Bulletin # 2625 - Week Ending June 13, 2014

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 Howard F. Pitkin, Banking Commissioner, at the Connecticut Department of Banking, 260 Constitution Plaza, Hartford, CT 06103-1800 or via E-mail. Written comments will be considered only if they are received within ten days from the date of this bulletin.

SECURITIES AND BUSINESS INVESTMENTS DIVISION ACTIVITY

Connecticut-Registered Broker-dealer Fined $5 Million for Supervisory System Lapse

On June 9, 2014, the Banking Commissioner entered a Consent Order (Docket No. CO-14-8023-S) with respect to Morgan Stanley Smith Barney LLC, a Connecticut-registered broker-dealer.  The Consent Order alleged that the firm failed to establish, enforce and maintain an adequate supervisory system, particularly with respect to supervisor access to employee e-mail, the outsourcing of external e-mail surveillance to third party contractors, including a third party contractor in Chennai India; and ensuring that individuals who supervised the India third party contractor personnel performing the outsourced work held licenses required by FINRA.  In addition, the Consent Order alleged that the firm 1) failed to maintain its records in a form readily accessible to the Commissioner and failed to make those records readily available to agency staff during an examination in contravention of Sections 36b-14(a)(3) and 36b-14(d) of the Connecticut Uniform Securities Act and Section 36b-31-14f of the Regulations thereunder; and 2) failed to keep certain compliance records true, accurate and current in contravention of Section 36b-31-14a(a) of the Regulations.

The Consent Order fined Morgan Stanley Smith Barney LLC $5 million and directed the firm to cease and desist from regulatory violations.  In addition, the Consent Order required that the firm 1) complete a targeted supervisory and quality control review within six months and ensure that supervisory personnel involved in e-mail surveillance maintain all securities licenses required by FINRA; 2) within twelve months, implement a system to ensure that branch supervisory personnel have direct access to e-mailed communications sent or received by specified employees during the previous 120 days; 3) within twelve months, implement procedures to ensure that required books and records would be open to inspection by, and readily accessible to, agency staff; 4) within twelve months conduct training within the firm's legal department to more efficiently address the treatment of legally privileged documents; and 5) within twelve months, implement a separate quarterly quality control procedure measuring the effectiveness of selecting external e-mails for review.

Amended Order to Cease and Desist and Notice of Intent to Fine Issued

On June 10, 2014, the Banking Commissioner issued an Amendment to the department’s December 17, 2013 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-13-8064-S) against 1) Gregory Richard Imbruce of New Canaan, Connecticut; 2) investment fund Hunton Oil Partners LP and its general partner, Hunton Oil Genpar LLC; 3) investment fund Giddings Oil & Gas LP and its general partner Giddings Genpar LLC; and 4) investment fund Asym Energy Fund III LP and its general partner, Asym Capital III LLC.  Each partnership and its respective general partner maintained a business address in Stamford, Connecticut.  According to the action, respondent Imbruce occupied a control position and exercised critical decision making for the entities.

The earlier action had alleged that at designated times between 2009 and 2012, the partnerships offered and sold unregistered securities absent compliance with Section 36b-16 of the Connecticut Uniform Securities Act.  The December 17, 2013 action had also alleged that 1) the general partners transacted business as unregistered investment advisers in contravention of Section 36b-6(c)(1) of the Act; 2) in violation of Section 36b-6(c)(2) of the Act, respondent Imbruce transacted business as an unregistered investment adviser agent; 3) the respondents violated the antifraud provisions of the Act by failing to disclose material facts to prospective limited partners, including disciplinary proceedings initiated by FINRA against respondent Imbruce relating to Imbruce’s activities while he was associated with Bernard L. Madoff Investment Securities LLC; 4) to induce several prospective limited partners to invest, respondent Imbruce represented to them that he personally invested in the affected limited partnership when that was not the case; 5) the subscription agreements for two of the partnerships falsely represented that all applicable blue sky registration requirements had been fulfilled; 6) respondent Imbruce violated Section 36b-23 of the Act by making a materially misleading statement to the Division; and 7) respondent Asym Energy Fund III LP employed an unregistered agent of issuer in violation of Section 36b-6(b) of the Act.

The Amendment added a new charge that respondent Imbruce further violated Section 36b-23 of the Act by making materially misleading statements to the Division relating to finder's fee payments in conjunction with the sale of Giddings Oil & Gas LP units.

A hearing on the action is pending.

Order to Cease and Desist and Notice of Intent to Fine Issued

On June 12, 2014, the Banking Commissioner issued an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-14-886-B) against Poppin Kettle Franchising, Inc. and Yofresh Yogurts Franchising, Inc., both of Boston, Massachusetts.  Also named in the action was Chris T. Gregoris a/k/a Christos T. Gregoris a/k/a Christopher Gregoris, the sole officer and director of the entities.  Respondent Gregoris had been the president of Java's Brewin Development, Inc. which was the subject of a June 23, 2008 Order to Cease and Desist and an October 8, 2008 Order Imposing Fine issued by the Commissioner under the Connecticut Business Opportunity Investment Act (Docket No. CF-2008-845-B).  The $30,000 fine levied by the October 8, 2008 Order remains unpaid.

The current action alleged that the respondents offered and/or sold unregistered Poppin Kettle franchises and unregistered Yofresh franchises in violation of Section 36b-67(1) of the Connecticut Business Opportunity Investment Act.  In addition, the action alleged that respondents Poppin Kettle Franchising, Inc. and Gregoris violated the antifraud provisions in Section 36b-67(6) of the Act by failing to provide purchaser-investors with material disclosures including the risks involved in buying the business opportunity; financial information on the seller; litigation involving Gregoris and several New York purchasers of the Java's Brewin business opportunity; background information on the seller, its principals and affiliates; that Gregoris was a control person of Java's Brewin; that the Commissioner fined Java's Brewin $30,000 for violating the Act; and that the fine against Java's Brewin remained unpaid.

Each of the respondents was afforded an opportunity to request a hearing on the Order to Cease and Desist and Notice of Intent to Fine.

CONSUMER CREDIT DIVISION ACTIVITY

Check Cashing Service License Activity

Findings of Fact, Conclusions of Law and Order

On May 12, 2014, the Commissioner issued Findings of Fact, Conclusions of Law and Order (“Order”) in the Matter of:  Consumer Law Associates, LLC (“CLA”), Towson, Maryland.  The Order was the result of an investigation by the Consumer Credit Division and an administrative hearing on the matters alleged in a Temporary Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing against CLA, among others, on April 1, 2013.  The Order found that from approximately February 2010 forward, CLA offered to engage in debt negotiation by representing to Connecticut debtors that it would assist them in negotiating or attempting to negotiate their obligations with their creditors, in violation of Section 36a 671(b) of the Connecticut General Statutes.  The Commissioner ordered that:  (1) CLA cease and desist from violating Section 36a-671(b) of the Connecticut General Statutes in effect prior to October 1, 2011, and Section 36a-671(b) of the Connecticut General Statutes as in effect after October 1, 2011; (2) CLA make restitution of those sums obtained as a result of CLA’s violation of Section 36a-671(b); and (3) a civil penalty of $550,000 be imposed upon CLA.

Notice of Intent to Issue Order to Cease and Desist and Notice of Intent to Impose Civil Penalty

On May 28, 2014, the Commissioner issued a Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing (“Notice”) in the Matter of:  Bridgepoint Mortgage LLC (NMLS # 1009871) (“Respondent”), Orange, Connecticut.  The Notice was the result of an investigation by the Consumer Credit Division.  The Commissioner alleges that Respondent failed to file certain annual information required on the Nationwide Mortgage Licensing System and Registry, in violation of Section 36a-534b(c)(3) of the Connecticut General Statutes.  Respondent was afforded an opportunity to request a hearing on the allegations set forth in the Notice.

Notice of Automatic Suspension, Temporary Order to Cease and Desist, Notice of Intent to Revoke Consumer Collection Agency License and Notice of Intent to Issue Order to Cease and Desist

On May 28, 2014, the Commissioner issued a Notice of Automatic Suspension, Temporary Order to Cease and Desist, Notice of Intent to Revoke Consumer Collection Agency License, Notice of Intent to Issue Order to Cease and Desist and Notice of Right to Hearing (“Notice”) in the Matter of:  NCC Recovery, Inc. (“Respondent”), Victorville, California.  The Notice was the result of an investigation by the Consumer Credit Division.  The Commissioner alleges that Respondent failed to maintain a surety bond that runs concurrently with the period of its consumer collection agency license for its office located at 12550 Hesperia Road, Suite 212, Victorville, California, in violation of Section 36a-802(a) of the 2014 Supplement to the General Statutes.  The Commissioner also found that public welfare required the issuance of a Temporary Order to Cease and Desist.  Respondent was afforded an opportunity to request a hearing with regard to the allegation set forth in the Notice.

Consent Order

On May 28, 2014, the Commissioner entered into a Consent Order with NE Moves Mortgage, LLC (NMLS # 2584) (“NE Moves Mortgage”), Waltham, Massachusetts.  The Consent Order was based on an investigation by the Consumer Credit Division.  As a result of such investigation, the Commissioner alleged that NE Moves Mortgage changed the address of its branch office specified on its most recent filing with the Nationwide Mortgage Licensing System and Registry (“NMLS”) and failed to file such change with NMLS at least 30 calendar days prior to such change, and, in connection with such address change, failed to provide, directly to the Commissioner, a bond rider or endorsement, or addendum, as applicable, to the surety bond on file with the Commissioner that reflects the address of the branch office, in violation of Section 36a-490(b) of the Connecticut General Statutes.  As part of the Consent Order, NE Moves Mortgage paid $500 as a civil penalty.

Dated:  Tuesday, June 17, 2014