SECURITIES AND BUSINESS INVESTMENTS DIVISION ACTIVITY
Amended and Restated Order to Cease and Desist, Notice of Intent to Revoke
Registration as a Broker-dealer, Notice of Intent to Revoke Registration
as a Broker-dealer Agent, Notice of Intent to Revoke Registration
as an Investment Adviser Agent and Notice of Intent to Fine Issued
On June 1, 2011, the Banking Commissioner issued an Amended and Restated Order to Cease and Desist and Notice of Intent to Fine against Wadsworth Investment Co., Inc., a registered broker-dealer located at 879 Church Street, Route 68, Wallingford, Connecticut; Portfolio Timing Service d/b/a PTS Asset Management, an SEC-registered investment adviser sharing the same address as Wadsworth Investment Co., Inc.; William F. Wadsworth, a control person of both Wadsworth Investment Co., Inc. and Portfolio Timing Service; and William F. Wadsworth, Jr., the national sales manager for Portfolio Timing Service. Also on June 1, 2011, the Banking Commissioner issued an Amended and Restated Notice of Intent to Revoke the registration of Wadsworth Investment Co., Inc. as a broker-dealer in Connecticut; the registrations of William F. Wadsworth as a broker-dealer agent and investment adviser agent; and the registration of William F. Wadsworth, Jr. as a broker-dealer agent. Similar relief had been sought by the agency in an August 11, 2010 action against the respondents. An administrative hearing relating to that action is pending.
As amended, the June 1, 2011 action alleged that all of the respondents engaged in fraudulent, dishonest or unethical practices by using or permitting the use of pre-signed blank client forms; calling or allowing other employees to call mutual funds and use false identities to gain client information that otherwise would have been denied to them; and posing or permitting others to pose as clients to obtain access to a third party mutual fundís online client accounts.
The amended action also alleged that the respondents, with the exception of William F. Wadsworth, Jr., made misrepresentations to investors to induce them to switch from one mutual fund family to another. The respondents allegedly failed to mention that investors would incur substantial fees to make the switch; that the original fund had taken steps to terminate its agreement with Wadsworth Investment Co., Inc. and Portfolio Timing Service; and that William F. Wadsworth and his family would not be paying any fees to make the switch.
In addition, the amended action alleged that Wadsworth Investment Co., Inc. 1) wilfully violated Section 36b-14(a) of the Connecticut Uniform Securities Act and Section 36b-31-14a of the Regulations thereunder by failing to maintain complete and accurate books and records and make those records available to the Commissioner; 2) wilfully violated Section 36b-14(d) of the Act and Section 36b-31-14f of the Regulations by failing to make required books and records available to the department upon its request; 3) wilfully violated Section 36b-31-6f of the Regulations by failing to enforce and maintain adequate supervisory procedures; 4) wilfully violated Section 36b-31-14e(a) of the Regulations by failing to notify the Commissioner of ownership changes affecting its business; and 5) wilfully violated Section 36b-31-15e of the Regulations by permitting an unregistered individual to serve as its Chief Compliance Officer.
The amended action also alleged that 1) respondents William F. Wadsworth and William F. Wadsworth, Jr. violated Section 36b-23 of the Act by making materially false or misleading statements in a department investigation; 2) respondent Portfolio Timing Service violated Section 36b-23 of the Act by denying that it maintained custody of client funds when that was not the case; and 3) respondents Wadsworth Investment Co., Inc., Portfolio Timing Service and William F. Wadsworth violated Section 36b-16 of the Act by selling unregistered securities of DECA ONE.
The respondents were afforded an opportunity to request a hearing on the amended and restated allegations.
Dated: Tuesday, June 7, 2011