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HFP CAPITAL MARKETS LLC * * * * * * * * * * * * * * * * * * |
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CONSENT ORDER DOCKET NO. CO-13-8124-S |
I. PRELIMINARY STATEMENT
WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the General Statutes of Connecticut, the Connecticut Uniform Securities Act (“Act”) and Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies (“Regulations”) promulgated under the Act;
WHEREAS, HFP Capital Markets LLC (“HFP”), a New York limited liability company located at 386 Park Avenue South, 8th Floor, New York, New York 10016, has been registered as a broker-dealer under the Act since January 20, 2000;
WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking (“Department”), conducted an investigation pursuant to Section 36b-26(a) of the Act into the activities of HFP to determine if it had violated, is violating or was about to violate any provision of the Act or Regulations (“Investigation”);
WHEREAS, as a result of the Investigation, the Commissioner has reason to believe that HFP has violated certain provisions of the Act and Regulations, and that such violations would support administrative proceedings against HFP under Sections 36b-15 and 36b-27 of the Act;
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-34, inclusive”;
WHEREAS, Section 36b-31(b) of the Act provides, in relevant part, that “[n]o . . . order may be made . . . unless the commissioner finds that the action 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 sections 36b-2 to 36b-34, inclusive”;
WHEREAS, an administrative proceeding initiated under Sections 36b-15 and 36b-27 of the Act would constitute a “contested case” within the meaning of Section 4-166(2) of the General Statutes of Connecticut;
WHEREAS, Section 4-177(c) of the General Statutes of Connecticut and Section 36a-1-55(a) of the Regulations of Connecticut State Agencies provide that a contested case may be resolved by consent order, unless precluded by law;
WHEREAS, without holding a hearing and without trial or adjudication of any issue of fact or law, and prior to the initiation of any formal proceeding, the Commissioner and HFP reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
WHEREAS, HFP expressly consents to the Commissioner’s jurisdiction under the Act and to the terms of this Consent Order;
WHEREAS, the Commissioner finds that the issuance 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;
WHEREAS, HFP acknowledges that in approximately January 2010 it sold $25,000 of unregistered nonexempt securities of Metals Milling & Mining LLC in a private placement (“Private Placement”) to a Connecticut investor (“Investor”);
WHEREAS, HFP represents and has furnished the Commissioner with proof, that on August 15, 2014 HFP remitted $30,000 by bank check to the Investor as full restitution for the investment in the Private Placement;
WHEREAS, HFP has represented to the Division that on October 17, 2013, HFP discharged 26 broker-dealer agents who HFP believed may have violated the Act and the Regulations, including Sections 36b-4(a) and 36b-4(b) of the Act and Sections 36b-31-15a(a)(20) and 36b-31-15b(a)(8) of the Regulations;
WHEREAS, the Division takes notice of the fact that on February 10, 2014 and February 11, 2014 HFP filed a Uniform Request for Broker-Dealer Withdrawal seeking to terminate its broker-dealer registrations in multiple jurisdictions, including Connecticut;
AND WHEREAS, HFP, through its execution of this Consent Order, specifically assures the Commissioner that none of the violations alleged in this Consent Order shall occur in the future.
II. CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, HFP, through its execution of this Consent Order, voluntarily waives the following rights:
| 1. | To be afforded notice and an opportunity for a hearing within the meaning of Sections 36b-15 and 36b-27 of the Act and Section 4-177(a) of the General Statutes of Connecticut; |
| 2. | To present evidence and argument and to otherwise avail itself of Sections 36b-15 and 36b-27 of the Act and Section 4-177c(a) of the General Statutes of Connecticut; |
| 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 or otherwise challenge or contest the validity of this Consent Order. |
III. ACKNOWLEDGEMENT OF THE COMMISSIONER'S ALLEGATIONS
WHEREAS, HFP, through its execution of this Consent Order, acknowledges the following allegations of the Commissioner, and does not admit or deny these allegations, but admits sufficient evidence exists for the Commissioner to issue an order to cease and desist, an order to make restitution, an order revoking HFP’s registration as a broker-dealer in Connecticut, and an order imposing a maximum administrative fine of one hundred thousand dollars ($100,000) per violation of the Act, or any regulation, rule or order adopted or issued under the Act:
| 1. | HFP violated Section 36b-31-9b of the Regulations by failing to maintain the required minimum net capital for broker-dealers, failing to give the Commissioner notice of such net capital deficiency, and failing to give the Commissioner an up-to-date statement of financial condition and such supplemental schedules and reports which were reasonably necessary to accurately reflect HFP’s total financial position; |
| 2. | HFP, through its former agents, in connection with the offer, sale or purchase of a security, directly or indirectly made untrue statements of material facts or omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, in violation of Section 36b-4(a) of the Act; |
| 3. | HFP, through its former agents, engaged in dishonest or unethical practices in the securities business within the meaning of Sections 36b-31-15a(a)(20) and 36b-31-15b(a)(8) of the Regulations by using sales presentations and sales scripts in such a manner as to be deceptive or misleading. Such conduct also constitutes a violation of Section 36b-4(b) of the Act; |
| 4. | HFP violated Section 36b-31-14f of the Regulations by failing to provide the Division with one or more requested documents when so requested; |
| 5. | HFP violated Section 36b-6(b) of the Act by employing at least three agents who effected or attempted to effect securities transactions for the accounts of Connecticut investors while such agents were not registered under the Act; |
| 6. | HFP violated Section 36b-16 of the Act through the offer and sale of unregistered nonexempt securities in or from Connecticut to at least one investor; |
| 7. | HFP and its agents violated Section 36b-23 of the Act by representing to the Division that HFP’s agents updated the investment objectives on a Connecticut investor’s new account form when they had not done so; and |
| 8. | HFP failed to establish, enforce and maintain a system for supervising the activities of its agents that was reasonably designed to achieve compliance with applicable securities laws and regulations in violation of Section 36b-31-6f of the Regulations. |
WHEREAS, the Commissioner would have the authority to enter findings of fact and conclusions of law after granting HFP an opportunity for a hearing;
AND WHEREAS, HFP acknowledges the possible consequences of an administrative hearing and voluntarily agrees to the terms of this Consent Order as described below.
IV. CONSENT TO ENTRY OF SANCTIONS
WHEREAS, HFP, through its execution of this Consent Order, consents to the Commissioner’s entry of a Consent Order imposing the following sanctions:
| 1. | HFP, its representatives, agents, employees, affiliates, assigns, and successors in interest shall cease and desist from engaging in conduct constituting or which would constitute a violation of the Act or any regulation or order under the Act, either directly or through any person, organization or other device; and |
| 2. | No later than the date this Consent Order is entered by the Commissioner, HFP shall remit to the Department by cashier’s check, certified check or money order, made payable to “Treasurer, State of Connecticut”, the sum of $3,500, which shall constitute an administrative fine. |
V. CONSENT ORDER
NOW THEREFORE,
the Commissioner enters the following:| 1. | The Sanctions 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 action against HFP 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 HFP and reflected herein are subsequently discovered to be untrue; and |
| 3. | This Consent Order shall become final when entered. |
| So ordered at Hartford, Connecticut, | _______/s/_________ | |
| this 11th day of December 2014. | Howard F. Pitkin | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, Geoffrey M. Byruch, state on behalf of HFP Capital Markets LLC 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 HFP Capital Markets LLC; that HFP Capital Markets LLC agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that HFP Capital Markets LLC consents to the entry of this Consent Order.
| HFP Capital Markets LLC | |
| By: | ________/s/___________ |
| Geoffrey M. Byruch | |
| Managing Member |
State of: Illinois
County of: Cook
On this the 31st day of October 2014, before me, Mary Hrubec, the undersigned officer, personally appeared Geoffrey M. Byruch, who acknowledged himself to be the Managing Member of HFP Capital Markets LLC, and that he, as such Managing Member, being authorized so to do, executed the foregoing instrument for the purposes therein contained by signing the name of the limited liability company by himself as Managing Member.
In witness whereof I hereunto set my hand.
| _____/s/_______________________ |
| Notary Public |
| Date Commission Expires: 3-29-15 |