| Securities and Business Investments Division | |
|
Securities Bulletin | |
| Vol. XXVII No. 2 |
Summer 2013 |
Features
Eric Wilder, Director
Cynthia Antanaitis, Assistant Director
Method Films, Inc., Thierry Thelemaque, Stilas Financial Services, S.A. and Matthew Bennett Greene Each Fined $50,000 for Violating State Securities Laws
On May 16, 2013, the Banking Commissioner entered four separate default Orders Imposing Fine against 1) Method Films, Inc. a/k/a Method Films, LLC a/k/a Method Film, LLC (“Method Films”) of 250 181st Drive, Sunny Isles Beach, Florida 33160 and 8939 Marks Street, Unit B, El Paso, Texas 79904; 2) Thierry Thelemaque, of 8939 Marks Street, Unit B, El Paso, Texas 79904, president of Method Films; 3) Stilas Financial Services, S.A. of 40 Wall Street, 28th Floor, New York, New York 10005; and 4) Matthew Bennett Greene of Portland House, 16th Floor, Stag Place, London, United Kingdom. Respondent Greene was the founder, president and chief legal counsel of Stilas Financial Services, S.A.
On March 11, 2013, the Banking Commissioner had issued an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-13-7997-S) against the respondents. The March 11, 2013 action had alleged that, in September 2008 and October 2008, respondents Method Films and/or Thelemaque offered and sold Method Films securities to one or more Connecticut investors. The offering proceeds would be used to finance the production of one or more films, including a movie entitled “Enigma.” The securities that were offered consisted of (a) an Investor Agreement pursuant to which Method Films, through its agent Thelemaque, agreed to split Enigma gross revenues in excess of $20,000 with investors in return for a $100,000 investment; and (b) a related Promissory Note pursuant to which obligors Method Films and Thelemaque promised to pay one or more investors $1.1 million on or before September 30, 2009 – a return of one thousand percent on a $100,000 investment. The action had further alleged that respondents Method Films and Thelemaque violated Section 36b-16 of the Connecticut Uniform Securities Act by offering and selling unregistered securities. In addition, the action had alleged that respondents Stilas Financial Services, S.A. and Greene materially aided Method Films’ and Thelemaque’s violation of Section 36b-16 of the Act, in part by accepting investor monies remitted for the purpose of investing in the Method Films offering. In addition, the action had alleged that, in violation of Section 36b-6 of the Act, respondent Method Films employed respondent Thelemaque as an unregistered agent of issuer, and that respondent Thelemaque transacted business in that unregistered capacity.
According to the action, respondent Thelemaque allegedly forwarded to one or more prospective investors a purported agreement by Stilas Financial Services, S.A. to finance the Enigma film project, leading investors to believe that the film project would proceed with the support of Stilas Financial Services, S.A. The action further alleged that the respondents violated the antifraud provisions in Section 36b-4(a) of the Act by failing to disclose, among other things, any financial information concerning the respondents; the estimated cash proceeds of the offering; any risk factors related to the investment in general or the film industry in particular; the remuneration to be paid to the principals of Method Films; the basis upon which a $100,000 investment in a $1.1 million Promissory Note could yield a rate of return of 1,000 percent; or the fact that respondent Thelemaque was not registered as an agent of issuer or in any other capacity to sell securities in Connecticut.
None of the respondents requested a hearing on the Notice of Intent to Fine.
In fining Method Films $50,000, the Commissioner found that Method Films violated Sections 36b-16, 36b-4(a) and 36b-6(b) of the Connecticut Uniform Securities Act. Stilas Financial Services, S.A. was fined $50,000 after the Commissioner found that that entity violated the antifraud provisions in Section 36b-4(a) of the Act and materially aided Method Films and Thelemaque in violating Section 36b-16 of the Act. Respondent Thierry Thelemaque was directed to pay a $50,000 fine following a finding that he violated Sections 36b-16, 36b-4(a) and 36b-6(a) of the Act. Respondent Greene was fined $50,000 after the Commissioner concluded that Greene violated the antifraud provisions in Section 36b-4(a) of the Act and materially aided Method Films and Thelemaque in violating Section 36b-16 of the Act.
Mohr & Moore, LLC and William Elmer Moore Each Fined $50,000 for Securities Registration and Fraud Violations
On May 16, 2013, the Banking Commissioner entered two separate default Orders Imposing Fine against Mohr & Moore, LLC of 9720 Coit Road, Suite 220-211, Plano, Texas 75025 and William Elmer Moore of 3524 Flat Creek Drive, Plano, Texas 75025. Respondent Moore was the president and control person of Mohr & Moore, LLC. The respondents had been the subject of a March 18, 2013 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-13-7971-S). The March 18, 2013 action had alleged that from at least June 2010 forward, the respondents violated Section 36b-16 of the Connecticut Uniform Securities Act by offering and selling unregistered commodity investment contracts and/or investment contracts related to trading in foreign currency exchange investments. The action had also alleged that the respondents violated the antifraud provisions in Section 36b-4(a) of the Act by failing to disclose to purchasers and prospective purchasers any risk factors related to the investment; any financial information on Mohr & Moore, LLC; that Robert Mihailovich, principal and founder of Trade Star Incorporated and the trading software platform that Mohr & Moore, LLC utilized, was a convicted felon; that Mohr & Moore, LLC subsequently executed a Limited Power of Attorney with Parthenon Capital as sub-trading agent; that Parthenon’s owner and operator had a criminal history; and that the investment contracts offered and sold by the respondents were not registered under the Act.
Neither respondent requested a hearing on the Notice of Intent to Fine.
In fining Mohr & Moore, LLC $50,000, the Commissioner found that Mohr & Moore, LLC violated the antifraud provisions in Section 36b-4(a) of the Act and the securities registration requirement in Section 36b-16 of the Act. William Elmer Moore was directed to pay a $50,000 fine as well after the Commissioner found that Moore violated Sections 36b-16 and 36b-4(a) of the Act.
The Order to Cease and Desist and Order to Make Restitution, being uncontested, had become permanent as to Mohr & Moore, LLC on April 6, 2013 and permanent as to William Elmer Moore on April 30, 2013.
First Financial LLC and Feisal Sharif Each Fined $200,000 for Securities Registration and Antifraud Violations; Order to Cease and Desist Becomes Permanent
Although the respondents requested a hearing on the allegations in the January 3, 2013 action, and were subsequently granted a continuance to March 27, 2013, neither respondent appeared at the March 27, 2013 hearing.
Having read the hearing record, the Commissioner found that since 2007, investors had invested more than $6 million with First Financial LLC; that respondent Sharif used over $600,000 of that invested amount for his personal expenses; and that investors received no documented disclosure concerning their investment with First Financial LLC. The Commissioner concluded that each respondent sold unregistered securities in violation of Section 36b-16 of the Connecticut Uniform Securities Act and that each respondent violated the antifraud provisions in Section 36b-4(a) of the Act. Consequently, the Commissioner directed that each respondent be fined $200,000 for a total of $400,000, and that the January 3, 2013 Order to Cease and Desist be made permanent as to each respondent effective May 13, 2013.
On May 13, 2013, the Banking Commissioner entered a post-hearing Order (Docket No. CF-13-7985-S) against First Financial LLC of 49 Rose Street #309, Branford, Connecticut and Feisal Sharif, managing member of First Financial LLC. The respondents had been the subject of a January 3, 2013 Order to Cease and Desist and Notice of Intent to Fine (Docket No. CF-13-7985-S) alleging that, from at least January 2007 forward, respondent Sharif, alone and under the auspices of First Financial LLC, pooled the funds of at least 80 investors for the purported purpose of investing those funds in an account managed by First Financial LLC and Sharif, and that Sharif guaranteed monthly and yearly returns of 1 percent to 15 percent. The January 3, 2013 action had also alleged that, in reality, Sharif commingled investor funds, paid off earlier investors with later investors' money and diverted investor funds for his personal use. According to the action, to hide his conduct, Sharif allegedly created and provided some investors with fictitious account statements reflecting false and inflated account balances. In addition, the respondents allegedly failed to disclose to investors any risk factors related to the investment, any financial information concerning the respondents and that investor funds would be applied to pay for the respondents' personal expenses and to pay off earlier investors.
John Calash and Susan Calash - Petition for Reconsideration Granted
On April 25, 2013, the Banking Commissioner rendered a Decision on a Petition filed by John Calash and Susan Calash to reconsider an Order to Cease and Desist, Order to Make Restitution and Order Imposing Fine entered by default against each of them. The Respondents argued that they did not receive actual notice of the administrative actions since their address of record had been subject to a bank foreclosure and that the home to which they then moved had been destroyed by Hurricane Sandy. John Calash and Susan Calash had been the subject of a December 17, 2012 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-12-7892-S). The Order to Cease and Desist and the Order to Make Restitution had become permanent by default on February 1, 2013. Similarly, on March 19, 2013, orders by default had been entered fining John Calash $100,000 and Susan Calash $30,000.
In agreeing to reconsider the matter, the Commissioner rescinded the Certifications rendering the Order to Cease and Desist and the Order to Make Restitution permanent. In addition, the Commissioner vacated the March 19, 2013 Orders Imposing Fine against John Calash and Susan Calash. The December 17, 2012 Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine was modified to reflect the respondents’ current address, and the respondents were given an additional opportunity to request a hearing and respond to the allegations in the December 17, 2012 action.
The December 17, 2012 action alleged that John Calash and Susan Calash devised a plan in January 2007 to convert Stead-Fast Custom Linings, LLC (“Linings”) of 641 Main Street, East Haven, Connecticut into a public company that traded on the Pink Sheets; that during the summer of 2007, John Calash, with the assistance of Christopher Borgo, sold unregistered membership interests in Linings to at least one investor; that John Calash merged Linings into Beere Financial Group, Inc., a Nevada shell corporation trading on the Pink Sheets; and that in September 2007,
John Calash renamed the merged entity Steadfast Holdings Group Inc. and then sold $767,500 in unregistered Holdings shares to investors in a private placement. The action had also alleged that 1) from February 2008 through April 2011, John Calash and Susan Calash, in their capacities as President and Secretary of Holdings, issued themselves thousands of shares of Holdings, which had the effect of diluting the value of the outstanding shares of Holdings; 2) John and Susan Calash eventually sold their controlling interest in Holdings in April 2011 for a profit of approximately $200,000. The action had further alleged that 1) Linings, Holdings, John Calash and Christopher Borgo offered and sold unregistered securities in violation of Section 36b-16 of the Connecticut Uniform Securities Act; 2) John Calash and Christopher Borgo violated Section 36b-6(a) of the Act by transacting business as unregistered agents of issuer; 3) Linings and Holdings violated Section 36b-6(b) of the Act by engaging unregistered agents of issuer; and 4) the respondents violated the antifraud provisions in Section 36b-4(a) of the Act by failing to make adequate risk disclosures to prospective investors and, in the case of John Calash and Susan Calash, failing to disclose the dilutive effect their actions had on investor securities holdings.
ProEquities, Inc. (CRD # 15708) Assessed $8,207.55 for Role in Unregistered Activity by Bankers Life and Casualty Company and BLC Financial Services, Inc.
On June 3, 2013, the Banking Commissioner entered a Consent Order (No. CO-13-8024-S) with respect to ProEquities, Inc., a Connecticut-registered broker-dealer located at 2801 Highway 280 South,
The June 3, 2013 Consent Order directed ProEquities, Inc. to cease and desist from materially aiding any person in a violation of the Connecticut Uniform Securities Act and its Regulations. In addition, the Consent Order directed the firm to pay a fine of $8,207.55 within ten business days following the Commissioner's entry of the Consent Order. The fine amount represented
Michael P. Healey, Healey Ford of Ansonia, Inc., Eurospeed USA, Inc. and American Motor Sports, LLC – Consent Order Entered
On May 30, 2013, the Banking Commissioner entered a Consent Order (No. CO-13-7831-S) with respect to Michael P. Healey of Milford, Connecticut. Also named in the Consent Order were Healey Ford of Ansonia, Inc., Eurospeed USA, Inc. and American Motor Sports, LLC, all of 500 Main Street, Ansonia, Connecticut. Michael P. Healey is the president of Healey Ford of Ansonia, Inc. and Eurospeed USA, Inc. as well as the managing member of American Motor Sports, LLC. The Consent Order alleged that, at various times from April 2006 to January 2009, the respondents offered and sold unregistered securities in violation of Section 36b-16 of the Connecticut Uniform Securities Act and made material omissions in contravention of Section 36b-4(a)(2) of the Act.
The Consent Order directed the respondents to cease and desist from regulatory violations. In addition, the Consent Order barred respondent Healey and any entity under his control from transacting business as a broker-dealer, agent, investment adviser or investment adviser agent; acting as a finder for compensation or receiving referral fees for soliciting or procuring securities investors, customers or clients for any issuer, broker-dealer or investment adviser; and soliciting or accepting funds for investment purposes from public or private investors in or from Connecticut. The bar would extend for ten years.
In addition, the Consent Order imposed a conditional 10 year bar on respondents Healey Ford of Ansonia, Inc., Eurospeed USA, Inc. and American Motor Sports, LLC. Specifically, those respondents would be barred from soliciting or accepting funds for investment purposes from public or private investors in or from Connecticut unless they provided the Securities and Business Investments Division with advance written notice; and retained experienced securities counsel to provide legal advice and make required regulatory filings.
DFS Capital Management, LP (CRD # 150836), John Vincent Greco (CRD # 1635380) and DFS Fund, Limited Partnership – Consent Order Entered
On May 1, 2013, the Banking Commissioner entered a Consent Order (Docket No. CO-12-8048-S) with respect to DFS Capital Management, LP, an investment adviser located at 50 Old Kings Highway North, Darien, Connecticut; John Vincent Greco, president of the firm; and DFS Fund, Limited Partnership (the “Fund”), an investment fund sharing the same address as DFS Capital Management, LP.
The respondents had been the subject of a November 6, 2012 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Revoke Registration as an Investment Adviser and Notice of Intent to Fine (Docket No. CRF-12-8048-S). DFS Capital Management, LP was the Fund’s general partner and investment adviser, and respondent Greco was responsible for the day-to-day management and operation of the Fund. The November 6, 2012 action had alleged that respondent Greco violated Section 36b-6(c)(2) of the Connecticut Uniform Securities Act by transacting business as an unregistered investment adviser agent, and that DFS Capital Management, LP violated Section 36b-6(c)(3) of the Act by employing Greco as an unregistered investment adviser agent. The action had also alleged that the respondents violated the antifraud provisions in Section 36b-4(a) of the Act in connection with an offering of interests in the Fund. In addition, respondents Greco and DFS Capital Management, LP allegedly violated Section 36b-4(b) of the Act by engaging in dishonest and unethical practices. Specifically, respondents Greco and DFS Capital Management, LP allegedly recommended that at least two investors liquidate their brokerage and retirement accounts at other firms to invest in the Fund which they variously characterized as a “no-lose” investment and one that would generate a return of approximately 20%. The action had alleged that respondents Greco and DFS Capital Management, LP did not disclose to the affected investors, one of whom was 75 years old, any risks associated with the investment or that the Fund’s investment strategy was almost exclusively speculative options trading. The two investors purportedly incurred $584,222 in trading losses due to their investment in the Fund. The action had alleged that in or about December, 2011, respondent Greco closed the Fund due to the Fund’s trading losses.
In addition, the November 6, 2012 action had alleged that respondents Greco and DFS Capital Management, LP violated Section 36b-23 of the Act by making a materially false or misleading statement during a 2011 examination of DFS Capital Management, LP’s books and records. Specifically, respondent Greco allegedly denied that he or DFS Capital Management, LP had issued any promissory notes. The action alleged that, in reality, respondent Greco had induced an individual to invest in the Fund by agreeing to reimburse her for the deferred sales/surrender charge associated with her liquidating annuities held at another firm. Subsequently, respondent Greco allegedly memorialized that agreement in a promissory note in favor of the investor. In addition, the action alleged that DFS Capital Management, LP, the Fund’s general partner and investment adviser, violated Section 36b-14(d) of the Act and Section 36b-31-14f of the Regulations by repeatedly failing to provide the Division with requested books and records.
The Consent Order recited that the respondents had provided the agency with documentation evidencing respondents’ agreement to repay the affected investors in good funds on or before June 30, 2013.
The Consent Order barred respondents Greco and DFS Capital Management, LP for ten years from 1) transacting business in or from Connecticut as a broker-dealer, agent, investment adviser or investment adviser agent; 2) directly or indirectly soliciting or accepting funds for investment purposes from public or private investors in or from Connecticut; and 3) engaging in any other activity that would trigger a registration obligation under the Connecticut Uniform Securities Act. The Consent Order also directed the respondents to cease and desist from regulatory violations. In addition, the Consent Order required that respondents Greco and DFS Capital Management, LP retain Connecticut legal counsel to perform periodic regulatory compliance evaluations according to a prescribed schedule and file related reports with the department.
The Consent Order also provided that a failure by the respondents to repay the affected investors on or before June 30, 2013 would result in an order of full restitution to the affected investors and the imposition of a $100,000 fine by the Commissioner.
Sageworks Capital Inc. d/b/a Raiseworks (CRD # 162182) - Broker-dealer Registration Conditioned
On June 28, 2013, the Banking Commissioner executed a Stipulated Agreement (No. ST-13-8090-S) conditioning the registration of Sageworks Capital Inc. as a broker-dealer in Connecticut. The firm is located at 25 West 36th Street, 11th Floor, New York, New York and focuses on selling private placements. Connecticut law requires that the principals of a securities brokerage firm fulfill certain experience requirements, and the firm did not satisfy the experience criteria. The Stipulated Agreement required that, for two years, the firm restrict its Connecticut securities activities to accredited investors and notify the agency of any material disciplinary actions and complaints involving the firm, its principals, employees and representatives.
Sageworks Capital Inc. became registered as a broker-dealer under the Connecticut Uniform Securities Act on June 28, 2013.
|
Licensing At A Glance |
1st Quarter |
2nd Quarter |
3rd Quarter |
4th Quarter |
|---|---|---|---|---|
| Broker-dealers Registered | 2,318 | 2,327 |
| |
| Broker-dealer Agents Registered | 151,390 | 153,103 |
| |
| Broker-dealer Branch Offices Registered | 2,675 | 2,676 |
| |
| Investment Advisers Registered | 555 | 563 | ||
| SEC Registered Advisers Filing Notice | 1,916 | 1,966 | ||
| Investment Adviser Agents Registered | 11,197 | 11,409 | ||
| Exempt Reporting Advisers |
68 |
71 |
||
| Agents of Issuer Registered | 21 | 23 |
| |
| Conditional Registrations |
0 |
1 |
|
|
|
Securities and Business |
1st Quarter |
2nd Quarter |
3rd Quarter |
4th Quarter |
Year to Date |
|---|---|---|---|---|---|
| Offerings Reviewed | 35 | 44 | 79 | ||
| Investment Company Notice Filings | 605 | 493 | 1,098 | ||
| Exemptions and Exemptive Notices | 767 | 824 | 1,591 | ||
| Examinations | |||||
| Broker-dealers | 32 | 27 | 59 | ||
| Investment Advisers | 30 | 47 | 77 | ||
| Securities Investigations | |||||
| Opened | 20 | 21 |
|
41 | |
| Closed | 14 | 10 |
|
24 | |
| Ongoing as of End of Quarter | 89 | 100 | |||
| Subpoenas issued | 11 | 25 | 36 | ||
| Matters referred from Attorney General | 0 | 5 | 5 | ||
| Matters referred from Other Agencies | 4 | 0 | 4 | ||
|
Business Opportunity Investigations | |||||
| Investigations Opened | 1 | 0 | 1 | ||
| Investigations Closed | 1 | 1 |
|
2 | |
| Ongoing as of End of Quarter | 3 | 2 | |||
|
Enforcement: Remedies and Sanctions | |||||
| Notices of Intent to Deny (Licensing) | 0 |
0 |
0 | ||
| Notices of Intent to Suspend (Licensing) |
1 |
0 |
|
|
1 |
| Notices of Intent to Revoke (Licensing) |
1 |
0 |
|
|
1 |
| Denial Orders (Licensing) | 0 | 0 |
|
0 | |
| Suspension Orders (Licensing) | 1 | 0 |
|
|
1 |
| Revocation Orders (Licensing) | 0 | 0 |
|
0 | |
| Notices of Intent to Fine | 7 | 0 |
|
7 | |
| Orders Imposing Fine | 5 | 8 |
|
13 | |
| Cease and Desist Orders | 6 | 0 |
|
6 | |
| Notices of Intent to Issue Stop Order | 0 | 0 | 0 | ||
| Activity Restrictions/Bars | 0 | 2 | 2 | ||
| Stop Orders | 0 | 0 | 0 | ||
| Vacating/Withdrawal/ Modification Orders | 0 | 2 | 2 | ||
| Restitutionary Orders | 4 | 0 | 4 | ||
| Injunctive Relief Obtained | 0 | 0 | 0 | ||
|
Proceedings and Settlements |
1st Quarter |
2nd Quarter |
3rd Quarter |
4th Quarter |
Year to Date |
| Administrative Actions |
13 |
7 |
20 | ||
| Consent Orders |
2 |
3 |
|
5 | |
| Stipulation and Agreements |
0 |
0 |
|
0 | |
|
Monetary Relief* |
1st Quarter |
2nd Quarter |
3rd Quarter |
4th Quarter |
Year to Date |
| Monetary Sanctions Imposed |
$360,000 |
$708,208 |
|
$1,068,208 | |
| Portion attributable to settlements |
$10,000 |
$8,208 |
|
|
$18,208 |
| Restitution or Other Monetary Relief (includes rescission offer amounts) |
$178,000 |
$265,000 |
$443,000 | ||
|
*Cents eliminated Securities Referrals |
1st Quarter |
2nd Quarter |
3rd Quarter |
4th Quarter |
Year to Date |
| Criminal (Chief State's Attorney) |
3 |
1 |
|
|
4 |
| Civil (Attorney General) |
0 |
0 |
|
|
0 |
| Other Agency Referrals |
0 |
0 |
|
|
0 |