The Department of Banking News Bulletin
Bulletin # 2948 - Week Ending August 21, 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
On August 21, 2020, the Commissioner extended his no action position to December 31, 2020. The no action position was originally issued on March 9, 2020 and was previously extended to August 31, 2020. The 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.
STATE BANK ACTIVITY
Section 36a-145 of the Connecticut General Statutes requires certain applications for a branch or limited branch at which loans will be made, address how the establishment of the branch will be consistent with safe and sound banking practices and promote the public convenience and advantage. Plans are submitted when such applications are filed and are available for public inspection and comment at the Department for a period of 30 days. Questions concerning branch activity should be directed to the Financial Institutions Division, (860) 240-8180.
DATE: August 19, 2020
BANK: DR Bank, Darien
LOCATION: 3695 Post Road, Southport, CT 06890
ACTIVITY-BRANCH TYPE: Filed Notice of Branch Closing
SECURITIES AND BUSINESS INVESTMENTS DIVISION ACTIVITY
Herbert H. Hafen a/k/a Elias Herbert Hafen (CRD No. 867068) Fined $100,000
On August 17, 2020, the Banking Commissioner entered an Order Imposing Fine (Docket No. CDF-20-8474-S) against Herbert H. Hafen, currently of Nashville, Tennessee and formerly 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 Order Imposing Fine had been preceded by a February 11, 2020 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing alleging 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 February 11, 2020 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.
Since respondent Hafen did not request a hearing on the Order to Cease and Desist, the Order to Cease and Desist became permanent on March 15, 2020. The respondent also did not request a hearing on the Notice of Intent to Fine. Accordingly, adopting as findings the allegations contained in the Notice, the Commissioner found that Hafen violated Section 36b-5(f) of the Act and imposed a $100,000 fine against Hafen.
Schupp & Grochmal, LLC, SG Insurance Investment Fund, LLC, SG Insurance & Technology Investment Fund, LLC and David Alexander Schupp (CRD No. 415958)
On August 21, 2020, the Banking Commissioner entered a Consent Order (No. CO-20-8389-S) with respect to Schupp & Grochmal, LLC f/k/a Townsend, Schupp & Grochmal, LLC of 64 Higley Road, West Granby, Connecticut 06090 and David Alexander Schupp ("Schupp"), managing member of Schupp & Grochmal, LLC. Also named in the Consent Order were SG Insurance Investment Fund, LLC f/k/a TSG Insurance Investment Fund, LLC and SG Insurance & Technology Investment Fund, LLC f/k/a TSG Insurance & Technology Investment, LLC (the "Funds"). Schupp was the manager of both Funds, and Schupp & Grochmal, LLC served as the investment adviser to the Funds.
Schupp & Grochmal, LLC was involved with the Connecticut Insurance Reinvestment Act Program which was ultimately administered by the State of Connecticut Department of Economic and Community Development. The Consent Order stated that Schupp and nonparties Frederick Snow Townsend, Jr. and Joseph Lawrence Grochmal, Jr. (CRD No. 1012907) established the Funds to participate in the Connecticut Insurance Reinvestment Act Program.
The Consent Order alleged that, at various times from approximately 2011 forward, 1) Schupp & Grochmal, LLC transacted business as an unregistered investment adviser and engaged one or more unregistered investment adviser agents in violation of Section 36b-6(c) of the Connecticut Uniform Securities Act; 2) Schupp violated Section 36b-6(c)(2) of the Act by transacting business as an unregistered investment adviser agent; and 3) Schupp & Grochmal, LLC, Schupp and the Funds sold unregistered membership interests in the Funds to investors in violation of Section 36b-16 of the Act.
The Consent Order directed each respondent to cease and desist from regulatory violations and required that the respondents remit $10,510, jointly and severally, to the agency. Of that amount, $7,500 constituted an administrative fine and $3,010 represented reimbursement for past due registration fees.
Lawrence Insurance - 5, LLC and Joseph Lawrence Grochmal, Jr. (CRD No. 1012907)
On August 21, 2020, the Banking Commissioner entered a Consent Order (No. CO-20-8389-S) with respect to Lawrence Insurance - 5, LLC ("Lawrence Insurance") of 359 North Plain Road, Housatonic, Massachusetts 01236-9741 and Joseph Lawrence Grochmal, Jr., manager of the limited liability company.
By way of background, the Consent Order alleged that two entities, SG Insurance Investment Fund, LLC f/k/a TSG Insurance Investment Fund, LLC and SG Insurance & Technology Investment Fund, LLC f/k/a TSG Insurance & Technology Investment, LLC (the "Funds") were formed in 2000 to participate in the Connecticut Insurance Reinvestment Act Program that was ultimately administered by the State of Connecticut Department of Economic and Community Development. The Consent Order alleged that Lawrence Insurance, in turn, was created as a vehicle for investing in the Funds. More specifically, the Consent Order alleged that at various times between December 28, 2012 and August 28, 2015, Lawrence Insurance and Grochmal violated Section 36b-16 of the Connecticut Uniform Securities Act by selling unregistered membership interests in Lawrence Insurance to investors.
The Consent Order fined the respondents $2,000, jointly and severally, and directed them to cease and desist from regulatory violations.
Dated: Tuesday, August 25, 2020