Orders Issued Against Firms
Selling Unregistered Commercial Paper
State Banking Commissioner John P. Burke issued cease and desist orders on Monday against two Florida-based businesses for selling unregistered promissory notes and commercial paper as investments that purportedly were "insured and guaranteed" by overseas companies.
The orders, issued Monday, prevent Sebastian International Enterprises, Inc. and World Vision Entertainment, Inc., from conducting further business in Connecticut. Combined, Connecticut customers invested more than $2.4 million on products offered by the two companies, both of which have been under scrutiny by federal and state securities regulators.
According to Burke, the companies, and others like them, apparently dupe local insurance agents into marketing the investments by falsely telling the agents that the products are not securities and that the investments are fully backed by foreign surety companies. Although the surety companies have credible-sounding names, more often than not they are questionable enterprises. Also, explained Burke, the banking department considers the products being sold to be securities and they must therefore be registered with his department. And, unless the insurance agents who sell them are registered with his department, they could be in violation of Connecticut’s securities laws.
Burke said no action was taken against the Connecticut insurance agents identified as being involved with the two companies. An investigation by his agency’s Securities Division has yet to uncover any evidence that the insurance agents willfully attempted to defraud their customers. In fact, he noted, several agents personally invested in the products marketed by the companies.
Burke explained that World Vision is currently in bankruptcy and Sebastian International Enterprises was placed in receivership following administrative action by the Securities and Exchange Commission. To date, no investor has recovered the funds invested in the products that were said to be "insured and guaranteed" by offshore surety companies.
Burke stated that the Securities Division is investigating similar schemes and warned Connecticut insurance agents that there may be other promoters trying to enlist their assistance. He urged insurance salespeople to immediately contact the banking department if they are approached to sell "high yield, low risk" investments.
Similarly, Burke advised investors against doing business with anyone selling promissory notes that are "guaranteed or insured" by companies located overseas. Before investing, get the facts by checking up on your investment professional, their firm or the product or service offered by calling the banking department’s Securities Division at (860) 240-8230 or 1-800-831-7225.