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The State of Connecticut Department of Banking is hosting Securities Forum 2008:  Weathering the Economic Storm on Thursday, October 23, 2008 at the Sheraton Hotel in Stamford, Connecticut.

The keynote speaker will be Stephen A. Ross, a board member of Freddie Mac and an economics professor at the Massachusetts Institute of Technology (MIT).

The program will highlight regulatory developments affecting the financial services industry in an increasingly volatile economy.  CFP credit is available for the conference.  The registration fee (which includes materials and luncheon) is $70 per person, discounted to $60 per person for multiple attendees from the same firm.
 
Don't miss out on this unique opportunity to hear about financial developments from the regulators themselves.  Go to our website to download a registration form and to read the planned agenda.

We hope you can join your industry colleagues at this timely event.

On September 22, 2008, the Commissioner entered a Consent Order with respect to Basic Investors Inc., a Connecticut-registered broker-dealer located at 510 Broadhollow Road, Suite 306, Melville, New York.  The Consent Order alleged that 1) from at least October 2005, the firm improperly failed to disclose to customers information concerning a fee classified as “Other” on trade confirmations; 2) from at least January, 2007 to October 2007, the firm violated Section 36b-6(b) of the Connecticut Uniform Securities Act by employing at least one unregistered agent; 3) between November 1, 2005 and April 18, 2007, the firm sold unregistered, nonexempt securities in contravention of Section 36b-16 of the Act; and 4) in violation of Section 36b-31-6f(b) of the Regulations under the Act, the firm failed to establish, enforce and maintain an adequate supervisory system.  The Consent Order acknowledged that the firm had reimbursed Connecticut customers approximately $9,000 for the “Other” fee payment on approximately 400 transactions.

The Consent Order fined the firm $21,500 and directed it to cease and desist from regulatory violations.  In addition, the Consent Order required that the firm reimburse the agency for the costs, not to exceed $3,500 in the aggregate, of one or more future examinations of the firm’s offices to be conducted within twenty-four months.

On September 29, 2008, the Commissioner entered an Order Imposing Fine against 1) Key Resource Group, LLC (“KRG”) of 155 North Market, Suite 900, Wichita, Kansas; 2) Dale C. Lucas, Russell Kilgariff and Michael J. McNaul, managing members and control persons of KRG; and 3) KRG agents Mark T. Duboise of 4676 Lakeview Avenue, Suite 113, Yorba Linda, California; Mike Bay of 39201 Ingraham Street, Building 11, Apartment 111, San Diego, California; George Phillips of 17555 Ventura Boulevard, Suite 200, Encino, California; Greg Hunter of 4676 Lakeview Avenue, Suite 113, Yorba Linda, California; Ronald Folkinga of 2514 East 3810 North, Town Falls, Idaho; and Mark Deaton of 1025 Shoshone Street North, Twin Falls, Idaho (collectively, the “Respondents”).

The Respondents had been the subject of a December 10, 2007 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing alleging that KRG issued securities consisting of fractional, undivided interests in oil and gas rights (the “KRG Interests”) as well as joint venture interests in individual gas and oil development projects (the “Joint Venture Interests”).  The KRG Joint Venture Interests included Pawnee Barber II Joint Venture; Cheyenne 6 Joint Venture #2; Cheyenne 6 Joint Venture #3. Tri-County Joint Venture; Rush County 6 Joint Venture; Heartland Joint Venture; and Heartland #2 Joint Venture.  According to the Order to Cease and Desist and Notice of Intent to Fine, commencing in 2001, the respondents violated Section 36b-16 of the Connecticut Uniform Securities Act by effecting sales of the KRG Interests and the Joint Venture Interests at a time when no securities registration was in effect.  In addition, the Order to Cease and Desist and Notice of Intent to Fine had alleged that KRG, Lucas, Kilgariff and McNaul employed, and Duboise, Bay, Phillips, Hunter, Folkinga and Deaton transacted business as, unregistered agents of issuer in contravention of Section 36b-6 of the Act.  The action also had alleged that the Respondents violated the antifraud prohibition in Section 36b-4(a) of the Act by failing to disclose, in connection with sales of the KRG Interests and the Joint Venture Interests, any financial information about the performance of prior interests in oil and gas rights where KRG was the operator; any risk factors; that none of the agents were registered to sell securities in Connecticut; and that sales agents were paid as much as 50% of the investment amount as a commission, which commission payment had the effect of reducing, by as much as half, the amount of the investor's investment that actually could be used for operational purposes.

Since respondents Duboise and Hunter had not requested a hearing on the Order to Cease and Desist, the Order to Cease and Desist had become permanent as to each of them on January 22, 2008.   Since respondents KRG, Lucas, Kilgariff, McNaul, Bay, Phillips, Folkinga and Deaton likewise failed to request a hearing on the Order to Cease and Desist, the Order to Cease and Desist had become permanent as to each of them on January 31, 2008.

Following a hearing at which none of the Respondents appeared, the Commissioner imposed the following fines against the Respondents:  1) KRG was fined $425,000 for selling unregistered securities in violation of Section 36b-16 of the Act, $425,000 for violating the antifraud prohibition in Section 36b-4 of the Act and $425,000 for employing unregistered agents of issuer, for a total of $1,275,000; 2) Lucas was fined $425,000 for violating Section 36b-16 of the Act, $425,000 for violating Section 36b-4 of the Act and $425,000 for employing unregistered agents of issuer, for a total of $1,275,000; 3) Kilgariff was fined $425,000 for violating Section 36b-16 of the Act, $425,000 for violating Section 36b-4 of the Act and $425,000 for employing unregistered agents of issuer, for a total of $1,275,000; 4) McNaul was fined $425,000 for violating Section 36b-16 of the Act, $425,000 for violating Section 36b-4 of the Act and $425,000 for employing unregistered agents of issuer, for a total of $1,275,000; 5) Duboise was fined $20,000 for violating Section 36b-16 of the Act, $20,000 for violating Section 36b-4 of the Act and $20,000 for acting as an unregistered agent of issuer, for a total of $60,000; 6) Bay was fined $105,000 for violating

Section 36b-16 of the Act, $105,000 for violating Section 36b-4 of the Act and $105,000 for acting as an unregistered agent of issuer, for a total of $315,000; 7) Phillips was fined $50,000 for violating Section 36b-16 of the Act, $50,000 for violating 36b-4 of the Act and $50,000 for acting as an unregistered agent of issuer, for a total of $150,000; 8) Hunter was fined $150,000 for violating Section 36b-16 of the Act, $150,000 for violating 36b-4 of the Act and $150,000 for acting as an unregistered agent of issuer, for a total of $450,000; 9) Folkinga was fined $100,000 for violating Section 36b-16 of the Act, $100,000 for violating Section 36b-4 of the Act and $100,000 for acting as an unregistered agent of issuer, for a total of $300,000; and 10) Deaton was fined $100,000 for violating Section 36b-16 of the Act, $100,000 for violating Section 36b-4 of the Act and $100,000 for acting as an unregistered agent of issuer, for a total of $300,000.

In imposing the fines, the Commissioner noted that the Respondents’ conduct was egregious inasmuch as the investments were sold to inexperienced investors; no risks were disclosed; the sales agents received as much as 50% of the investment as a commission; and all of the investors lost money.

       Dated:  Tuesday, October 7, 2008