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IN RE APPLICATION OF: * * * * * * * * * * * * |
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CONSENT ORDER |
WHEREAS, the Banking Commissioner (the "Commissioner") is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (the "Act"), and Sections 36b-31-2 et seq. of the Regulations of Connecticut State Agencies promulgated under the Act (the "Regulations");
WHEREAS, on April 26, 2006, Harrison Douglas, Inc (“Harrison”) of 3025 South Parker Road 801, Aurora, Colorado, filed an application with the Commissioner for registration in Connecticut as a broker-dealer;
WHEREAS, the Commissioner, through the Securities and Business Investments Division (the "Division") of the Department of Banking , conducted an investigation of Harrison pursuant to Section 36b-8 of the Act;
WHEREAS, the National Association of Securities Dealers, Inc. (the “NASD”) is a self-regulatory organization registered with the Securities and Exchange Commission (the “SEC”) pursuant to Section 15A of the Securities Exchange Act of 1934;
WHEREAS, as a result of the investigation, the Division obtained evidence that 1) on July 7, 2000, the NASD imposed a fine of $5,000 on Harrison for conducting a securities business while failing to maintain the minimum net capital requirement required by the SEC (Docket No. C3A000024). The fine has not been stayed or overturned; 2) on June 25, 2001, the NASD censured and fined Harrison and Harrison's principal and president, Douglas Wayne Schriner ("Schriner"), $10,500, jointly and severally, and fined Harrison an additional $7,500. The NASD found that Harrison sold shares of an initial public offering to residents of a state where the offering was not registered, completed a false offering questionnaire for the lead underwriter and failed to promptly file an amended Form BD and amended Form U-4 to reflect a final disciplinary action and bankruptcies. The NASD also found that Harrison failed to have an adequate firm element for continuing education (Docket No. C3A010023). The censure and fine have not been stayed or overturned; and 3) on September 17, 2003, the NASD censured and fined Harrison and Schriner $25,000, jointly and severally. The NASD found that Harrison failed to exercise adequate supervisory controls by permitting Schriner to perform duties requiring registration while his registration status was inactive from December 7, 2001 through February 7, 2002, due to his failure to complete required continuing education requirements (Disciplinary Proceeding No. C3A030028). The censure and fine have not been stayed or overturned;
WHEREAS, on April 30, 2004, and based on the 2000, 2001 and 2003 NASD sanctions described above, the Commissioner entered an Order denying Harrison’s registration as a broker-dealer pursuant to Section 36b-15(a)(2)(F)(iii) of the Act (Docket No. ND-2004-6925-S);
WHEREAS, Section 36b-15(a) of the Act provides, in part, that:
The commissioner may, by order, deny . . . any registration or, by order, restrict or impose conditions on the securities or investment advisory activities that an applicant or registrant may perform in this state if the commissioner finds that (1) the order is in the public interest, and (2) the applicant or registrant or, in the case of a broker-dealer . . . any partner, officer, or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the broker-dealer . . . (E) is the subject of . . . an order of the commissioner denying . . . registration as a broker-dealer . . . [or] (F) is the subject of any of the following sanctions that are currently effective or were imposed within the past ten years . . . (iii) a suspension, expulsion or other sanction issued by a national securities exchange or other self-regulatory organization registered under federal laws administered by the Securities and Exchange Commission . . . if the effect of the sanction has not been stayed or overturned by appeal or otherwise . . . .
WHEREAS, Section 36b-31(a) of the Act, provides, in relevant part, that "[t]he commissioner may from time to time make . . . such . . . orders as are necessary to carry out the provisions of sections 36b-2 to 36b-33, inclusive";
WHEREAS, Section 4-177(c) of the Connecticut General Statutes provides, in relevant part, that "[u]nless precluded by law, a contested case may be resolved by . . . consent order";
WHEREAS, in connection with its April 26, 2006 application for registration as a broker-dealer, Harrison represented to the Division in writing that it had made organizational changes that would improve the firm’s handling of compliance and regulatory issues. Such changes included: employment of a full-time compliance officer; employment of an office manager to oversee day-to-day operations; and placement of certain registered representatives under the direct supervision of principals of the firm other than Schriner;
WHEREAS, Harrison has requested that its Connecticut registration be limited so as to enable it to service a long term client who had recently moved to Connecticut and who wished to effect transactions in limited partnership interests;
WHEREAS, Harrison has represented to the Division that the above-described client is an “accredited investor” within the meaning of Rule 501(a) of federal Regulation D, and that Harrison has taken steps to ensure the client’s status as an “accredited investor”;
CONSENT TO ENTRY OF ACTIVITY RESTRICTIONS
CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, Harrison, through its execution of this Consent Order, voluntarily waives the following rights:
| 1. | To receive prior written notice within the meaning of Sections 36b-15(f) and 4-177(b) of the Connecticut General Statutes; |
| 2. | To present evidence and argument and to otherwise avail itself of Section 36b-15(f) of the Act and Section 4-177c(a) of the Connecticut General Statutes; |
| 3. | To present its position in a hearing in which it is represented by counsel; |
| 4. | To have a written record of the hearing made and a written decision issued by a hearing officer; and |
| 5. | To seek judicial review of, or otherwise challenge or contest, the matters described herein, including the validity of this Consent Order. |
ACKNOWLEDGEMENT OF THE ENTRY OF FINDINGS
WHEREAS, Harrison, through its execution of this Consent Order, and without admitting or denying that the Commissioner would have a basis for initiating administrative proceedings under Section 36b-15 of the Act, accepts and consents to the entry of the following findings by the Commissioner:
| 1. | The entry of this Consent Order is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of the Act. |
| 2. | The sanctions imposed by the NASD in case numbers C3A000024 (July 7, 2000), C3A010023 (June 25, 2001) and C3A030028 (September 17, 2003) and more fully described herein provide a basis for denying Harrison’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(F)(iii) of the Act; |
| 3. | The April 30, 2004 entry of an order denying Harrison’s registration as a broker-dealer under the Act (Docket No. ND-2004-6925-S) provides a basis for an order denying Harrison’s April 26, 2006 application for registration under Section 36b-15(a)(2)(E) of the Act. |
CONSENT TO ENTRY OF ACTIVITY RESTRICTIONS
WHEREAS, Harrison through its execution of this Consent Order, consents to the Commissioner's entry of a Consent Order imposing on it the following restrictions:
| 1. |
For a period of three years from the entry of this Consent Order by the Commissioner, Harrison and its successors in interest shall:
a. Restrict its securities business in Connecticut to no more than ten (10) individuals or entities each of whom shall qualify as an “accredited investor” as that term is defined in Rule 501(a) of Regulation D, 17 C.F.R. § 230.501 (a), promulgated under the Securities Act of 1933;
b. Restrict its securities business in Connecticut to effecting transactions in (1) securities listed on the New York Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Global Market; (2) securities issued by investment companies regulated under the Investment Company Act of 1940; and (3) interests in limited partnerships; provided that any such offering of limited partnership interests shall be registered under the Act or shall be the subject of a perfected exemptive claim or claim of covered security status under Section 36b-21 of the Act;
c. In transacting business in or from Connecticut, Harrison shall not employ more than two agents at any one time to represent it in effecting or attempting to effect securities transactions; |
| 2. | Harrison shall retain a full-time compliance officer, office manager and such electronic surveillance systems as are necessary to maintain proper supervisory controls over the firm’s trading activities; |
| 3. | No later than the date this Consent Order is entered by the Commissioner, Harrison shall contract with an outside party, who shall first be identified to, and not deemed unacceptable by, the Division Director, to conduct an annual compliance audit of the firm and its personnel for a three year period. The first audit shall cover the period from January 1, 2007 to December 31, 2007; the second audit shall cover the period from January 1, 2008 to December 31, 2008; and the third audit shall cover the period from January 1, 2009 to December 31, 2009. Each annual compliance audit shall include the firm’s compliance with the provisions of this Consent Order. Within one hundred twenty (120) days following each year-end period, the first of which would be December 31, 2007, Harrison shall provide the Division Director with a copy of the audit for such period and shall include in an addendum thereto those recommendations that have been implemented; the timetable for implementing any remaining recommendations; and, if a particular recommendation will not be implemented, the reason(s) therefor. Such report and addendum shall be returned to Harrison following review by the Division Director; |
| 4. | For three years following the entry of this Consent Order by the Commissioner, Harrison shall notify the Division Director in writing each calendar quarter of any securities related complaints, actions or proceedings (including arbitrations, and updates thereto) involving Harrison, its officers, directors, and/or control persons, initiated by Connecticut customers, which occur during the quarter, including the disposition thereof. Each such report shall be provided no later than ten (10) business days following the close of the quarter and shall include any written reprimands, censures or warnings issued by Harrison to its personnel. If no complaints, actions, proceedings, reprimands, censures, warnings or updates exist for the quarter, the report shall so indicate. The first report shall cover the quarter ending March 31, 2007, and the final report shall cover the quarter ending March 31, 2010; |
| 5. | Harrison shall amend its supervisory procedures to require a qualified principal, other than Schriner, to directly review or supervise securities activity conducted in or from Connecticut and to train those persons associated with Harrison, or any of its successors in interest, who engage in any such activity; and |
| 6. | Harrison, its officers, directors, agents, employees and representatives shall refrain from engaging in conduct constituting or which would constitute a violation of the Act or any regulation or order under the Act. |
CONSENT ORDER
NOW THEREFORE, the Commissioner enters the following:
| 1. | The Findings and Activity Restrictions set forth above be and are hereby entered; |
| 2. | Entry of this Consent Order by the Commissioner is without prejudice to the right of the Commissioner to take enforcement against Harrison, its officers, directors, agents, employees or representatives based upon a violation of this Consent Order or the matters underlying its entry, if the Commissioner determines that compliance with the terms herein is not being observed or if any representations made by Harrison, and reflected herein are subsequently discovered to be untrue; |
| 3. | Entry of this Consent Order shall not be deemed a waiver or estoppel on the part of the Commissioner from proceeding in individual actions against any person who may have violated the Act or any transaction not currently known to the Commissioner at the time this Consent Order is issued; |
| 4. | Contemporaneously with the entry of this Consent Order by the Commissioner, the name "Harrison Douglas Inc." shall be entered on the register of broker-dealers in accordance with Section 36b-8 of the Act; and |
| 5. | This Consent Order shall become final when issued. |
________/s/_________
Howard F. Pitkin
Banking Commissioner
So ordered at Hartford, Connecticut
this 20th day of December, 2006.
CONSENT TO ENTRY OF ORDER
I, Douglas W. Schriner, state on behalf of Harrison Douglas, Inc., that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of Harrison Douglas, Inc; that Harrison Douglas, Inc agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Harrison Douglas, Inc. consents to the issuance of this Consent Order, expressly waiving any right to a hearing on the matters described herein.
Harrison Douglas, Inc.
By
________/s/_______________
Douglas W. Schriner
President
On this 18 day of Dec., 2006, personally appeared Douglas W. Schriner, signer of the foregoing Consent Order Conditioning Registration as a Broker-dealer, who, being duly sworn, did acknowledge to me that he was authorized to execute the same on behalf of Harrison Douglas, Inc., a corporation, and acknowledged the same to be his free act and deed, before me.
_______________/s/________________________
Notary Public/Commissioner of the Superior Court
My Commission Expires: 06-27-2010