The Department of Banking News Bulletin 

Bulletin # 1919
Week Ending December 1, 2000

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.

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 the Bank Examination Division, (860) 240-8180.
Note: dates are listed in month/day/year format.

NEW BANK ACTIVITY

On November 28, 2000, pursuant to Section 36a-70(i) of the Connecticut General Statutes, upon the application filed on November 8, 2000 by the organizers of The Apple Valley Bank & Trust Company, and after a hearing, the Commissioner extended for cause the period for which the Temporary Certificate of Authority is valid from December 7, 2000 to March 7, 2001.

NAME CHANGE

The effective date of The Savings Bank of Rockville name change to Rockville Bank is December 1, 2000.

SECTION 36a-425 APPLICATION

On November 29, 2000, Bayerische Hypo- und Vereinsbank Aktiengesellschaft, a corporation organized under the laws of the Federal Republic of Germany, filed an application to maintain an office of 10 subsidiaries of Bank Austria Aktiengesellschaft, upon the consummation of the acquisition of Bank Austria Aktiengesellschaft by Bayerische Hypo- und Vereinsbank Aktiengesellschaft. The subsidiaries are Bank Austria Creditanstalt Trade Finance Services, Inc.; Bank Austria Creditanstalt Corporate Finance, Inc.; Bank Austria Creditanstalt Equipment Leasing, Inc.; Bank Austria Creditanstalt Community Development, Inc.; Bank Austria Creditanstalt Holdings Corporation; New Uncle B's Bakery Corp.; Bank Austria Creditanstalt American Corporation, Greenwich; Bank Austria Creditanstalt Property Corp., all Delaware corporations; and DEH Holdings LLC and BAUS Funding LLC, both Delaware limited liability companies, all of which will continue to operate at Two Greenwich Plaza, Greenwich, Connecticut.

SECURITIES AND BUSINESS INVESTMENTS DIVISION ACTIVITY
Hearing Decision Rendered

On November 27, 2000, the Banking Commissioner issued a Corrected Final Decision in proceedings involving First Providence Financial Group, LLC of 90 Broad Street, 10th Floor, New York, New York, and its Chief Executive Officer, Kenneth Michael Klein. Klein had been the subject of a January 27, 2000 Notice of Intent to Revoke Agent Registration and Summary Suspension. First Providence Financial Group, LLC had been the subject of an April 17, 2000 Amended Notice of Intent to Revoke Registration as Broker-dealer; Amended Order Summarily Suspending Registration as Broker-dealer; and Amended Notice of Intent to Fine. The proceedings against Klein and the firm were consolidated, and a hearing held. The Commissioner found that respondent First Providence Financial Group, LLC violated Sections 36b-14(d) and 36b-6(b) of the Connecticut Uniform Securities Act; engaged in dishonest or unethical conduct supporting the suspension of its registration under Section 36b-15(a)(2)(H) of the Connecticut Uniform Securities Act; and violated Section 36b-31-6f(b) of the Regulations under the Act. Accordingly, the Commissioner fined the firm $30,000, and ordered that its registration be suspended for a period to run concurrently with the previously imposed summary suspension. The suspension would be lifted upon the firm's payment of the $30,000 fine. Based upon evidence adduced at the hearing, the suspension of respondent Klein's registration was lifted nunc pro tunc.

Concealment Claim Against Klein Not Supported

The Final Decision ruled that, during the course of an agency examination, Klein placed certain documents into his computer's recycle bin and attempted to either delete them or to hide them, thus hindering their discovery and concealing them within the meaning of Section 36b-15(a)(2)(L) of the Connecticut Uniform Securities Act. However, since the documents were not material to the firm's business, grounds for action against Klein under Section 36b-15(a)(2)(L) of the Act could not be established.

Firm's Employment of Unregistered "Cold Callers"
A Dishonest or Unethical Practice

The department had alleged that First Providence Financial Group, LLC had engaged in dishonest or unethical practices by employing "cold callers" who were not registered with the NASD. The Final Decision ruled that, in ascertaining whether a broker-dealer engaged in dishonest or unethical practices in the securities business, it was not necessary that the alleged misconduct be performed in Connecticut; rather, Connecticut registration established the requisite jurisdictional nexus. Noting that employing unregistered cold callers violated NASD Rule 1031, the Commissioner found that First Providence Financial Group, LLC engaged in dishonest or unethical practices within the meaning of Section 36b-15(a)(2)(H) of the Connecticut Uniform Securities Act. The Commissioner also found that the firm had employed unregistered agents in violation of Section 36b-6(b) of the Act.

Fraud Charges Against First Providence Financial Group, LLC

The department had claimed that First Providence Financial Group, LLC violated the antifraud prohibition in Section 36b-4(a)(2) of the Connecticut Uniform Securities Act by misrepresenting or omitting material information in telephone conversations and through the use of sales scripts. The Final Decision found that, although a broker made untrue telephonic statements to the effect that he was positioning all of his clients into large blocks of stocks; that the broker was one of the top producers; and that First Providence Financial Group, LLC was one of the most powerful investment banks in the country, the materiality of those statements was not established under the specific facts of the case. The Final Decision also found that inflated statements made by a broker concerning the amount of funds managed did not rise to the level of fraud where the statements were made to a prospect having a very high net worth and a high tolerance for risk. The Final Decision also ruled that, based on the evidence, representations that a broker would forego a commission were not material. In light of the above, the Commissioner found that the department did not meet its burden of proving a violation of Section 36b-4(a)(2) of the Connecticut Uniform Securities Act.

Firm Violated Connecticut Law By Refusing to Provide the Agency
With Access to Books and Records

In ruling that First Providence Financial Group, LLC violated Section 36b-14(d) of the Connecticut Uniform Securities Act, the Final Decision noted that advance notice of an examination was not required under that section. The Final Decision rejected the firm's argument that market conditions prevailing on the date of the examination made the examination "unreasonable", noting that, for the firm to take it upon itself to decide when the Commissioner may examine the firm's books and records was "unreasonable and unlawful" and that the firm's failure to furnish any of the requested documents "shows a blatant disregard for the authority of the Commissioner."

Firm Failed to Enforce and Maintain Adequate Supervisory Procedures

The Final Decision found that several firm representatives violated firm procedures by failing to obtain accurate and detailed information on clients; by misstating customer suitability; and by using rude and abusive language in pressured sales calls. These practices, combined with the representatives' failure to receive a complete supervisory manual, supported the department's claim that supervisory lapses occurred in violation of Section 36b-31-6f(b) of the Regulations under the Act.