Securities and Business Investments Division
Securities Bulletin

Vol. XXXIV No. 2 - Summer 2020

• Quarterly Statistical Summaries

Enforcement and Other Highlights

• Administrative Actions
• Consent Orders
• Stipulation and Agreements
• Other Orders

ADMINISTRATIVE ACTIONS

Solace Investments, LLC and Rafael Alves Muzzi 

On June 25, 2020, the Banking Commissioner issued an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-20-8411-S) against Solace Investments, LLC of 90 Church Street, Naugatuck, Connecticut 06770 and Rafael Alves Muzzi, the sole member of Solace Investments, LLC.

The action alleged that from at least January 2017 to June 2018, Muzzi, individually and through Solace Investments, LLC, raised approximately $800,000 from at least 25 investors primarily located in Connecticut for the purpose of pooling  investor funds to invest in FOREX accounts managed by Muzzi to trade currency. The action also alleged that, from at least January 2017, in connection with offers and sales of the FOREX investments, Muzzi, directly and through Solace Investments, LLC 1) represented to investors that their money would be invested in FOREX investments when, in reality, only a portion of such investments were ever made; 2) failed to disclose to investors the amount of investor monies that Muzzi failed to invest and that he kept for himself; and 3) mailed monthly account statements to investors that did not accurately reflect the true status and transactional history of such accounts.  The respondents also failed to disclose to prospective investors any risk factors related to the FOREX investments, including financial information on Muzzi or Solace Investments, LLC; the fact that respondents would use a portion of investor monies for personal expenses and to pay off earlier investors or that the FOREX investments were not registered under the Connecticut Uniform Securities Act.

The Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine alleged that respondents violated the antifraud provisions in Section 36b-4(a) of the Connecticut Uniform Securities Act; engaged in dishonest or unethical practices in violation of Section 36b-4(b) of the Act; and sold unregistered securities in violation of Section 36b-16 of the Act.  

The respondents were afforded an opportunity to request a hearing on the allegations in the action.

Erin Lynn Verespy (CRD No. 2727866)

On June 25, 2020, the Banking Commissioner issued an Order to Cease and Desist, Notice of Intent to Fine, Notice of Intent to Revoke Registrations as a Broker-dealer Agent and an Investment Adviser Agent and Notice of Right to Hearing (Docket No. NRCDF-20-8507-S) against Erin Lynn Verespy of Trumbull, Connecticut.  Respondent Verespy was previously registered as a broker-dealer agent and investment adviser agent of HD Vest Investment Services and HD Vest Advisory Services, Inc., respectively, until June 2019 when filings to withdraw her registrations in all jurisdictions became effective.  Connecticut law permits the Commissioner to initiate revocation proceedings within one year after a withdrawal becomes effective.

The action alleged that respondent Verespy 1) engaged in dishonest or unethical business practices by failing to provide HD Vest with written notice of outside business activity in which she was engaged; 2) violated Section 36b-31-14e of the Regulations under the Connecticut Uniform Securities Act by failing to amend her regulatory filings to disclose pending civil litigation involving a Connecticut client; and 3) engaged in dishonest or unethical business practices by borrowing money from a Connecticut customer without the customer's prior consent and without notice to her employing firm.  The action acknowledged that, following the initiation of litigation by the affected Connecticut customer, respondent Verespy agreed to pay the customer back $800,000.  The payment was to be made pursuant to an agreed-upon settlement between the parties.

Respondent Verespy was afforded an opportunity to request a hearing on the allegations in the action.

James Thomas Booth (CRD No. 1906145) Fined $100,000; Broker-dealer Agent and Investment Adviser Agent Registrations Revoked

On June 18, 2020, the Banking Commissioner entered an Order Revoking Registration as a Broker-dealer Agent and Investment Adviser Agent and Order Imposing Fine (Docket No. CDFR-20-8535-S) against James Thomas Booth of Norwalk, Connecticut.  Booth had been the subject of a February 14, 2020 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine, Notice of Intent to Revoke Registration as a Broker-dealer Agent and Investment Adviser Agent and Notice of Right to Hearing (Docket No. CDFR-20-8535-S).  Also named in that action was Insurance Trends, Inc., an entity controlled by Booth.  The February 14, 2020 action had alleged that, from 2013 to 2019, Booth violated the antifraud provisions in Section 36b-4(a) of the Connecticut Uniform Securities Act and engaged in dishonest or unethical  practices while associated with his past two employing firms.  More specifically, respondent Booth allegedly solicited firm clients to invest in outside opportunities and send their funds to Insurance Trends, Inc.  The action had also alleged that respondent Booth then used investor funds for his personal expenses and that he fabricated client account statements to reflect investments that were, in fact, never made.  Booth allegedly misappropriated approximately $5 million in investor funds.

Since respondent Booth did not request a hearing on the Order to Cease and Desist and the Order to Make Restitution, those orders became permanent as to him on March 12, 2020.

Similarly, respondent Booth did not request a hearing on the Notice of Intent to Fine or the Notice of Intent to Revoke Registration as a Broker-dealer Agent and as an Investment Adviser Agent.  Consequently, the Commissioner’s June 18, 2020 order was entered by default.  Adopting as findings the allegations in the February 14, 2020 action, the Commissioner fined Booth $100,000 and revoked Booth’s broker-dealer agent and investment adviser agent registrations.

Insurance Trends, Inc. Fined $100,000

On June 18, 2020, the Banking Commissioner entered an Order Imposing Fine (Docket No. CDFR-20-8535-S) against Insurance Trends, Inc. of Norwalk, Connecticut, an unregistered entity controlled by James Thomas Booth (CRD No. 1906145).  Insurance Trends, Inc. had been the subject of a February 14, 2020 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CDFR-20-8535-S).  James Thomas Booth was also named in that action.  The February 14, 2020 action had alleged that, from 2013 to 2019, Booth violated the antifraud provisions in Section 36b-4(a) of the Connecticut Uniform Securities Act by allegedly soliciting firm clients to invest in outside opportunities and send their funds to Insurance Trends, Inc. which operated as a conduit  Booth then purportedly used investor funds for his personal expenses and fabricated client account statements to reflect investments that were, in fact, never made.

Since respondent Insurance Trends, Inc. did not request a hearing on the Order to Cease and Desist and the Order to Make Restitution, those orders became permanent as to it on March 12, 2020.

Similarly, respondent Insurance Trends, Inc. did not request a hearing on the Notice of Intent to Fine.  Consequently, the Commissioner’s June 18, 2020 order was entered by default.  Adopting as findings the allegations in the February 14, 2020 action, the Commissioner fined Insurance Trends, Inc. $100,000.

Joseph Gatano D'Arrigo (CRD No. 2001666) Fined $100,000

On June 4, 2020, the Banking Commissioner entered an Order Imposing Fine (Docket No. CRF-20-8480-S) against Joseph Gatano D'Arrigo, Co-Founder and Chief Executive Officer of Native American Energy Group, Inc., a purported development stage company specializing in oil, natural gas and alternative energy systems.  Native American Energy Group, Inc. was located at 61-43 186th Street, Suite 507, Fresh Meadows, New York 11365.

D'Arrigo, together with Native American Energy Group, Inc., Raj S. Nanvaan and J.R. Bautista, Jr., had been the subject of a January 28, 2020 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-20-8480-S).  The January 28, 2020 action alleged that the respondents violated the antifraud provisions in Section 36b-4(a) of the Connecticut Uniform Securities Act by failing to disclose to investors that the proceeds from their investment in Native American Energy Group, Inc. were actually being wired out to D’Arrigo, Nanvaan and Bautista rather than being used to invest in oil or gas investments.

Since respondent D'Arrigo failed to request a hearing on the allegations, the Order to Cease and Desist and Order to Make Restitution became permanent as to him on May 21, 2020.  Similarly, respondent D'Arrigo did not request a hearing on the Notice of Intent to Fine, and the June 4, 2020 Order Imposing Fine was therefore entered by default.  Finding that D'Arrigo violated Section 36b-4(a) of the Connecticut Uniform Securities Act, the Commissioner fined D'Arrigo $100,000.

ARO Equity, LLC – Order Imposing $300,000 Fine Issued

On May 14, 2020, the Banking Commissioner entered an Order Imposing Fine (Docket No. CRF-19-8426-S) against ARO Equity, LLC of 41 Pine Street, #17, Peabody, Massachusetts 01960.  ARO Equity, LLC, a self-described “private investment fund”, had been the subject of a January 9, 2020 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-19-8426-S).  Also named in the January 9, 2020 action were Thomas David Renison, an undisclosed principal of ARO Equity, LLC, and Thomas James Renison, a member and owner of the fund.

The January 9, 2020 action had alleged that from approximately August 2015, ARO Equity, LLC violated Section 36b-16 of the Connecticut Uniform Securities Act by offering and selling over $5.8 million of unregistered “fixed rate promissory notes” purportedly paying returns ranging from 8% to 12% to investors in Connecticut, Massachusetts, Tennessee and New Jersey.  Many of those investors were elderly retirees who tapped their retirement savings to make the investments.   The action also alleged that ARO Equity, LLC violated the antifraud provisions in Section 36b-4(a) of the Act by failing to disclose, among other things 1) that, contrary to respondents’ representations concerning the use of investment proceeds, investor monies were really being used to pay off earlier investors as well as ARO Equity, LLC’s business expenses and Thomas David Renison’s personal expenses; 2) the specific risk factors related to the investments; 3) Thomas David Renison’s prior disciplinary history; and 4) the precise business and operating history of ARO Equity, LLC and its affiliates.  In addition, the action alleged that ARO Equity, LLC violated Section 36b-6(b) of the Act by employing an unregistered agent of issuer.

Since ARO Equity, LLC did not request a hearing on the Order to Cease and Desist or the Order to Make Restitution, each of those orders became permanent as to it on January 30, 2020.  Similarly, ARO Equity, LLC did not request a hearing on the Notice of Intent to Fine and the Order Imposing Fine was entered by default.  Adopting as findings the allegations in the January 9, 2020 action, the Commissioner found that ARO Equity, LLC violated Sections 36b-4(a), 36b-6(b) and 36b-16 of the Act, and directed ARO Equity, LLC to pay a $300,000 fine to the department.

 
CONSENT ORDERS

Merrill Lynch, Pierce, Fenner & Smith Incorporated (CRD No.7691)

On June 23, 2020, the Banking Commissioner entered a Consent Order (Docket No. CO-20-8249-S) with respect to Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), a Connecticut-registered broker-dealer.  The Consent Order alleged that the firm violated Section 36b-31-6f of the Regulations under the Connecticut Uniform Securities Act by failing to enforce its established procedures for supervising the activities of its agents, investment adviser agents and Connecticut office operations.  More specifically, the firm allegedly failed to supervise a former agent who, during his tenure with the firm, engaged in unauthorized trading; used the firm's e-mail system in connection with an unapproved private securities transaction; and incorrectly marked trade tickets as unsolicited.  The Consent Order acknowledged that, in 2015, the firm paid $450,000 in restitution to the Connecticut investor adversely affected by the former agent's unauthorized trading.  The Consent Order also alleged that Merrill Lynch violated Section 36b-14 of the Connecticut Uniform Securities Act by maintaining inaccurate books and records regarding solicited trades.

The Consent Order directed the firm to cease and desist from regulatory violations and pay a $150,000 fine to the department within thirty days.  In addition, the Consent Order required that Merrill Lynch remit an additional $250,000 to the agency to be applied, at the discretion of the Commissioner, to investor education, staff training and education material.

TPEG Securities, LLC (CRD No. 146726)

On June 8, 2020, the Banking Commissioner entered a Consent Order (No. CO-20-8473-S) with respect to TPEG Securities, LLC, a broker-dealer located at 925 South Kimball Avenue, Suite 100, Southlake, Texas 76092.  The firm has been registered as a broker-dealer in Connecticut since 2015.  The Consent Order alleged that, from 2010 to 2018, the firm violated Section 36b-16 of the Connecticut Uniform Securities Act by selling securities for which no registration or exemption filing had been made.  The Consent Order also alleged that, from approximately 2010 to 2015, the firm transacted business as a broker-dealer in Connecticut absent registration in violation of Section 36b-6(a) of the Act.

The Consent Order directed the firm to cease and desist from regulatory violations and to pay $8,950 to the department.  Of that amount, $7,500 constituted an administrative fine and $1,450 represented reimbursement for past due broker-dealer registration fees.

Glenn Bradford Johnson (CRD No. 4333813), Annmarie Lucy Savona (CRD No. 2688571) and Jabez Financial, LLC (CRD No. 292819)

On May 29, 2020, the Banking Commissioner entered a Consent Order (No. CO-20-8460-S) with respect to Glenn Bradford Johnson of Niantic, Connecticut, Annmarie Lucy Savona of Waterford, Connecticut and Jabez Financial, LLC, a Connecticut-registered investment adviser located at 251 West Main Street, Niantic, Connecticut 06357.  Johnson is the president and control person of Jabez Financial, LLC, a single member limited liability company.

The Consent Order alleged that from approximately August 2016 to November 2017, Johnson and Savona sold $2.65 million of unregistered interests in various investment funds offered by Woodbridge Group of Companies, LLC d/b/a Woodbridge Wealth to approximately 22 Connecticut residents and two Massachusetts residents.  Woodbridge Group of Companies, LLC, based in California, was a defendant in a civil action brought by the Securities and Exchange Commission alleging that it operated a purported Ponzi scheme.  For their role in selling interests in the Woodbridge Funds, Johnson and Savona received $123,082.43 in commissions and reimbursement of costs from Woodbridge Group of Companies, LLC.  The Consent Order alleged that Johnson and Savona violated Section 36b-16 of the Connecticut Uniform Securities Act by selling unregistered securities and that they transacted business as unregistered agents of issuer in contravention of Section 36b-6(a) of the Act.

The Consent Order directed Johnson and Savona to cease and desist from regulatory violations and to jointly and severally disgorge the $123,082.43 in commissions they earned to affected investors.  The disgorgement fund would be established through outside legal counsel, with $30,000 funded outright and the balance contributed in four equal installments of $23,270.60, the last being remitted on or before September 21, 2020.

While the Consent Order contemplated that Johnson and Savona would jointly and severally liable for a $30,000 administrative fine, collection of that fine would be stayed for three years subject to Johnson and Savona providing updated financial documentation demonstrating their continuing inability to pay the fine.  After three years, payment of the fine would be permanently waived.

The Consent Order also permanently barred Savona from transacting business in Connecticut as a broker-dealer, agent, investment adviser or investment adviser agent and from acting in any other capacity requiring a license or registration from the Commissioner.

In addition, the Consent Order limited the investment advisory activities that Johnson and Jabez Financial, LLC could perform.  More specifically, 1) for 2 years Johnson and Jabez Financial, LLC would be prohibited from exercising discretionary trading authority with respect to client accounts and from maintaining custody or control of client funds or securities; and 2) for three years, Johnson and Jabez Financial, LLC would be required to limit their investment advisory activity to limited securities, investment company securities, commercial paper, certificates of deposit, corporate debt securities, United States and municipal securities and insurance products subject to regulation by the Connecticut Insurance Commissioner.

Great Heritage Investments, LLC (CRD No. 288521) and George Henry Messier (CRD No. 1005894) – Consent Order Entered

On April 27, 2020, the Banking Commissioner entered a Consent Order (Docket No. CO-20-8436-S) with respect to Great Heritage Investments, LLC of 14 Main Street South, Woodbury, Connecticut 06798 and George Henry Messier, Chief Compliance Officer of the firm.  Great Heritage Investments, LLC is registered as an investment adviser under the Connecticut Uniform Securities Act and George Messier is registered as an investment adviser agent of the firm in Connecticut.  The Respondents had been the subject of a December 19, 2019 Order to Cease and Desist, Notice of Intent to Restrict or Impose Conditions on Securities or Investment Advisory Activities and Notice of Intent to Fine (Docket No. CRNDF-19-8436-S).

The December 19, 2019 action had alleged that, contrary to Section 36b-5(b)(1) of the Act, the firm failed to enter into signed investment advisory agreements with its clients; that the firm violated Section 36b-5 of the Act and Section 36b-31-5a of the Regulations by disseminating misleading advertising and performance representations; that the firm failed to maintain the records required by Section 36b-14(a)(1) of the Act and Section 36b-31-14b of the Regulations; that, in violation of Section 36b-23 of the Act, respondents made materially misleading statements in filings made with the Commissioner; and that respondents failed to update their regulatory filings as required by Section 36b-31-14e of the Regulations.

The Consent Order directed the Respondents to cease and desist from regulatory violations and required that they jointly and severally pay a $20,000 fine to the department.  $10,000 of that fine would be paid upfront, with the balance payable in installments of $2,000 on the first of every month, commencing on June 1, 2020 and concluding on October 1, 2020.

The Consent Order also required that the firm retain a regulatory consultant to perform on-site compliance reviews for a three year period.  In addition, the Consent Order 1) prohibited Respondents from having custody or control of client funds or securities for three years; 2) required that Respondents submit all advertising to the department for prior review for a three year period; and 3) restricted Respondents' investment advisory activity for three years to securities listed on the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market or the NASDAQ Global Market, securities issued by investment companies regulated under the Investment Company Act of 1940, commercial paper, certificates of deposit, corporate debt securities, municipal securities, United States government securities, and insurance products subject to regulation by the Connecticut Insurance Commissioner.

 
STIPULATION AND AGREEMENTS

Monica Hoyos-Farfan (CRD No. 2757331)

On June 24, 2020, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-20-202010-S) with Monica Hoyos-Farfan of Miami, Florida.  The Stipulation and Agreement alleged that, from August 17, 2015 through December 1, 2016, Hoyos-Farfan violated Section 36b-6(c)(2) of the Connecticut Uniform Securities Act by transacting business as an unregistered investment adviser agent of P-Square Investments LLC and accepting $15,133.50 in post-engagement referral fees, consisting of a portion of the management fee charged to clients, the last fee being paid on February 6, 2020.  Hoyos-Farfan is not currently registered under the securities laws of any jurisdiction.

Pursuant to the Stipulation and Agreement Hoyos-Farfan agreed to cease and desist from regulatory violations and to pay a $500 fine to the department.

P-Square Investments LLC d/b/a P-Squared Capital Management (CRD No. 125794)

On May 29, 2020, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-20-202010-S) with P-Square Investments LLC, a Connecticut-registered investment adviser located at 5 Beechcroft Road, Greenwich, Connecticut 06830.  The Stipulation and Agreement followed an examination of the firm by the agency's Securities and Business Investments Division.  The Stipulation and Agreement alleged that from August 17, 2015 through December 1, 2016, the firm engaged an unregistered investment adviser agent in contravention of Section 36b-6(c)(3) of the Connecticut Uniform Securities Act and continued to pay that individual post-engagement referral fees through February 6, 2020.

In resolution of the matter, the firm agreed to refrain from regulatory violations and to remit $5,000 to the department.  Of that amount, $4,500 constituted an administrative fine and $500 represented reimbursement for past due investment adviser agent registration fees.

ERG Securities (US) LLC (CRD. No. 121057)

On May 21, 2020, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-20-202011-S) with ERG Securities (US) LLC, a Connecticut-registered broker-dealer located at 50 Washington Street, Suite 921, Norwalk, Connecticut 06854.  The Stipulation and Agreement alleged that, commencing in 2018, the firm employed an unregistered broker-dealer agent in violation of Section 36b-6(b) of the Connecticut Uniform Securities Act and, in so doing, failed to effectively establish, enforce and maintain an adequate supervisory system in violation of Section 36b-31-6f(b) of the Regulations under the Act.  The agent in question has since become registered in Connecticut.

In resolution of the matter, the firm agreed to refrain from regulatory violations and to remit $3,250 to the department.  Of that amount $3,000 constituted an administrative fine and $250 represented reimbursement for past due agent registration fees.

 
OTHER ORDERS

Bankers Life and Casualty Company - Order Modifying Consent Order Entered

On April 29, 2020, the Banking Commissioner entered an Order Modifying Consent Order (No. CO-2020-8018-S) with respect to Bankers Life and Casualty Company.  The firm, together with its affiliate, BLC Financial Services, Inc., had been the subject of a June 29, 2012 Consent Order resulting from a multi-state investigation into unregistered broker-dealer activity.  BLC Financial Services, Inc. voluntarily dissolved on December 27, 2012.

The Order Modifying Consent Order acknowledged that certain provisions in the 2012 Consent Order could be construed to unduly impair the ability of insurance industry personnel to fully assess whether insurance products were suitable for their customers.

The 2012 Consent Order had prohibited Insurance Producers from obtaining a copy of consumer statements for securities products; discussing any other aspect of the securities products; or arranging for consumers to meet with persons who were registered to give advice on securities products.  Among other things, the modified Consent Order permitted Insurance Producers to obtain a copy of the consumer’s statements for securities products as part of the insurance factfinding process to the extent that the information was used to give the Insurance Producer reasonable grounds to believe recommendations for insurance-only products were suitable for the consumer.  In addition, the modified Consent Order permitted Insurance Producers to have general discussions concerning diversification of assets, financial objectives, and general market risk differences between insurance and securities products.  However, Insurance Producers could not make recommendations or provide advice concerning the consumer’s specific securities products, compare the consumer’s specific securities or investment performance with other financial products (including annuities or life insurance) or recommend that specific securities be liquidated or used to fund an annuity or life insurance product.  In addition, Insurance Producers would still be required to disclose to consumers that they were not registered to sell securities.

 

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STATISTICAL SUMMARY