NO-ENFORCEMENT ACTION DETERMINATION AFFECTING PERSONS
DISPLACED AS A RESULT OF HURRICANE KATRINA OR RITA
Pursuant to Section 36b-31(f) of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (“Act”), as amended by Public Act 05-177, the Banking Commissioner of the State of Connecticut has determined that the Securities and Business Investments Division of the State of Connecticut Department of Banking (“Division”) will not institute a proceeding or an action under the Act with respect to certain securities activities involving investors and/or financial professionals who have been displaced as a result of Hurricane Katrina or Rita (“Statement of Policy”).
Section 36b-6 of the Act, as amended by Public Act 05-177, prohibits broker-dealers, investment advisers, agents and investment adviser agents from transacting business in this state without being registered or exempt from registration. In the case of an investment adviser registered or required to be registered with the Securities and Exchange Commission (“SEC”) under the Investment Advisers Act of 1940 (“Federally Covered Adviser”), Section 36b-6(e) of the Act, as amended, conditions the Federally Covered Adviser’s exempt status on the Federally Covered Adviser filing a notice with the Department.
The Division will not pursue enforcement action against a broker-dealer, agent, investment adviser, Federally Covered Adviser or investment adviser agent (collectively, “Financial Professionals”) for violations of the registration and notice filing requirements in Section 36b-6 of the Act, as amended, provided that the Financial Professionals comply with Connecticut law and the conditions in this Statement of Policy.
For purposes of this Statement of Policy, the terms “Pre-existing Customers and Clients” and “Pre-Existing Customer or Client” refer to customers or clients with whom the Financial Professional had a bona fide, pre-existing securities brokerage or investment advisory relationship on or before August 29, 2005, and while the Financial Professional was domiciled in its home state.
Temporary Displacement of Pre-Existing Customers and Clients to Connecticut
Where Pre-Existing Customers and Clients of Financial Professionals have been displaced to Connecticut as a result of Hurricane Katrina or Rita and Financial Professionals do business with such Pre-Existing Customers and Clients temporarily located in this state, the Division will not take enforcement action for violations of the registration and notice filing requirements in Section 36b-6 of the Act, as amended, as long as the Financial Professional satisfies four conditions:
1. The Financial Professional may only effect securities transactions or render investment advisory services to persons who are Pre-Existing Customers and Clients as defined above;
2. The Financial Professional must be registered or exempt from registration in the home state of the Pre-Existing Customer or Client;
3. The Financial Professional must be registered or exempt from registration with the SEC, a “self-regulatory organization” as defined in Section 36b-3(20) of the Act, as amended by Public Act 05-177, and the home state of the Financial Professional to the extent required by law; and
4. The Financial Professional must disclose to Pre-Existing Customers and Clients who have been displaced and who are temporarily in this state that the Financial Professional is not registered under the Act.
Temporary Displacement of Financial Professionals to Connecticut
Where a Financial Professional has been temporarily displaced to Connecticut as a result of Hurricane Katrina or Rita, the Division will not take enforcement action for violations of the registration and notice filing requirements in Section 36b-6 of the Act, as amended, if such Financial Professional effects securities transactions or renders investment advisory services from Connecticut on behalf of Pre-Existing Customers and Clients, provided that:
1. The Financial Professional provides written or electronic notice to the Division that the Financial Professional has relocated to Connecticut and plans to transact securities business or render investment advisory services in reliance on this Statement of Policy;
2. The Financial Professional discloses to such Pre-Existing Customers and Clients that it is temporarily domiciled in Connecticut and that it is not registered under the Act;
3. The Financial Professional is registered with the home state from which it was displaced or, in the case of a Federally Covered Adviser, has filed a notice with the home state from which it was displaced; and
4. If the Financial Professional is a broker-dealer, the Financial Professional is registered with the SEC and with a “self-regulatory organization” as defined in Section 36b 3(20) of the Act, as amended.
Limitations
This Statement of Policy does not permit any Financial Professional that has not fulfilled the filing requirements under Section 36b-6 of the Act, as amended, to solicit any new customers or clients in Connecticut.
This Statement of Policy does not prohibit the Division from taking enforcement action based on any other violation of the Act, including, without limitation, violations of the antifraud provisions in Sections 36b-4 and 36b-5 of the Act.
A Financial Professional effecting securities transactions or rendering investment advisory services on behalf of Pre-Existing Customers and Clients may only act within the scope of this Statement of Policy. Any activity beyond the scope of this Statement of Policy may constitute grounds for enforcement action by the Commissioner.
This Statement of Policy describes the enforcement position of the Division, and does not create an independent exemption from the registration and notice filing requirements in Section 36b-6 of the Act, as amended. In addition, Section 36b-29 of the Act provides certain remedies to investors and to investment advisory clients when the Act has been violated. These remedies are applicable notwithstanding this Statement of Policy.
UNLESS EXTENDED BY THE COMMISSIONER, THIS STATEMENT OF POLICY SHALL BE LIMITED TO ACTIVITIES DESCRIBED HEREIN OCCURRING ON OR BEFORE DECEMBER 31, 2005.
Dated at Hartford, Connecticut, John P. Burke
this 18th day of October 2005. Banking Commissioner