DATE:  September 1, 2017

BANK:  Savings Bank of Danbury, Danbury

LOCATION:  133 E. Putnam Avenue, Cos Cob, CT  06807

ACTIVITY-BRANCH TYPE:  Filed - Loan Production Office

On August 15, 2017, the Commissioner entered into a Consent Order with Residential Mortgage Services Inc. d/b/a Residential Mortgage Services (NMLS # 1760) (“Residential Mortgage Services”), South Portland, Maine. The Consent Order was based on an investigation by the Consumer Credit Division. As a result of the investigation, the Commissioner alleged, among other things, that Residential Mortgage Services failed to maintain adequate records of each residential mortgage loan transaction, in violation of Section 36a-493 of the Connecticut General Statutes, such that the Commissioner was unable to access, receive and use books, accounts, records, files, documents, information or evidence and other documents the Commissioner deemed relevant to an examination, in violation of Section 36a-498f(a)(1)(C) of the Connecticut General Statutes. As part of the Consent Order, Residential Mortgage Services was ordered to not violate Sections 36a-493, 36a-498f(a)(1)(C), 36a-498f(b), 36a-498f(f) or 36a-17(d) of the Connecticut General Statutes, to provide the Commissioner with formal policies, procedures and programs to ensure its compliance with 12 U.S.C. § 2607, and to pay $25,000 as civil penalty.

On August 28, 2017, the Banking Commissioner entered a Consent Order (Docket No. CRSRF-16-8108-S) with respect to Cantone Research Inc. and Victor Polakoff, a control person and Executive Vice President of the firm. The firm, which is registered as a broker-dealer and an investment adviser under the Connecticut Uniform Securities Act, maintains its principal office at 766 Shrewsbury Avenue, Suite E-401, Tinton Falls, New Jersey 07724. The Consent Order had been preceded by an October 20, 2016 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Suspend or Revoke Registrations as a Broker-dealer, an Investment Adviser and a Broker-dealer Agent and a Notice of Intent to Fine (Docket No. CRSRF-16-8108-S). The October 20, 2016 action had alleged that the firm and respondent Polakoff permitted one Robert Lawrence Gray, an individual barred from the securities industry, to direct trading in the account of a Connecticut investor at a time when there was no written firm record evidencing the investor’s acquiescence to the arrangement. The action had also alleged that the respondents materially aided Gray's transacting business as an unregistered investment adviser, and that both respondents engaged in dishonest or unethical practices in the securities business. Ultimately, the investor lost approximately $200,000 due to trades directed by Gray and effected through Cantone Research Inc. and agent Polakoff.

As a separate matter, the action had further alleged that 1) the respondents violated Section 36b-16 of the Act by selling unregistered shares of XenaCare Holdings, Inc.; 2) the firm failed to keep books and records that accurately characterized certain trades as solicited or unsolicited; 3) respondent Polakoff engaged in outside business activity with a client (the spouse of Robert Gray) without providing notice to the firm; and 4) the firm failed to enforce and maintain adequate supervisory procedures.

The August 28, 2017 Consent Order with respondents Cantone Research Inc. and Polakoff resolved the allegations in the October 20, 2016 action without the need for an administrative hearing on the issues. The Consent Order acknowledged that respondent Polakoff filed to withdraw his Connecticut broker-dealer agent registration on August 25, 2017 and that Polakoff had represented that, upon effectiveness of the withdrawal, he would not reapply for registration as a broker-dealer agent for 18 months or engage in any activity that would require registration under the Act. The withdrawal became effective on August 28, 2017. The Consent Order also acknowledged that the respondents had paid $185,000 in restitution to the affected Connecticut investor.

The Consent Order directed the respondents to cease and desist from regulatory violations and fined them $20,000, jointly and severally. The Consent Order reflected the firm’s representation that, in light of the restitution paid to the Connecticut investor and $2.4 million in restitution and fines imposed by the Superior Court of New Jersey in an unrelated securities matter brought by the New Jersey Attorney General (Porrino v. Cantone Research, Inc. et al., Docket No. ESX-C-252-15 (6/13/2017)), the firm was financially unable to pay the maximum fine that might have been imposed as a term of the Consent Order or as a result of the October 20, 2016 Connecticut proceeding.

In addition, the Consent Order required the firm to 1) retain an independent consultant to review the firm’s supervisory and compliance procedures and issue written recommendations; and 2) for a three year period, before offering or selling securities in or from Connecticut, retain legal counsel to advise it on securities law compliance and make required regulatory filings. The Consent Order also restricted the firm’s Connecticut securities business for 18 months to investment company shares, governmental securities and exchange-listed securities. Transactions involving private placements and securities listed or traded on the OTC Bulletin Board, the OTCQB marketplace or the OTC Pink marketplace would not be allowed under the 18 month restriction.