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I. PRELIMINARY STATEMENT
II. FINDINGS OF FACT
|1.||Bankers Life is a life insurance company located in Illinois that has never been registered as a broker-dealer or investment adviser.|
|2.||BLCFS is a wholly-owned subsidiary of Bankers Life that also is located in Illinois. BLCFS has been a member of NASD or FINRA since 2003 and is registered as a broker-dealer only in Illinois. During its existence, BLCFS has had no business activity other than as described herein. BLCFS has never been registered as a broker-dealer or investment adviser in Connecticut, and it has not registered any agents or investment adviser agents in Connecticut.|
At all relevant times, ProEquities was a broker-dealer registered under the Act and a federally registered investment adviser that made a notice filing with the Commissioner pursuant to Section 36b-6(e) of the Act.
|5.||Under the ProEquities Agreement, ProEquities was required to pay BLCFS between 87% and 91% of revenue received by ProEquities for the securities business conducted by the Dual Agents. ProEquities also was required to provide reports to BLCFS of the amount of compensation to be paid to each Dual Agent for securities work, and BLCFS was to retain the difference.|
|6.||BLCFS, in its current Form BD filing, lists the following as other business:|
|7.||Evidence obtained during the investigation indicated that Bankers screened prospective securities agents, trained new securities agents, conducted some periodic training sessions for securities agents, monitored and attempted to increase securities production of securities agents, and played a significant role in determining the compensation of securities agents. In addition, evidence showed that the involvement of Bankers in securities-related roles led to confusion in the reporting and responsibility hierarchies between Bankers and ProEquities.|
|8.||At no time were the Dual Agents registered as agents or investment adviser agents of Bankers Life or BLCFS. The agents were registered agents and investment adviser agents of ProEquities.|
|9.||From April 30, 2010 through November 30, 2011, Bankers received, on a nationwide basis, a total of approximately $11 million from ProEquities under the ProEquities Agreement for variable annuity and securities transactions and investment advice.|
III. CONCLUSIONS OF LAW
Under Section 36b-6(a) of the Act, a person may not transact business as a broker-dealer in Connecticut unless registered.
Similarly, under Section 36b-6(c) of the Act, a person may not transact business as an investment adviser in Connecticut unless registered or exempt from registration.
|3.||Section 36b-6(b) of the Act prohibits a broker-dealer from employing an agent unless that agent is registered under the Act or an associated person who represents a broker-dealer in effecting transactions described in subdivisions (2) and (3) of Section 15(h) of the Securities Exchange Act of 1934.|
|4.||Section 36b-6(c)(3) of the Act prohibits an investment adviser from engaging an investment adviser agent unless such investment adviser agent is registered under the Act.|
|5.||By engaging in the conduct set forth above, Bankers transacted business as a broker-dealer and as an investment adviser absent registration in Connecticut in violation of Sections 36b-6(a) and 36b-6(c) of the Act.|
|6.||Furthermore, by employing or engaging dual agents who were not registered in Connecticut as agents or investment adviser agents of Bankers, Bankers violated Sections 36b-6(b) and 36b-6(c)(3) of the Act.|
|7.||By engaging in the conduct set forth above, ProEquities engaged in conduct that would support the initiation of administrative proceedings under Sections 36b-15, 36b-27(a)(3) and 36b-27(d)(1)(C) of the Act;|
|8.||As a result, 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.|
IV. CONSENT ORDER
On the basis of the Findings of Fact, Conclusions of Law, and the consent of the Respondent to the entry of this Consent Order,
IT IS HEREBY ORDERED THAT:
ProEquities shall CEASE AND DESIST from materially aiding any person, including Bankers, in a violation of the Act and the Regulations thereunder;
In accordance with the terms of the multistate settlement, ProEquities shall pay $435,000 to be distributed among the states where dual agents were located during the period from April 30, 2010 through December 2, 2011. Within ten (10) business days following the entry of this Consent Order by the Commissioner, ProEquities shall pay to the “Treasurer, State of Connecticut”, by electronic funds transfer or wire transfer, the sum of Eight Thousand Two Hundred Seven and 55/100 Dollars ($8,207.55) as an administrative fine, which amount constitutes Connecticut’s proportionate share of the total state settlement amount of $435,000.
If any state securities regulator determines not to accept the settlement offer of ProEquities reflected herein, the monetary payment to Connecticut hereunder shall not be affected, and ProEquities shall not be relieved of any of the non-monetary provisions of this Consent Order.
ProEquities shall not attempt to recover any part of the payments described in this Consent Order from Dual Agents, Bankers Life or customers of ProEquities.
ProEquities shall fully cooperate with any investigation or proceeding related to the subject matter of this Consent Order.
From the date this Consent Order is entered by the Commissioner through March 31, 2015, and while Bankers has dual agents that are registered agents or investment adviser agents of ProEquities, any agreement between Bankers and ProEquities shall be consistent with the provisions set forth in the Commissioner’s June 29, 2012 Consent Order concerning Bankers Life and Casualty Company and BLC Financial Services, Inc. (No. CO-12-8018-S).
|7.||This Consent Order concludes the investigation by the Division and any other action that the Commissioner could commence under the Act on behalf of Connecticut as it relates to the violations described above, up to and including activity occurring through December 2, 2011; provided, however, that excluded from and not covered by this paragraph are any claims by the Commissioner arising from or relating to enforcement of the terms and conditions of this Consent Order.|
|8.||If payments are not made by ProEquities, or if ProEquities defaults in any of its obligations set forth in this Consent Order, the Commissioner may vacate this Consent Order, at the Commissioner’s sole discretion, upon 10 days notice to ProEquities and without opportunity for administrative hearing or judicial review.|
|9.||Nothing herein shall preclude the State of Connecticut, its departments, agencies, boards, commissions, authorities, political subdivisions and corporations, other than the Commissioner and only to the extent set forth herein, (collectively, “State Entities”) and the officers, agents or employees of State Entities from asserting any claims, causes of action, or applications for compensatory, nominal and/or punitive damages, administrative, civil, criminal, or injunctive relief against ProEquities.|
|10.||This Consent Order is not intended by the Commissioner to subject any person to any disqualifications under the laws of the United States, any state, the District of Columbia, Puerto Rico, or the Virgin Islands including, without limitation, any disqualification from relying upon the state or federal registration exemptions or safe harbor provisions.|
|11.||This Consent Order and the order of any other state in related proceedings against ProEquities (collectively, the “Orders”) shall not disqualify any person from any business that they otherwise are qualified, licensed or permitted to perform under applicable securities laws of Connecticut, and any disqualifications from relying upon this state’s registration exemptions or safe harbor provisions that arise from the Orders are hereby waived.|
|12.||This Consent Order and any dispute related thereto shall be construed and enforced in accordance with, and governed by, the laws of Connecticut without regard to any choice of law principles.|
|13.||This Consent Order shall be binding upon ProEquities, its affiliates, successors and assigns.|
|14.||Except as set forth above, the Commissioner agrees to take no action adverse to ProEquities based solely on the same conduct addressed in this Consent Order. However, nothing in this Consent Order shall preclude the Commissioner from: (a) taking adverse action based on other conduct; (b) taking this Consent Order and the conduct described above into account in determining the proper resolution of action based on other conduct; (c) taking any and all available steps to enforce this Consent Order; or (d) taking any action against other entities or individuals, regardless of any affiliation or relationship between ProEquities and the entities or individuals.|
|15.||Except in an action by the Commissioner to enforce the obligations of ProEquities and its affiliates, successors and assigns pursuant to this Consent Order, this Consent Order may neither be deemed nor used as an admission of or evidence of any alleged fault, omission, or liability of ProEquities in any civil, criminal, arbitration, or administrative proceeding in any court, administrative agency, or tribunal. For any person or entity not a party to this Consent Order, this Consent Order does not limit or create any private rights or remedies against ProEquities, limit or create liability of ProEquities, or limit or create defenses of ProEquities to any claims.|
NOW THEREFORE, the Commissioner enters the following:
|1.||The Findings of Fact, Conclusions of Law and Consent Order 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 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 Respondent 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 3rd day of June 2013.||Howard F. Pitkin|
CONSENT TO ENTRY OF ORDER
I, Michael J. Mungenast, state on behalf of ProEquities, Inc., 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 ProEquities, Inc.; that ProEquities, Inc., agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that ProEquities, Inc. voluntarily consents to the entry of this Consent Order, expressly waiving any right to a hearing on the matters described herein.
|Michael J. Mungenast|
|President and Chief Executive Officer|
County of: Jefferson
On this the 31 day of May, 2013, before me, the undersigned officer, personally appeared Michael J. Mungenast, who acknowledged himself to be the President and Chief Executive Officer of ProEquities, Inc., a corporation, and that he, as such President and Chief Executive Officer, being authorized to do so, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as President and Chief Executive Officer.
Date Commission Expires: May 22, 2014