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ASHLEIGH COOPER SWAYZE * * * * * * * * * * * * * * * * * * |
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CONSENT ORDER No. CO-17-8290a-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, Ashleigh Cooper Swayze (“Swayze”) is the Chief Compliance Officer of RPM Capital Management, LLC (IARD No. 164200) (“RPM”), and is described as a control person on RPM’s Form ADV (Uniform Application for Investment Adviser Registration) filings;
WHEREAS, RPM is an investment adviser formerly located at 2 Greenwich Office Park, Suite 300, Greenwich, Connecticut 06831. RPM, a Connecticut limited liability company organized on March 20, 2012, initially became registered as an investment adviser in Connecticut on June 22, 2012. On February 9, 2016, RPM became registered as an investment adviser with the federal Securities and Exchange Commission, and filed to withdraw its Connecticut investment adviser registration on March 30, 2016;
WHEREAS, at various times beginning in 2009, Swayze was registered as an investment adviser representative/agent in other jurisdictions as well as Connecticut. Swayze is not currently registered in any capacity under Connecticut’s securities laws;
WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking (“Department”), conducted an examination of RPM (“Examination”) pursuant to Section 36b-14(d) of the Act. As a result of that exam, the Division initiated a related investigation of Swayze and RPM pursuant to Section 36b-26(a) of the Act (“Investigation”) to determine whether Swayze and/or RPM had violated or were about to violate provisions of the Act or Regulations;
WHEREAS, according to the Division, as a result of such Investigation, the Division obtained evidence that, from June 2012 through March 8, 2016, (1) a third party associated with RPM (“Agent A”) transacted business as an investment adviser agent of RPM while unregistered in violation of Section 36b-6(c)(2) of the Act; and (2) RPM violated Section 36b-6(c)(3) of the Act by engaging an unregistered investment adviser agent. Agent A only applied for investment adviser agent registration under the Act on March 8, 2016;
WHEREAS, on June 12, 2012, before becoming registered as an investment adviser in Connecticut, RPM amended its Form ADV to reflect that, as of June 2012, Agent A was one of two managing members of the firm and a control person. The Instructions to Form ADV define “control” to include “[t]he power, directly or indirectly, to direct the management or policies of a person, whether through ownership of securities, by contract, or otherwise.” RPM’s June 12, 2012 Form ADV amendment also listed Swayze as an Additional Regulatory Contact, i.e., a person “authorized to receive information and respond to questions about this Form ADV.” (Emphasis supplied.)
WHEREAS, the Commissioner alleges that, commencing in 2012 and while acting in an unregistered capacity, Agent A, with the actual or constructive knowledge of Swayze, (1) had investment advisory interactions with clients or prospective clients; (2) routinely conducted research on potential bonds to be offered to clients, and was the sole individual at RPM responsible for choosing the bonds for clients; (3) contacted other firms to solicit their business and create sub advisory relationships for RPM; and (4) was authorized, by virtue of her position with RPM, to engage in solicitation and/or advisory activity on behalf of RPM;
WHEREAS, on November 28, 2015, in connection with an examination of RPM by the Division, Swayze made the following written representations to the Division: (1) Agent A did not give securities advice to clients; (2) Agent A did not speak with clients; (3) Agent A did not counsel clients; (4) Agent A did not evaluate individual client investment objectives and make recommendations; (5) Agent A did not answer questions from clients about the advisability of investing in a given security; (6) Agent A did not meet with clients to encourage them to work with RPM; and (7) Agent A did not perform new client intake interviews;
WHEREAS, without making any formal findings of fact or conclusions of law, the Commissioner alleges that (1) Swayze, as Chief Compliance Officer of RPM, did not inquire further into the nature of Agent A’s activities or adequately pursue measures to ensure that Agent A was in compliance with the registration requirements of the Act; (2) such conduct materially aided RPM’s failure to abide by the supervisory requirements in Section 36b-31-6f(b) of the Regulations with respect to the unregistered status of Agent A; and (3) Swayze violated Section 36b-23 of the Act;
WHEREAS, the Commissioner has reason to believe that the foregoing conduct would support the initiation of administrative proceedings seeking the entry of a cease and desist order against Swayze under Section 36b-27(a)(3) of the Act and the imposition of a fine against Swayze under Section 36b-27(d)(1)(C) of the Act;
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 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, Swayze maintains that she had no personal knowledge of the activities of Agent A giving rise to the Commissioner’s regulatory concerns and that the statements she made to the Commissioner were based on her understanding and her conversations with Agent A;
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 Swayze reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
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;
WHEREAS, Swayze expressly consents to the Commissioner’s jurisdiction under the Act and to the terms of this Consent Order;
AND WHEREAS, Swayze, through her 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, Swayze, through her 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 herself of Section 36b-27 of the Act and Section 4-177c(a) of the General Statutes of Connecticut; |
| 3. | To present her position in a hearing in which she 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, Swayze, through her execution of this Consent Order, acknowledges the following allegations of the Commissioner without admitting or denying them:
| 1. |
Swayze engaged in conduct that materially aided RPM’s failure to abide by the supervisory requirements in Section 36b-31-6f(b) of the Regulations with respect to the unregistered status of Agent A; |
| 2. | Swayze violated Section 36b-23 of the Act by making materially false or misleading statements to the Commissioner concerning Agent A’s status with RPM as well as the nature and scope of Agent A’s solicitation and/or advisory activities with the firm; |
WHEREAS, the Commissioner would have the authority to enter findings of fact and conclusions of law after granting Swayze an opportunity for a hearing;
AND WHEREAS, Swayze 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, Swayze, through her execution of this Consent Order, consents to the Commissioner’s entry of an order imposing on her the following sanctions:
| 1. | Swayze shall cease and desist from directly or indirectly violating, or materially aiding in the violation of, any provision of the Act and the Regulations, including, without limitation, Sections 36b-6(c) and 36b-23 of the Act and Section 36b-31-6f(b) of the Regulations; and |
| 2. |
No later than the date this Consent Order is entered by the Commissioner, Swayze shall remit to the Department, by cashier’s check, certified check or money order made payable to “Treasurer, State of Connecticut”, 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 Swayze 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 Swayze based upon: (i) 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; or (ii) evidence indicating that Swayze withheld material information from, or made any material misstatement or omission to, the Commissioner in connection with this matter; |
| 4. | Swayze 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. However, nothing in this Consent Order affects Swayze’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; |
| 5. | Swayze 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; and |
| 6. | This Consent Order shall become final when entered. |
| So ordered at Hartford, Connecticut, | _____/s/____________ | |
| this 21st day of April 2017. | Jorge L. Perez | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, Ashleigh Cooper Swayze, 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/_________ |
| Ashleigh C. Swayze |
State of: New Jersey
County of: Mercer
On this the 20th day of April 2017, before me, the undersigned officer, personally appeared Ashleigh Cooper Swayze, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and acknowledged that she executed the same for the purposes therein contained.
In witness whereof I hereunto set my hand.
_____/s/_______________________
Notary Public
Date Commission Expires: 9/21/2017