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COLUMBUS ADVISORY * * * * * * * * * * * * * * * * * * |
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CONSENT ORDER No. CO-14-8172-S |
I. PRELIMINARY STATEMENT
WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the General Statutes of Connecticut, the Connecticut Uniform Securities Act (“Act”), and Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies (“Regulations”) promulgated under the Act;
WHEREAS, Columbus Advisory Group, Ltd. (“Columbus”) is a broker-dealer registered under the Act since September 9, 2003, with its principal office located at 150 East 58th Street, 14th Floor, New York, New York 10155, and a branch office located at 246 Wolcott Road, Suite #9, Wolcott, Connecticut 06716 (Branch CRD # 521444) (“Connecticut Branch Office”);
WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, conducted an examination of Columbus and the Connecticut Branch Office pursuant to Section 36b-14(d) of the Act and Section 36b-31-14f of the Regulations (“Examination”) and a related investigation pursuant to Section 36b-26(a) of the Act (“Investigation”) to determine whether Columbus had violated, was violating or was about to violate provisions of the Act or Regulations or any order thereunder;
WHEREAS, as a result of the Examination and Investigation, the Division obtained evidence that: 1) Columbus employed an individual at its main office who engaged in “cold-calling” and who asked qualifying questions to at least one Connecticut investor at a time when the individual was not registered as an agent under the Act; (2) Columbus employed an individual at its main office who utilized research materials, sales presentations and/or sales scripts in a misleading manner; (3) Columbus employed an unregistered agent at the Connecticut Branch Office who conducted securities transactions from Connecticut. On January 30, 2014, such agent became registered under the Act; and (4) Columbus’ Written Supervisory Procedures (“WSPs”) were deficient because they failed to delineate the activities in which nonregistered personnel could and could not engage and because the WSPs lacked guidelines, including appropriate restrictions and prohibitions, regarding the use of scripts, sales materials and research; the exercise of due diligence; and limitations on the types of representations and recommendations that could be made to prospective clients;
WHEREAS, the Commissioner has reason to believe that the foregoing conduct violates certain provisions of the Act and Regulations, and would support administrative proceedings against Columbus under Sections 36b-15 and 36b-27 of the Act;
WHEREAS, an administrative proceeding initiated under Sections 36b-15 and 36b-27 of the Act would constitute a “contested case” within the meaning of Section 4-166(2) of the General Statutes of Connecticut;
WHEREAS, Section 4-177(c) of the General Statutes of Connecticut and Section 36a-1-55(a) of the Regulations provide that a contested case may be resolved by consent order, unless precluded by law;
WHEREAS, Section 36b-31(a) of the Act provides, in pertinent part, that “[t]he commissioner may from time to time make . . . such . . . orders as are necessary to carry out the provisions of sections 36b-2 to 36b-34, inclusive”;
WHEREAS, Section 36b-31(b) of the Act provides, in pertinent part, that “[n]o . . . order may be made . . . unless the commissioner finds that the action is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of sections 36b-2 to 36b-34, inclusive”;
WHEREAS, Columbus has represented to the Division that it has revised its WSPs to include specific guidelines regarding permissible activities for registered and non-registered personnel;
WHEREAS, Columbus has represented to the Division that it has revised its WSPs to require that all sales materials and “scripts” be reviewed by the firm’s Compliance staff before those materials could be used by agents in sales presentations to prospective Connecticut investors;
WHEREAS, without holding a hearing and without trial or adjudication of any issue of fact or law, and prior to the initiation of any formal proceeding, the Commissioner and Columbus reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
WHEREAS, Columbus expressly consents to the Commissioner’s jurisdiction under the Act and to the terms of this Consent Order;
WHEREAS, the Commissioner finds that the entry of this Consent Order is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of the Act;
AND WHEREAS, Columbus, through its execution of this Consent Order, specifically represents and agrees that none of the violations alleged in this Consent Order shall occur in the future.
II. CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, Columbus, through its execution of this Consent Order, voluntarily waives the following rights:
| 1. | To be afforded notice and an opportunity for a hearing within the meaning of Sections 36b-27 and 36b-15(f) of the Act and Section 4-177(a) of the General Statutes of Connecticut; |
| 2. | To present evidence and argument and to otherwise avail itself of Sections 36b-27 and 36b-15(f) of the Act and. Section 4-177c(a) of the General Statutes of Connecticut; |
| 3. | To present its position in a hearing in which it is represented by counsel; |
| 4. | To have a written record of the hearing made and a written decision issued by a hearing officer; and |
| 5. | To seek judicial review of, or otherwise challenge or contest the matters described herein, including the validity of this Consent Order. |
III. ACKNOWLEDGEMENT OF THE COMMISSIONER'S ALLEGATIONS
WHEREAS, Columbus, through its execution of this Consent Order, acknowledges the following allegations of the Commissioner and admits sufficient evidence exists for the Commissioner to issue an order to cease and desist, an order suspending or revoking Columbus’ registration as a broker-dealer in Connecticut, and an order imposing a maximum administrative fine of one hundred thousand dollars ($100,000) per violation of the Act, or any regulation, rule or order adopted or issued under the Act:
| 1. | Columbus engaged in dishonest or unethical business practices within the meaning of Section 36b-31-15a(b) of the Regulations by employing an individual who engaged in “cold-calling” at least one Connecticut investor and asking qualifying questions at a time when the individual was not registered as an agent under the Act; |
| 2. | Columbus violated Section 36b-4 of the Act and engaged in dishonest or unethical business practices within the meaning of Section 36b-31-15a(20) of the Regulations by employing an agent who used research materials, sales presentations and/or sales scripts in a misleading manner; |
| 3. | Columbus violated Section 36b-6(b) of the Act by employing an agent who was not registered under the Act; and |
| 4. | Columbus violated Section 36b-31-6f of the Regulations by failing to establish, enforce and maintain a system for supervising the activities of its agents and its Connecticut branch office operations reasonably designed to achieve compliance with applicable securities laws and regulations. |
WHEREAS, the foregoing conduct would support administrative proceedings against Columbus under Sections 36b-15(a)(2)(B), 36b-15(a)(2)(H) and 36b-15(a)(2)(K) of the Act as well as subsections (a) and (d) of Section 36b-27 of the Act;
AND WHEREAS, Columbus acknowledges the possible consequences of an administrative hearing and voluntarily agrees to consent to the entry of the sanctions described below.
IV. CONSENT TO ENTRY OF SANCTIONS
WHEREAS, Columbus, through its execution of this Consent Order, consents to the Commissioner’s entry of an order imposing on it the following sanctions:
| 1. | Columbus, its representatives, agents, employees, affiliates, assigns, and successors in interest shall cease and desist from engaging in conduct constituting or which would constitute a violation of the Act or any regulation, rule or order adopted or issued under the Act, either directly or through any person, organization or other device, including without limitation: (a) employing unregistered personnel who engage in “cold-calling” Connecticut clients and prospective clients and asking those clients and prospective clients qualifying questions, (b) permitting its agents to utilize research materials, sales presentations and/or sales scripts in a misleading manner, (c) employing unregistered agents to transact securities business in or from Connecticut, and (d) failing to establish, enforce and maintain a system for supervising the activities of its agents and its Connecticut branch office operations that is reasonably designed to achieve compliance with applicable securities laws and regulations. |
| 2. | No later than the date this Consent Order is entered by the Commissioner, Columbus shall remit to the Department, by cashier’s check, certified check or money order made payable to “Treasurer, State of Connecticut”, the sum of five thousand dollars ($5,000) as an administrative fine; and |
| 3. | Columbus will reimburse the Division for the cost of a future regulatory examination to be conducted within twenty-four months (24) following the entry of this Consent Order, the cost of which examination shall not exceed three thousand five hundred dollars ($3,500). |
V. CONSENT ORDER
NOW THEREFORE,
the Commissioner enters the following:| 1. | The Sanctions set forth above be and are hereby entered; |
| 2. | Entry of this Consent Order by the Commissioner is without prejudice to the right of the Commissioner to take enforcement action against Columbus based upon a violation of this Consent Order or the matters underlying its entry, if the Commissioner determines that compliance with the terms herein is not being observed or if any representations made by Columbus and reflected herein are subsequently discovered to be untrue; |
| 3. | Nothing in this Consent Order shall be construed as limiting the Commissioner’s ability to take enforcement action against Columbus based upon evidence of which the Division was unaware on the date hereof relating to a violation of the Act or any regulation or order under the Act; and |
| 4. | This Consent Order shall become final when entered. |
| So ordered at Hartford, Connecticut, | _______/s/_________ | |
| this 26th day of November 2014. | Howard F. Pitkin | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, Michael Murphy, state on behalf of Columbus Advisory Group, Ltd., that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of Columbus Advisory Group, Ltd.; that Columbus Advisory Group, Ltd. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Columbus Advisory Group, Ltd. consents to the entry of this Consent Order.
| Columbus Advisory Group, Ltd. | |
| By: | _____/s/________________ |
| Michael Murphy | |
| Title CEO |
State of: New York
County of: Nassau
On this the 6 day of November 2014 before me, Michael Murphy [sic], the undersigned officer, personally appeared [blank in original], who acknowledged him/herself to be the President / CEO of Columbus Advisory Group, Ltd., and that he/she, as such [blank in original], being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by him/herself as President / CEO.
In witness whereof I hereunto set my hand.
| _____/s/____________________ |
| Michael O. Bunsis |
| Notary Public |
| Date Commission Expires: 3/17/15 |