Connecticut Banking Commissioner Howard Pitkin Announces Settlement
With Royal Alliance Associates, Inc.
Investigation results in $9.2 million in restitution to the public
Connecticut State Banking Commissioner Howard F. Pitkin today announced a settlement with Royal Alliance Associates, Inc., (Royal) a New York based broker dealer registered in Connecticut.
Commissioner Pitkin stated that this settlement brings to a conclusion an investigation that had originally focused on the unlawful conduct of Kevin O. Kelley, formerly the manager of Royal’s Stamford office. Kelley was barred from working in the securities industry by the Department of Banking in August 2005. The investigation had revealed that Kelley concealed the fact that he had been preparing fraudulent statements which improperly inflated the value of client holdings and subsequently misappropriated his clients’ monies. It was also determined that Kelley, unbeknownst to Royal and Kelley’s clients, had a direct or indirect interest in various securities sold to those clients.
Finally, it was uncovered that Kelley’s support staff maintained an account into which client funds were deposited and misappropriated by Kelley for his personal use. Kelley was registered as an agent of Royal Alliance Associates, Inc for a period of fourteen years beginning in 1989. Kelley was recently sentenced to a term of fourteen years in prison and required to pay $15 million criminal forfeiture in addition to restitution payments of $4.2 million. As a result of these actions, the order against Kelley decrees that he is permanently barred from acting as any sort of investment adviser in the state of Connecticut.
The order requires Royal to be assessed an administrative penalty of $750,000. Of this amount, $500,000 is a fine assessed directly to Royal and the remaining $250,000 directed to the Department’s Investor Education Fund.
“Royal Alliance has worked very hard to repay and make whole many of the investors harmed by Kelley’s actions. They have worked with the Department to return over $9.2 million in restitution funds,” Commissioner Pitkin commented. “We believe that the company has tried to make amends for a terrible situation in which one corrupt individual attempted to defraud his employer and many of their clients. Finally, I would like to commend the Department’s Securities and Business Investments Division for their thorough and complete investigation which resulted in a high level of restitution to our citizens.”