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CONSENT ORDER |
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, Moreau Investment Management Company (“MIM”) is an investment adviser with its principal office located at 436 North Lake Street, Litchfield, Connecticut 06759. MIM has been registered as an investment adviser under the Act since March 10, 2004;
WHEREAS, Roger Robert Moreau (CRD No. 1701859) is the President of MIM and has been registered as an investment adviser agent of MIM under the Act since March 10, 2004;
WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking (“Department”), conducted an investigation of MIM under Section 36b-26 of the Act to determine whether it violated, had violated or was about to violate any provision of the Act or any regulation or order under the Act (“Investigation”). Such Investigation included an examination of MIM’s books and records pursuant to Section 36b-14(d) of the Act and Section 36b-31-14f of the Regulations (“Examination”);
WHEREAS, as a result of the Investigation, the Division ascertained that during the time period from September 11, 2015 to February 2, 2016, MIM’s allocation of profits from block trading accounts resulted in Moreau’s account or related accounts receiving approximately a $7,000 profit;
WHEREAS, as a result of the Investigation and Examination, the Division ascertained that from September 11, 2015 to February 2, 2016, MIM failed to establish, enforce and maintain (i) an adequate written trade allocation policy with respect to block trading accounts in a manner reasonably designed to achieve compliance with applicable securities laws and regulations, and (ii) adequate supervisory procedures with respect to the enforcement of such policy;
WHEREAS, as a result of the Investigation and Examination, the Commissioner has reason to believe that the foregoing conduct violates certain provisions of the Regulations, and would support administrative proceedings against MIM under Section 36b-15 of the Act and Section 36b-27 of the 2018 Supplement to the General Statutes (“2018 Supplement”);
WHEREAS, the Commissioner acknowledges that MIM has cooperated with the Division during the Investigation and Examination, and that MIM, on its own initiative, has since enhanced its procedures for block trading accounts;
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-15 of the Act and Section 36b-27 of the 2018 Supplement would constitute a “contested case” within the meaning of Section 4-166(4) 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 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 MIM reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
WHEREAS, MIM 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;
AND WHEREAS, MIM, through its execution of this Consent Order, specifically represents and agrees that none of the violations alleged in this Consent Order shall occur in the future.
II. CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, MIM, 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 Section 36b-15(f) of the Act, Section 36b-27 of the 2018 Supplement and Section 4-177(a) of the General Statutes of Connecticut; |
| 2. | To present evidence and argument and to otherwise avail itself of Section 36b-15(f) of the Act, Section 36b-27 of the 2018 Supplement 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 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, MIM, through its execution of this Consent Order, and without admitting or denying the Commissioner’s allegation, acknowledges the following allegations of the Commissioner:
| MIM violated Section 36b-31-6f(b) of the Regulations by failing to establish, enforce and maintain (i) an adequate written trade allocation policy with respect to block trading accounts in a manner reasonably designed to achieve compliance with applicable securities laws and regulations, and (ii) adequate supervisory procedures with respect to the enforcement of such policy; |
WHEREAS, the Commissioner would have the authority to enter findings of fact and conclusions of law after granting MIM an opportunity for a hearing;
AND WHEREAS, MIM 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, MIM, through its execution of this Consent Order, consents to the Commissioner’s entry of a Consent Order imposing the following sanctions:
| 1. | MIM, 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, including, without limitation, failing to establish, enforce and maintain (i) an adequate written trade allocation policy with respect to block trading accounts in a manner reasonably designed to achieve compliance with applicable securities laws and regulations, and (ii) adequate supervisory procedures with respect to the enforcement of such policy, and |
| 2. |
No later than the date this Consent Order is entered by the Commissioner, MIM shall remit to the Department by cashier’s check, certified check or money order made payable to “Treasurer, State of Connecticut”, or by wire transfer, the sum of ten thousand dollars ($10,000) 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 MIM 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; |
| 3. | Nothing in this Consent Order shall be construed as limiting the Commissioner’s ability to take enforcement action against MIM based upon evidence of which the Division was unaware on the date hereof relating to a violation of the Act or any regulation or order under the Act; |
| 4. | MIM shall not take any action or make or permit to be made any public statement, including in regulatory filings, any proceeding in any forum 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. | MIM 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. Nothing in this provision affects MIM’s testimonial obligations or right to take a legal or factual position in litigation, arbitration, or other legal proceeding 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 2nd day of May 2018. | Jorge L. Perez | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, Roger Robert Moreau, state on behalf of Moreau Investment Management Company (“MIM”), 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 MIM; that MIM agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that MIM consents to the entry of this Consent Order.
| Moreau Investment Management Company | |
| By: | ________/s/_________________________ |
| Roger Robert Moreau | |
| President |
State of: Connecticut
County of: Litchfield
On this the 30th day of April 2018, before me, the undersigned officer, personally appeared Roger Robert Moreau, who acknowledged himself to be the President of Moreau Investment Management Company, a corporation, and that he, as such President, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as President.
In witness whereof I hereunto set my hand.
| ____/s/___________________________ |
| Notary Public |
| Date Commission Expires: 7/31/2022 |