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IN THE MATTER OF: (Collectively, "Respondents") * * * * * * * * * * * * * * * * * * |
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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, Matthew Charles Woodard (“Woodard”) is an individual whose address last known to the Commissioner is 44 Fenwick Drive, Farmington, Connecticut 06032. Woodard was registered as a broker-dealer agent of ProEquities, Inc. (CRD No. 15708) from September 13, 2013 to September 16, 2014, and was employed at First Allied Securities, Inc. (CRD No. 32444) as a non-registered branch assistant from July 22, 2015 to October 28, 2015;
WHEREAS, Toppikgink 539, LLC d/b/a Titan Brokerage Services (“Toppikgink”) is a Texas limited liability company and an insurance brokerage agency, located at 1031 Farmington Avenue, Floor 3, Farmington, Connecticut 06032. Woodard is a founding member and the treasurer of Toppikgink;
WHEREAS, on February 19, 2016, FINRA accepted a Letter of Acceptance, Waiver and Consent (No. 2015047964901) (“AWC”) from Woodard. The AWC was executed by Woodard on February 9, 2016 in resolution of FINRA claims that Woodard, while employed by First Allied Securities, Inc., violated FINRA Rules 8210 and 2010 by refusing to respond to FINRA’s request for documents and information made pursuant to FINRA Rule 8210. The AWC barred Woodard from association with any FINRA member firm in any capacity;
WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking (“Department”), conducted an investigation (“Investigation”) pursuant to Section 36b-26(a) of the Act into the activities of Respondents to determine if they had violated, were violating or were about to violate provisions of the Act or Regulations;
WHEREAS, as a result of the Investigation, the Commissioner has reason to believe that Respondents have violated certain provisions of the Act, and that such violations would support administrative proceedings against Respondents under Section 36b-27 of the Act, as amended by Public Act 17-236;
WHEREAS, as a result of such Investigation, the Division obtained evidence that:
| 1. | Investor One is a Connecticut investor who was a brokerage client of Woodard at ProEquities, Inc. from September 2013 to August 2014; | |
| 2. | In 2014 and 2015, Woodard, individually and on behalf of Toppikgink, offered securities of Toppikgink (“Securities”) in and from Connecticut to Investor One, which securities were not registered in Connecticut under Section 36b-16 of the Act, nor were they the subject of a filed exemption claim or claim of covered security status. At least one of the offers to Investor One culminated in a sale of Securities, and at least one of Woodard’s offers of Securities to Investor One took place while Woodard was a broker-dealer agent of ProEquities, Inc. and without the knowledge of ProEquities, Inc. Such securities were characterized as Series A Preferred Debt; | |
| 3. | Although the offering documents for the Securities represented that the offering proceeds would be used to invest in private distressed debt opportunities, Respondents instead used Investor One’s monies to pay a portion of both Woodard’s personal expenses and Toppikgink’s business expenses; | |
| 4. | At various times from approximately August 2014 to June 2015, including the period when Woodard was a registered broker-dealer agent of ProEquities, Inc., Woodard asked Investor One to loan money to Toppikgink. Specifically, Woodard, on behalf of Toppikgink, borrowed approximately $220,000 from Investor One through a series of transactions and loan agreements; | |
| 5. | Walter J. Dubiel (“Dubiel”) (CRD No. 4234689) was registered with ProEquities, Inc. as a broker-dealer agent from April 8, 2014 to July 3, 2014, and as an investment adviser agent from April 15, 2014 to July 3, 2014. Dubiel was registered as a broker-dealer agent of First Allied Securities, Inc. (CRD No. 32444) from June 6, 2014 to November 30, 2015, and registered as an investment adviser agent of First Allied Advisory Services, Inc. (CRD No. 137888) from June 12, 2014 to December 11, 2015. Collectively, First Allied Securities, Inc. and First Allied Advisory Services, Inc. are referred to as “First Allied”; | |
| 6. | Woodard and Dubiel developed a business relationship while both were working at ProEquities, Inc. In approximately August 2014 after they both left ProEquities, Inc., Woodard and Dubiel began sharing office space at Toppikgink’s offices located at 1031 Farmington Avenue, Floor 3, Farmington, Connecticut. Several of Woodard’s clients from ProEquities, Inc., including Investor One, moved their accounts to First Allied and became Dubiel’s clients. Investor One’s account was converted to an investment advisory account at First Allied and Dubiel had discretionary trading authority over this account. Without the knowledge of First Allied and without Woodard being employed by or registered with First Allied, Woodard began assisting Dubiel with computer, technological and administrative tasks related to Dubiel’s securities business. Although Woodard became a non-registered branch assistant of First Allied on July 22, 2015, Woodard was never registered as a broker-dealer agent or as an investment adviser agent of First Allied under the Act and had no authority to execute transactions on behalf of Investor One; | |
| 7. | In approximately January 2015, Dubiel shared his First Allied confidential client account log-in credentials with Woodard. Woodard then used the credentials to surreptitiously access Investor One’s First Allied advisory account on multiple occasions. Woodard then placed several liquidating securities transactions in Investor One’s account without Investor One’s knowledge or consent and without having any authority to execute transactions in Investor One’s account; and | |
| 8. | In total, through a variety of transactions, Investor One either loaned to or invested with Woodard, individually or on behalf of Toppikgink, $325,000. |
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 Respondents under Section 36b-27(a) of the Act, an order of restitution against Respondents under Section 36b-27(b), and the imposition of a fine against Respondents under Section 36b-27(d) of the Act, as amended by Public Act 17-236;
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, as amended, 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 Respondents 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, Respondents expressly consent to the Commissioner’s jurisdiction under the Act and to the terms of this Consent Order;
WHEREAS, Woodard has provided documentation to the Division evidencing that as of the date this Consent Order is entered, he has remitted, under the oversight of his legal counsel, the sum of $58,000 in good funds to Investor One as partial restitution and/or repayment to Investor One for monies invested with or loaned to Woodard and/or Toppikgink;
WHEREAS, Woodard has provided documentation to the Division evidencing that he has forwarded to his legal counsel $267,000 in good funds to be deposited into his counsel’s client fund account (“Account”), for the purpose of repaying the balance of $325,000 owed by Woodard to Investor One;
WHEREAS, Respondents have provided documentation to the Division evidencing that, subsequent to making the aforementioned payments to Investor One, Respondents will be financially unable to pay a larger fine that otherwise would have been assessed against them pursuant to this Consent Order;
AND WHEREAS, Respondents, through their execution of this Consent Order, specifically represent and agree that none of the violations alleged in this Consent Order shall occur in the future.
II. CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, Respondents, through their execution of this Consent Order, voluntarily waive the following rights:
| 1. | To be afforded notice and an opportunity for a hearing within the meaning of Section 36b-27 of the Act, as amended, and Section 4-177(a) of the General Statutes of Connecticut; |
| 2. | To present evidence and argument and to otherwise avail themselves of Section 36b-27 of the Act, as amended, and Section 4-177c(a) of the General Statutes of Connecticut; |
| 3. | To present their position in a hearing in which they are 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, Respondents, through their execution of this Consent Order, acknowledge the following allegations of the Commissioner:
| 1. | Respondents violated Section 36b-16 of the Act through the offer and sale of securities in or from Connecticut to at least one investor, which securities were not registered in Connecticut under the Act, nor were they the subject of an exemption claim or claim of covered security status; | |
| 2. | Respondents violated Section 36b-4(a) of the Act by, in connection with the offer, sale or purchase of any security, directly or indirectly employing a device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, and engaging in an act, practice, or course of business which operates or would operate as a fraud or deceit upon any person; | |
| 3. | Woodard violated Section 36b-4(b) of the Act by, in connection with the offer, sale or purchase of any security, directly or indirectly engaging in dishonest or unethical practices; | |
| 4. | Woodard violated Section 36b-6(c)(2) of the Act by transacting business as an unregistered investment adviser agent of First Allied; | |
| 5. | Woodard violated Section 36b-31-6e of the Regulations while he was a broker-dealer agent of ProEquities by participating in private securities transactions without providing prior written notice to his employing broker-dealer describing in detail the proposed transactions, his proposed role therein and stating whether he had received or would receive selling compensation in connection with such transactions; | |
| 6. | Woodard engaged in dishonest or unethical practices in the securities business within the meaning of Section 36b-31-15b(a)(2) of the Regulations while he was a broker-dealer agent of ProEquities by engaging in conduct prohibited by section 36b-31-6e of the Regulations; and | |
| 7. | Woodard engaged in dishonest or unethical practices in the securities business within the meaning of Section 36b-31-15b(c) of the Regulations by borrowing money from a customer while he was a broker-dealer agent of ProEquities in violation of FINRA Rule 3240, which prohibits agents associated with a member in any registered capacity from borrowing money from any customer unless the member has written procedures allowing agents to borrow money from customers (which ProEquities did not have); |
WHEREAS, the Commissioner would have the authority to enter findings of fact and conclusions of law after granting Respondents an opportunity for a hearing;
AND WHEREAS, Respondents acknowledge the possible consequences of an administrative hearing and voluntarily agree to consent to the entry of the sanctions described below.
IV. CONSENT TO ENTRY OF SANCTIONS
WHEREAS, Respondents, through their execution of this Consent Order, consent to the Commissioner’s entry of an order imposing on them the following sanctions:
| 1. | Woodard, either directly or through any person, organization, entity or other device, shall cease and desist from directly or indirectly violating any provision of the Act and the Regulations, including, without limitation, Sections 36b-16, 36b-4(a), 36b-4(b) and 36b-6(c)(2) of the Act and Section 36b-31-6e of the Regulations, and from engaging in dishonest or unethical business practices within the meaning of Sections 36b-31-15b(a)(2) and 36b-31-15b(c) of the Regulations; |
| 2. | Toppikgink shall cease and desist from directly or indirectly violating any provision of the Act and the Regulations, including, without limitation, Sections 36b-16 and 36b-4(a) of the Act; |
| 3. | No later than the date this Consent Order is entered by the Commissioner, Woodard, through his legal counsel, shall remit to Investor One the balance of $267,000, which is currently being held in the Account; |
| 4. | No later than the date this Consent Order is entered by the Commissioner, Woodard shall remit to the Department, by cashier’s check, certified check or money order made payable to “Treasurer, State of Connecticut”, the sum of twenty thousand dollars as an administrative fine; and |
| 5. | From the date this Consent Order is entered by the Commissioner, Woodard shall be PERMANENTLY BARRED from directly or indirectly, through any person, organization, entity or other device, (a) transacting business in or from Connecticut as a broker-dealer, agent, investment adviser or investment adviser agent, as such terms are defined in the Act, and notwithstanding any definitional exclusion that might otherwise be available under the Act; (b) acting in any other capacity which requires a license or registration from the Commissioner; (c) serving as an officer, director or control person of a broker-dealer, investment adviser, issuer and/or any other entity which requires a license or registration from the Commissioner; and (d) soliciting or accepting funds for investment purposes from public or private investors in or from Connecticut. |
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 Respondents 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 Respondents 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 Respondents withheld material information from, or made any material misstatement or omission to, the Commissioner in connection with this matter; |
| 4. | Respondents 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, that the Commissioner had a basis to pursue the allegations set forth in Section III of this Consent Order, or create the impression that this Consent Order is without factual basis; |
| 5. | Respondents 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. However, nothing in this Consent Order affects Respondents’ (i) testimonial obligations; or (ii) right to take any legal or factual position in litigation, arbitration, or other legal proceedings 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 23rd day of March 2018. | Jorge L. Perez | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, Matthew Charles Woodard, 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/___________ | |
| Matthew Charles Woodard |
State of: MA
County of: Middlesex
On this the 28th day of February 2018, before me, the undersigned officer, personally appeared Matthew Charles Woodard, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained.
In witness whereof I hereunto set my hand.
| _____/s/__________________________ |
| Notary Public |
| Date Commission Expires: Jan. 1, 2021 |
CONSENT TO ENTRY OF ORDER
I, Matthew Charles Woodard, state on behalf of Toppikgink 539, LLC (“Toppikgink”), 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 Toppikgink; that Toppikgink agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Toppikgink consents to the entry of this Consent Order.
| Toppikgink 539, LLC | |
| By: | _______________________ |
| Matthew Charles Woodard | |
| Managing Member |
State of: MA
County of: Middlesex
On this the 28th day of February 2018, before me, the undersigned officer, personally appeared Matthew Charles Woodard, who acknowledged himself to be the Treasurer/Managing Member of Toppikgink 539, LLC, a limited liability company, and that he, as such [blank in original], 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 Treasurer/Managing Member.
In witness whereof I hereunto set my hand.
| ____/s/___________________________ |
| Notary Public |
| Date Commission Expires: Jan. 1, 2021 |