|Securities and Business Investments Division|
|Vol. X No. 1||March 1996|
- A Word from the Banking Commissioner
- Commissioner Issues Order on Securities Registration Status of Certain Internet Offerings
- New Investment Advisory Registrant's Certificate Explained
- Licensing Section Develops Simplified Agent of Issuer Instructions
- Quarterly Statistical Summary
- Ralph A. Lambiase, Division Director
- Cynthia Antanaitis, Assistant Director and Bulletin Editor
- Eric J. Wilder, Assistant Director
Jeffrey P. Halperin, Senior Administrative Attorney
- Louise Hanson, Subscription Coordinator
- Cynthia Antanaitis, Assistant Director and Bulletin Editor
Although only a small percentage of American households are "on-line" today, most observers predict that access to the Internet and World Wide Web will soon reach a mass-market level. Forecasters say the Internet will eventually become a powerful, if not dominant, electronic communications and commerce medium.
As securities regulators consider how this technological revolution may affect markets and investors, industry firms should begin to proactively review their own Internet use policies. We believe it is important for firms to establish written guidelines for their employees and agents regarding Internet business. Additional supervisory safeguards may also be warranted depending on a firm's organizational structure and whether individual employees are working from detached locations.
This Bulletin issue includes an Order the Banking Commissioner recently signed exempting certain offers of securities made on the Internet from securities registration. The Order recognizes that when an issuer offers securities on the Internet, regardless of the issuer's intent, everyone with Internet access receives the offer and it is not reasonable to subject all such offers to registration. Sales of securities are not covered by the Order. We believe the Order will promote capital formation as technology advances, while at the same time retaining adequate safeguards to protect Connecticut investors.
I am also pleased to announce that the Connecticut Department of Banking has established its own "home page" on the Internet's World Wide Web.
We hope that the securities industry and the public will find the site a valuable source of information on our services and activities. The Securities and Business Investments Division, for example, has created an instructive FAQ (frequently asked questions) section for industry firms. Questions regarding securities registration, business opportunity registration, broker-dealer and investment adviser licensing, agent of issuer registration and testing requirements for securities industry personnel are all addressed. The Division has also published an array of investor education materials.
As you visit the Web site, we welcome your comments and suggestions on how we may improve its future usefulness and value.
-- John P. Burke, Banking Commissioner
ORDER EXEMPTING CERTAIN OFFERS OF SECURITIES
MADE ON THE INTERNET FROM SECURITIES REGISTRATION
WHEREAS the Banking Commissioner (the "Commissioner") is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (the "Act") and Sections 36b-31-2 et seq. of the Regulations of Connecticut State Agencies promulgated under the Act;
WHEREAS Section 36b-31(a) of the Act provides, in part, that "[t]he commissioner may from time to time make, amend and rescind such ... orders as are necessary to carry out the provisions of ... [the Act], including ... orders ... defining any terms, whether or not used in said sections, insofar as the definitions are not inconsistent with the provisions of ... [the Act]. For the purpose of ... orders, the commissioner may classify securities, persons and matters within his jurisdiction, and prescribe different requirements for different classes";
WHEREAS Section 36b-21(b)(15) of the Act states that: "The following transactions are exempted from [the securities registration requirement and the sales literature filing requirement in] sections 36b-16 and 36b-22 [of the Act]: ... any other transaction that the commissioner by ... order may exempt, conditionally or unconditionally, on a finding that registration is not necessary or appropriate in the public interest or for the protection of investors";
WHEREAS the Commissioner acknowledges that an attempt or offer to dispose of, or the solicitation of an offer to buy, a security or an interest in a security for value, that is made on or through the Internet, the World Wide Web or a similar proprietary or common carrier electronic system (such systems hereinafter being referred to collectively as the "Internet"), would constitute an "offer" for purposes of Section 36b-3(11)(B) of the Act, and would otherwise trigger the registration and sales literature filing requirements in Sections 36b-16 and 36b-22 of the Act;
WHEREAS the Commissioner also acknowledges that use of the Internet may be a legitimate means of raising capital, and that a communication made on the Internet may be directed not only to particular recipients but also to anyone with access to the Internet;
WHEREAS the Commissioner finds that the issuance of this 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 the Commissioner further finds that the registration of certain Internet offers is not necessary or appropriate in the public interest or for the protection of investors;
THE COMMISSIONER THEREFORE ORDERS THAT:
1) Pursuant to Section 36b-21(b)(15) of the Act, offers of securities made by, or on behalf of, issuers on or through the Internet shall be exempt from Sections 36b-16 and 36b-22 of the Act if the following conditions are observed:
(A) The Internet offer indicates, directly or indirectly, that the securities are not being offered to residents of Connecticut;
(B) The Internet offer is not specifically directed to any person in Connecticut by, or on behalf of, the issuer of the securities; and
(C) No sales of the issuer's securities are made in Connecticut as a result of the Internet offering until such time as the offering has been registered under Sections 36b-17 or 36b-18 of the Act and a final prospectus or Form U-7 is delivered to Connecticut investors prior to such sales.
2) Nothing in this Order shall preclude an issuer, or a person acting on behalf of an issuer, which offers securities on the Internet or effects sales to Connecticut residents following such an offering from relying upon any other applicable exemption pursuant to Section 36b-21 of the Act, nor shall this Order relieve such persons from liability under Section 36b-4 of the Act.
3) This Order shall remain in effect until amended or rescinded by the Commissioner.
So ordered at Hartford, Connecticut this 28th day of March, 1996.
-- John P. Burke
COMMON QUESTIONS AND ANSWERS ON
INVESTMENT ADVISERS' FINANCIAL STATEMENTS
Recently, the Securities and Business Investments Division of the Department of Banking (the "Division") forwarded a revised Registrant's Certificate to all registered investment advisers. The Division has received many inquiries regarding the filing of this form. Some of the most commonly asked questions follow.
Q: Must I file my financial statement with the Registrant's Certificate or may I file only the Registrant's Certificate?
A: You must attach the Registrant's Certificate to your financial statement.
Q: What are allowable assets?
A: Allowable assets are total assets less intangible assets. Allowable assets less liabilities equal net tangible assets.
Q: What are intangible assets?
A: Neither the Connecticut Uniform Securities Act nor its regulations define this term. The Division, however, is guided by generally accepted accounting principles. Following are some examples of intangible assets. The examples are not exhaustive. The Division may consider others if accounting authority is provided supporting why the item should not be deducted from an investment advisory financial statement.
- Organization Costs
- Patents, Copyrights and Trademarks
- Leases, Leaseholds, and Leasehold Improvements
- Exploration Rights and Costs of Development of Natural Resources
- Formulas, Processes and Designs (e.g., software)
- Licenses, Franchises, Memberships and Customer Lists
- Prepaid Expenses (e.g., rent, insurance)
- Deferred Charges
NEW CONNECTICUT INSTRUCTIONS -
AGENT OF ISSUER REGISTRATION
What is an Agent of Issuer?
Generally, an issuer is a business organization, such as a corporation, partnership or limited liability company that offers or sells its own securities to investors. For example, ABC Corporation may sell its own common stock to the public, or XYZ Limited Partnership may offer limited partnership interests to would-be purchasers. An agent of issuer is an individual who represents the issuer in offering or selling the issuer's securities. An agent of issuer must be a natural person (i.e. an individual) and not a corporation or other business entity.
Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (the "Act") requires that agents of issuer be registered with the Department of Banking's Securities and Business Investments Division. Some agents of issuer, who offer or sell securities exempt from securities registration under certain sections of the Act, need not register with the department. However, any agent of issuer that offers or sells securities in a private placement (sometimes called a private offering) must still be registered even though the securities themselves are exempt from registration with the department. If you have doubts about whether you must register as an agent of issuer, it would be wise to first consult with legal counsel.
Special Rule For General Partners, Officers or Directors of an Issuer
The issuer's general partners, officers or directors would only be considered "agents of issuer" for securities law purposes if they 1) represent the issuer in offering or selling securities; and 2) receive compensation that is directly or indirectly related to purchases or sales of securities.
Quick Checklist For Filers
- Form U-4 (Uniform Application for Securities and Commodities Industry Representative and/or Agent). Included with these Instructions.
- $50 Initial Registration Fee made payable to "Treasurer, State of Connecticut."
- Proof that You Have Passed the Series 63 Examination
- Photograph of Yourself (if applicable)
- Form DBA-1 (if applicable). Included with these Instructions.
COMMON REGISTRATION QUESTIONS
What Paperwork Do I File?
- Form U-4 (Uniform Application for Securities and Commodities Industry Representative and/or Agent). Make sure that you file an originally signed version with the department and that the filed version is notarized. In addition, be sure your submission is complete.
- Proof that You Have Passed the Series 63 Examination
- Photograph of Yourself. You do not have to provide a photograph if your fingerprints are on file with the National Association of Securities Dealers' Central Registration Depository ("CRD"). Simply let us know in your cover letter.
- Form DBA-1. If, in representing the issuer, you will be doing business under a name other than your own or that of the issuer, you must file a Form DBA-1 with the department. Form DBA-1 requests information on your use of a trade or assumed name. There is no filing fee associated with this filing.
Where Do I File the Paperwork?
After completing the required paperwork, mail it to: Connecticut Department of Banking, Securities and Business Investments Division, 260 Constitution Plaza, Hartford, CT 06103
How Do I Contact the Securities and Business Investments Division If I Have Questions?
Telephone us at 1-800 831-7225 or (860) 240-8230, or fax your inquiry to (860) 240-8295.
How Much Does Registration Cost?
The registration fee for your initial registration is $50. Be sure to make your check payable to "Treasurer, State of Connecticut." Your initial registration will automatically expire on December 31st of the year you become registered unless you renew your registration. The renewal fee is $40 and is for a one-year period. We will send you a renewal invoice at the end of the calendar year. By law, registration fees are non-refundable.
Do I Have To Take Any Examinations?
To be registered in Connecticut, an agent of issuer must pass the Uniform State Agents Securities Law Examination (Series 63) which is administered by the National Association of Securities Dealers, Inc. (the "NASD"). You may obtain information on testing sites and sign-up procedures by contacting the NASD directly at: (301) 590-6500. The department may consider waivers from the examination requirement in extraordinary circumstances such as where the applicant has long standing experience in the securities industry and an unblemished disciplinary record.
How Will I Know When I Become Registered?
The department will notify you in writing once you have become registered as an agent of issuer under the Act. Until that time, you may not lawfully transact business as an agent of issuer from Connecticut or with Connecticut residents.
Can I Represent More Than One Issuer At A Time?
Yes, if the department consents. However, you will have to file an agent of issuer application for each issuer you represent. The Regulations under the Act provide that the department may consent to your multiple representation if each employing issuer files a written undertaking with us indicating the effective date of the multiple employment and stating that 1) the employer consents to your multiple employment; and 2) the employer agrees to assume joint and several liability with all other employers for any of your acts or omissions during the employment period.
Can I Be Registered As An Investment Adviser Agent and An Agent of Issuer At the Same Time?
Yes. Here, however, you must obtain and file with us written statements from each of your employers consenting to your acting in the multiple capacity. Note: Written employer consent is not required if both employers are affiliated or under common management and control.
Can I Be Registered As A Broker-Dealer Agent and An Agent of Issuer At the Same Time?
Yes. However, your activities would be subject to Section 36b-31-6e of the Regulations under the Connecticut Uniform Securities Act governing private securities transactions by broker-dealer agents, and you would have to obtain the broker-dealer's written consent to act as an agent of issuer. We may ask for a copy of the broker-dealer's written consent in processing your agent of issuer application.
What Do I Do If I End My Relationship With An Issuer?
You must notify the department on Form U-5 (Uniform Termination Notice for Securities Industry Representative and/or Agent) that you have terminated your association with the issuer.
On January 25, 1996, the Commissioner issued an Order to Cease and Desist and Notice of Right to Hearing (Docket number CD-95-716-B) under the Connecticut Business Opportunity Investment Act against A-Plus Vending, a Torrance, California corporation with offices at 1611 Crenshaw Boulevard, Suite 281, and 1658 West Carson Street, Suite 200, Torrance, California.
The Order to Cease and Desist alleged that the corporation, which markets a vending machine dispensing condoms, offered and sold unregistered business opportunities in violation of Section 36b-67(1) of the Act. The Order also alleged that the respondent represented that the business opportunity would provide a specific income or earnings potential without providing any supporting documentation. The cease and desist order also claimed that the respondent engaged in fraudulent conduct by failing to disclose the unregistered status of the business opportunity and the related financial risks. Since the respondent did not request a hearing within the prescribed time period, the cease and desist order became permanent on February 16, 1996.
American Arcade & Amusement, Inc., Christopher Livanos and Joe Peterson
On January 25, 1996, the Commissioner issued an Order to Cease and Desist and Notice of Right to Hearing (Docket number CD-95-719-B) under the Connecticut Business Opportunity Investment Act against American Arcade & Amusement, Inc. of 8433 North Black Canyon Highway, Suite 180, Phoenix, Arizona; Christopher Livanos, the corporation's Director of Operations; and Joe Peterson, a company sales representative.
The Commissioner claimed that the corporation, which markets vending machines such as the Fun Bar Merchandiser and the Bulk Vendor Machine, offered and sold unregistered business opportunities in violation of Section 36b-67(1) of the Act through Livanos and Peterson. Since none of the respondents requested a hearing within the prescribed time period, the cease and desist order became permanent as to all respondents on March 1, 1996.
Press-A-Print, Inc. and Craig Peterson
On January 25, 1996, the Commissioner issued an Order to Cease and Desist and Notice of Right to Hearing (Docket number CD-95-160-B) under the Connecticut Business Opportunity Investment Act against Press-A-Print, Inc. of 527 West 20th Street, Idaho Falls, Idaho, and its employee sales representatives, Craig Peterson.
The Commissioner's action was based on allegations that the corporation, which manufactures a pad printing system, offered and sold an unregistered business opportunity in violation of Section 36b-67(1) of the Act. Since neither respondent requested a hearing within the prescribed time period, the Order to Cease and Desist became permanent against Press-A-Print, Inc. and Craig Peterson, respectively, on March 19, 1996 and February 16, 1996.
Thunder Headgear, Inc. and Cindy Sanderson (CRD # 2029137)
On March 15, 1996, the Commissioner issued an Order to Cease and Desist and Notice of Right to Hearing (Docket number CD-95-2850-S) under the Connecticut Uniform Securities Act against Thunder Headgear, Inc. ("THI"), a Nevada corporation with its last known address at P.O. Box 291, Draper, Utah, and Cindy Sanderson, an employee of THI.
The Order to Cease and Desist alleged that the corporation, through Sanderson, offered and sold at least 10,000 shares of unregistered non-exempt stock to Connecticut residents in violation of Section 36b-6(a) of the Act and, in so doing, employed an unregistered agent in violation of Section 36b-6(b) of the Act. The Commissioner also claimed that the respondents violated the Act's antifraud provisions by failing to disclose the unregistered status of the securities or Sanderson's unregistered status as an agent. Since neither respondent requested a hearing within the prescribed time period, the Order to Cease and Desist became permanent as to both respondents on March 29, 1996.
FMG Distributors, Inc. (CRD # 29243) and James G. Kaiser (CRD # 1095441)
On January 23, 1996, the Banking Commissioner entered a Consent Order (No. CO-95- 2878-S) with respect to FMG Distributors, Inc. ("FMG"), an applicant for broker-dealer registration located at 33 Ludlow Street, Stamford, Connecticut, and James G. Kaiser, its president. The Consent Order followed a Securities and Business Investments Division investigation under the Connecticut Uniform Securities Act. That investigation uncovered indications that 1) from at least 1994, the firm transacted business as a broker- dealer absent registration under the Connecticut Uniform Securities Act by acting as a subdistributor of mutual fund shares; and 2) failed to adequately disclose the extent of such activity in filings made with the agency.
The Consent Order required that both FMG and James Kaiser refrain from regulatory violations, and that the firm review, revise and implement supervisory and compliance procedures designed to detect and prevent violations of Connecticut's securities laws. In addition, the Consent Order required that James Kaiser complete the Regulatory Element of the Securities Industry Continuing Education Program in 90 days. The Consent Order also required that, for two years, the firm report to the Division quarterly on any securities-related complaints involving Connecticut customers. Finally, the Consent Order imposed a $2,500 fine on the parties jointly.
Murphey Favre Incorporated (CRD # 599)
On February 20, 1996, the Banking Commissioner entered a Consent Order (No. CO-96- 2880-S) with respect to Murphey Favre Incorporated ("MFI"), a broker-dealer located at 1201 Third Avenue, Suite 780, Seattle, Washington. The Consent Order followed a Securities and Business Investments Division investigation under the Connecticut Uniform Securities Act. That investigation uncovered indications that from approximately 1991 through 1995, MFI allegedly transacted business as a broker-dealer in Connecticut in violation of Section 36b-6(a) of the Act and employed unregistered agents in purported contravention of Section 36b-6(b) of the Act.
The Consent Order required that MFI refrain from engaging in conduct that would violate the state's securities laws, and that the firm review, revise and implement supervisory and compliance procedures designed to ensure regulatory compliance. In addition, the Consent Order required that the firm pay $2,570 to the agency; $2,000 of that amount represented an administrative fine and the balance constituted reimbursement for back registration fees.
David E. Kannen d/b/a Kannen Consulting Associates (CRD # 840414)
On March 4, 1996, the Banking Commissioner entered a Consent Order (No. NR/CD-95- 3927-S) with respect to David E. Kannen. Kannen had been the subject of a July 11, 1995 Notice of Intent to Revoke Registration as an Agent and as an Investment Adviser, and an Order to Cease and Desist also issued on July 11, 1995. Among other things, the Notice of Intent to Revoke and the Order to Cease and Desist alleged that Kannen acted as an unregistered agent, sold unregistered securities and effected private securities transactions which were not properly recorded on the records of the broker-dealer with whom he was then associated. Without admitting or denying the agency's allegations, Kannen agreed to the entry of a Consent Order informally resolving the matter.
The Consent Order required that Kannen pay a $10,800 fine to the department. Further provisions in the Consent Order barred Kannen from acting as an agent of a broker- dealer or issuer for seven years, with leave to submit such an application four years from the entry of the Consent Order. Kannen was also suspended from rendering investment advice for compensation, acting as an investment adviser or soliciting accounts as an investment adviser for 30 days following the entry of the Consent Order; after the expiration of that 30 day period, Kannen would only be permitted to conduct investment advisory business on a "fee based" basis. The Consent Order also barred Kannen for seven years from acting as a finder for compensation, splitting commissions with an agent registered under the Connecticut Uniform Securities Act and receiving referral fees in connection with the offer, sale or purchase of securities.
In addition to censuring Kannen, the Consent Order directed him to refrain from engaging in conduct that would violate the state's securities laws. The Consent Order also mandated that Kannen retain an independent consultant to review his compliance procedures and make appropriate recommendations. In addition, the Consent Order required that Kannen file periodic reports concerning investor complaints, take the Series 65 examination and advise his customers of the Consent Order, providing them with an opportunity to close their accounts.
Kenneth Von Kohorn d/b/a Von Kohorn Research & Management (CRD # 1163037)
On March 14, 1996, the Banking Commissioner entered a Consent Order (No. CO-96- 2784-S) with respect to Kenneth Von Kohorn, an investment adviser located at 226 Main Street, Westport, Connecticut. The Consent Order followed a Securities and Business Investments Division investigation under the Connecticut Uniform Securities Act. That investigation alleged that Von Kohorn failed to disclose certain fee arrangements to clients in contravention of Section 36b-5 of the Act and failed to amend his investment adviser registration to reflect such fees. Von Kohorn had been the subject of a February 22, 1995 Securities and Exchange Commission Order Instituting Proceedings, Making Findings, Imposing Remedial Sanctions and Issuing Cease and Desist Orders. Among other things, the SEC order censured Von Kohorn, required that he disgorge approximately $248,021 to clients and pay a civil penalty.
Without admitting or denying any of the Commissioner's allegations, Von Kohorn agreed to the entry of a Consent Order informally resolving the state issues. The Consent Order fined Von Kohorn $12,500 and required him to pay an additional $2,500 in investigative costs. In addition, the Consent Order mandated that Von Kohorn cease and desist from regulatory violations and that, for three months, he refrain from taking on new clients. Once that three month period expired, the Consent Order permitted Von Kohorn to render advisory services to new clients who met the federal sophistication tests for being an "accredited investor"; this limitation would extend for nine months. The Consent Order also required that Von Kohorn engage an independent consultant to review his internal supervisory and compliance procedures. Von Kohorn would be required to provide a copy of the consultant's report to the department, together with an implementation timetable for the consultant's recommendations. In addition, the Consent Order required that, for 2 years, Von Kohorn provide the agency with periodic reports on any complaints, actions or proceedings filed against him, including their disposition. Pursuant to the Consent Order Von Kohorn was also required to pass the Series 65 examination. Finally, the Consent Order required that Von Kohorn distribute copies of the Consent Order to all current and prospective clients.
Allmerica Investments, Inc. (CRD # 3960)
On January 18, 1996, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-95-2807-S) with Allmerica Investments, Inc. ("AII") of 440 Lincoln Street, Worcester, Massachusetts. The Stipulation and Agreement followed a Securities and Business Investments Division investigation conducted pursuant to the Connecticut Uniform Securities Act. That investigation uncovered evidence that 1) AII employed one Charles Robert Snyder (CRD number 429761) as a securities agent and in a supervisory capacity at a time when Snyder had not passed an examination as principal given by the NASD; 2) that, while acting as an agent of AII, Snyder engaged in private securities transactions involving the issuance of promissory notes to customers and clients of AII and used the proceeds thereof for his personal benefit; 3) that such note sales were neither effected with AII's knowledge and consent nor reflected on the firm's books and records; and 4) that both AII and Snyder may have failed reasonably to supervise firm employees and representatives, notably one Robert S. Ritson, to ensure compliance with the Connecticut securities laws.
In furtherance of its desire to resolve the matter informally, AII made a representation to the agency that it had paid or caused to be paid approximately $1.9 million to persons who invested in the notes issued by Snyder; that figure was based on amounts invested in the notes.
The Stipulation and Agreement required that the firm 1) implement revised supervisory and compliance procedures designed to improve regulatory compliance; 2) retain an independent consultant to review its internal procedures to ensure compliance; 3) file copies of its compliance audits with the agency for three years; 4) for two years, report to the Division on a quarterly basis concerning any securities-related complaints, action or proceedings received from or initiated by Connecticut residents; and 5) remit $2,427 to the department representing reimbursement for agency investigative costs and for the costs incurred in monitoring compliance with the Stipulation and Agreement.
Grayson, Burger & Co. (CRD # 6047)
On January 19, 1996, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-96-2888-S) with Grayson, Burger & Co. ("Grayson"), a registered broker-dealer located at 411 West Putnam Avenue, Greenwich, Connecticut. The Stipulation and Agreement followed a Securities and Business Investments Division investigation which revealed indications that from at least 1986, Grayson had employed two unregistered agents in alleged contravention of Section 36b-6(b) of the Connecticut Uniform Securities Act.
Pursuant to the Stipulation and Agreement, Grayson agreed that Morton Grayson (CRD number 228198) and Herbert Burger (CRD number 35514) of the firm would complete the Regulatory Element of the Securities Industry Continuing Education Program within ninety days, and supply evidence of completion to the Division. The Stipulation and Agreement also required the firm to 1) retain an independent consultant to conduct a review of its supervisory and compliance procedures and 2) file a copy of the consultant's report with the Division. The Stipulation and Agreement also required that the firm pay a fine of $500, and reimburse the department $1,500 to cover back registration fees and Division investigative costs.
Grodsky Associates, Inc. (CRD # 29148)
On January 26, 1996, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-96-2893-S) with Grodsky Associates, Inc. ("Grodsky"), an applicant for broker- dealer registration located at 76 South Orange Avenue, South Orange, New Jersey. The Stipulation and Agreement followed a Securities and Business Investments Division investigation that uncovered indications that from March 26, 1993, the firm had transacted business as a broker-dealer absent registration under the Connecticut Uniform Securities Act.
Pursuant to the Stipulation and Agreement, the firm agreed to refrain from regulatory violations and to improve its supervisory and compliance procedures. In addition, Grodsky agreed to pay $1,990 to the department; $680 of that amount represented the disgorgement of commissions earned during the period of unregistered activity, $810 represented back registration fees due, and the $500 balance represented a civil penalty.
Chatfield Dean & Co. (CRD # 14714)
On February 26, 1996, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-96-2908-S) with Chatfield Dean & Co. ("Chatfield"), a registered broker-dealer located at 7935 E. Prentice Avenue #200, Greenwood Village, Colorado. The Stipulation and Agreement followed a Securities and Business Investments Division review which revealed indications that, in January 1996, the firm had transacted business from a Connecticut location without registering that location as a branch office under the Connecticut Uniform Securities Act.
Pursuant to the Stipulation and Agreement, Chatfield agreed to 1) implement revised branch office procedures designed to ensure regulatory compliance; and 2) for two years, to provide the agency with quarterly reports describing any securities-related complaints, actions or proceedings initiated by Connecticut residents. The Stipulation and Agreement also required that the firm reimburse the department $750 for Division investigative costs.
Hart Securities, Inc. (CRD # 28389) - Broker-dealer Registration Revoked
On January 16, 1996, the Banking Commissioner entered an order revoking the broker-dealer registration of Hart Securities, Inc. of 5851 San Felipe, Suite 950, Houston, Texas. The Commissioner found that the State of Texas had revoked the firm's broker-dealer registration, and that the firm was insolvent in that its liabilities exceeded its assets. Hart Securities, Inc. did not appear or contest the matter.
Kinlaw Securities Corp. (CRD # 18448) - Broker-dealer Registration Revoked
On January 16, 1996, the Banking Commissioner entered an order revoking the broker- dealer registration of Kinlaw Securities Corp. of 13155 Noel Road, 11th Floor, Dallas, Texas. The Commissioner found that 1) the firm was the subject of a July 1995 permanent injunction issued by the United States District Court for the Northern District of Texas enjoining it from violating federal antifraud provisions; and 2) the firm's broker-dealer registration had been revoked by the Securities and Exchange Commission on August 2, 1995. Kinlaw Securities Corp. did not contest the matter.
Quantech Research Group, Inc. (CRD # 39114) - Investment Adviser Registration Denied; Cease and Desist Order Permanent
Mark Tyler Minervini (CRD # 8980780) - Investment Adviser Agent RegistrationDenied; Cease and Desist Order Permanent
On January 18, 1996, following an administrative hearing, the Banking Commissioner issued Findings of Fact, Conclusions of Law and an Order against Quantech Research Group, Inc. ("Quantech") of 341 Main Street, West Haven, Connecticut and 475 West Todd Street, Hamden, Connecticut, and its president, Mark T. Minervini. The Order denied both Quantech's pending investment adviser registration under the Connecticut Uniform Securities Act, and Minervini's pending investment adviser agent registration. In addition, the Order made permanent a July 26, 1995 cease and desist order entered against Quantech and Minervini.
The Commissioner's action was based on findings that Quantech and Minervini wilfully violated former Section 36-474(c) of the Act by transacting business in Connecticut as an unregistered investment adviser and investment adviser agent, respectively. The Commissioner also found that Minervini failed to satisfy the knowledge, training and experience requirements set forth in former Section 36-500-6 of the Regulations under the Act.
January 1, 1996 through March 31, 1996
|Total Coordination (Initial & Renewal)||2,167||n/a||2,167|
|-- (Investment Co. Renewals: 1,514)|
|-- (All other Coordinations: 653)|
|Regulation D Filings||464||n/a||464|
|Other Exemption or Exclusion Notices||23||11||23 (SE)|
|Business Opportunity (Initial)||n/a||7||7|
|Business Opportunity (Renewal)||n/a||4||4|
|Licensing & Branch Office Registration||
|Firm Initial Registrations Processed||128||44||n/a||128 (BD)|
|Firms Registered as of 3/31/96||1,905||1,109||n/a||n/a|
|Agent Initial Registrations Processed||9,050||737||15||9,050 (BD)|
|Agents Registered as of 3/31/96||73,732||9,842||273||n/a|
|Branch Offices Registered as 3/31/96||1,160||353||n/a||n/a|
|Examinations Conducted||41||8||0||41 (BD)|
|Investigations Opened||43||0||43 (SE)|
|Investigations Closed||39||3||39 (SE)|
|Investigations in Progress as of 3/31/96||87||6||n/a|
|Referrals from Attorney General||3||2||3 (SE)|
|Referrals from Other Agencies||4||1||4 (SE)|
|Subpoenas Issued||1||0||1 (SE)|
|Stipulation and Agreements||4||4||4/4|
|Cease and Desist Orders||1||2||1/2|
|Denial, Suspension & Revocation Orders||4||4||4/4|
|Conditional Licensing Orders||0||0||0/0|
|Other Notices and Orders||0||0||0/0|
|Cease and Desist Orders||3||6||3/6|
|Other Notices and Orders||0||0||0/0|
|Consent Orders and Stipulation and
|$ 38,037||$ 38,037|
the Investing Public
Voluntary Restitution Offers;
|Securities||$ 647,901||$ 647,901|
|Totals||$ 647,901||$ 647,901|