The Department of Banking News Bulletin
Bulletin # 2957 - Week Ending October 23, 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.
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: October 22, 2020
BANK: Liberty Bank, Middletown
LOCATION: 504 Bridgeport Avenue, Suite 300, Box 11, Shelton, CT 06484
ACTIVITY-BRANCH TYPE: Filed Notice of Branch Closing
ONLINE FILING OPTION
Connecticut Launches Online Filing Option for Private Placements
Effective November 2, 2020
On September 17, 2020, the Banking Commissioner issued an Order designating the North American Securities Administrators Association, Inc.'s (“NASAA”) online Electronic Filing Depository ("EFD") as a permissible means of making securities registration, exemption and covered security notice filings in Connecticut under the Connecticut Uniform Securities Act.
Use of the EFD System is optional and will be rolled out in stages, with issuers of Rule 506 private placements being the first to benefit from the new system starting November 2, 2020.
Developed by NASAA, EFD is an online system that allows an issuer to simultaneously make securities offering filings in multiple states and pay related fees online. In addition, the EFD website (www.efdnasaa.org), permits members of the public to search for and view, free of charge, filings made with state securities regulators through the system. Members of the public are reminded that making a filing with the Securities and Exchange Commission or with a state securities regulator does not mean that the SEC or the affected state has approved the securities or made any judgment on the soundness of the securities as an investment.
Although the Division strongly encourages issuers to use EFD for securities filings, paper filings and checks will continue to be accepted and processed by the Division for the immediate future.
CONSUMER CREDIT DIVISION ACTIVITY
On October 16, 2020, the Commissioner entered into a Consent Order with Bittrex, Inc. d/b/a Bittrex (NMLS # 1544336) (“Bittrex”), Seattle, Washington. The Consent Order was based on an investigation by the Consumer Credit Division. As a result of such investigation, the Commissioner alleged that Bittrex engaged in the business of money transmission in this state without the required license by operating an online platform that stored the digital assets of Bittrex customers and facilitated trades of those digital assets between customers, in violation of Section 36a-597(a) of the Connecticut General Statutes. As part of the Consent Order, Bittrex paid $10,000 as a civil penalty and $3,375 as back licensing fees.
SECURITIES AND BUSINESS INVESTMENTS DIVISION ACTIVITY
On October 21, 2020, the Banking Commissioner entered a Consent Order (No. CO-20-8388-S) with respect to Janney Montgomery Scott, LLC, a Connecticut-registered broker-dealer. Janney Montgomery Scott, LLC previously employed one James Albert Pettit (CRD No. 733916) as a broker-dealer agent and as an investment adviser agent. The Consent Order stated that, despite numerous red flags and escalated issues pertaining to Pettit, the firm allowed Pettit to act as executor of a client’s estate in contravention of the firm's own written supervisory procedures that prohibited such activity. Pettit was the subject of an independent action by the department alleging, among other things, that he engaged in self-dealing in conjunction with a power of attorney he held over the account of an elderly client, since deceased (Docket No. Docket No. NDCDF-17-8218-S).
The Consent Order acknowledged that the firm had provided the agency with evidence that $108,459.68 in restitution had been paid to the estate of the affected Connecticut client who suffered financial harm due to Pettit's actions.
The Consent Order alleged that Janney Montgomery Scott, LLC violated 1) Section 36b-14(d) of the Connecticut Uniform Securities Act by failing to produce records requested by the agency; 2) Section 36b-31-6f of the Regulations under the Act by failing to establish, enforce and maintain a system for supervising the activities of its agents, investment adviser agents and Connecticut office operations that was reasonably designed to achieve compliance with applicable securities laws and regulations; and 3) Section 36b-31-14e of the Regulations by failing to file a correcting amendment to a Form U-5 it had previously filed with the Commissioner for James Albert Pettit.
The Consent Order directed the firm to cease and desist from regulatory violations and to remit $150,000 to the department. Of that amount, $100,000 constituted an administrative fine and $50,000 constituted reimbursement for agency investigative costs. In addition, the Firm agreed to pay $100,000 to be applied, in the discretion of the Commissioner, to financial literacy and investor education initiatives, training and related materials. The Consent Order also required the firm to conduct training for its Legal and Compliance staff on responding to regulatory inquiries and to retain an independent consultant to review the firm's supervisory and compliance procedures.
Dated: Tuesday, October 27, 2020