Connecticut Law By Refusing to Provide the Agency With Access to Books and Records
In ruling that First Providence Financial Group, LLC violated Section 36b-14(d) of the Connecticut Uniform Securities Act, the Final Decision noted that advance notice of an examination was not required under that section. The Final Decision rejected the firm's argument that market conditions prevailing on the date of the examination made the examination "unreasonable", noting that, for the firm to take it upon itself to decide when the Commissioner may examine the firm's books and records was "unreasonable and unlawful" and that the firm's failure to furnish any of the requested documents "shows a blatant disregard for the authority of the Commissioner."
Firm Failed to Enforce and Maintain Adequate Supervisory Procedures
The Final Decision found that several firm representatives violated firm procedures by failing to obtain accurate and detailed information on clients; by misstating customer suitability; and by using rude and abusive language in pressured sales calls. These practices, combined with the representatives' failure to receive a complete supervisory manual, supported the department's claim that supervisory lapses occurred in violation of Section 36b-31-6f(b) of the Regulations under the Act.
Nicholas Mario Antonelli (CRD # 2459572) Ordered to Cease and Desist from Regulatory Violations; Notice of Intent to Fine Issued
On November 21, 2000, the Banking Commissioner entered an Order to Cease and Desist and Notice of Intent to Fine (Docket No. CF-2000-6121-S) against Nicholas Mario Antonelli of 25 Sioux Drive, Commack New York. The action alleged that Antonelli, formerly affiliated with the securities brokerage firm of Morgan, Taylor & Associates, Inc., transacted business as an agent of that firm in Connecticut absent registration under the Connecticut Uniform Securities Act. The Order to Cease and Desist and Notice of Intent to Fine also claimed that Antonelli violated Section 36b-31-6e of the Regulations under the Act by engaging in private securities transactions without notice to his employing broker-dealer. Respondent Antonelli was afforded an opportunity to request a hearing on the Order to Cease and Desist. A hearing on the Notice of Intent to Fine has been scheduled for January 10, 2001.
F1 Trading.com Inc. f/k/a Gold Country Securities (CRD # 20375) - Notice of Intent to Deny Broker-dealer Registration and Notice of Intent to Fine Issued; Firm Ordered to Cease and Desist from Regulatory Violations
On November 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. NDCF-2000-6107-S) against F1 Trading.com Inc., formerly known as Gold Country Securities. The firm maintains its principal office at 600 Old Country Road, Suite 535, Garden City, New York. The action was based on claims that 1) from at least September 1999 to June 2000, the firm transacted business as a broker-dealer absent registration under the Connecticut Uniform Securities Act; 2) in conjunction with its broker-dealer application, the firm filed false or misleading information concerning the extent of its prior broker-dealer activity. Respondent was afforded an opportunity to request a hearing on the Order to Cease and Desist and the Notice of Intent to Deny Registration as Broker-dealer. A hearing on the Notice of Intent to Fine has been scheduled for January 2, 2001.
Chemical Trust Ordered to Cease and Desist from Securities Violations; Notice of Intent to Fine Issued
On November 8, 2000, the Banking Commissioner entered an Order to Cease and Desist and Notice of Intent to Fine (Docket No. CF-2000-5541-S) against Chemical Trust of 130 Wildwood Parkway, Suite 108, Birmingham, Alabama. The action was based on allegations that from at least August 1999, Chemical Trust sold unregistered non-exempt notes to Connecticut investors through at least one unregistered agent of issuer in violation of the Connecticut Uniform Securities Act. Respondent was provided with an opportunity to request a hearing on the Order to Cease and Desist. A hearing on the Notice of Intent to Fine has been scheduled for December 27, 2000.
Ameritech Petroleum, Inc. Ordered to Cease and Desist from Securities Violations; Notice of Intent to Fine Issued
On November 7, 2000, the Banking Commissioner entered an Order to Cease and Desist and Notice of Intent to Fine (Docket No. CF-2000-6137-S) against Ameritech Petroleum, Inc. of 16775 Addison Road, #335, Addison Texas and 16901 Dallas Parkway, Suite 111, Dallas, Texas. The action was based on allegations that from at least November 1996, the corporation sold unregistered non-exempt notes to Connecticut investors through at least four unregistered agents of issuer in violation of the Connecticut Uniform Securities Act. A hearing on the Notice of Intent to Fine was scheduled for December 27, 2000. Since the respondent did not request a hearing on the Order to Cease and Desist, the Order to Cease and Desist became permanent on January 16, 2001.
Canko Environmental Technologies, Inc. Ordered to Cease and Desist from Regulatory Violations; Notice of Intent to Fine Issued
On November 7, 2000, the Banking Commissioner entered an Order to Cease and Desist and Notice of Intent to Fine (Docket No. CF-2000-5538-S) against Canko Environmental Technologies, Inc. of 10458 Mayfield Road, #206, Edmonton, Alberta, Canada. The action was predicated on claims that from at least November 1997, the corporation sold unregistered non-exempt notes to Connecticut investors through at least two unregistered agents of issuer in violation of the Connecticut Uniform Securities Act. Since the respondent did not request a hearing on the Order to Cease and Desist, that order became permanent on December 2, 2000. A hearing on the Notice of Intent to Fine has been scheduled for December 27, 2000.
Communications Marketing Associates, Inc. - Notice of Intent to Issue a Stop Order Denying Effectiveness to Business Opportunity Registration Issued
On November 7, 2000, the Banking Commissioner issued a Notice of Intent to Issue a Stop Order denying effectiveness to the pending business opportunity registration of Communications Marketing Associates, Inc. (Docket No. SO-2000-765-B). The corporation maintains its principal office at One Park Place, 621 N.W. 53rd Street, Suite 355, Boca Raton, Florida. The Notice maintained that the Respondent, a seller of payphone equipment packages, filed a materially incomplete application for business opportunity registration. Respondent was afforded an opportunity to request a hearing on the allegations.
Redbank Petroleum, Inc. the Subject of Order to Cease and Desist; Notice of Intent to Fine
On November 7, 2000, the Banking Commissioner entered an Order to Cease and Desist and Notice of Intent to Fine (Docket No. CF-2000-6143-S) against Redbank Petroleum, Inc. of 16901 Dallas Parkway, Suite 111, Dallas, Texas. The action was based on claims that from at least April 1998, the corporation sold unregistered non-exempt notes to Connecticut investors through at least four unregistered agents of issuer in violation of the Connecticut Uniform Securities Act. A hearing on the Notice of Intent to Fine was scheduled for December 27, 2000. Since the respondent did not request a hearing on the Order to Cease and Desist, the Order to Cease and Desist became permanent on January 16, 2001.
South Mountain Resort and Spa, Inc. Ordered to Halt Sales of Unregistered Promissory Notes; Notice of Intent to Fine Issued
On November 7, 2000, the Banking Commissioner entered an Order to Cease and Desist and Notice of Intent to Fine (Docket No. CF-2000-6134-S) against South Mountain Resort and Spa, Inc. of 930 Queens Road, Charlotte, North Carolina. The Order to Cease and Desist and the Notice alleged that from at least November 1997, the corporation sold unregistered non-exempt notes to Connecticut investors through at least two unregistered agents of issuer in violation of the Connecticut Uniform Securities Act. Since Respondent did not request a hearing on the Order to Cease and Desist, the Order to Cease and Desist became permanent on December 7, 2000. A hearing on the Notice of Intent to Fine has been scheduled for December 27, 2000.
Sweetwater Development Corporation Ordered to Cease and Desist from Securities Violations; Notice of Intent to Fine Issued
On November 7, 2000, the Banking Commissioner entered an Order to Cease and Desist and Notice of Intent to Fine (Docket No. CF-2000-6132-S) against Sweetwater Development Corporation of 5001 Silverside Road, Suite 113, Wilmington, Delaware. The action was based on allegations that from at least November 1998, the corporation sold unregistered non-exempt notes to Connecticut investors through at least two unregistered agents of issuer in violation of the Connecticut Uniform Securities Act. Since the respondent did not request a hearing on the Order to Cease and Desist, that order became permanent on November 29, 2000. A hearing on the Notice of Intent to Fine has been scheduled for December 27, 2000.
Yucatan Investment Corp. Ordered to Cease and Desist from Regulatory Violations; Notice of Intent to Fine Issued
On November 7, 2000, the Banking Commissioner entered an Order to Cease and Desist and Notice of Intent to Fine (Docket No. CF-2000-6133-S) against Yucatan Investment Corp. of 711 South Michigan Street, LaPaz, Indiana. The Order to Cease and Desist and Notice of Intent to Fine claimed that from at least August 1998, the corporation sold unregistered non-exempt notes to Connecticut investors through at least one unregistered agent of issuer in violation of the Connecticut Uniform Securities Act. Since the respondent withdrew its request for a hearing on the Order to Cease and Desist, that order became permanent on December 21, 2000. A hearing on the Notice of Intent to Fine has been scheduled for December 27, 2000.
First Global Securities, Inc. (CRD # 28612) Fined $10,000; Broker-dealer Registration Denied
On October 30, 2000, the Banking Commissioner issued Findings of Fact, Conclusions of Law and an Order denying the broker-dealer registration of First Global Securities, Inc. (Docket No. CF-2000-5550-S) and fining the firm $10,000. The firm is located at 790 East Colorado Boulevard, Suite 500, Pasadena, California. The agency's action was based on findings 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 department found 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 and fining of the firm's president, Noble Trenham. The firm had been the subject of a May 8, 2000 Order to Cease and Desist which was uncontested and became permanent on May 27, 2000.
Lifeblood Biomedical, Inc. Ordered to Cease and Desist from Securities Violations; Notice of Intent to Fine Issued
On October 13, 2000, the Banking Commissioner entered an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2000-5538-S) against Lifeblood Biomedical, Inc. of 101 Southhall Lane, Suite 400, Maitland, Florida. The Order to Cease and Desist and the Notice of Intent to Fine claimed that, from at least March 1997, the corporation sold unregistered, non-exempt promissory notes to the Connecticut public through unregistered agents of issuer in violation of the Connecticut Uniform Securities Act.
Since the respondent failed to request a hearing on the Order to Cease and Desist, the Order to Cease and Desist became permanent on November 21, 2000. A hearing on the Notice of Intent to Fine has been scheduled for December 14, 2000.
Palm Beach Investment Group, Inc. Ordered to Cease and Desist from Regulatory Violations; Notice of Intent to Fine Issued
On October 10, 2000, the Banking Commissioner issued an Order to Cease and Desist and Notice of Intent to Fine (Docket No. CF-2000-5325-S) against Palm Beach Investment Group, Inc., now or formerly of 12765 West Forest Hills Boulevard, Suite 1313, Wellington, Florida, 12765 West Forest Hills Boulevard, Suite 1313, West Palm Beach, Florida and 1395 Woodrow Way, Wellington, Florida. The Order to Cease and Desist and Notice of Intent to Fine alleged that, from at least November, 1998, the corporation sold unregistered stock to Connecticut residents through at least five unregistered agents in violation of Sections 36b-16 and 36b-6(b) of the Connecticut Uniform Securities Act. The Order and Notice also alleged that the corporation violated the antifraud prohibition in Section 36b-4(a)(2) of the Act through representations made by its co-chairman and president, Michael Shuda, and in brochures circulated to investors. Those representations were purportedly false in that they claimed the stock of Palm Beach Investment Group, Inc. was FDIC-insured and that the corporation was capitalized in the amount of $19 million.
Since respondent did not request a hearing on the Order to Cease and Desist, that order became permanent on November 28, 2000. A hearing on the Notice of Intent to Fine has been scheduled for December 5, 2000.
Michael Shuda Ordered to Cease and Desist from Securities Violations Notice of Intent to Fine Issued
On October 10, 2000, the Banking Commissioner issued an Order to Cease and Desist and Notice of Intent to Fine (Docket No. CF-2000-5325-S) against Michael Shuda, co-chairman and president of Palm Beach Investment Group, Inc. The Order to Cease and Desist and Notice of Intent to Fine alleged that, from at least November, 1998, Shuda made, or caused to be made, false statements to the effect that the stock of Palm Beach Investment Group, Inc. was FDIC-insured and that the corporation was capitalized in the amount of $19 million. Such conduct, if proven, would constitute a violation of the antifraud prohibition in Section 36b-4(2) of the Connecticut Uniform Securities Act.
Since the respondent did not request a hearing on the Order to Cease and Desist, that order became permanent on November 28, 2000. A hearing on the Notice of Intent to Fine has been scheduled for December 12, 2000.
James S. Halligan (CRD # 2284780). Permanently Barred from Securities Business
On December 22, 2000, the Banking Commissioner entered a Consent Order (Docket No. CO-00-6074-S) with respect to James S. Halligan of Middlefield, Connecticut. The Consent Order alleged that from approximately October 1998 to January 1999, Halligan sold unregistered, non-exempt securities of Palm Beach Investment Group, Inc. to Connecticut residents and that, in so doing, Halligan acted as an unregistered agent of issuer in violation of the Connecticut Uniform Securities Act. The Consent Order also claimed that Halligan violated Section 36b-31-6e of the Regulations under the Connecticut Uniform Securities Act by engaging in private securities transactions involving Palm Beach Investment Group, Inc. absent written notice to his employing firm, Mutual of Omaha Investor Services, Inc.
The Consent Order permanently barred Halligan from transacting business in Connecticut as a broker-dealer, investment adviser, broker-dealer agent, agent of issuer and investment adviser agent as well as from effecting purchases or sales of business opportunities. The Consent Order also permanently barred Halligan from acting as a finder for compensation, and from splitting commissions or receiving referral fees in connection with any recommendation, sale or purchase of securities. Halligan could, however, effect transacts in insurance or endowment policies or annuity contracts issued by insurers subject to regulation by the Connecticut Insurance Commissioner. In addition, the Consent Order directed Halligan to cease and desist from regulatory violations and required that he remit $1,500 to the agency, $1,000 of which constituted an administrative fine and $500 of which represented reimbursement for investigative costs.
W. Henry Oppermann Permanently Barred from Securities Business
On December 11, 2000, the Banking Commissioner entered a Consent Order (Docket No. CO-00-5588-S) with respect to W. Henry Oppermann of Ledyard, Connecticut. The Consent Order claimed that from November 1996 to April 1999, Oppermann sold unregistered, non-exempt securities of Ameritech Petroleum, Omne-SRL Taormina, Redbank Petroleum, Inc., Sebastian International Enterprises, Inc., Sun Broadcasting Systems, Inc. and Sweetwater Development Corporation to Connecticut residents and that, in so doing, Oppermann acted as an unregistered agent of issuer in violation of the Connecticut Uniform Securities Act.
The Consent Order permanently barred Oppermann from transacting business in Connecticut as a broker-dealer, investment adviser, broker-dealer agent, agent of issuer and investment adviser agent as well as from effecting purchases or sales of business opportunities. In addition, the Consent Order directed Oppermann to cease and desist from regulatory violations and mandated that he remit $1,500 to the agency, $1,000 of which constituted an administrative fine and $500 of which represented reimbursement for investigative costs.
Securities America, Inc. (CRD # 10205) Assessed $17,500 for Supervisory Lapses
On October 30, 2000, the Banking Commissioner entered a Consent Order (Docket No. CO-00-6055-S) with respect to Securities America, Inc. of 7100 West Center Road, Suite 500, Omaha, Nebraska. The Consent Order alleged that the firm failed to properly supervise the activities of Boutros Mansour, an ex-agent, who purportedly offered and sold non-existent arbitrage and hedge investment opportunities to Connecticut residents in violation of firm policies. Mansour (CRD # 2426615) had been the subject of an April 15, 1999 Order to Cease and Desist by the department. The Order to Cease and Desist had become permanent on June 29, 1999 (Docket number CD-99-5340-S) Mansour is currently facing criminal charges based on larceny in the first degree, fraud in connection with the sale of securities and the sale of unregistered securities.
The Consent Order required that the firm pay the department $17,500. Of that amount, $10,000 constituted an administrative fine, $5,000 represented reimbursement for agency investigative costs and $2,500 was to be allocated to the Securities and Business Investments Division's enforcement activities and investor education programs. In addition, the Consent Order mandated that the firm 1) conduct examinations of all Connecticut branch offices by June 30, 2001, and 2) with the assistance of counsel, submit a written report to the department describing modifications the firm would make to its supervisory system and the timetable for implementing those changes.
Columbus Circle Investors (SEC File No. 801-47516) Fined $5,000 for Late Notice Filing
On October 30, 2000, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-00-6113-S) with Columbus Circle Investors, an investment adviser registered with the Securities and Exchange Commission and having its principal office at Metro Center, One Station Place, Stamford, Connecticut. The Stipulation and Agreement alleged that, for calendar year 2000, the firm had been delinquent in making the investment advisory notice filing and paying the fee required by Section 36b-6(e) of the Connecticut Uniform Securities Act.
In entering into the Stipulation and Agreement, Columbus Circle Investors represented to the agency that 1) the firm had retained legal counsel to assist it in improving its internal compliance systems; 2) the firm would hire a third party filing service prior to year-end to ensure that state filings were made in a timely manner; and 3) the firm would hire a chief administrator and compliance officer by March 1, 2001 to implement and manage a general regulatory compliance system. The Stipulation and Agreement directed the firm to pay a $5,000 monetary penalty in resolution of the matter.
| Licensing At A Glance December 31, 2000 | |
| Broker-dealers Registered | 2,519 |
| Broker-dealer Agents Registered | 111,544 |
| Broker-dealer Branch Offices Registered | 1,654 |
| Investment Advisers Registered | 396 |
| SEC Registered Advisers Filing Notice | 971 |
| Investment Adviser Agents Registered | 4,343 |
| Investment Advisory Branch Offices Registered | 526 |
| SEC Advisers Filing Branch Notice | 236 |
| Agents of Issuer Registered | 150 |
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Year to Date | |
|---|---|---|---|---|---|
| Examinations | |||||
| Broker-dealers | 20 | 37 | 19 | 41 | 117 |
| Investment Advisers | 51 | 7 | 6 | 33 | 97 |
| |||||
| Securities Investigations | |||||
| Opened | 79 | 63 | 58 | 58 | 258 |
| Closed | 70 | 57 | 57 | 39 | 223 |
| Ongoing as of December 31, 2000 | 85 | 91 | 92 | 110 | |
| Subpoenas issued | 11 | 17 | 17 | 2 | 47 |
| Cases referred from Attorney General | 1 | 2 | 3 | 2 | 8 |
| Cases referred from Other Agencies | 4 | 2 | 5 | 2 | 13 |
| |||||
| Securities Enforcement | |||||
| Administrative Actions | |||||
| Notices of Intent to Deny (Licensing) | 0 | 1 | 0 | 3 | 4 |
| Notices of Intent to Suspend (Licensing) | 1 | 0 | 0 | 0 | 1 |
| Notices of Intent to Revoke (Licensing) | 1 | 1 | 0 | 0 | 2 |
| Denial Orders (Licensing) | 0 | 0 | 0 | 1 | 1 |
| Suspension Orders (Licensing) | 1 | 1 | 0 | 1 | 3 |
| Revocation Orders (Licensing) | 0 | 0 | 0 | 0 | 0 |
| Notices of Intent to Fine | 5 | 1 | 0 | 14 | 20 |
| Orders Imposing Fine | 0 | 2 | 0 | 2 | 4 |
| Cease and Desist Orders | 9 | 1 | 0 | 16 | 26 |
| Notice of Intent to Condition Registration | 1 | 0 | 0 | 0 | 1 |
| Notices of Intent to Issue Stop Order | 0 | 0 | 0 | 0 | 0 |
| Stop Orders | 0 | 0 | 0 | 0 | 0 |
| Vacating/Withdrawal Orders | 2 | 0 | 0 | 1 | 3 |
| Settlements | |||||
| Consent Orders | 5 | 4 | 3 | 3 | 15 |
| Stipulation and Agreements | 0 | 0 | 0 | 1 | 1 |
| Activity Restrictions/Bars | 1 | 2 | 1 | 2 | 6 |
| Monetary Relief | |||||
| Monetary Sanctions | $80,500 $30,000 (adj from prior year) |
$168,700 | $17,800 | $65,500 | $362,500 |
| Voluntary Restitution | $352,839 | $357,993 | $1,136,309 | $6,729 | $1,876,090 |
| Securities Referrals | |||||
| Criminal (Chief State's Attorney) | 0 | 1 | 2 | 0 | 3 |
| Criminal (Other) | 0 | 0 | 2 | 0 | 2 |
| Civil (Attorney General) | 1 | 0 | 0 | 0 | 1 |
| Other Agency Referrals | 0 | 0 | 2 | 0 | 2 |
The Securities and Business Investments Division is also charged with
administering the Connecticut Business Opportunity Investment Act.