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OBSIDIAN FINANCIAL * * * * * * * * * * * * * * * * * * |
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CONSENT ORDER No. CO-12-8053-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, Obsidian Financial Group, LLC (“Obsidian”) is a broker-dealer registered under the Act since May 4, 2001, and has its principal office located at 1000 Woodbury Road, Suite 110, Woodbury, New York;
WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking (“Department”), conducted an examination of Obsidian pursuant to Section 36b-14(d) of the Act and 36b-31-14f of the Regulations, and a related investigation under Section 36b-26(a) of the Act into the activities of Obsidian to determine whether it had violated, was violating or was about to violate any provisions of the Act or Regulations or any order thereunder (“Investigation and Examination”);
WHEREAS, as a result of such Investigation and Examination, the Division ascertained that Obsidian failed to supervise the activities of some of its agents who engaged in inaccurate disclosure practices with respect to a “Handling Fee” charged to Connecticut customers by incorrectly representing to some of Obsidian’s Connecticut customers that the “Handling Fee” was a ticket charge assessed by Obsidian’s clearing firm and not revenue to the firm;
WHEREAS, as a result of the Investigation and Examination, the Division obtained evidence that Obsidian failed to have and maintain the minimum net capital required by Securities and Exchange Commission (“SEC”) Rule 15c3-1, 17 C.F.R. § 240.15c3-1 and by Section 36b-31-9b(a) of the Regulations. Also, in violation of subsections (b) and (c) of Section 36b-31-9b of the Regulations, Obsidian and its agents, failed to give the Commissioner telegraphic or other notice of the net capital deficiency, and failed 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 Obsidian’s total financial position;
WHEREAS, in connection with the Investigation and Examination, Obsidian failed to provide in a timely manner some records that were requested by the Division. Such conduct contravened Section 36b-14(d) of the Act and Section 36b-31-14f of the Regulations;
WHEREAS, the Commissioner has reason to believe that the foregoing conduct violates certain provisions of the Act and Regulations, and would support administrative proceedings against Obsidian 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(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 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, Obsidian represents that it has adopted policies and procedures since the initiation of the Investigation and Examination that are designed to ensure compliance with all legal and regulatory requirements regarding inaccurate disclosure practices with respect to “Handling Fees” charged to Connecticut customers;
WHEREAS, since the initiation of the Investigation and Examination, Obsidian has come into compliance with the minimum net capital requirements of SEC Rule 15c3-1, 17 C.F.R. § 240.15c3-1 and Section 36b-31-9b of the Regulations, and has produced the records requested by the Division;
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 Obsidian reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
WHEREAS, Obsidian, 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, 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, Obsidian, 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, Obsidian, 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. CONSENT TO ENTRY OF FINDINGS
WHEREAS, Obsidian, through its execution of this Consent Order, accepts and consents to the entry of the following Findings by the Commissioner without admitting or denying them:
| 1. | The entry of this Consent Order is appropriate, in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act; |
| 2. | Obsidian violated Section 36b-31-6f(b) of the Regulations by failing to establish, enforce and maintain a supervisory system reasonably designed to achieve regulatory compliance. Specifically, Obsidian failed to supervise it agents who engaged in inaccurate disclosure practices with respect to the “Handling Fee” charged to certain Connecticut customers; |
| 3. | Obsidian violated Section 36b-31-9b of the Regulations by failing to have and maintain the required minimum net capital, failing to give the Commissioner telegraphic notice of the 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 Obsidian’s total financial position; |
| 4. | Obsidian violated Section 36b-14(d) of the Act and Section 36b-31-14f of the Regulations by failing to provide in a timely manner records that were requested by the Division; and |
| 5. | The foregoing conduct would support administrative proceedings against Obsidian under Sections 36b-15(a)(2)(B), 36b-15(a)(2)(K) and 36b-15(a)(2)(L) of the Act as well as subsections (a) and (d) of Section 36b-27 of the Act. |
IV. CONSENT TO ENTRY OF SANCTIONS
WHEREAS, Obsidian, through its execution of this Consent Order, consents to the Commissioner’s entry of an order imposing on it the following sanctions:
| 1. | Obsidian, 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; and |
| 2. | No later than the date this Consent Order is entered by the Commissioner, Obsidian shall remit to the Department, by cashier’s check, certified check or money order made payable to “Treasurer, State of Connecticut”, the sum of seven thousand five hundred dollars ($7,500) 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 Obsidian 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 Obsidian and reflected herein are subsequently discovered to be untrue; |
| 3. | Nothing in this Consent Order shall be construed as limiting the Commissioner’s ability to take enforcement action against Obsidian 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; and |
| 4. | This Consent Order shall become final when entered. |
| So ordered at Hartford, Connecticut | _______/s/_________ | |
| this 11th day of January 2013. | Howard F. Pitkin | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, Upinder Sharma a/k/a Kevin Sharma, state on behalf of Obsidian Financial Group, 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 Obsidian Financial Group, LLC; that Obsidian Financial Group, LLC, agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Obsidian Financial Group, LLC consents to the entry of this Consent Order.
| Obsidian Financial Group, LLC | |
| By: | ______/s/_________________ |
| Upinder Sharma | |
| President |
State of: New York
County of: Nassau
On this the 7th day of January 2013 before me, [blank in original], the undersigned officer, personally appeared Upinder Sharma a/k/a Kevin Sharma, who acknowledged himself to be the President of Obsidian Financial Group, LLC, a limited liability company, 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 limited liability company by himself as President.
In witness whereof I hereunto set my hand.
_____/s/______________________
Notary Public
Date Commission Expires: 5/7/2015