Bulletin # 2649 - Week Ending November 28, 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, Department of Banking, 260 Constitution Plaza, Hartford, CT 06103-1800.  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 certain applications 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 Financial Institutions Division, (860) 240-8180.

CREDIT UNION ACTIVITY

Merger

On November 25, 2014, the Commissioner approved the merger of Sargent & Company Employees Federal Credit Union, a federally chartered credit union, with and into CONNEX Credit Union, Inc., a Connecticut credit union. The merger was approved pursuant to Section 36a-468a of the Connecticut General Statutes.

CONSUMER CREDIT DIVISION ACTIVITY

Order Revoking Consumer Collection Agency License and Order to Cease and Desist

On November 18, 2014, the Commissioner issued an Order Revoking Consumer Collection Agency License and Order to Cease and Desist (“Order”) in the Matter of:  Legacy Customer Management Group, LLC (“Respondent”), Jacksonville, Florida.  The Order was based on Respondent’s failure to maintain a surety bond that runs concurrently with the period of its consumer collection agency license, in violation of Section 36a-802(a) of the 2014 Supplement to the General Statutes.  The Order revokes Respondent’s license to act as a consumer collection agency in Connecticut from 7901 Baymeadows Way, Suite 31, Jacksonville, Florida, and orders Respondent to cease and desist from violating Section 36a-802(a) of the 2014 Supplement to the General Statutes.

Consent Orders

On November 18, 2014, the Commissioner entered into a Consent Order with LMB Mortgage Services, Inc. d/b/a lowermybills.com (“LMB Mortgage”) (NMLS # 167283), Playa Vista, California.  The Consent Order was based on an investigation by the Consumer Credit Division.  As a result of such investigation, the Commissioner alleged that LMB Mortgage changed the address of its main 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 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 new address of the main office, in violation of Section 36a-490(b) of the Connecticut General Statutes  As part of the Consent Order, LMB Mortgage paid $500 as a civil penalty.

On November 18, 2014, the Commissioner entered into a Consent Order with Skyline Financial Corp. d/b/a Skyline Home Loans d/b/a NewLeaf Wholesale d/b/a NewLeaf Lending (“Skyline Financial”) (NMLS # 12072), Calabasas, California.  The Consent Order was based on an investigation by the Consumer Credit Division.  As a result of such investigation, the Commissioner alleged that Skyline Financial removed three (3) “other trade names” 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 removal, 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 removal of such “other trade names”, in violation of Section 36a 490(b) of the Connecticut General Statutes.  As part of the Consent Order, Skyline Financial paid $500 as a civil penalty.

SECURITIES AND BUSINESS INVESTMENTS DIVISION ACTIVITY

Restitutionary Order Upheld Following Hearing; $25,000 Fine Imposed; Order to Cease and Desist Made Permanent

On November 13, 2014, following an administrative hearing, the Banking Commissioner entered Findings of Fact, Conclusions of Law and an Order against Ulysses Partners, LLC, now or formerly of Norwalk, Connecticut, and James E. Neilsen, chief financial officer of the firm.  The intended purpose of Ulysses Partners, LLC was to solicit investments in hedge funds on a compensated basis.  Respondent Neilsen, a former broker-dealer agent, is also a Certified Public Accountant.  The action had been preceded by a January 9, 2014 Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine (Docket No. CRF-13-8014-S) alleging that, 1) from approximately November 2005, to finance the business operations of Ulysses Partners, LLC, respondent Neilsen sold approximately $10 million of securities in the form of notes and investment agreements to Connecticut investors, the majority of whom were accounting clients of respondent Neilsen; 2) Respondent Neilsen allegedly represented to would-be investors that the investment would generate a high rate of return; and 3) investors allegedly did not receive key disclosures concerning, among other things, the risks involved, how the offering proceeds would be used or that the securities were not registered under the Connecticut Uniform Securities Act.  On February 18, 2014, the action was amended to change the end date of the alleged misconduct from December 2010 to September 2011.

After reviewing the evidence, the Commissioner concluded that, between 2005 and 2012, both Ulysses Partners, LLC and James E. Neilsen had violated Section 36b-16 of the Connecticut Uniform Securities Act by selling unregistered securities in the form of promissory notes, subscription agreements and investment agreements to 33 persons who invested approximately $7,438,341 in Ulysses Partners, LLC.  The Commissioner also determined that the respondents, through Neilsen, violated the antifraud provisions of the Act by misrepresenting the anticipated rate of return on the investments; guaranteeing principal; and omitting any type of written disclosure or discussion of risks.  The Commissioner noted that the misrepresentations and omissions were made to investors who had trusted Neilsen for years as their personal and business accountant.  Neilsen reassured investors that Ulysses was profitable and that investors were sure to be millionaires.  In reality, Ulysses Partners, LLC never made a profit.

The November 13, 2014 Order rendered permanent the earlier restitutionary order, but revised the relevant time period to May 2005 through September 2012.  Emphasizing the importance of returning money to investors, the Commissioner noted that, while he was authorized to fine Ulysses Partners, LLC and James E. Neilsen up to $100,000 per violation, the respondents would be fined $25,000, jointly and severally.  The November 13, 2014 also rendered permanent the Order to Cease and Desist issued against both respondents.

Consent Order Entered

On November 26, 2014, the Banking Commissioner entered a Consent Order (No. CO-14-8172-S) with respect to Columbus Advisory Group, Ltd., a Connecticut-registered broker-dealer located in New York, New York, New York  10155.  The firm maintained a branch office at 246 Wolcott Road, Suite #9, Wolcott, Connecticut.  The Consent Order, which resulted from an examination of the firm’s books and records, alleged that the firm 1) engaged in dishonest or unethical business practices by employing an unregistered “cold caller”; 2) violated Section 36b-4 of the Connecticut Uniform Securities Act and engaged in dishonest or unethical business practices by employing an agent who used research materials, sales presentations and/or sales scripts in a misleading manner; 3) violated Section 36b-6(b) of the Act by employing an unregistered agent; and 4) failed to establish, enforce and maintain an adequate supervisory system.  The Consent Order fined the firm $5,000 and directed it to cease and desist from regulatory violations.  In addition, the Consent Order required that the firm reimburse the agency up to $3,500 for the cost of a future regulatory examination to be conducted within 24 months.

Order to Cease and Desist Entered

On November 26, 2014, the Banking Commissioner entered an Order to Cease and Desist and Notice of Right to Hearing (Docket No. CD-14-8081-S) against Andre Paul Young, a former broker-dealer agent and investment adviser agent of MetLife Securities Inc.  Respondent Young was assigned to the 6 Corporate Drive, Shelton, Connecticut branch office of MetLife Securities Inc.  The action alleged that the respondent engaged in dishonest or unethical business practices by lending money to an investment advisory client of MetLife Securities Inc.  The Consent Order also alleged that, while registered as a broker-dealer agent of MetLife Securities Inc., the respondent made improper use of two customers’ monies by not investing those monies in a stock fund but rather depositing customer monies into respondent’s personal bank account.  The Consent Order stated that the respondent had admitted on the record that he had used the customers’ funds to pay his mortgage.  Ultimately, the respondent repaid the clients $45,000 of the $208,400 that the clients had tendered to the respondent.  On April 22, 2013, MetLife Securities Inc. entered into a settlement with the affected clients and reimbursed them $163,400 representing the unpaid balance of the funds they had tendered to respondent Young.

Respondent Young was afforded an opportunity to request a hearing on the Order to Cease and Desist.

Dated:  Tuesday, December 2, 2014

Howard F. Pitkin
Banking Commissioner