The Department of Banking News Bulletin
Bulletin # 2936 - Week Ending May 29, 2020
This bulletin constitutes the only official notification you will receive from this office concerning any of the following applications. Any observations you may have are solicited. Any comments should be in writing to Jorge L. Perez, Banking Commissioner, Department of Banking, 260 Constitution Plaza, Hartford, CT 06103-1800. Written comments will be considered only if they are received within ten business days from the date of this bulletin.
COMMISSIONER EXTENDS NO ACTION POSITION
No Action Position Regarding Temporarily Working from Home Due to COVID-19
On May 20, 2020, the Commissioner extended his no action position issued on March 9, 2020 to June 30, 2020. The March 9, 2020 no action position advised the mortgage industry, and other financial services sectors licensed by the Department, that it would take a no action position with regard to employees working from home who otherwise would be required to work from a licensed branch location.
SECURITIES AND BUSINESS INVESTMENTS DIVISION ACTIVITY
North American Drilling Corporation, Brown Well 1 Joint Venture, Brown Well 1A Joint Venture, Brazelton Well 2A Joint Venture and Larry Michael Koonce (CRD No. 4603240) Fined $500,000 in the Aggregate, Order to Cease and Desist and Order to Make Restitution Made Permanent
On February 7, 2020, following an administrative hearing, the Banking Commissioner entered Findings of Fact, Conclusions of Law and an Order in the Matter of North American Drilling Corporation, Brown Well 1 Joint Venture, Brown Well 1A Joint Venture, Bravelton Well 2A Joint Venture and Larry Michael Koonce (collectively, the "Respondents") (Docket No. CRF-19-8287-S). Since none of the Respondents appeared at the November 13, 2019 hearing, the Order was entered by default. Respondent North American Drilling Corporation was the manager of corespondents Brown Well 1 Joint Venture, Brown Well 1A Joint Venture and Brazelton Well 2A Joint Venture, all three of which were Texas joint ventures engaged in the oil and gas business. Larry Michael Koonce of Plano, Texas was the president of North American Drilling Corporation and a control person of the joint ventures.
The Respondents had been the subject of a March 27, 2019 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-19-8287-S). The March 27, 2019 action had alleged that the Respondents violated the antifraud provisions in Section 36b-4(a) of the Connecticut Uniform Securities Act by representing to investors that the investment had little risk and by channeling investment proceeds to Wildcat Resources, LC, an affiliated entity, in contravention of statements made in the offering materials. In addition, investors were not apprised that at least a portion of the monies transferred to the Wildcat Resources, LC account were used to benefit Koonce and/or his relatives. The action had also alleged that respondents Koonce and North American Drilling Corporation violated Section 36b-23 of the Act by making a misleading statement to the Commissioner concerning the source of Koonce's compensation in connection with the joint ventures.
In accordance with Section 36a-31(b) of the Regulations of Connecticut State Agencies and in light of Respondents' default, the Commissioner deemed the allegations in the March 27, 2019 action admitted. Finding that the Respondents violated the antifraud provisions in Section 36b-4(a) of the Act and that Koonce, on behalf of North American Drilling Corporation violated Section 36b-23 of the Act, the Commissioner ordered that 1) the Order to Cease and Desist against all respondents be made permanent; 2) that each Respondent be fined $100,00 for a total of $500,000; 3) the Order to Make Restitution be made permanent as to all Respondents; and 4) that the Respondents pay the affected Connecticut investor $32,039.97 in restitution within thirty days following the mailing of the Order.
Glenn Bradford Johnson (CRD No. 4333813), Annmarie Lucy Savona (CRD No. 2688571) and Jabez Financial, LLC (CRD No. 292819)
On May 29, 2020, the Banking Commissioner entered a Consent Order (No. CO-20-8460-S) with respect to Glenn Bradford Johnson of Niantic, Connecticut, Annmarie Lucy Savona of Waterford, Connecticut and Jabez Financial, LLC, a Connecticut-registered investment adviser located at 251 West Main Street, Niantic, Connecticut 06357. Johnson is the president and control person of Jabez Financial, LLC, a single member limited liability company.
The Consent Order alleged that from approximately August 2016 to November 2017, Johnson and Savona sold $2.65 million of unregistered interests in various investment funds offered by Woodbridge Group of Companies, LLC d/b/a Woodbridge Wealth to approximately 22 Connecticut residents and two Massachusetts residents. Woodbridge Group of Companies, LLC, based in California, was a defendant in a civil action brought by the Securities and Exchange Commission alleging that it operated a purported Ponzi scheme. For their role in selling interests in the Woodbridge Funds, Johnson and Savona received $123,082.43 in commissions and reimbursement of costs from Woodbridge Group of Companies, LLC. The Consent Order alleged that Johnson and Savona violated Section 36b-16 of the Connecticut Uniform Securities Act by selling unregistered securities and that they transacted business as unregistered agents of issuer in contravention of Section 36b-6(a) of the Act.
The Consent Order directed Johnson and Savona to cease and desist from regulatory violations and to jointly and severally disgorge the $123,082.43 in commissions they earned to affected investors. The disgorgement fund would be established through outside legal counsel, with $30,000 funded outright and the balance contributed in four equal installments of $23,270.60, the last being remitted on or before September 21, 2020.
While the Consent Order contemplated that Johnson and Savona would jointly and severally be liable for a $30,000 administrative fine, collection of that fine would be stayed for three years subject to Johnson and Savona providing updated financial documentation demonstrating their continuing inability to pay the fine. After three years, based on submitted financial documentation, if the Commissioner determines that Johnson and Savona are still unable to pay, the fine would be permanently waived.
The Consent Order also permanently barred Savona from transacting business in Connecticut as a broker-dealer, agent, investment adviser or investment adviser agent and from acting in any other capacity requiring a license or registration from the Commissioner.
In addition, the Consent Order limited the investment advisory activities that Johnson and Jabez Financial, LLC could perform. More specifically, 1) for 2 years Johnson and Jabez Financial, LLC would be prohibited from exercising discretionary trading authority with respect to client accounts and from maintaining custody or control of client funds or securities; and 2) for three years, Johnson and Jabez Financial, LLC would be required to limit their investment advisory activity to limited securities, investment company securities, commercial paper, certificates of deposit, corporate debt securities, United States and municipal securities and insurance products subject to regulation by the Connecticut Insurance Commissioner.
P-Square Investments LLC d/b/a P-Squared Capital Management (CRD No. 125794)
On May 29, 2020, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-20-202010-S) with P-Square Investments LLC, a Connecticut-registered investment adviser located at 5 Beechcroft Road, Greenwich, Connecticut 06830. The Stipulation and Agreement followed an examination of the firm by the agency's Securities and Business Investments Division. The Stipulation and Agreement alleged that from August 17, 2015 through December 1, 2016, the firm engaged an unregistered investment adviser agent in contravention of Section 36b-6(c)(3) of the Connecticut Uniform Securities Act and continued to pay that individual post-engagement referral fees through February 6, 2020.
In resolution of the matter, the firm agreed to refrain from regulatory violations and to remit $5,000 to the department. Of that amount, $4,500 constituted an administrative fine and $500 represented reimbursement for past due investment adviser agent registration fees.
Dated: Tuesday, June 2, 2020