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IN THE MATTER OF: (Collectively, "Respondents") * * * * * * * * * * * * * * * * * * |
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CONSENT ORDER |
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 promulgated under the Act (“Regulations”);
WHEREAS, Senior Financial Advisors, Inc. (“SFA”), located at 1 Corporate Drive, Suite 105, Shelton, Connecticut 06484, has been registered as an investment adviser under the Act from March 23, 2006 to December 31, 2015, and from January 12, 2016 to the present;
WHEREAS, William Thomas Leavitt (“Leavitt”) has been registered under the Act as an investment adviser agent of SFA from March 13, 2006 to December 31, 2015, and from January 5, 2017 to the present;
WHEREAS, at all times relevant hereto, Leavitt has been SFA’s President, owner and control person;
WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking (“Department”), conducted an investigation (“Investigation”) pursuant to Section 36b-26(a) of the Act into the activities of Respondents to determine if they had violated, were violating or were about to violate any provision of the Act or Regulations. Such investigation included an examination of SFA’s books and records (“Examination”) pursuant to Section 36b-14(d) of the Act and Section 36b-31-14f of the Regulations;
WHEREAS, as a result of the Examination and Investigation, the Commissioner has reason to believe that Respondents have engaged in conduct, as more fully described herein, that violated certain provisions of the Act and Regulations and that would support administrative proceedings against Respondents under Section 36b-15 of the Act and Section 36b-27 of the Act, as amended by Public Act 17-236;
WHEREAS, as a result of the Examination and Investigation, the Division obtained evidence that:
WHEREAS, as a result of the Examination and Investigation, the Division obtained evidence that:
| 1. | In 2012, the owner of one of SFA’s investment advisory accounts designated Leavitt as the sole trustee of the account (“Account”) upon the owner’s death. When the owner died on October 26, 2014, Leavitt became trustee of the Account and, consequently, SFA, in its capacity as the Account’s investment adviser, had access to the Account’s funds and securities. As a result, SFA had custody of the Account’s funds and securities, and therefore was required, pursuant to Section 36b-31-14e(a) of the Regulations, to amend its investment advisory filings to disclose that SFA had custody of the funds and securities in the Account in 2015 and 2016. SFA failed to amend its investment advisory filings to disclose such custody; | |
| 2. | In March 2016, SFA began doing business as “Senior Financial College Planning,” whose business purpose was to assist students with the college preparation and admissions process, including providing advice to parents of college bound students on how to manage their finances. As a result, pursuant to Section 36b-31-14e(a) of the Regulations, SFA was required to amend its investment advisory filings in 2016 and 2017 to disclose that SFA also conducted business as “Senior Financial College Planning” and to explain the nature of that business. SFA failed to make such amendments to its investment advisory filings; | |
| 3. | Leavitt transacted business as an unregistered investment adviser agent of SFA from January 1, 2016 to January 4, 2017; and | |
| 4. | Leavitt failed to amend his Form U4 (Uniform Application for Securities Industry Registration or Transfer) to disclose that, beginning in March 2016, Leavitt, through SFA, began doing business as “Senior Financial College Planning”. |
WHEREAS, once the Division put the Respondents on notice of the above, Respondents made the following corrective and amended filings:
| 1. | On January 5, 2017, Leavitt filed for and became registered as an investment adviser agent of SFA; | ||||||||||
| 2. | On June 7, 2017, SFA filed an amendment to its Form ADV (Uniform Application for Investment Adviser Registration), wherein it disclosed the following information:
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| 3. | On June 8, 2017, Leavitt filed an Amendment to his Form U4, wherein he disclosed under “Question 13 Other Business” that: (a) he has been a licensed independent insurance agent since 1995; (b) since 2016, he has been doing business as Senior Financial College Planning, which offers college planning services that may include referrals to an entity for compensation which helps students with the college preparation and admissions process; and (c) he has been a Trustee for a trust since 2014 and receives compensation for these duties. |
WHEREAS, Leavitt maintains that his failure to register as an investment adviser agent was not intentional;
WHEREAS, SFA, through its execution of this Consent Order, specifically represents to the Commissioner that at all times both before and during the time when Leavitt was Trustee of the Account, the funds and securities held for the Account were maintained in compliance with the Act and the Regulations;
WHEREAS, on December 10, 2017, Leavitt transferred the trusteeship of the Account to a third party, and therefore Leavitt no longer has custody of the Account’s funds and securities;
WHEREAS, Section 36b-31(a) of the Act provides, in relevant 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 relevant 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, an administrative proceeding initiated under Section 36b-15 of the Act and Section 36b-27 of the Act, as amended, would constitute a “contested case” within the meaning of Section 4-166(4) 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, 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 Respondents reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
WHEREAS, Respondents expressly consent to the Commissioner’s jurisdiction under the Act and to the terms of this Consent Order;
WHEREAS, the issuance 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, Respondents, through their execution of this Consent Order, specifically assure the Commissioner that none of the violations alleged in this Consent Order shall occur in the future.
II. CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, Respondents, through their execution of this Consent Order, voluntarily waive the following rights:
| 1. | To be afforded notice and an opportunity for a hearing within the meaning of Section 36b-15 of the Act, Section 36b-27 of the Act, as amended, and Section 4-177(a) of the General Statutes of Connecticut; |
| 2. | To present evidence and argument and to otherwise avail themselves of Section 36b-15 of the Act, Section 36b-27 of the Act, as amended, and Section 4-177c(a) of the General Statutes of Connecticut; |
| 3. | To present their position in a hearing in which each 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 or otherwise challenge or contest the validity of this Consent Order. |
III. ACKNOWLEDGEMENT OF THE COMMISSIONER'S ALLEGATIONS
WHEREAS, Respondents, through their execution of this Consent Order, acknowledge the following allegations of the Commissioner, without admitting or denying them, yet admit that, if proven, such allegations would support administrative proceedings seeking the entry of an order to cease and desist, an order suspending or revoking SFA’s registration as an investment adviser in Connecticut, an order suspending or revoking Leavitt’s registration as an investment adviser agent in Connecticut, and/or 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, based on the following:
| 1. | SFA violated Section 36b-31-14e(a) of the Regulations by failing to amend its Form ADV to reflect that it had custody of an advisory client’s cash, bank accounts and/or securities; | |
| 2. | SFA violated Section 36b-31-14e(a) of the Regulations by failing to amend its Form ADV to reflect that it was doing business as Senior Financial College Planning; | |
| 3. | SFA violated Section 36b-6(c)(3) of the Act by engaging an unregistered investment adviser agent; | |
| 4. | Leavitt violated Section 36b-6(c)(2) of the Act by transacting business in this state as an unregistered investment adviser agent; and | |
| 5. | Leavitt violated Section 36b-31-14e(a) of the Regulations by failing to amend his Form U4 to disclose that Leavitt, through SFA, was doing business as Senior Financial College Planning; |
WHEREAS, the Commissioner would have the authority to enter findings of fact and conclusions of law after granting Respondents an opportunity for a hearing;
AND WHEREAS, Respondents acknowledge the possible consequences of an administrative hearing and voluntarily agree to the terms of this Consent Order as described below.
IV. CONSENT TO ENTRY OF SANCTIONS
WHEREAS, Respondents, through their execution of this Consent Order, consent to the Commissioner’s entry of a Consent Order imposing the following sanctions:
| 1. | SFA shall cease and desist from engaging in conduct constituting or which would constitute a violation of the Act or any regulation or order under the Act, either directly or through any person, organization or other device, including without limitation, failing to file a Form ADV Amendment whenever its Form ADV becomes inaccurate or incomplete in any material respect for any reason, and engaging an unregistered investment adviser agent; |
| 2. | Leavitt shall cease and desist from engaging in conduct constituting or which would constitute a violation of the Act or any regulation or order under the Act, either directly or through any person, organization or other device, including without limitation, transacting business as an unregistered investment adviser agent and failing to amend his Form U4 whenever his Form U4 becomes inaccurate or incomplete in any material respect for any reason; |
| 3. | Within six months of the entry of this Consent Order, SFA shall complete a full review of its written supervisory procedures and update and revise them, as necessary, to ensure that SFA is compliant with Section 36b-31-5b of the Regulations (Custody or possession of client funds or securities) and all other applicable regulatory requirements; and |
| 4. | No later than the date this Consent Order is entered by the Commissioner, Respondents shall remit to the Department by cashier’s check, certified check or money order made payable to “Treasurer, State of Connecticut,” the sum of ten thousand dollars ($10,000), which shall constitute an administrative fine. SFA and Leavitt shall be jointly and severally liable for the remittance of the administrative fine. |
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 Respondents 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 representation made by either Respondent and set forth herein is subsequently determined to be untrue; |
| 3. | Nothing in this Consent Order shall be construed as limiting the Commissioner’s ability to take enforcement action against either Respondent 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; |
| 4. | Respondents shall not take any action or make or permit to be made any public statement, including in regulatory filings, any proceeding in any forum or otherwise, denying, directly or indirectly, any allegation referenced in this Consent Order or create the impression that this Consent Order is without factual basis; |
| 5. | Respondents shall not take any position in any proceeding brought by or on behalf of the Commissioner, or to which the Commissioner is a party, that is inconsistent with any part of this Consent Order. Nothing is this provision affects Respondents’ testimonial obligations or right to take a legal or factual position in litigation or other legal proceeding in which the Commissioner is not a party; and |
| 6. | This Consent Order shall become final when entered. |
| So ordered at Hartford, Connecticut, | ____/s/_____________ | |
| this 15th day of December 2017. | Jorge L. Perez | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, William Thomas Leavitt, state on behalf of Senior Financial Advisors, Inc., 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 Senior Financial Advisors, Inc.; that Senior Financial Advisors, Inc. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Senior Financial Advisors, Inc. consents to the entry of this Consent Order.
| Senior Financial Advisors, Inc. | ||
| _____/s/_____________ | ||
| By: | William Thomas Leavitt | |
| President |
State of: Connecticut
County of: Fairfield
On this the 13 day of December 2017, before me, the undersigned officer, personally appeared William Thomas Leavitt, who acknowledged himself to be the President of Senior Financial Advisors, Inc., a corporation, and that he, as such President, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as President.
In witness whereof I hereunto set my hand.
| ____/s/________________________ |
| Notary Public |
| Date Commission Expires: 07/31/2020 |
CONSENT TO ENTRY OF ORDER
I, William Thomas Leavitt, state that I have read the foregoing Consent Order; that I know and fully understand its contents; that I agree freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that I consent to the entry of this Consent Order.
| _____/s/___________ | |
| William Thomas Leavitt |
State of: Connecticut
County of: Fairfield
On this the 13 day of December 2017, before me, the undersigned officer, personally appeared William Thomas Leavitt, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained.
In witness whereof I hereunto set my hand.
| ____/s/_________________________ |
| Notary Public |
| Date Commission Expires: 07/31/2020 |