The Department of Banking News Bulletin

Bulletin # 1856
Week Ending September 17, 1999

This bulletin constitutes the only official notification you will receive from this office concerning any of the following applications. Any observations you may have are solicited. Any comments should be in writing to John P. Burke, Banking Commissioner, at the Connecticut Department of Banking, 260 Constitution Plaza, Hartford, CT 06103-1800 or via E-mail to john.burke@ct.gov. Written comments will be considered only if they are received within ten days from the date of this bulletin.

Commissioner John P. Burke is sponsoring a special training conference for CEOs and bank directors on Thursday, September 30, 1999 at the Radisson Hotel and Conference Center in Cromwell, Connecticut. In today's rapidly changing financial marketplace, directors must have a good working knowledge of their bank's risk management efforts, investment management practices, compliance activities and more. The bank directors' conference will focus on providing board members with practical information so they may approach their jobs with clarity, assurance and effectiveness. Dr. Douglas V. Austin, of Toledo, Ohio, a nationally recognized expert in the areas of business and banking litigation and corporate conflict, will be the luncheon speaker. Advance registration is required. For further conference information, visit the department's web site or call the agency at (860) 240-8170.

Securities Forum '99

The Securities and Business Investments Division, in conjunction with the Securities Advisory Council to the Department, is sponsoring its eleventh annual Securities Forum conference on Monday, October 25, 1999 at the Omni New Haven Hotel in New Haven, Connecticut. A timely and outstanding agenda of panel presentations, featuring expert speakers from throughout the country, will help financial industry professionals keep abreast of current and evolving regulatory developments. Mary L. Schapiro, President of NASD, will be the keynote speaker. The conference includes a luncheon and course materials. For further program and registration information, visit the department's web site or call the agency at (860) 240-8170.

STATE BANK ACTIVITY
Branch Activity

Section 36a-145 of the Connecticut General Statutes requires that each application for a branch, or for a limited branch at which loans will be made, be accompanied by a plan detailing how adequate services to meet the banking needs of all community residents will be provided. Plans are submitted when such applications are filed and are available for public inspection and comment at this Department for a period of 30 days. Questions concerning branch activity should be directed to Glenn Hayes, Assistant Director, Bank Examination Division, (860) 240-8183 or via E-mail to glenn.hayes@ct.gov. Note: dates are listed in month/day/year format.

Pursuant to the provisions of Section 36a-581(d) of the Connecticut General Statutes, on September 14, 1999, Financial Service Centers, Inc. applied to relocate its licensed check cashing service general facility from 79 North Main Street, South Norwalk, to 80 North Main Street, South Norwalk.

SECURITIES AND BUSINESS INVESTMENTS DIVISION ACTIVITY
Broker-Dealer Fined $1,000; Prohibited from Supervisory Activity for Two Years

On September 16, 1999, the Banking Commissioner entered a Consent Order with respect to Andrew R. Flagg, a broker-dealer agent and investment adviser agent under the Connecticut Uniform Securities Act. The Consent Order followed a Securities and Business Investments Division investigation which uncovered evidence that Andrew R. Flagg made unsuitable investment recommendations to clients.

The Consent Order 1) directed that Flagg pay a $1,000 fine; 2) prohibited him from being involved in the day-to-day supervision of broker-dealer agents for two years; 3) restricted his investment advisory activities for two years to exchange and NASDAQ-NMS listed securities, corporate debt, municipal securities, investment company securities, governmental securities and insurance products subject to regulation by the Connecticut Insurance Commissioner; and 4) required that, for two years, Flagg submit quarterly reports to the Division concerning any securities-related complaints, actions or proceedings.

Broker-Dealer Fined $75,000
Investment Adviser Fined $3,000

On September 16, 1999, the Banking Commissioner entered a Consent Order under the Connecticut Uniform Securities Act with respect to Merit Capital Associates, Inc., a registered broker-dealer, and its affiliate Merit Capital Management, Inc., a registered investment adviser. Both entities maintain their principal office at 1221 Post Road East in Westport, Connecticut. The Consent Order followed a Securities and Business Investments Division investigation which revealed indications 1) that Merit Capital Associates, Inc. employed unregistered broker-dealer agents; 2) that certain broker-dealer agents of Merit Capital Associates, Inc. based in Florida used sales material that had not been properly reviewed by the firm's compliance department; 3) that Merit Capital Associates, Inc. failed to exercise adequate supervisory controls over agent activity; and 4) that Merit Capital Management, Inc. employed unregistered investment adviser agents. In furtherance of its desire to resolve the matter informally with the agency, Merit Capital Associates, Inc. demonstrated that an independent consultant retained on the firm's own initiative following initiation of the division's investigation had conducted a review of the firm's internal supervisory and compliance procedures to ensure regulatory compliance. The Consent Order fined Merit Capital Associates, Inc. $75,000 and required that Merit Capital Management, Inc. pay a $3,000 fine. In addition, the Consent Order required that Merit Capital Associates, Inc. submit a copy of the consultant's report to the division, together with a summary of implemented recommendations, and pay the costs of one or more examinations to be conducted within twenty four months. The Consent Order also mandated that both firms submit quarterly reports for two years describing any securities-related complaints, actions or proceedings involving Connecticut residents.