State of Connecticut Department of Banking

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The Department of Banking News Bulletin 

Bulletin # 2762
Week Ending January 27, 2017

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 Jorge L. Perez, 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 CREDIT UNION ACTIVITY

Main Office Relocation

On January 26, 2017, pursuant to Section 36a-463b of the Connecticut General Statutes, America’s First Network Credit Union received approval to relocate its main office from 75 Merritt Blvd., Trumbull, Connecticut, to 50 Commerce Drive, Trumbull, Connecticut.

CONSUMER CREDIT ACTIVITY

Consent Order

On January 17, 2017, the Commissioner entered into a Consent Order with Village Capital & Investment LLC (NMLS # 3317) (“Village Capital”), Henderson, Nevada.  The Consent Order was based on an investigation by the Consumer Credit Division.  As a result of such investigation, the Commissioner alleged that from January 2015 to August 2016, Village Capital, while licensed as a mortgage lender, acted as a mortgage servicer while neither licensed nor exempt from morgage servicer licensure, in violation of Section 36a-718 of the 2016 Supplement to the General Statutes.  To resolve the matter, Village Capital complied with the necessary requirements pursuant to Section 36a-719c of the 2016 Supplement to the General Statutes and paid a civil penalty of $10,000.

SECURITIES AND BUSINESS INVESTMENTS DIVISION ACTIVITY

Broker-dealer Agent and Investment Adviser Agent Registrations Revoked;
Permanent Bar Imposed

On January 26, 2017, the Banking Commissioner entered a Consent Order (No. CO-17-8312-S) with respect to John William Rafal who had been the founder, President and Chief Executive Officer of Essex Financial Services, Inc. (“EFS”).  The 2017 Consent Order resolved allegations against Rafal contained in an August 19, 2016 Order to Cease and Desist, Notice of Intent to Revoke Registration as a Broker-dealer Agent, Notice of Intent to Revoke Registration as an Investment Adviser Agent, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-16-8312-S).  Rafal had also been the subject of a related November 23, 2015 Consent Order (No. CO-15-8158) alleging that Rafal engaged in dishonest or unethical practices in the securities business by 1) improperly and knowingly authorizing the payment of advisory referral fees by EFS to a third party attorney whom Rafal knew was not registered as an investment adviser agent of EFS under the Connecticut Uniform Securities Act; and 2) requesting that the attorney provide EFS with an itemized invoice mischaracterizing the services the attorney would perform for EFS. Among other things, the November 23, 2015 Consent Order fined Rafal $25,000.

The August 19, 2016 administrative action had alleged that, at all times prior to the entry of the 2015 Consent Order, Rafal represented and led the Commissioner to believe that the third party attorney was no longer in possession of any money or compensation relating to advisory referrals.  The August 19, 2016 administrative action was based on new evidence, undisclosed to the agency by Rafal, and obtained from the Securities and Exchange Commission.  That evidence indicated that, in April 2013, and notwithstanding EFS’ instruction that the attorney not receive advisory referral fees while unregistered, Rafal took it upon himself to personally pay the attorney the referral fees.  The attorney deposited the payments which included reimbursement for the referral fee refund the attorney previously made to EFS.  The attorney’s receipt of the payments stood in stark contrast to Rafal’s prior representations to the Commissioner, representations that had led the Commissioner to believe the attorney no longer possessed any referral-based money or compensation.  Consequently, the August 19, 2016 action alleged that Rafal violated Section 36b-23 of the Connecticut Uniform Securities Act by making materially misleading statements or omissions.  The action also alleged that Rafal engaged in dishonest or unethical practices in the securities business.
  
Following the initiation of the Commissioner’s August 19, 2016 proceeding, on January 6, 2017, the Securities and Exchange Commissioner barred Rafal from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and required that Rafal pay a civil money penalty of $275,000, disgorgement of $275,000 and prejudgment interest of $27,297.72 to the SEC (SEC Administrative Proceeding File No. 3-17760).  In addition, on November 29, 2016 Rafal agreed to plead guilty (“Guilty Plea”) in the United States District Court for the District of Massachusetts to one count of violating 18 U.S.C. Section 1505 (obstruction of justice, a felony) (United States of American v. John William Rafal, Case No. 1:17-cr-10004).

The January 26, 2017 Consent Order revoked Rafal’s registration as a broker-dealer agent and an investment adviser agent in Connecticut.  In addition, the 2017 Consent Order permanently barred Rafal from 1) transacting business in or from Connecticut as a broker-dealer, agent, investment adviser or investment adviser agent; 2) acting in any other capacity requiring a license or registration from the Commissioner; and 3) absent the consent of the Commissioner, holding any position as a director, officer, employee or independent contractor with any Connecticut-chartered bank or credit union or any federal bank or credit union having a Connecticut principal office or with a holding company that holds a subsidiary that is a bank as defined in Section 36a-2 of the Connecticut General Statutes.  The January 26, 2017 Consent Order also fined Rafal an additional $15,000 and required that he cease and desist from regulatory violations.

 

Dated: Tuesday, January 31, 2017


Jorge L. Perez
Banking Commissioner