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TRADE-PMR INC. * * * * * * * * * * * * * * * * * * |
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CONSENT ORDER No. CO-16-8170-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, Trade-PMR Inc. is a broker-dealer registered under the Act since August 21, 2000, with its principal office located at 2511 NW 41st Street, Gainesville, Florida 32606. According to its website, Trade-PMR Inc.’s only line of business is serving the needs of registered investment advisors;
WHEREAS, J. Capital Advisors Wealth Management (“J. Capital”) (CRD No. 151176) was a Connecticut-based investment adviser that was registered under the Act from February 3, 2010 until October 21, 2013 when the Commissioner revoked the firm’s registration (Docket No. RS-13-8063-S) for engaging in dishonest or unethical practices relating to the deduction of excessive, undisclosed client advisory fees from client accounts. The Commissioner also revoked the investment adviser agent registration of the firm’s president and control person Aaron Jousan Johnson (“Johnson”) (CRD No. 4402048). On July 14, 2014, the Securities and Exchange Commission imposed a permanent bar on Johnson (Docket/Case No.3-15808) in a collateral action;
WHEREAS, Trade-PMR Inc. has cooperated with the Securities and Business Investments Division (“Division”) of the Department of Banking in conducting its investigation of J. Capital and Johnson, in responding to inquiries, providing documentary evidence and other materials, and providing access to facts relating to the investigation;
WHEREAS, on or about April 16, 2010, J. Capital and Johnson set up an RIA Sundry Account with Trade-PMR Inc. Clients of J. Capital and Johnson authorized Johnson to direct Trade-PMR Inc. to deduct advisory fees from their Trade-PMR Inc. brokerage accounts. Under this authority, J. Capital and Johnson directed Trade-PMR, Inc. to pay advisory fees from the clients’ accounts to the RIA Sundry Account;
WHEREAS, the Commissioner, through the Division conducted an investigation pursuant to Section 36b-26(a) of the Act (“Investigation”) to determine whether Trade-PMR Inc. had violated, is violating or was about to violate any provision of the Act or Regulations or any order thereunder;
WHEREAS, as a result of the Investigation, the Division obtained evidence that at various times commencing in June 2010, J. Capital and Johnson directed transfers of excess advisory fees from J. Capital’s client accounts that were held at Trade-PMR Inc. to the RIA Sundry Account. The Division also obtained evidence that Trade-PMR Inc., through inaction or a lack of system monitoring, allowed J. Capital and Johnson to deduct excessive client advisory fees from client accounts. From at least 2011 forward, the frequency and amount of fees J. Capital and Johnson directed Trade-PMR, Inc. to deduct and transfer from the J. Capital’s client accounts at Trade-PMR Inc. increased significantly, in some cases causing a marked depletion of client account holdings. In total, J. Capital and Johnson withdrew approximately $654,000 from J. Capital’s client accounts held at Trade PMR Inc. Each of these transfers was disclosed to the customers at the time that they were made;
WHEREAS, as a result of the Investigation, the Commissioner has reason to believe that Trade PMR Inc. may have violated certain provisions of the Act and Regulations, and that such violations would support administrative proceedings against Trade-PMR Inc. under Sections 36b-15 and 36b 27 of the Act;
WHEREAS, in light of the Division’s Investigation, Trade-PMR Inc. has agreed to the resolution of this matter and represents, through its execution of this Consent Order, that it has enhanced its account monitoring procedures relating to third party investment advisers, including direct fee deduction arrangements;
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, 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(4) of the General Statutes of Connecticut, as amended by Public Act 15-61;
WHEREAS, Section 4-177(c) of the General Statutes of Connecticut and Section 36a-1-55(a) of the Regulations of Connecticut State Agencies 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 Trade-PMR Inc. reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
WHEREAS, Trade-PMR Inc. expressly consents to the Commissioner’s jurisdiction under the Act and to the terms of this Consent Order;
WHEREAS, the Commissioner finds that 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, Trade-PMR Inc., through its execution of this Consent Order, specifically represents and agrees that the alleged violations referenced herein shall not occur in the future.
II. CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, Trade-PMR Inc., 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-15 and 36b-27 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-15 and 36b-27 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 or otherwise challenge or contest the validity of this Consent Order. |
III. ACKNOWLEDGEMENT OF THE COMMISSIONER'S ALLEGATIONS
WHEREAS, Trade-PMR Inc., through its execution of this Consent Order, acknowledges the following allegation of the Commissioner solely for the purpose of settling this matter, without admitting or denying it:
| In contravention of Section 36b-31-6f of the Regulations, Trade-PMR Inc. failed to establish, enforce and maintain an effective compliance and supervisory system for monitoring account activity that would have flagged the deduction of excessive client advisory fees from client accounts by a third party investment adviser. |
WHEREAS, the Commissioner would have the authority to enter findings of fact and conclusions of law after granting Trade-PMR Inc. an opportunity for a hearing;
WHEREAS, this Consent Order is not an acknowledgement or finding of Trade-PMR Inc.’s liability and this Consent Order does not create liability or bases for liability or findings with respect to any person not a party to this Consent Order or for purposes of any private right of action;
WHEREAS, neither this Consent Order nor anything related to it shall toll any statutes of limitations for private civil claims of clients of J. Capital or Johnson;
AND WHEREAS, Trade-PMR Inc. acknowledges the possible consequences of an administrative hearing and voluntarily agrees to the terms of this Consent Order as described below.
IV. CONSENT TO ENTRY OF SANCTIONS
WHEREAS, Trade-PMR Inc., through its execution of this Consent Order, consents to the Commissioner’s entry of a Consent Order imposing the following sanctions:
| 1. | Trade-PMR Inc., 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, by failing to establish, enforce and maintain a compliance and supervisory system reasonably designed to monitor account activity that would flag the deduction of excessive, undisclosed client advisory fees from client accounts by third party investment advisers; | |||||||||
| 2. | Trade-PMR Inc. shall establish, implement and maintain revised written supervisory procedures and update its supervisory systems in order to enhance its procedures in monitoring fee deductions authorized by third party investment advisers to ensure compliance with applicable securities laws and regulations; | |||||||||
| 3. |
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| 4. | In the event of nonperformance or violation by Trade-PMR Inc. of any term or condition addressed to it as set forth in this Consent Order, all of the allegations in this Consent Order are deemed admitted by Trade-PMR Inc. for the purposes of any and all matters and/or actions by and between the Commissioner and Trade-PMR Inc., and Trade-PMR Inc. knowingly, willfully and voluntarily waives its right to notice and an administrative hearing in conjunction therewith. |
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 Trade-PMR Inc. based upon a violation of this Consent Order by Trade-PMR Inc. 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 Trade PMR Inc. and set forth herein is subsequently discovered to be untrue; |
| 3. | Trade-PMR Inc. 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; |
| 4. | Trade-PMR Inc. 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 Trade-PMR Inc.’s (i) testimonial obligations; or (ii) right to take a legal or factual position in litigation or other legal proceeding in which the Commissioner is not a party; |
| 5. | Nothing in this Consent Order shall be construed as limiting the Commissioner’s ability to take enforcement action against Trade-PMR Inc. and/or its affiliates and successors in interest based upon evidence of which the Division was unaware on the date hereof relating to a violation of the Act, Regulations or order under the Act; and |
| 6. | This Consent Order shall become final when entered. |
| So ordered at Hartford, Connecticut, | ____/s/_____________ | |
| this 7th day of July 2016. | Jorge L. Perez | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, Robb W. Baldwin, state on behalf of Trade-PMR 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 Trade-PMR Inc.; that Trade-PMR Inc. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Trade-PMR Inc. consents to the entry of this Consent Order.
Trade-PMR Inc.
_____/s/______________________
By:
Robb W. Baldwin
President and Chief Executive Officer State of: Florida
County of: Alachua
On this the 7 day of July 2016, before me, the undersigned officer, personally appeared Robb W. Baldwin, who acknowledged himself to be the President and Chief Executive Officer of Trade-PMR Inc., and that he, as such President and Chief Executive Officer, 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 and Chief Executive Officer.
In witness whereof I hereunto set my hand.
| ____/s/____________________________ |
| Notary Public |
| Date Commission Expires: April 13, 2018 |