Securities and Business Investments Division
Securities Bulletin

Vol. XXXV Nos. 2 and 3 - Summer and Fall 2021

Features

• Commissioner Announces Some Onsite Exams to Resume in Q4
• Electronic Payments Made Directly to Agency Should Should Use Automated Clearance House (ACH) Funds Transfer
• Quarterly Statistical Summaries

Enforcement and Other Highlights

• Administrative Actions
• Consent Orders
• Stipulation and Agreements

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BANKING COMMISSIONER ANNOUNCES CONTINUATION OF REMOTE EXAMINATIONS AND RESUMPTION OF SOME ON-SITE/HYBRID EXAMINATIONS DURING FINAL QUARTER OF 2021

During the COVID pandemic, the Department of Banking paused on-site examinations and switched to a remote examination model.  After careful consideration, the Commissioner has determined that, starting in the final quarter of 2021, the agency will once again conduct on-site examinations of its regulated entities.  These entities include, but are not limited to, broker-dealers and investment advisers, consumer credit licensees, state-charted banks and credit unions and other non-depository institutions.  The agency will closely monitor and reassess this decision and make appropriate adjustments should circumstances change.

Given the agency’s overriding concern with the health and safety of industry members as well as the agency’s own employees, strict precautions will be implemented.  The agency will follow the guidance developed by the CDC (Centers for Disease Control and Prevention) and its partner, OSHA (Occupational Safety and Health Administration), as well as the Connecticut Department of Public Health (DPH), in helping to minimize COVID-19 exposure risks.  Entities being examined are expected to do the same.  Guidance by the CDC is located at https://www.cdc.gov.  The OSHA guidance may be found at https://www.osha.gov.  The DPH offers COVID-19 resources and guidance at https://portal.ct.gov/DPH.  In addition, we will also do our best to accommodate any protocols or policies a regulated entity may have.

Agency staff displaying COVID symptoms or evidence of COVID exposure (direct or indirect) will not be permitted to participate in an on-site examination.  During the examination, agency personnel will wear masks and maintain social distancing of at least six (6) feet.

While the examination is being conducted, requested records should be provided in an electronic format whenever possible to limit physical interaction and maintain social distancing.  Depending on both the length of time needed to fully conduct the examination and the timeliness of records production, the examination may consist of both on-site and remote components.  We will continue to rely as much as possible on electronic and other strategies to minimize actual time spent on site.

Situations may also arise where, due to the nature of the entity’s business, a remote examination would be more expedient.  This announcement is not intended to supplant the agency’s ability to conduct remote examinations in such instances.  The Department reserves the right to change course at any time depending on circumstances.

ELECTRONIC PAYMENTS MADE DIRECTLY TO AGENCY SHOULD USE AUTOMATED CLEARANCE HOUSE (ACH) FUNDS TRANSFER

As a result of the pandemic, many staffers in the Securities and Business Investments Division of the State of Connecticut Department of Banking have been working remotely.  We have relied to a greater extent on technology and on electronic payments when processing filings coming directly to our office.  Such filings are distinguishable from those made through NASAA’s Electronic Filing Depository System (“EFD”) and FINRA’s Central Registration Depository and Investment Adviser Registration Depository which are treated differently.  Filings coming directly to our office include, without limitation, mutual fund filings, securities registration filings, private placement filings not made through the EFD System and business opportunity registration filings.

For operational and cost-savings reasons, the Division is advising direct filers that electronic payments should be made through the Automated Clearing House (ACH) network rather than via wire transfer.  Funds relayed by wire transfer typically involve a fee imposed on the person initiating the payment and the person receiving the payment.  In addition, wire transfers are more difficult to reverse if there is a problem.

If you opt to pay electronically (versus via paper check), please contact us at dob.ar@ct.gov for account details and specifics.  In making the ACH payment, be sure to include the issuer’s (or business opportunity seller’s) name on the transfer documentation (e.g., under Description or Beneficiary).

Remember that we receive a large number of filings, and we want to make sure we can match your payment with your filing to ensure proper credit.  Substantial processing delays may result if we cannot do so.  When you make your direct filing, add a notation advising us when you made your ACH payment, the type of filing, the amount remitted and the applicable reference number.

Please feel free to e-mail us at dob.sec-reg@ct.gov if you have any questions or concerns.

 

Administrative Actions

Jax Acquisitions II LLC

On July 6, 2021, the Banking Commissioner entered an Order Imposing Fine (Docket No. CF-21-8397-S) against Jax Acquisitions II LLC of 2101 Vista Parkway, Suite 125, West Palm Beach, Florida 33411.  The company's main business was to raise money to acquire and renovate a multi-family property in Jacksonville, Florida.  Jax Acquisitions II LLC did not appear or contest the Commissioner's imposition of the fine, and the order was entered by default.

Jax Acquisitions II LLC had been the subject of an April 9, 2021 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing alleging that, beginning in 2010, the company violated Section 36b-16 of the Connecticut Uniform Securities Act by selling unregistered limited liability company units to three Connecticut investors. The Order to Cease and Desist, being uncontested, had become permanent on June 7, 2021.

The July 6, 2021 Order Imposing Fine adopted the allegations in the April 9, 2021 action as findings, and imposed a $100,000 fine against Jax Acquisitions II LLC.

CV Brokerage, Inc. (CRD No. 462)

On July 1, 2021, the Banking Commissioner entered an Order Revoking and Canceling Registration as Broker-dealer (Docket No. NRC-21-20205-S) with respect to CV Brokerage, Inc. of 1521 East Malaga Road, Williamstown, New Jersey 08094.  The firm did not appear or contest the Commissioner's revocation and cancellation of its registration, and the order was entered by default.

The July 1, 2021 revocation and cancellation action had been preceded by a May 27, 2021 Notice of Intent to Revoke and Cancel Registration as a Broker-dealer and Notice of Right to Hearing whose allegations were deemed admitted as a result of the firm’s default.  The May 27, 2021 action had alleged that 1) on March 13, 2020, the Financial Industry Regulatory Authority (“FINRA”) expelled the firm from membership for failing to pay fines and/or costs; 2) the firm's broker-dealer registration had been terminated, canceled or revoked in approximately 32 jurisdictions other than Connecticut; 3) none of the firm's direct owners and executive officers were registered as agents of the firm in any jurisdiction; 4) the firm no longer had any agents registered under the Connecticut Uniform Securities Act; and 5) the firm failed to respond to multiple written communications from the department concerning the agency's regulatory concerns.  The May 27, 2021 action had further alleged that the FINRA expulsion supported revoking the firm's broker-dealer registration under Section 36b-15 of the Connecticut Uniform Securities Act, and that the firm's apparent cessation of business supported the entry of an order canceling the firm's registration.

Travis Smith (CRD No. 4778832)

On April 22, 2021, the Banking Commissioner entered an Order Imposing Fine (Docket No. CRF-21-8433-S) against Travis Smith of Hamden, Connecticut.  Smith, a former broker-dealer agent and investment adviser agent, was also the managing member and control person of Executive Consulting Group LLC, an inactive Connecticut entity.  The Order Imposing Fine had been preceded by a March 26, 2021 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-21-8433-S).  The March 26, 2021 action had alleged that, while Smith was registered as a broker-dealer agent and an investment adviser agent under the Connecticut Uniform Securities Act, he made arrangements with three Connecticut residents to manage their money without notifying his employing firm.  Smith allegedly persuaded the affected investors to invest their monies in securities issued by Woodbridge Group of Companies, LLC and its affiliates (collectively, "Woodbridge").  Woodbridge compensated Smith for the sales.  The action further alleged that Smith misappropriated a portion of investor monies and channeled them to Executive Consulting Group LLC's bank account for his personal use.  The affected investors were not advised of, nor did they consent to, the transfer.

Since Travis Smith had not requested a hearing on the Order to Cease and Desist and the Order to Make Restitution, each of those orders had become permanent as to him on April 14, 2021.

Travis Smith also did not request a hearing on the Notice of Intent to Fine.  Accordingly, the Order Imposing Fine was entered by default.

Adopting as finding the allegations in the March 26, 2021 action, the Commissioner fined Travis Smith $300,000.  Among other things, the Commissioner found that Travis Smith committed at least one violation of Section 36b-16 of the Act by selling unregistered securities, at least one violation of the antifraud provisions in Section 36b-4(a) of the Act, at least one violation of Section 36b-4(b) of the Act by engaging in dishonest or unethical conduct, at least one violation of Section 36b-6(a) of the Act by transacting business as an unregistered agent of issuer and at least one violation of Section 36b-23 of the Act by failing to disclose his involvement with Woodbridge in regulatory filings.

Consent Orders

Fernando Manuel Paiva (CRD No. 2821278)

On September 27, 2021, the Banking Commissioner entered a Consent Order (No. CO-21-201914443-S) with respect to Fernando Manuel Paiva, a former registered broker-dealer agent of Davinci Capital Management, Inc.  The Consent Order alleged that Paiva violated Section 36b-31-14e(a) of the Regulations under the Connecticut Uniform Securities Act by failing to amend his registration filings to disclose 1) that he also worked out of an unregistered branch office of the firm in Hartford, Connecticut; and 2) that had had an unsatisfied judgment or lien against him.  The judgment was later satisfied.

The Consent Order fined Paiva $5,000 and directed that he cease and desist from regulatory violations.

Richard Louis Bonnanzio and NorthOne Capital Partners, LLC

On September 20, 2021, the Banking Commissioner entered a Consent Order (No. CO-21-10632-S) with respect to Richard Louis Bonnanzio of Madison, Connecticut  Also named in the Consent Order was NorthOne Capital Partners, LLC, a now defunct commercial lending company formerly located at 224 Cornfield Road, Milford, Connecticut and co-founded by Bonnanzio.  The Consent Order alleged that the Respondents violated Section 36b-16 of the Connecticut Uniform Securities Act by offering and selling unregistered securities that were structured as a “General Services Agreement” and purportedly accompanied by standby letters of credit.  The securities were sold from Connecticut to a resident of Canada who invested $125,000 with the Respondents with the expectation that he would receive two standby letters of credit in the amount of $50 million.  The Consent Order also alleged that the Respondents violated the antifraud provisions in Section 36b-4 of the Act by falsely representing to the affected investor that his $125,000 investment would be returned if the letters of credit were not procured.  In addition, the Consent Order alleged that Bonnanzio violated Section 36b-23 of the Act by making materially false or misleading statements to the Commissioner during an investigation.

The Consent Order directed the Respondents to cease and desist from regulatory violations.  In addition, the Consent Order barred Respondents from 1) offering or selling securities in or from Connecticut; 2) transacting business in or from Connecticut as a broker-dealer, agent, investment adviser or investment adviser agent; and 3) acting in any other capacity requiring a license or registration from the Commissioner.

Based on Respondents’ documented inability to pay the $100,000 fine and $125,000 in restitution that otherwise would have been imposed against them, the Commissioner temporarily stayed enforcement of those penalties for three years.  After three years, if Respondents were still unable to make payment, the fine would be waived but the obligation to pay restitution would remain in force.

Commonwealth Equity Services, LLC d/b/a Commonwealth Financial Network (CRD No. 8032)

On September 17, 2021, the Banking Commissioner entered a Consent Order (No. CO-21-202023-S) with respect to Commonwealth Equity Services, LLC, a Connecticut-registered broker-dealer located at 29 Sawyer Road, Waltham, Massachusetts 02453-3483.

The Consent Order alleged that the firm violated Section 36b-31-6f(b) of the Regulations under the Connecticut Uniform Securities Act by failing to establish, enforce and maintain a system for supervising the activities of its agents that was reasonably designed to achieve regulatory compliance.  More specifically, the Consent Order alleged that the firm should have taken greater measures to ensure that a since-deceased Connecticut client, whom the firm allegedly knew was suffering from mild cognitive decline, fully understood the ramifications of changing the beneficiaries on his brokerage account before the firm removed two of the client’s three children as beneficiaries.

The Consent Order fined the firm $20,000 and directed it to cease and desist from regulatory violations.

Stipulation and Agreements

Mountain Vista Wealth Management, LLC (IARD No. 290456)

On August 13, 2021, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-21-202129-S) with Mountain Vista Wealth Management, LLC, a Connecticut-registered investment adviser.  The firm maintains its principal office at 1514 Anacapa Street, Suite C, Santa Barbara, California 93101.  The Stipulation and Agreement alleged that from approximately September 14, 2018 to June 11, 2021, the firm violated Section 36b-6(d) of the Connecticut Uniform Securities Act by transacting business from an unregistered branch office located at 4 Prospect Street, Ridgefield, Connecticut 06877.  The Ridgefield branch office became registered on June 11, 2021 after the agency brought the matter to the firm's attention.

In resolution of the matter, Mountain Vista Wealth Management, LLC agreed to refrain from regulatory violations and to pay a $2,500 fine to the department.

Abbington Investment Group, LLC (IARD No. 174407)

On August 9, 2021, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-21-20211-S) with Abbington Investment Group, LLC, a Connecticut-registered investment adviser located at 251 Riverside Avenue, Westport, Connecticut 06880.  Prior to May, 2021, the firm was based in Boston, Massachusetts.  The Stipulation and Agreement alleged that, from approximately October 2019 through December 21, 2020, the firm violated Section 36b-6(d) of the Connecticut Uniform Securities Act by transacting business from an unregistered branch office in Connecticut.  The unregistered branch office was located at 251 Riverside Avenue, Westport, Connecticut. The firm cured the violation by registering the Westport branch, and the branch office registration was later terminated when the firm moved its main office to the Westport site.

In resolution of the matter, the firm agreed to refrain from regulatory violations and to pay a $2,500 fine to the agency.

 

Statistical Summary