In accordance with Governor Lamont's emergency declaration, employees and the public are asked to observe social distancing measures to ensure communal safety and to slow the spread of the novel coronavirus (COVID-19). People are asked to work from home and telecommute wherever possible. Adhering to these instructions, the Department of Banking has closed its offices to the public. However, agency staff will continue to provide services to consumers and industry through telework. When contacting the Department, please use electronic communication whenever possible. Agency staff will continue to check voicemails during this time. Consumers are encouraged to use our online form for complaints. If you are unsure where to send an inquiry, you may send it to Department.Banking@ct.gov and it will be routed appropriately. Thank you for your patience during this time.

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IN THE MATTER OF: 

PETER D. HERSHMAN


(CRD No. 5999754)

   

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CONSENT ORDER

No. CO-17-8313-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, Peter D. Hershman (“Respondent”) is an individual residing in Branford, Connecticut.  Respondent has never been registered in any capacity under the Act;
WHEREAS, Essex Financial Services, Inc. (CRD No. 127549) (“EFS”), located at 176 Westbrook Road, Essex, Connecticut 06426, has been an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) (SEC No. 801-62242) since August 7, 2003, and has filed the notice required by Section 36b-6(e) of the Act since August 7, 2003.  EFS has also been registered as a broker-dealer under the Act since September 22, 2003;
WHEREAS, in April 2014 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 Respondent (“First Investigation”) and as a result of the First Investigation, the Division obtained evidence that:  (a) in 2012, Respondent received $25,190 in referral fees from EFS based on a referral of an investment advisory account Respondent made in 2010 to EFS and to one of EFS’ investment adviser agents, John William Rafal (“Rafal”), the founder, President and Chief Executive Officer of EFS at the time; (b) in 2012, Respondent received $25,190 in referral fees from EFS despite the fact that Respondent was not registered as an investment adviser agent of EFS; and (c) in April 2013, EFS directed Respondent to return the $25,190 in referral fees to EFS because Respondent was not registered as an investment adviser agent.  Respondent returned the referral fees on April 17, 2013;
WHEREAS, on June 26, 2015, 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 entered a Consent Order (No. CO-15-8222-S) (“2015 Consent Order”), which 2015 Consent Order is incorporated by reference herein;
WHEREAS, on April 26, 2016, the Division obtained new information that Respondent failed to disclose to the Division at any time during the First Investigation or at any other time prior to or following the entry of the 2015 Consent Order.  Specifically, the Division obtained new information that in April 2013, after Respondent returned $25,190 to EFS and without the knowledge of EFS, Respondent received two checks directly from Rafal, one for $24,570 (for alleged referral fees billed to EFS by Respondent but not yet paid) and one for $25,190 (for alleged referral fees that Respondent returned to EFS) out of accounts Rafal controlled. 
WHEREAS, in light of this newly discovered information, the Commissioner, through the Division, conducted a second investigation pursuant to Section 36b-26(a) of the Act (“Second Investigation”) to determine whether Respondent’s receipt of the two checks from Rafal and Respondent’s failure to disclose the receipt of such checks to the Division was a violation of any provision of the Act or any regulation or order under the Act;
WHEREAS, as a result of the Second Investigation, the Commissioner has reason to believe that Respondent violated certain provisions of the Act, and that such violations would support administrative proceedings against Respondent under Section 36b-27 of the Act;
WHEREAS, as a result of the Second Investigation and based on the new evidence, on August 19, 2016, the Commissioner, acting pursuant to Section 36b-27 of the Act, issued an Order to Cease and Desist, Order to Provide Disgorgement, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CDF-16-8313-S) against Respondent (collectively “2016 Notice”), which 2016 Notice is incorporated by reference herein;
WHEREAS, on August 26, 2016, Respondent requested a hearing on the matters alleged in the 2016 Notice;
WHEREAS, on September 9, 2016, the Commissioner issued a Notification of Hearing and Designation of Hearing Officer, wherein the Commissioner scheduled the hearing on the matters alleged in the 2016 Notice for November 16, 2016, and appointed Department of Banking Attorney Stacey Serrano as the Hearing Officer on the matters alleged in the 2016 Notice;
WHEREAS, on November 7, 2016, Hearing Officer Serrano granted a continuance of the hearing scheduled for November 16, 2016 to a date to be determined and scheduled a joint conference call with the Hearing Officer and the parties on January 10, 2017;
WHEREAS, on January 10, 2017, Hearing Officer Serrano granted a continuance of the hearing to April 19-21, 2017;
WHEREAS, in approximately May 2013, the SEC began an investigation into the referral payments made by EFS to Respondent (“SEC Investigation”).  In connection with the SEC Investigation,  on January 9, 2017, the SEC, acting pursuant to Sections 203(f) and 203(k) of the Investment Advisers Act of 1940, Sections 4C and 15(b) of the Securities Exchange Act of 1934, Section 9(b) of the Investment Company Act of 1940, and Rule 102(e) of the SEC’s Rules of Practice, entered an Order Instituting Administrative and Cease and Desist Proceedings, Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order against Respondent.  Among other things, Respondent was ordered to pay disgorgement of $49,760 (the fees he received from Rafal), prejudgment interest of $4,923.57 and civil penalties of $37,500 to the SEC, and was barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization;
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 Section 36b-27 of the Act would constitute a “contested case” within the meaning of Section 4-166(4) of the General Statutes of Connecticut;
WHEREAS, Section 36b-27(f) of the Act provides, in relevant part, that “[a]ny time after the issuance of an order or notice provided for in subsection (a), (b) . . . or subdivision (1) of subsection (d) of this section, the commissioner may accept an agreement by any respondent named in such order or notice to enter into a written consent order in lieu of an adjudicative hearing”;
WHEREAS, Section 4-177(c) of the General Statutes of Connecticut and Section 36a-1-55(a) of the Regulations provide that a contested case may be resolved by consent order, unless precluded by law;
WHEREAS, without a hearing or adjudication of any issue of fact or law, Respondent and the Commissioner have reached an agreement and now desire to resolve the matters alleged in the 2016 Notice without the need for further administrative proceedings, and this Consent Order is entered solely for such purpose;
WHEREAS, Respondent, without admitting or denying any of the Commissioner’s allegations or findings, expressly consents to the Commissioner’s jurisdiction under the Act and to the terms of this Consent Order;
WHEREAS, Respondent acknowledges that he has discussed all aspects of this Consent Order and the effect of the same with his legal counsel, that he has had a reasonable time to review this Consent Order, and that he fully understands all the provisions of the Consent Order;
WHEREAS, the Commissioner finds that 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;
AND WHEREAS, Respondent, through his execution of this Consent Order, represents and agrees that none of the violations alleged in the 2016 Notice shall occur in the future.   

II. CONSENT TO WAIVER OF PROCEDURAL RIGHTS

WHEREAS, Respondent, through his 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 Section 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 himself of Section 36b-27 of the Act and Section 4-177c(a) of the General Statutes of Connecticut;
3. To present his position in a hearing in which he 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.

III. ACKNOWLEDGEMENT OF THE COMMISSIONER'S ALLEGATIONS

WHEREAS, the Respondent, through his execution of this Consent Order, acknowledges the allegations of the Commissioner set forth in the Notice, without admitting or denying those allegations;

WHEREAS, the Commissioner would have the authority to enter findings of fact and conclusions of law after granting Respondent an opportunity for a hearing;

AND WHEREAS, Respondent acknowledges the possible consequences of an administrative hearing and voluntarily agrees to consent to the entry of the sanctions described below.

IV. CONSENT TO ENTRY OF SANCTIONS

WHEREAS, Respondent, through his execution of this Consent Order, consents to the Commissioner’s entry of an order imposing on him the following sanctions:

1. Respondent shall cease and desist from engaging in conduct constituting or which would constitute a violation of the Act or any regulation, rule or order adopted or issued under the Act, either directly or through any person, organization or other device, including without limitation, engaging in any conduct alleged in the Notice; and
2. No later than the date this Consent Order is entered by the Commissioner, Respondent shall remit to the Department, by cashier’s check, certified check or money order made payable to “Treasurer, State of Connecticut”, the sum of eight thousand five hundred dollars ($8,500) as 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 Respondent if the Commissioner determines that compliance is not being observed with the terms hereof;
3. This Consent Order shall not preclude additional proceedings by the Commissioner against Respondent for acts or omissions not specifically addressed in this Consent Order or for acts and/or omissions that do not arise from the facts or transactions addressed herein;
4. Respondent shall not take any action or make or permit to be made any public statement, including in regulatory filings or otherwise, denying, directly or indirectly, any allegation referenced in this Consent Order or create the impression that this Consent Order is without factual basis;
5. Respondent shall not take any position in any proceeding brought by or on behalf of the Commissioner, or to which the Commissioner is a party, that is inconsistent with any part of this Consent Order.  However, nothing in this Consent Order affects Respondent’s testimonial obligations or right to take any legal or factual position in litigation, arbitration, or other legal proceedings in which the Commissioner is not a party; and
6. This Consent Order shall become final when entered.


So ordered at Hartford, Connecticut,      _____/s/____________
this 27th day of March 2017.      Jorge L. Perez
Banking Commissioner 

   
CONSENT TO ENTRY OF ORDER

I, Peter D. Hershman, state that I have read the foregoing Consent Order; that I know and fully understand its contents; that I agree freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that I consent to the entry of this Consent Order.   

         
_____/s/_________
Peter D. Hershman



State of:  Connecticut

County of:  New Haven


On this the 21st day of March 2017, before me, the undersigned officer, personally appeared Peter D. Hershman, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained.
In witness whereof I hereunto set my hand.
  
         
__________/s/____________________
Commissioner of the Superior Court
    

  

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