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HAI KHOA DANG
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ORDER TO CEASE AND DESIST AND NOTICE OF RIGHT TO HEARING DOCKET NO. CD-16-8075-S |
I. PRELIMINARY STATEMENT
| 1. | 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. |
| 2. | Pursuant to Section 36b-26(a) of the Act, the Commissioner, through the Securities and Business Investments Division of the Department of Banking, has conducted an investigation into the activities of Hai Khoa Dang (“Respondent”) to determine if Respondent has violated, is violating or is about to violate provisions of the Act or Regulations (“Investigation”). |
| 3. |
As a result of the Investigation, the Commissioner has reason to believe that Respondent has violated certain provisions of the Act. |
| 4. | As a result of the Investigation, the Commissioner has reason to believe that a basis exists to issue a cease and desist order against Respondent pursuant to Section 36b-27(a) of the Act. |
II. RESPONDENT
| 5. | Respondent is an individual whose addresses last known to the Commissioner are: 6 Bancroft Lane, South Windsor, Connecticut 06074; P.O. Box 583, Hartford, Connecticut 06141; and 253 Asylum Street, Hartford, Connecticut 06103. Respondent was registered as a broker-dealer agent under the Act at various times from October 23, 1996 to December 31, 2006, and as an investment adviser agent under the Act at various times from April 14, 2000 to December 31, 2006. From November 14, 2003 to December 31, 2006, Respondent was registered as a broker-dealer agent of Investors Capital Corp. (CRD #30613) (“ICC”) under the Act; and from June 16, 2005 to December 31, 2006, Respondent was registered as an investment adviser agent of ICC under the Act. Respondent’s Form U5 dated December 20, 2006 reflects “Non-renewal” (of registration) as the reason for Respondent’s termination of registration. |
III. STATEMENT OF FACTS
| 6. | In June 2006, while registered as a broker-dealer agent of ICC and without notice to ICC, Respondent asked one of his ICC customers (“Customer A”), a Connecticut resident who was also a personal friend of Respondent, to lend Respondent money to invest in real estate. Specifically, on June 15, 2006 Respondent, on behalf of Nine Properties, LLC, a Connecticut limited liability company, executed a promissory note for $130,000 in favor of Customer A (“Note 1”). Respondent signed Note #1 as the manager of Nine Properties, LLC. On the same day, Respondent asked Customer A to lend money to a third party (“Third Party”) who was purportedly a relative of Respondent. The loan was evidenced by a second promissory note for $50,000 (“Note #2”), which Respondent signed as Power of Attorney for the Third Party. It was Customer A’s understanding that Note #1 and Note #2 were personal loans to Respondent. |
| 7. | At no time did Respondent disclose to or seek permission from ICC to borrow money from Customer A by executing Note #1 or Note #2. |
| 8. | After Respondent ceased working at ICC, Respondent stayed in touch with Customer A and assisted her in opening a brokerage account at TD Ameritrade in May 2007. From approximately May 2007 to approximately December 2009, Respondent made investment recommendations to Customer A regarding her TD Ameritrade account and assisted her in managing that account, though Respondent did not receive any compensation for this assistance. Between May 2007 and December 2009, Customer A’s TD Ameritrade account suffered significant trading losses. |
| 9. | On December 19, 2012, Customer A filed a customer complaint with FINRA against Respondent and ICC alleging, inter alia, that: (i) Respondent borrowed money from Customer A in violation of FINRA rules; (ii) ICC should have known that Respondent was improperly borrowing money from Customer A and should have warned Customer A of the same; and (iii) Customer A suffered investment losses that occurred in her TD Ameritrade account after Respondent terminated his association with ICC. FINRA Dispute Resolution Arbitration No. 12-04300. On October 28, 2015, ICC and Customer A entered into a Settlement Agreement and Mutual Release, wherein Customer A was paid $137,500 by ICC. |
IV. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST
a. Engaging in Dishonest or Unethical Practices in the
Securities Business Within the Meaning of Section 36b-31-15b(a)(1)
of the Regulations – Borrowing Money from a Firm Client
Absent Notice to Employing Broker-Dealer
| 10. | Paragraphs 1 through 9, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 11. |
Respondent’s borrowing money from a brokerage client’s account absent notice to Respondent’s employing firm, as more fully described in paragraphs 6 through 8, inclusive, constitutes a dishonest or unethical practice in the securities business within the meaning of Section 36b-31-15b(a)(1) of the Regulations and thus forms a basis for an order to cease and desist to be issued against Respondent under Section 36b-27(a) of the Act. |
b. Engaging in Dishonest or Unethical Practices in the
Securities Business Within the Meaning of Section 36b-31-15b(c)
of the Regulations – Outside Business Activity
| 12. | Paragraphs 1 through 11, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 13. |
FINRA Rule 3270 states in pertinent part that, “[n]o registered person may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, unless he or she has provided prior written notice to the member.” |
| 14. | Respondent engaged in dishonest or unethical practices in the securities business by engaging in outside business activity absent written notice to ICC, as more fully described in paragraphs 6 through 8. Such conduct constitutes a dishonest or unethical business practice within the meaning of Section 36b-31-15b(c) of the Regulations and thus forms a basis for an order to cease and desist to be issued against Respondent under Section 36b-27(a) of the Act. |
V. ORDER TO CEASE AND DESIST
AND NOTICE OF RIGHT TO HEARING
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Respondent has engaged in a [sic] dishonest or unethical practices in the securities business within the meaning of Sections 36b-31-15b(a)(1) and 36b-31-15b(c) of the Regulations;
WHEREAS, the Commissioner further finds that the issuance of an Order to Cease and Desist is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policies and provisions of the Act;
WHEREAS, the Commissioner ORDERS that HAI KHOA DANG CEASE AND DESIST from directly or indirectly engaging in dishonest or unethical practices in the securities business;
THE COMMISSIONER FURTHER ORDERS THAT, pursuant to Section 36b-27 of the Act, Respondent will be afforded an opportunity for a hearing on the allegations set forth above if a written request for a hearing is received by the Department of Banking, Securities and Business Investments Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800 within fourteen (14) days following Respondent’s receipt of this Order. To request a hearing, complete and return the enclosed Appearance and Request for Hearing Form to the above address. If Respondent will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as “pro se”. If a hearing is requested, the hearing will be held on January 19, 2017, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
The hearing will be held in accordance with the provisions of Chapter 54 of the General Statutes of Connecticut. At such hearing, Respondent will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.
If Respondent does not request a hearing within the time period prescribed or fails to appear at any such hearing, the allegations herein against Respondent will be deemed admitted. Accordingly, the Order to Cease and Desist shall remain in effect and become permanent against Respondent.
| Dated at Hartford, Connecticut, | _____/s/____________ | |
| this 29th day of November 2016. | Jorge L. Perez | |
| Banking Commissioner |
CERTIFICATION
I hereby certify that on this 29th day of November 2016, I caused to be mailed by certified mail, return receipt requested, the foregoing Order to Cease and Desist and Notice of Right to Hearing to Hai Khoa Dang at: 6 Bancroft Lane, South Windsor, Connecticut 06074, certified mail no. 7012 3050 0000 6997 6353; P.O. Box 583, Hartford, Connecticut 06141, certified mail no. 7012 3050 0000 6997 6360; 273 Asylum Street, Hartford, Connecticut 06103, certified mail no. 7012 3050 0000 6997 6377; and Hai Khoa Dang c/o Aaron L. Gersten, Esq., Gersten & Gersten, LLP, 818 Farmington Avenue, West Hartford, Connecticut 06119, certified mail no. 7012 3050 0000 6997 6384.
| ___/s/_____ | |
| W. C. Hall | |
| Paralegal |