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NATIONAL SECURITIES * * * * * * * * * * * * * * * * * * |
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CONSENT ORDER No. CO-15-8256-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, National Securities Corporation (“National”) is a broker-dealer registered under the Act since June 21, 1984, with its principal office located at 1001 Fourth Avenue, Suite 3750, Seattle, Washington 98154;
WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, conducted an examination of National pursuant to Section 36b-14(d) of the Act and Section 36b-31-14f of the Regulations (“Examination”) and a related investigation pursuant to Section 36b-26(a) of the Act (“Investigation”) to determine whether National had violated, was violating or was about to violate provisions of the Act or Regulations or any order thereunder;
WHEREAS, as a result of the Examination and Investigation, the Commissioner has reason to believe that National engaged in conduct, as more fully described herein, that violated certain provisions of the Act and Regulations and that would support administrative proceedings against National under Sections 36b-15 and 36b-27 of the Act;
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(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, Section 36b-31(a) of the Act provides, in pertinent 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 pertinent 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, 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 National reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
WHEREAS, National expressly consents to the Commissioner’s jurisdiction under the Act and to the terms of this 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, National, 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, National, 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-27 and 36b-15(f) 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-27 and 36b-15(f) 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 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, National, through its execution of this Consent Order, acknowledges the following allegations of the Commissioner, and does not admit or deny these allegations, but accepts sufficient evidence exists for the Commissioner to issue an order to cease and desist, an order suspending or revoking National’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. | National engaged in dishonest or unethical business practices within the meaning of Section 36b-31-15a(b) of the Regulations by employing an individual who engaged in “cold-calling” and asking qualifying questions at a time when such individual was not registered as an agent under the Act; |
| 2. | In or about June 2012, National violated Section 36b-4 of the Act and engaged in dishonest or unethical business practices within the meaning of Section 36b-31-15a(20) of the Regulations by employing one or more agents who used sales presentations in a misleading manner. Such misleading sales presentations were used, inter alia, to solicit the purchase of Armour Residential REIT, Inc. securities by at least one prospective Connecticut investor; |
| 3. | National violated Section 36b-31-14a(a) of the Regulations by failing to maintain true, accurate and current books and records, in that National indicated on at least thirty-nine (39) trade confirmations that the transactions were solicited when, in fact, said transactions were unsolicited; |
| 4. | National violated Section 36b-31-6f of the Regulations by failing to establish, enforce and maintain a system for supervising the activities of its agents and its operations reasonably designed to achieve compliance with applicable securities laws and regulations. |
WHEREAS, the foregoing conduct would support administrative proceedings against National under Sections 36b-15(a)(2)(B), 36b-15(a)(2)(H) and 36b-15(a)(2)(K) of the Act as well as subsections (a) and (d) of Section 36b-27 of the Act;
AND WHEREAS, National 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, National, through its execution of this Consent Order, consents to the Commissioner’s entry of an order imposing on it the following sanctions:
| 1. | National, 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, rule or order adopted or issued under the Act, either directly or through any person, organization or other device, including without limitation: (a) employing unregistered personnel to engage in “cold-calling” Connecticut clients and prospective clients and to ask those clients and prospective clients qualifying questions; (b) permitting its agents to utilize sales presentations and/or sales scripts in a misleading manner; (c) failing to maintain true, accurate and current books and records; and (d) failing to establish, enforce and maintain a system for supervising the activities of its agents and its operations that is reasonably designed to achieve compliance with applicable securities laws and regulations; |
| 2. | No later than the date this Consent Order is entered by the Commissioner, National shall remit to the department by cashier’s check, certified check or money order made payable to “Treasurer, State of Connecticut” the sum of four thousand dollars ($4,000) as an administrative fine; and |
| 3. | National shall reimburse the Division for the cost of one or more examinations of its books and records to be conducted by the Division within twenty-four (24) months following the entry of this Consent Order by the Commissioner, the cost of such examination(s) not to exceed three thousand five hundred dollars ($3,500) in the aggregate. |
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 National 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 National based upon evidence of which the Commissioner was unaware on the date hereof relating to a violation of the Act or any regulation or order under the Act; |
| 4. | National 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. | National 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 National’s (i) testimonial obligations; or (ii) right to take legal or factual position in litigation or other legal proceedings in which the Commissioner is not a party; |
| 6. | For purposes of Rule 506(d)(2)(iii) of federal Regulation D and Rule 262(a)(3) of federal Regulation A, the entry of this Consent Order by the Commissioner is not intended to give rise to disqualifications under Rule 506(d)(1) of federal Regulation D, 17 C.F.R. Section 230.506(d)(1) or Rule 262(a) of federal Regulation A, 17 C.F.R. Section 230.262(a); and |
| 7. | For purposes of the Securities Exchange Act Section 15(b)(4)(H)(ii) the entry of this Consent Order by the Commissioner is not intended to give rise to disqualification under Securities Exchange Act Section 15(b)(4)(H)(ii); and |
| 8. | For purposes of the Investment Advisor Act of 1940 the entry of this Consent Order by the Commissioner is not intended to give rise to disqualification under Section 203(e)(9)(b); and |
| 9. | This Consent Order shall become final when entered. |
| So ordered at Hartford, Connecticut | _____/s/____________ | |
| this 29th day of December 2015. | Jorge L. Perez | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, Mark Goldwasser, state on behalf of National Securities Corporation, 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 National Securities Corporation; that National Securities Corporation agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that National Securities Corporation consents to the entry of this Consent Order.
| National Securities Corporation | |
| By: | ____/s/___________________ |
| Title: CEO |
State of: New York
County of: New York
On this the 22 day of December 2015 before me, the undersigned officer, personally appeared Mark H. Goldwasser, who acknowledged him/herself to be the CEO of National Securities Corporation, and that he/she, in such capacity and being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by him/herself as CEO.
In witness whereof I hereunto set my hand.
| ____/s/__________________________ |
| Notary Public |
| Date Commission Expires: 07/24/2017 |