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Securities and Business Investments Division
Securities Bulletin

Vol. XXXIV No. 1 - Spring 2020 Features

Features

Enforcement and Other Highlights


 

Quarterly Statistical Summaries

Click here for summary.

 


ADMINISTRATIVE ACTIONS

Native American Energy Group, Inc. and Raj S. Nanvaan f/k/a Tejbir Singh (CRD No. 2801400) Each Fined $100,000

On March 13, 2020, the Banking Commissioner entered an Order Imposing Fine (Docket No. CRF-20-8480-S) against Native American Energy Group, Inc. of 61-43 186th Street, Suite 507, Fresh Meadows, New York 11365.  The corporation is a purported development stage company specializing in oil, natural gas and alternative energy systems.

Also on March 13, 2020, the Commissioner entered a separate Order Imposing Fine against Raj S. Nanvaan, the company’s Chief Financial Officer.

The Orders Imposing Fine had been preceded by a January 28, 2020 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-20-8480-S) which, in addition to naming Native American Energy Group, Inc. and Raj S. Nanvaan as respondents, also named Joseph Gatano D’Arrigo, Co-Founder and Chief Executive Officer of the company and J.R. Bautista, Jr., a company consultant.  Bautista had been the subject of a January 17, 1990 agency Consent Order based on allegations of unregistered agent activity.  That Consent Order resulted in an eighteen month bar being imposed against Bautista.

The January 28, 2020 action had alleged that respondents Native American Energy Group, Inc. and Bautista violated Section 36b-16 of the Connecticut Uniform Securities Act by selling unregistered common shares of the company to at least one Connecticut investor.  The action had also alleged that the all respondents violated the antifraud provisions in Section 36b-4(a) of the Act by failing to disclose to the affected investor that the investment proceeds were actually being wired out to respondents D’Arrigo, Nanvaan and Bautista rather than being used to invest in oil or gas investments.

Each of the respondents was afforded an opportunity to request a hearing on the allegations in the January 28, 2020 Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine.  Since respondents Native American Energy Group, Inc. and Nanvaan failed to request a hearing, the Order to Cease and Desist and Order to Make Restitution became permanent as to them on February 16, 2020 and February 23, 2020, respectively.

Similarly, respondents Native American Energy Group, Inc. and Nanvaan did not request a hearing on the Notice of Intent to Fine, and the March 13, 2020 Orders Imposing Fine were therefore entered by default.  Finding that Native American Energy Group, Inc. violated Sections 36b-16 and 36b-4(a) of the Connecticut Uniform Securities Act, the Commissioner fined the company $100,000.  Likewise, finding that Nanvaan violated the antifraud provisions in Section 36b-4(a) of the Act, the Commissioner imposed a $100,000 fine against Nanvaan.

The matters involving respondents D’Arrigo and Bautista remain pending.




NYPPEX, LLC (CRD No. 47654) and Laurence Geoffrey Allen (CRD No. 1063970)

On February 21, 2020, the Banking Commissioner issued a Notice of Intent to Deny Registration as Broker-dealer, Notice of Intent to Revoke Registration as a Broker-dealer Agent and Notice of Right to Hearing (Docket No. NDR-20-14445-S) with respect to NYPPEX, LLC, an applicant for broker-dealer registration, and Laurence Geoffrey Allen, managing member of the firm.  The firm, formerly located at 55 Old Field Point Road, Greenwich, Connecticut, is now based at 800 Westchester Avenue, Rye Brook, New York 10573.  Laurence Allen had previously been registered as a broker-dealer agent in Connecticut, but that registration expired on December 31, 2019 for failure to renew.  Under Connecticut law, the Commissioner has the authority to initiate revocation proceedings within one year following a registration's expiration for nonrenewal.

The action alleged that on February 4, 2020, in a proceeding brought by the Attorney General of the State of New York, the Supreme Court of the State of New York entered a preliminary injunction enjoining NYPPEX, LLC, Allen and others from, inter alia, engaging in fraudulent, deceptive and illegal acts in conjunction with limited partnership investments (People v. Allen, Laurence G., No. 2378/2019 (Supreme Ct. N.Y. Cnty. 2019).  The Connecticut action further alleged that the preliminary injunction supported the initiation of Connecticut proceedings to deny the firm's broker-dealer registration and revoke Allen's agent registration under the Connecticut Uniform Securities Act.

Both respondents were afforded an opportunity to request a hearing on the Notice of Intent to Deny Registration as Broker-dealer and Notice of Intent to Revoke Registration as a Broker-dealer Agent.

James Thomas Booth (CRD No. 1906145) and Insurance Trends, Inc.

On February 14, 2020, the Banking Commissioner issued an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine, Notice of Intent to Revoke Registration as a Broker-dealer Agent and Investment Adviser Agent and Notice of Right to Hearing (Docket No. CDFR-20-8535-S) against James Thomas Booth of Norwalk, Connecticut.  Also named in the action was Insurance Trends, Inc., an entity controlled by Booth.

Most recently and from 2018 to 2019, Respondent Booth had been registered as a broker-dealer agent and investment adviser agent of LPL Financial LLC in Connecticut.  While those registrations had previously been withdrawn, Connecticut law permits the Commissioner to initiate revocation proceedings within one year after the withdrawal becomes effective.

The action alleged that, from 2013 to 2019, Booth violated the antifraud provisions in Section 36b-4(a) of the Connecticut Uniform Securities Act and engaged in dishonest or unethical  practices while associated with his past two employing firms.  More specifically, respondent Booth allegedly solicited firm clients to invest in outside opportunities and send their funds to Insurance Trends, Inc.  The action also alleged that respondent Booth then used investor funds for his personal expenses and that he fabricated client account statements to reflect investments that were, in fact, never made.  Booth allegedly misappropriated approximately $5 million in investor funds.

The action also noted that Booth had significant disciplinary history including 1) a June 26, 2019 permanent bar imposed by FINRA; 2) a November 1, 2019 bar entered by the Securities and Exchange Commission; and 3) an October 22, 2019 guilty plea to securities fraud (United States v. James T. Booth, Crim. No. 19-cr-00699-JGK, SDNY).  Sentencing in the criminal proceeding is set for February 21, 2020.

Respondents were afforded an opportunity to request a hearing on the allegations in the agency’s action.  Since Respondents Booth and Insurance Trends, Inc. did not request a hearing on the Order to Cease and Desist and the Order to Make Restitution, those orders became permanent as to each of them on March 12, 2020.

Herbert H. Hafen a/k/a Elias Herbert Hafen (CRD No. 867068) - Order to Cease and Desist and Notice of Intent to Fine Issued

On February 11, 2020, the Banking Commissioner issued an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CDF-20-8474-S) against Herbert H. Hafen of New Canaan, Connecticut.  Hafen, also known as Elias Hafen, Elias Niggebrugge and E. Herbert Niggebrugge, was previously registered as a broker-dealer agent and investment adviser agent of Wells Fargo Clearing Services, LLC and Morgan Stanley in Connecticut.

The action alleged that respondent Hafen violated Section 36b-5(f) of the Connecticut Uniform Securities Act by engaging in dishonest or unethical practices in connection with his investment advisory activities.  More specifically, from approximately July 2011 to 2018 and at a time when he was registered in Connecticut, Hafen allegedly convinced an elderly advisory client to move her IRA funds to an outside investment opportunity.  Hafen allegedly knew that the IRA, which the client had inherited from her deceased husband, was intended to support the client for the rest of her life.  Instead of investing the client's funds, Hafen purportedly used them to pay his own credit card bills, mortgage and other personal expenses and to repay another investor who had also relayed monies to Hafen for investment purposes.  In addition, the action alleged that Hafen falsely represented to the client that her IRA account was valued at $300,000 when it really held only $150,000 in available funds.  Ultimately, Hafen's employing firm reimbursed the client for her loss.

The respondent was afforded an opportunity to request a hearing on the Order to Cease and Desist and Notice of Intent to Fine.

Also on February 11, 2020 and as a separate matter, Hafen pled guilty in federal court to investment adviser fraud and was sentenced to 30 months in prison commencing April 7, 2020 (United States v. Hafen, SDNY, Docket No. 1:19CR00637-AKH).

North American Drilling Corporation, Brown Well 1 Joint Venture, Brown Well 1A Joint Venture, Brazelton Well 2A Joint Venture and Larry Michael Koonce (CRD No. 4603240) Fined $500,000 in the Aggregate, Order to Cease and Desist and Order to Make Restitution Made Permanent

On February 7, 2020, following an administrative hearing, the Banking Commissioner entered Findings of Fact, Conclusions of Law and an Order in the Matter of North American Drilling Corporation, Brown Well 1 Joint Venture, Brown Well 1A Joint Venture, Bravelton Well 2A Joint Venture and Larry Michael Koonce (collectively, the "Respondents") (Docket No. CRF-19-8287-S).  Since none of the Respondents appeared at the November 13, 2019 hearing, the Order was entered by default. Respondent North American Drilling Corporation was the manager of corespondents Brown Well 1 Joint Venture, Brown Well 1A Joint Venture and Brazelton Well 2A Joint Venture, all three of which were Texas joint ventures engaged in the oil and gas business.  Larry Michael Koonce of Plano, Texas was the president of North American Drilling Corporation and a control person of the joint ventures.

The Respondents had been the subject of a March 27, 2019 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-19-8287-S).  The March 27, 2019 action had alleged that the Respondents violated the antifraud provisions in Section 36b-4(a) of the Connecticut Uniform Securities Act by representing to investors that the investment had little risk and by channeling investment proceeds to Wildcat Resources, LC, an affiliated entity, in contravention of statements made in the offering materials.  In addition, investors were not apprised that at least a portion of the monies transferred to the Wildcat Resources, LC account were used to benefit Koonce and/or his relatives.  The action had also alleged that respondents Koonce and North American Drilling Corporation violated Section 36b-23 of the Act by making a misleading statement to the Commissioner concerning the source of Koonce's compensation in connection with the joint ventures.

In accordance with Section 36a-31(b) of the Regulations of Connecticut State Agencies and in light of Respondents' default, the Commissioner deemed the allegations in the March 27, 2019 action admitted.  Finding that the Respondents violated the antifraud provisions in Section 36b-4(a) of the Act and that Koonce, on behalf of North American Drilling Corporation violated Section 36b-23 of the Act, the Commissioner ordered that 1) the Order to Cease and Desist against all respondents be made permanent; 2) that each Respondent be fined $100,00 for a total of $500,000; 3) the Order to Make Restitution be made permanent as to all Respondents; and 4) that the Respondents pay the affected Connecticut investor $32,039.97 in restitution within thirty days following the mailing of the Order.

ARO Equity, LLC, Thomas David Renison (CRD No. 1863759) and Thomas James Renison (CRD No. 6039707) – Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing Issued

On January 9, 2020, the Banking Commissioner issued an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-19-8426-S) against Thomas David Renison (the “Senior Renison”) of South Glastonbury, Connecticut, Renison’s son, Thomas James Renison (the “Junior Renison”), also of Glastonbury, and ARO Equity, LLC of 41 Pine Street, #17, Peabody, Massachusetts 01960.  ARO Equity, LLC was a self-described “private investment fund” investing in small to medium business ventures.  Among those ventures was a now-defunct Massachusetts electronics manufacturing company, a construction company and a healthcare company.  The Senior Renison was an undisclosed principal of ARO Equity, LLC and the Junior Renison was a member and owner of the fund.

The action noted that the Senior Renison had been the subject of an October 22, 2012 Consent Order by the State of Maine Office of Securities; a June 2, 2011 federal criminal complaint alleging mail/wire fraud; a May 19, 2013 State of Connecticut Insurance Department Stipulation and Consent Order; a July 3, 2014 Securities and Exchange Commission Order Instituting Administrative Proceedings; and an August 13, 2014 Consent Order issued by the State of Florida Department of Financial Services.  On February 11, 2019, the Junior Renison had been barred by FINRA from association with any FINRA member.  The action added that, due to the Senior Renison’s disciplinary history, his involvement in ARO Equity, LLC was intentionally concealed.

The action alleged that from approximately August 2015, ARO Equity, LLC and the Senior Renison violated Section 36b-16 of the Connecticut Uniform Securities Act by offering and selling over $5.8 million of unregistered “fixed rate promissory notes” purportedly paying returns ranging from 8% to 12% to investors in Connecticut, Massachusetts, Tennessee and New Jersey.  Many of those investors were elderly retirees who tapped their retirement savings to make the investments.  The action also alleged that the Senior Renison transacted business as an unregistered agent of issuer in violation of Section 36b-6 of the Act.

In addition, the action alleged that ARO Equity, LLC and the Senior Renison violated the antifraud provisions in Section 36b-4(a) of the Act by failing to disclose, among other things 1) that, contrary to respondents’ representations concerning the use of investment proceeds, investor monies were really being used to pay off earlier investors as well as ARO Equity, LLC’s business expenses and the Senior Renison’s personal expenses; 2) the specific risk factors related to the investments; 3) the Senior Renison’s prior disciplinary history; and 4) the precise business and operating history of ARO Equity, LLC and its affiliates, including financial information on the respondents.  The action also alleged that the Junior Renison materially aided the foregoing antifraud violations.

The action also alleged that the Junior Renison violated Section 36b-23 of the Act by making materially false or misleading statements in filings made with the Commissioner.  More specifically, at the time the Junior Renison was registered as a broker-dealer agent in Connecticut, the Junior Renison failed to disclose his involvement with ARO Equity, LLC and the related compensation he received.

The action sought the entry of a permanent Order to Cease and Desist and a fine against all respondents and a restitutionary order against respondents ARO Equity, LLC and the Senior Renison.  The respondents were afforded an opportunity to request a hearing on the allegations in the action.  Since respondent ARO Equity, LLC did not request a hearing on the Order to Cease and Desist or the Order to Make Restitution, each of those orders became permanent as to it on January 30, 2020.
 


CONSENT ORDERS

Solium Financial Services LLC (CRD No. 147933)

On February 21, 2020, the Banking Commissioner entered a Consent Order (No. CO-20-14428-S) with respect to Solium Financial Services LLC, an applicant for broker-dealer registration having its principal office at 50 Tice Boulevard, Suite A-18, Woodcliff Lake, New Jersey 07677.  Morgan Stanley had acquired the firm’s affiliate on May 1, 2019.  Solium Financial Services LLC’s business focuses on providing equity plan administration software to employers and facilitating employees’ exercise or liquidation of securities for which the firm receives a portion of the commissions.

The Consent Order followed a North American Securities Administrators Association, Inc. multistate investigation into unregistered broker-dealer activity by the firm.  The firm had self-reported to the states that it had transmitted orders for employee-participants at a time when it was not registered in various jurisdictions.  The Consent Order alleged that the firm violated Section 36b-6(a) of the Connecticut Uniform Securities Act by transacting business as a broker-dealer in Connecticut while unregistered.

In resolution of the matter, the firm agreed to cease and desist from regulatory violations and to remit $51,136 to the state.  Of that amount, $49,296 constituted an administrative fine and $1,840 represented reimbursement for past due registration fees.

Solium Financial Services LLC became registered as a broker-dealer in Connecticut on February 21, 2020.

 


OTHER ORDERS

Adam Westphalen (CRD No. 2821723), Mosaic Financial Strategies LLC f/k/a Mosaic Portfolio Strategists LLC (CRD No. 149364) and Mosaic Financial Strategies LLC d/b/a Mosaic Advisory Partners (CRD No. 288997)


On April 27, 2020, the Banking Commissioner issued an Order Pursuant to Executive Order No. 7M in the matter of  Adam Westphalen (CRD No. 2821723), Mosaic Financial Strategies LLC f/k/a Mosaic Portfolio Strategists LLC (CRD No. 149364) and Mosaic Financial Strategies LLC d/b/a Mosaic Advisory Partners (CRD No. 288997) (collectively, “Respondents”). The Order granted a request from the Hearing Officer to extend the deadline for rendering a final decision for a hearing held concerning allegations contained in an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Deny Registrations as an Investment Adviser and as an Investment Adviser Agent, Notice of Intent to Fine and Notice of Right to Hearing issued against Respondents on March 11, 2019.  The Commissioner extended the deadline for rendering a final decision from May 4, 2020 to July 6, 2020.





STATISTICAL SUMMARY

Licensing At A Glance
at the end of the quarter

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Broker-dealers Registered 2,053      
Broker-dealer Agents Registered 173,318      
Broker-dealer Branch Offices Registered 2,480      
Investment Advisers Registered 499    
SEC Registered Advisers Filing Notice 2,280    
Investment Adviser Agents Registered 15,061      
Exempt Reporting Advisers 139    
Agents of Issuer Registered 3      
Conditional Registrations 0      

 

Securities and Business
Opportunity Filings

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Offerings Reviewed 43        43
Investment Company Notice Filings 499       499
Exemptions and Exemptive Notices 1,059       1,059
Examinations
Broker-dealers 25       25
Investment Advisers 36       36
Securities Investigations
Opened 9       9
Closed 10       10
Ongoing as of End of Quarter 94       94
Subpoenas issued 5       5
Matters referred from Attorney General 0       0
Matters referred from Other Agencies 0       0
Business Opportunity Investigations
Investigations Opened        1
Investigations Closed        0
Ongoing as of End of Quarter        2
Enforcement: Remedies and Sanctions
Notices of Intent to Deny (Licensing)        1
Notices of Intent to Suspend (Licensing)        0
Notices of Intent to Revoke (Licensing)        2
Denial Orders (Licensing)       0
Suspension Orders (Licensing)       0
Revocation Orders (Licensing)       0
Notices of Intent to Fine        4
Orders Imposing Fine       3
Cease and Desist Orders        4
Notices of Intent to Issue Stop Order        0
Activity Restrictions/Bars        0
Stop Orders       0
Vacating/Withdrawal/ Modification Orders       0
Restitutionary Orders and Disgorgement Orders        3
Injunctive Relief Obtained        0

Proceedings and Settlements

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Administrative Actions       5
Consent Orders       1
Stipulation and Agreements       0

Monetary Relief*

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Monetary Sanctions Imposed $751,136       $751,136
Portion attributable to settlements $51,136        $51,136
Attributable to Court-Ordered Penalties        
Restitution or Other Monetary Relief
(includes rescission offer amounts)
$46,140        $46,140
*Cents eliminated

Securities Referrals

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Criminal Matters       0
Civil (Attorney General)       0
Other Agency Referrals       0