To protect the health and safety of the public and our employees, the Department of Banking has limited the number of employees at our office at 260 Constitution Plaza in Hartford. When contacting the Department, please use electronic communication whenever possible. Consumers are encouraged to use our online form for complaints. If you are unsure where to send an inquiry, you may send it to Department.Banking@ct.gov and it will be routed appropriately. Thank you for your patience during this time.

Securities and Business Investments Division
Securities Bulletin

Vol. XXXIV No. 4 - Winter 2020

Features

Enforcement and Other Highlights

Connecticut Launches Online Filing Option for Private Placements Effective November 2, 2020

On September 17, 2020, the Banking Commissioner issued an Order designating the North American Securities Administrators Association, Inc.'s (“NASAA”) online Electronic Filing Depository as a permissible means of making securities registration, exemption and covered security notice filings in Connecticut under the Connecticut Uniform Securities Act.

Use of the EFD System is optional and will be rolled out in stages, with issuers of Rule 506 private placements being the first to benefit from the new system starting November 2, 2020.

Developed by NASAA, EFD is an online system that allows an issuer to simultaneously make securities offering filings in multiple states and pay related fees online.  In addition, the EFD website, permits members of the public to search for and view, free of charge, filings made with state securities regulators through the system..  Members of the public are reminded that making a filing with the Securities and Exchange Commission or with a state securities regulator does not mean that the SEC or the affected state has approved the securities or made any judgment on the soundness of the securities as an investment.

Starting November 2, 2020, the Securities and Business Investments Division of the Department of Banking will accept EFD filings made pursuant to Rule 506 of federal Regulation D.  To promote efficiency, the past requirement that issuers file a separate Broker-Dealer/Sales Agent Questionnaire or written equivalent has been eliminated.

Although the Division strongly encourages issuers to use EFD for securities filings, paper filings and checks will continue to be accepted and processed by the Division for the immediate future.  Questions regarding EFD should be directed to William Olesky of the Division at (860) 240-8240 or william.olesky@ct.gov.

Text of Order

Order Designating the NASAA Electronic Filing Depository as a Permissible Means of Filing Securities Registration, Exemption, Covered Security Notice and Related Filings

WHEREAS,
the Banking Commissioner (the “Commissioner”) is responsible for administering 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 (the “Regulations”) promulgated under the Act;

WHEREAS,
the North American Securities Administrators Association, Inc. (“NASAA”) is an association of state securities administrators.  NASAA has developed and operates the online Electronic Filing Depository (“EFD”) to interface with the Securities and Exchange Commission’s online Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”) system and to 1) receive filings and collect fees on behalf of participating jurisdictions; and 2) provide the investing public with web-based access to information on securities offerings.  Initially launched to cover filings made under Rule 506 of federal Regulation D, the platform has been expanded to cover investment company filings and additional state filings may be made electronically at a future date;

WHEREAS,
through its Universal Filing Type (UFT) functionality, EFD has been expanded to cover areas that include, without limitation, registrations by coordination and qualification, Regulation A and Rule 504 filings;

WHEREAS,
Section 36b-31(c) of the Act authorizes the Commissioner to cooperate with state and federal securities regulators as well as organizations of securities officials or agencies in establishing central depositories for the registration of securities or securities industry personnel under the Act and for documents or records required or allowed to be filed with or maintained by the Commissioner under the Act;

WHEREAS,
Section 36b-32(a) of the Act provides that:  “A document is filed when it is received by the commissioner or any other person designated in writing by the commissioner”;

WHEREAS,
Section 36b-31(a) of the Act provides, in part, that:  “The commissioner may from time to time make, amend and rescind such . . . orders as are necessary to carry out the provisions of sections 36b-2 to 36b-34, inclusive, including . . . orders governing registration statements, notice filings, applications, and reports . . . For the purpose of . . . orders, the commissioner may classify securities, persons and matters within his or her jurisdiction, and prescribe different requirements for different classes”;

WHEREAS,
Section 36b-31(b) of the Act states, in part, that:  “No . . . order may be made, amended or rescinded 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.  In prescribing . . . orders, the commissioner may cooperate with the securities administrators of the other states and the Securities and Exchange Commission with a view to effectuating the policy of said sections to achieve maximum uniformity in the form and content of registration statements, notice filings, applications and reports wherever practicable”;

WHEREAS
the Commissioner finds that the issuance of this Order is necessary and appropriate in the public interest and for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of the Act;

NOW THEREFORE THE COMMISSIONER ORDERS AS FOLLOWS:

1. Effective upon the entry of this Order, the Commissioner designates EFD as an optional platform to receive securities registration, exemption and notice filings, including amendments, under Sections 36b-21 and 36b-19 of the Act and, to the extent applicable, agent of issuer registrations, including amendments, under Sections 36b-7(a), 36b-12(b) and 36b-13(b) of the Act, and to collect related fees on behalf of the department;

2. Any documents or fees required to be filed with the Commissioner under the Act or the Regulations that are not permitted to be filed with, or cannot be accepted by, EFD shall be filed directly with the Commissioner;

3. Nothing in this Order shall relieve a filer from its obligation to file such supplemental information directly with the Commissioner as the Commissioner may request;

4. The Commissioner may re-evaluate the use of EFD at any time in light of changed circumstances; the public interest in having securities offering information available for public viewing through a centralized database; and the effectiveness of EFD as a filing platform; and

5. This Order shall remain in effect until modified, superseded or vacated by the Commissioner or other lawful authority.

So ordered at Hartford, Connecticut
this  17th  day of  September, 2020.

______/s/__________________
Jorge L. Perez
Banking Commissioner 

Consent Orders

The Hansbury Group, LLC (CRD No. 127205)

On November 16, 2020, the Banking Commissioner entered a Consent Order (No. CO-20-14431-S) with respect to The Hansbury Group, LLC of 1105 Sienna Drive, Danbury, Connecticut 068111.  The firm, which was previously registered as an investment adviser under the Connecticut Uniform Securities Act, was staffed by two individuals, only one of whom was based in the U.S.  The Consent Order alleged that by failing to qualify the domestic individual and to retain an outside consultant as agreed in a prior letter of understanding with the department, the firm violated Section 36b-23 of the Act. The Consent Order also alleged that the firm violated Section 36b-31-6f(b) of the Regulations under the Act by failing to establish, enforce and maintain an adequate supervisory system.

The firm has since provided the agency with the agreed-upon compliance audits prepared by an outside consultant.

The Consent Order directed the firm to cease and desist from regulatory violations and fined the firm $5,000.

Janney Montgomery Scott, LLC (CRD No. 463)

On October 21, 2020, the Banking Commissioner entered a Consent Order (No. CO-20-8388-S) with respect to Janney Montgomery Scott, LLC, a Connecticut-registered broker-dealer.  Janney Montgomery Scott, LLC previously employed one James Albert Pettit (CRD No. 733916) as a broker-dealer agent and as an investment adviser agent.  The Consent Order stated that, despite numerous red flags and escalated issues pertaining to Pettit, the firm allowed Pettit to act as executor of a client’s estate in contravention of the firm's own written supervisory procedures that prohibited such activity.  Pettit was the subject of an independent action by the department alleging, among other things, that he engaged in self-dealing in conjunction with a power of attorney he held over the account of an elderly client, since deceased (Docket No. Docket No. NDCDF-17-8218-S).

The Consent Order acknowledged that the firm had provided the agency with evidence that $108,459.68 in restitution had been paid to the estate of the affected Connecticut client who suffered financial harm due to Pettit's actions.

The Consent Order alleged that Janney Montgomery Scott, LLC violated 1) Section 36b-14(d) of the Connecticut Uniform Securities Act by failing to produce records requested by the agency; 2) Section 36b-31-6f of the Regulations under the Act by failing to establish, enforce and maintain a system for supervising the activities of its agents, investment adviser agents and Connecticut office operations that was reasonably designed to achieve compliance with applicable securities laws and regulations; and 3) Section 36b-31-14e of the Regulations by failing to file a correcting amendment to a  Form U-5 it had previously filed with the Commissioner for James Albert Pettit.

The Consent Order directed the firm to cease and desist from regulatory violations and to remit $150,000 to the department.  Of that amount, $100,000 constituted an administrative fine and $50,000 constituted reimbursement for agency investigative costs.  In addition, the Firm agreed to pay $100,000  to be applied, in the discretion of the Commissioner, to financial literacy and investor education initiatives, training and related materials.  The Consent Order also required the firm to conduct training for its Legal and Compliance staff on responding to regulatory inquiries and to retain an independent consultant to review the firm's supervisory and compliance procedures.

Edward Kenneth Crowe (CRD No. 3248161)

On October 13, 2020, the Banking Commissioner entered a Consent Order (No. CO-20-202028-S) with respect to Edward Kenneth Crowe of Sherman, Connecticut.   Crowe is the owner of Edward K. Crowe & Associates, LLC, a Connecticut limited liability company offering insurance products and services.

The Consent Order alleged that from approximately June 2015 to approximately August 2017, Crowe sold approximately $250,000 of interests in various investment funds offered by Woodbridge Group of Companies, LLC d/b/a Woodbridge Wealth (“Woodbridge”) to three investors.  Woodbridge Group of Companies, LLC, based in California, was a defendant in a civil action brought by the Securities and Exchange Commission alleging that it operated a purported Ponzi scheme.   One of the investors was reimbursed $100,000 plus interest from Woodbridge.  For his role in selling interests in the Woodbridge funds, Crowe received $4,500 in remuneration from Woodbridge.  The Consent Order also stated that Crowe himself had purchased $94,000 of interests in the Woodbridge Funds.  The Consent Order alleged that Crowe violated Section 36b-16 of the Connecticut Uniform Securities Act by selling unregistered securities and that he transacted business as unregistered agent of issuer in contravention of Section 36b-6(a) of the Act.  The Consent Order acknowledged Crowe's representation that, based on legal documents supplied to him by Woodbridge, he believed that the Woodbridge Funds were not securities and that securities registration was unnecessary.

The Consent Order fined Crowe $10,000 and directed him to cease and desist from regulatory violations.  In addition, the Consent Order required that Crowe disgorge to affected investors the $4,500 in remuneration he earned from Woodbridge.  The monies would be deposited with Crowe's legal counsel which would then oversee disbursement of the funds to investors.
Stipulation and Agreements
Financial Vision Advisory Services, LLC (CRD No. 120921)

On December 9, 2020, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-20-2022180-S) with Financial Vision Advisory Services, LLC, a Connecticut-registered investment adviser located at 111 Founders Plaza, East Hartford, Connecticut 06108.  The Stipulation and Agreement alleged that 1) in contravention of Section 36b-6(c)(3) of the Connecticut Uniform Securities Act, the firm continued to pay advisory fees to an unregistered individual once that individual left the firm's employ; and 2) the firm transacted business from an unregistered branch office in violation of Section 36b-6(d) of the Act.  The Stipulation and Agreement acknowledged the firm's representations that it had relied on legal counsel and an outside consultant, respectively, in not registering the affected individual or the branch office.  The branch office has since become registered.

In resolution of the matter, the firm agreed to refrain from regulatory violations and to remit $5,375 to the agency.  Of that amount, $5,000 constituted an administrative fine and $375 represented reimbursement for past due investment adviser agent registration fees.

Quint Wealth Management, Inc. (CRD No. 168463)

On October 7, 2020, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-20-2021959-S) with Quint Wealth Management, Inc. of 10 Raymond Avenue, Poughkeepsie, New York 12603.  The firm, which has no Connecticut place of business, became registered as an investment adviser with the Securities and Exchange Commission on June 1, 2020 and was previously registered as an investment adviser under the Connecticut Uniform Securities Act.

The Stipulation and Agreement alleged that, from April 2016 through June 2020, the firm engaged an unregistered investment adviser agent in violation of Section 36b-6(c)(3) of the Act.  The Stipulation and Agreement acknowledged the firm's representation that the failure to register the investment adviser agent was due to faulty advice from a compliance consultant.

In resolution of the matter, the firm agreed to refrain from regulatory violations and to pay $5,000 to the department.  Of that amount, $4,500 constituted an administrative fine and $500 represented reimbursement for past due investment adviser agent registration fees.


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 

2,038 

2,032 

1,978

Broker-dealer Agents Registered

173,318 

175,350 

178,176

172,879

Broker-dealer Branch Offices Registered

2,480 

2,482 

 2,470

2,387

Investment Advisers Registered

499 

493 

 496

467

SEC Registered Advisers Filing Notice

2,280 

2,287 

 2,320

2,240

Investment Adviser Agents Registered

15,061 

15,189 

 15,513

15,181

Exempt Reporting Advisers

139 

140 

141 

145

Agents of Issuer Registered

3

Conditional Registrations

 0

0

 

Securities and Business
Opportunity Filings

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Year
to Date

Offerings Reviewed

43 

14 

 23

22

102

Investment Company Notice Filings

499 

303 

382

7,366

8,550

Exemptions and Exemptive Notices

1,059 

1,068 

1,148

1,592

4,866

Examinations

Broker-dealers

25 

17 

18

17

77

Investment Advisers

36 

34 

31

42

143

Securities Investigations

Opened

18

9

42

Closed

10 

10 

18

17

55

Ongoing as of End of Quarter

94 

90 

90

84

Subpoenas issued

1

5

16

Matters referred from Attorney General

0

0

Matters referred from Other Agencies

0

1

1

Business Opportunity Investigations

Investigations Opened

1

0

2

Investigations Closed

0

0

Ongoing as of End of Quarter

3

3

 

Enforcement: Remedies and Sanctions

Notices of Intent to Deny (Licensing)

0

0

 1 

Notices of Intent to Suspend (Licensing)

 0 

0

0

 0 

Notices of Intent to Revoke (Licensing)

0

0

Denial Orders (Licensing)

2

0

0

 0 

Suspension Orders (Licensing)

0

 0 

Revocation Orders (Licensing)

0

0

Notices of Intent to Fine

0

0

 6 

Orders Imposing Fine

4

0

11

Cease and Desist Orders

0

0

Notices of Intent to Issue Stop Order

0

0

0

Activity Restrictions/Bars

0

0

Stop Orders

0

0

0

Vacating/Withdrawal/ Modification Orders

0

0

 1 

Restitutionary Orders and Disgorgement Orders

2

0

5

Injunctive Relief Obtained

0

0

Proceedings and Settlements

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Year
to Date

Administrative Actions

0

15

Consent Orders

5

3

13

Stipulation and Agreements

2

2

7

Monetary Relief*

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Year
to Date

Monetary Sanctions Imposed

$751,136 

$1,037,700 

$1,649,025 

$275,375

$3,713,236 

Portion attributable to settlements

$51,136 

$437,700 

$49,025 

$275,375

$813,236

Attributable to Court-Ordered Penalties

 

 

 

 

Restitution or Other Monetary Relief
(includes rescission offer amounts)

$46,140 

$215,831 

$497,583 

$894,072

$1,654,526

*Cents eliminated

Securities Referrals

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Year
to Date

Criminal Matters

0

1

Civil (Attorney General)

1

2

3

Other Agency Referrals

3

0

3