Bulletin # 2921 - Week Ending February 14, 2020

CONSUMER CREDIT DIVISION ACTIVITY

Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing

 
On February 6, 2020, the Commissioner issued a Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing (“Notice”) in the Matter of: Midwest Recovery Systems, LLC, NMLS # 1587525 (“Respondent”), Earth City, Missouri. The Notice was the result of an investigation by the Consumer Credit Division. The Notice alleges that: (1) Respondent’s acting within this state as a consumer collection agency without a consumer collection agency license constitutes a violation of Section 36a-801(a) of the Connecticut General Statutes, in effect at such time; and (2) Respondent’s collecting or receiving payments of principal and interest on at least one small loan made by a person who had not obtained a small loan license constitutes a violation of Section 36a-573(a) of the Connecticut General Statutes, in effect prior to July 1, 2016, and subsections (4) and (5) of Section 36a-556(a) of the Connecticut General Statutes, in effect at such time. Respondent was afforded an opportunity to request a hearing with regard to the allegations set forth in the Notice.

SECURITIES AND BUSINESS INVESTMENTS DIVISION ACTIVITY

Herbert H. Hafen a/k/a Elias Herbert Hafen (CRD No. 867068) - Order to Cease and Desist and Notice of Intent to Fine Issued

On February 11, 2020, the Banking Commissioner issued an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CDF-20-8474-S) against Herbert H. Hafen of New Canaan, Connecticut. Hafen, also known as Elias Hafen, Elias Niggebrugge and E. Herbert Niggebrugge, was previously registered as a broker-dealer agent and investment adviser agent of Wells Fargo Clearing Services, LLC and Morgan Stanley in Connecticut.

The action alleged that respondent Hafen violated Section 36b-5(f) of the Connecticut Uniform Securities Act by engaging in dishonest or unethical practices in connection with his investment advisory activities. More specifically, from approximately July 2011 to 2018 and at a time when he was registered in Connecticut, Hafen allegedly convinced an elderly advisory client to move her IRA funds to an outside investment opportunity. Hafen allegedly knew that the IRA, which the client had inherited from her deceased husband, was intended to support the client for the rest of her life. Instead of investing the client's funds, Hafen purportedly used them to pay his own credit card bills, mortgage and other personal expenses and to repay another investor who had also relayed monies to Hafen for investment purposes. In addition, the action alleged that Hafen falsely represented to the client that her IRA account was valued at $300,000 when it really held only $150,000 in available funds. Ultimately, Hafen's employing firm reimbursed the client for her loss.

The respondent was afforded an opportunity to request a hearing on the Order to Cease and Desist and Notice of Intent to Fine.

Also on February 11, 2020 and as a separate matter, Hafen pled guilty in federal court to investment adviser fraud and was sentenced to 30 months in prison commencing April 7, 2020 (United States v. Hafen, SDNY, Docket No. 1:19CR00637-AKH).


James Thomas Booth (CRD No. 1906145) and Insurance Trends, Inc.

On February 14, 2020, the Banking Commissioner issued an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine, Notice of Intent to Revoke Registration as a Broker-dealer Agent and Investment Adviser Agent and Notice of Right to Hearing (Docket No. CDFR-20-8535-S) against James Thomas Booth of Norwalk, Connecticut. Also named in the action was Insurance Trends, Inc., an entity controlled by Booth.

Most recently and from 2018 to 2019, Respondent Booth had been registered as a broker-dealer agent and investment adviser agent of LPL Financial LLC in Connecticut. While those registrations had previously been withdrawn, Connecticut law permits the Commissioner to initiate revocation proceedings within one year after the withdrawal becomes effective.

The action alleged that, from 2013 to 2019, Booth violated the antifraud provisions in Section 36b-4(a) of the Connecticut Uniform Securities Act and engaged in dishonest or unethical practices while associated with his past two employing firms. More specifically, respondent Booth allegedly solicited firm clients to invest in outside opportunities and send their funds to Insurance Trends, Inc. The action also alleged that respondent Booth then used investor funds for his personal expenses and that he fabricated client account statements to reflect investments that were, in fact, never made. Booth allegedly misappropriated approximately $5 million in investor funds.

The action also noted that Booth had significant disciplinary history including 1) a June 26, 2019 permanent bar imposed by FINRA; 2) a November 1, 2019 bar entered by the Securities and Exchange Commission; and 3) an October 22, 2019 guilty plea to securities fraud (United States v. James T. Booth, Crim. No. 19-cr-00699-JGK, SDNY). Sentencing in the criminal proceeding is set for February 21, 2020.

Respondents were afforded an opportunity to request a hearing on the allegations in the agency’s action.

      Dated: Wednesday, February 19, 2020