DOB: December 1994 Securities Bulletin

Securities and Business Investments Division

Securities Bulletin

Vol. VIII No. 4 December 1994

Features:

Enforcement Highlights:

Contributors:

Ralph A. Lambiase, Division Director
Cynthia Antanaitis, Assistant Director and Bulletin Editor
Eric J. Wilder, Assistant Director
Jeffrey P. Halperin, Senior Administrative Attorney
Louise Hanson, Subscription Coordinator

A WORD FROM THE BANKING COMMISSIONER

In December, 1994, I was appointed Banking Commissioner by Governor John G. Rowland and am very pleased to be here. My thirty years of experience in the banking industry, including eleven years as a bank president and chief executive officer, will be very useful in the management of this department. As the first active banker to be appointed Commissioner in some time, I hope to bring a business perspective on industry issues and government regulation. I look forward, in this dynamic and evolutionary time for the banking and financial services industries, to working with Ralph Lambiase and the dedicated staff of the Securities and Business Investments Division. Together, we will maintain the department's strong tradition of commitment to protecting Connecticut investors.

The Department of Banking has also experienced a number of changes coincidental with a change in administration. The agency has moved to new offices located at 260 Constitution Plaza in Hartford. The Securities and Business Investments Division of the department has implemented a new computer system to better manage its information processing needs. These improvements in office "infrastructure" will enable the agency to more efficiently serve the public.

In an earlier edition of the Securities Bulletin, a status report on securities industry continuing education proposals was published. In February, 1995, the Securities and Exchange Commission approved rules finalizing continuing education proposals, with implementation of the regulatory element of the program to start on July 1, 1995. The Connecticut Department of Banking strongly supports continuing education as a means of reinforcing the industry's high level of professional competence and business conduct and ultimately, providing increased protection to the investing public. Realization of this program's goals promises very positive benefits to both securities brokerage firms and individual investors.

Also included in this issue of the Bulletin is an interpretive release and policy statement addressing the customer information document which broker-dealers and investment advisers must prepare and distribute to clients and customers. The release answers many of the questions which have arisen following the institution of this regulatory requirement in August 1994. The Securities and Business Investments Division welcomes additional comments in this area in its effort to improve investor protection while simultaneously being sensitive to business needs.

-- John P. Burke, Banking Commissioner


INTERPRETIVE RELEASE AND POLICY STATEMENT

Introduction

This release shall clarify the regulatory requirements regarding the customer information document which must be maintained by broker-dealers and investment advisers pursuant to Sections 36-500-482a(b)(2) and 36-500-482b(b)(2) of the Regulations of Connecticut State Agencies promulgated under the Connecticut Uniform Securities Act (the "Regulations") and which must be provided to their customers pursuant to Sections 36-500-484a(a)(8) and 36-500-484c(a)(16) of the Regulations. The release also provides guidance with respect to the time frame to which a broker-dealer must adhere when obtaining margin and option agreements from its customers.

Following the latest revisions to the Regulations which became effective on August 22, 1994, the Securities and Business Investments Division of this department (the "Division") has received several requests for clarification of the aforementioned requirements. Most of the comments received by the Division to date have concerned compliance difficulties regarding (i) the requirement that broker-dealers and investment advisers maintain a "customer information document" for each customer account that is opened where at least one beneficial owner of the account is a natural person located in Connecticut or the account is serviced by a Connecticut office pursuant to Sections 36-500-482a(b)(2) and 36-500-482b(b)(2) of the Regulations and (ii) the fact that the failure to provide a customer with a completed copy of such customer information document within 10 days from the date an account is opened will constitute a dishonest or unethical business practice pursuant to Sections 36-500-484a(a)(8) and 36-500-484c(a)(16) of the Regulations.

Customer Information Document

This department promulgated the regulatory requirements concerning the customer information document in its continuing effort to protect the investing public in Connecticut. In light of interpretive questions which have arisen following the close of the public comment period, the Division will be re-evaluating those sections of the Regulations concerning the customer information document. Pending the outcome of that re-evaluation, this department is issuing this interim release and policy statement.

As a preliminary matter, the Division will not seek enforcement action against a broker-dealer or investment adviser that provides its customers with the customer information document within 15 days from the date an account is opened, as opposed to the current 10 day requirement contained in the Regulations. In addition, only one customer information document will be required to be maintained by a broker-dealer and an investment adviser under common control, even if a customer maintains an account with both the broker-dealer and the investment adviser.

To clarify the scope of the requirements concerning the customer information document, the terms "customer account" and "investment advisory account" as used in Sections 36-500-482a(b)(2) and 36-500-482b(b)(2) of the Regulations, respectively, shall apply only to individual and joint accounts where at least one beneficial owner of the account is domiciled in Connecticut. Therefore, the Division will not take enforcement action against a broker-dealer or investment adviser who does not maintain a customer information document with respect to any account other than an individual or joint account, e.g., trust account, corporate account, pension account, etc. Moreover, the failure to provide the customer with a copy of the completed customer information document within 15 days from the date on which an account, other than an individual or joint account, is opened will not constitute a dishonest or unethical business practice.

Furthermore, the Division will not take any enforcement action against a broker-dealer or investment adviser who does not maintain a customer information document for any account that is serviced by a Connecticut office where the account is entirely owned by one or more individuals not domiciled in Connecticut. Similarly, the failure to provide a customer information document within 15 days from the date on which an account is opened at a Connecticut office for an individual or individuals not domiciled in this state shall not constitute a dishonest or unethical business practice.

The preceding "no-action" positions will not affect the enforcement of all other record keeping requirements contained within the Regulations including the requirement that broker-dealers maintain a securities holding record pursuant to Section 36-500-482a(d)(1) of the Regulations and that investment advisers maintain a list or other record of all accounts in which the investment adviser is vested with any discretionary power with respect to the funds, securities or transactions of such client pursuant to Section 36-500-482b(d)(7) of the Regulations.

The next issue concerns whether the requirement for the maintenance of a customer information document will apply to broker-dealers who do not provide investment advice or make recommendations with respect to the purchase and sale of securities. The Division takes the position that if a broker-dealer does not provide investment advice and does not make recommendations with respect to the purchase and sale of securities, the requirements contained within Sections 36-500-482a(b)(2) and 36-500-484a(a)(8) of the Regulations will be waived. It is the intention of the Division that the requirements concerning the maintenance and the distribution of the customer information document shall not apply to (i) broker-dealers who do not solicit orders or make investment recommendations and only solicit accounts by means of general advertising; (ii) broker-dealers when executing trades for clients of investment advisers where the investment adviser has trading discretion over the account (be advised that the requirements concerning the customer information document will still apply to such investment advisers); or (iii) broker-dealers when effecting transactions solely for direct-marketed mutual funds. Again, the foregoing position will not obviate the need for broker-dealers to comply with the record keeping requirements contained within the Regulations including the maintenance of a securities holding record.

The Division will also waive the requirement for the maintenance of the customer information document for investment advisers who provide investment timing services to individual or joint accounts where the investment adviser does not provide investment advice concerning the customer's initial purchase of securities, and subsequently, only moves customer funds between fully invested positions in the securities that were pre-selected by the customer or by a broker-dealer agent. Again, because the requirement for the maintenance of the customer information document will be waived, such an investment adviser will not be deemed to be engaging in a dishonest or unethical business practice by not providing its customers with a customer information document within 15 days from the date on which an account is opened.

The remaining issue relates to the specific categories of information that must be captured on the customer information document pursuant to Sections 36-500-482a(b)(2) and 36-500-482b(b)(2) of the Regulations. This requirement, generally, shall remain in effect. The Division, however, will not recommend enforcement action against a broker-dealer who does not obtain the information relating to whether the account was solicited and whether the account was opened in connection with an order to purchase or sell a security. Further, it should be noted, that if upon request by a broker-dealer or investment adviser, the customer refuses to provide any of the information required to be obtained, such as annual income, net worth, investment objectives, or prior investment activity, the broker-dealer or investment adviser will satisfy the requirement as to that information by noting such refusal on the customer information document prior to providing it to the customer.

Margin and Option Agreements

In order to maintain consistency between various regulatory schemes imposed upon broker-dealers, the Division will allow broker-dealers an extension of time, from 10 days to 15 days, with respect to the requirement that it obtain a completed margin or option agreement following consummation of the initial transaction in such an account pursuant to Sections 36-500-484a(a)(9) and 36-500-484a(a)(15) of the Regulations.

Conclusion

The Division will continue to monitor and evaluate the effectiveness of the revised requirements authorized by this release in light of the ultimate goal of investor protection. Should the Division determine that any further modifications are required, it may, at any time, rescind or modify any position contained herein.

John P. Burke
Banking Commissioner
March 3, 1995


POLICY STATEMENT CONCERNING THE FILING OF
FINANCIAL STATEMENTS BY APPLICANTS
FOR BROKER-DEALER AND INVESTMENT ADVISER REGISTRATION

Section 36-500-477a(a) of the Regulations under Chapter 672a of the Connecticut General Statutes, The Connecticut Uniform Securities Act, states that:

Each applicant for initial registration as a broker-dealer or investment adviser shall file as part of its application an original statement of financial condition in such detail as to disclose the nature and amount of assets, liabilities and capital as of a date within 60 days of the application filing date.

Section 36-500-477a(a) also provides that, if the applicant is a broker-dealer and has been in business for one year or more, the statement of financial condition must be "examined in accordance with generally accepted auditing standards and reported upon with an opinion expressed by an independent certified public accountant or independent public accountant." Likewise, an audited financial statement would be required for investment advisers who will either 1) have custody or possession of clients' funds or securities or 2) require the prepayment of advisory fees six months or more in advance and in excess of $500 per client. Thus, for certain broker-dealers and investment advisers, not only must the statement of financial condition be recent (i.e. as of a date within 60 days of the application filing date) but audited as well.

Recognizing that strict adherence to Section 36-500-477a(a) of the Regulations may have an inequitable impact on applicants whose fiscal year end is not contemporaneous with the application filing date, the Commissioner has determined that the public interest warrants relief in such instances. Therefore, pursuant to Section 36-500-500c of the Regulations, broker-dealer and investment adviser applicants who otherwise would have been required to obtain audited financial statements no more than 60 days old need not do so if 1) the applicant submits its most recent audited statement of financial condition; and 2) that financial statement is accompanied by an unaudited statement of financial condition as of a date within 60 days preceding the date the application is filed.

This policy statement articulates the Securities and Business Investments Division's current practice relating to this area.


PROBLEMS NOTED WITH BROKER-DEALERS DOING BUSINESS
WITHIN BANKS AND OTHER FINANCIAL INSTITUTIONS

During the last few years , the department has seen a proliferation of brokerage firms entering into networking agreements with banks, credit unions and other financial institutions. Broker-dealers setting up such offices are commonly known as "third party marketers" ("TPMs"). The Securities and Business Investments Division has noted four areas that have caused significant concern regarding TPM activities in Connecticut:

  1. Misrepresentations concerning the nature of investment products sold to Connecticut residents.
  2. Supervisory problems in TPM offices.
  3. Problems with a disproportionate number of complaints by senior citizens.
  4. Registration and books and records deficiencies.

Specifically, the Division has received a number of complaints from Connecticut investors alleging misrepresentation by representatives of TPMs. Complainants have stated that they believed they were purchasing a bank sponsored product with traditional safety features, when in actuality, many of the investments were neither insured, nor guaranteed by the Federal Deposit Insurance Corporation. In some cases, investors felt misled due to the fact that the offering materials and advertisements, especially in the case of bank proprietary products, contained trademarks and service marks of the sponsoring entity. The agency has also received complaints that investors were told that the investment was "just as safe" as a CD. Many of these complaints focused on the sale of government backed securities. Therefore, TPMs should take extra care in explaining the differences between CDs and other investments, especially government backed securities, and in emphasizing that market changes can significantly affect the value of a client's portfolio.

Problems have also arisen concerning the adequacy of supervision of the day-to-day operations of TPM offices. Not having adequate supervisory personnel means that no qualified individual is carefully looking over the activities of the TPM to determine the suitability of customers , that is, whether agents have made sufficient inquiry to "know their customers." In addition, not having adequate supervision in place means that the TPM cannot sufficiently determine if all documents have been properly filled out, whether proper disclosures have been given to the client and whether all regulatory requirements concerning books and records have been met. It is important for TPMs to understand their supervisory duties and that the first line of supervisory responsibility lies with the particular branch manager.

In recent years, a significant number of investor complaints have been filed against TPMs by elderly citizens. Many of these complainants traditionally invested in certificates of deposit in order to have a steady income stream during their retirement years. The interest earned from these CDs supplemented income received through Social Security or pension benefits. The dramatic drop in interest rates over the past few years severely affected many of these elderly complainants. CDs becoming due could not be renewed at the same interest rate, and therefore could not produce sufficient revenue to sustain required income levels. The financial institution would refer individual CD holders directly to the TPM office located within that financial institution. Customers then would be induced to purchase a higher risk investment. Many claimed that they were never informed of, nor did they understand, such concepts as sales charges, up-front fees and/or rear end charges. Nor did they fully comprehend whether the investment earned a fixed rate or was guaranteed. Elderly individuals, with their more pressing need to supplement lost income, became more susceptible to promises of higher rates of return without understanding the risks involved and the sales charges imposed. Extra care should be taken when dealing with the needs of retired citizens on fixed incomes , particularly regarding disclosure of the risks involved in fixed income securities so that such investors can make a proper investment decision.

Finally, during the last two year period, examinations conducted of TPMs uncovered record-keeping deficiencies in 63% of the examinations. Such deficiencies included: 1) failure to maintain updated compliance manuals at the branch locations; 2) failure to maintain commission reports; 3) failure to establish and maintain correspondence files; 4) failure to maintain documentation evidencing the review of incoming and outgoing mail; and 5) failure to maintain sufficient account documentation such as trade confirmations.

All firms are cautioned to review agent and branch office registrations to ensure compliance with state law requirements. The Securities and Business Investments Division will more closely monitor firm observance with branch office registration requirements in particular.


ENFORCEMENT HIGHLIGHTS

ADMINISTRATIVE SANCTIONS

CEASE AND DESIST ORDERS

Ixion Energy, Inc. and Gary A. Pahl (CRD # 856705)

On October 12, 1994, following a Securities and Business Investments Division investigation, the Banking Commissioner issued a cease and desist order (CD-94-2575-S) against Ixion Energy, Inc. of 5580 La Jolla Boulevard, La Jolla, California, and its president, Gary A. Pahl. The Commissioner alleged that during 1993, Pahl offered and sold unregistered non-exempt shares of Ixion Energy, Inc. common stock to Connecticut residents in violation of Section 36-485 of The Connecticut Uniform Securities Act. The Commissioner also alleged that the respondents violated the antifraud provisions in Section 36-472 of the Act by 1) falsely representing to Connecticut residents that the stock was to be listed on NASDAQ and would therefore increase in value, and 2) failing to disclose any financial risks associated with the investment. Since neither respondent requested a hearing within the prescribed time period, the Order became permanent as to both respondents on October 29, 1994.

EDI Financial, Inc. (CRD #15699)

On December 15, 1994, following a Securities and Business Investments Division investigation, the Banking Commissioner issued a cease and desist order (CD-94-2309-S) against EDI Financial, Inc. of Irving, Texas. The Commissioner alleged that from August 1993 to March 1994, while the respondent was not registered as a broker-dealer under former Section 36-474(a) of The Connecticut Uniform Securities Act, it effected securities transactions for Connecticut residents introduced to it by one Stanley P. Kerry. The Commissioner claimed that the firm's unregistered activity and employment of an unregistered agent contravened former Sections 36-474(a) and 36-474(b) of the Act. The matter is currently pending.

CONSENT ORDERS

Lew Lieberbaum & Co., Inc. (CRD # 17341)

On November 7, 1994, the Banking Commissioner entered a Consent Order with respect to Lew Lieberbaum & Co., Inc. ("LLC") (No. CO-94-2511-S) of 600 Old Country Road, Suite 518, Garden City, New York. The Consent Order followed an investigation by the Securities and Business Investments Division pursuant to Section 36-495 of The Connecticut Uniform Securities Act. That investigation revealed indications that at various times during 1993, LLC employed five unregistered agents in contravention of Section 36-474(b) of the Act.

In furtherance of its desire to resolve the matter informally with the agency, LLC furnished proof to the Division that it had offered to Connecticut purchasers the opportunity to rescind approximately $134,000 in securities transactions effected through the unregistered LLC agents.

The Consent Order required that LLC refrain from regulatory violations and review, revise and implement supervisory and compliance procedures designed to prevent and detect violations of the Act and its regulations. In addition, the Consent Order required that within 30 days, LLC commence an internal review of its supervisory and compliance procedures governing Connecticut licensing requirements and submit a summarizing report to the Division within 120 days following the initiation of the review. Finally, the Consent Order required that the firm pay a $5,000 civil penalty to the department.

Money Growth Institute, Inc. d/b/a Money Growth Management (CRD # 35853)

On November 15, 1994, the Banking Commissioner entered a Consent Order (No. CO-94-2689-S) with respect to Money Growth Institute, Inc. d/b/a Money Growth Management ("MGM") of 614 Broad Avenue, Ridgefield, New Jersey. The Consent Order followed an investigation by the Securities and Business Investments Division pursuant to Sections 36-476 and 36-495 of The Connecticut Uniform Securities Act in connection with MGM's application for investment adviser registration. That investigation revealed indications that from approximately 1993 through 1994, MGM transacted business as an investment adviser absent registration under Section 36-474(c) of the Act and engaged unregistered investment adviser agents in contravention of that section.

The Consent Order required that MGM cease and desist from regulatory violations and that the firm review, revise and implement supervisory and compliance procedures designed to prevent and detect violations of the Act and the Regulations thereunder. In addition, the Consent Order required that the firm pay $2,000 to the agency; $1,500 of that amount represented a civil penalty and $500 represented reimbursement for the division's investigative costs.

The Danforth Associates, Inc. (CRD # 35124)

On November 18, 1994, the Banking Commissioner entered a Consent Order (No. CO-94-2678-S) with respect to The Danforth Associates, Inc. ("Danforth") of One Hollis Street, Suite 106, Wellesley, Massachusetts. The Consent Order followed an investigation by the Securities and Business Investments Division pursuant to Sections 36-476 and 36-495 of The Connecticut Uniform Securities Act in connection with Danforth's application for investment adviser registration. That investigation revealed indications that from at least 1976 to 1994, Danforth transacted business as an investment adviser absent registration under Section 36-474(c) of the Act and engaged unregistered investment adviser agents in contravention of that section.

The Consent Order required that Danforth cease and desist from regulatory violations and that the firm review, revise and implement supervisory and compliance procedures designed to prevent and detect violations of the Act and the Regulations thereunder. In addition, the Consent Order required that the firm pay $31,000 to the agency; $25,000 of that amount represented a civil penalty, $5,000 represented uncollected registration fees during the period of unregistered activity and the remaining $1,000 represented reimbursement for the division's investigative costs.

Thomas Francis Holeva (CRD # 1446107)

On November 25, 1994, the Banking Commissioner entered a Consent Order (No. CO-94-2625-S) with respect to Thomas Francis Holeva of Stratford, Connecticut. An investigation by the Securities and Business Investments Division pursuant to Section 36-495 of The Connecticut Uniform Securities Act uncovered evidence that from at least March 1990 through December 1990, while under the supervision and control of Robert Todd Financial Corporation (CRD # 7423), a registered broker-dealer, and in March 1993, while under the supervision and control of Gilford Securities, Incorporated (CRD # 8076), another registered broker-dealer, Holeva transacted business as an agent absent registration in alleged violation of Section 36-474(a) of the Act. The Division's investigation also revealed indications that, in September 1992, while under the supervision and control of Gilford Securities, Incorporated, Holeva fraudulently transferred stock between Connecticut domiciled accounts in alleged contravention of Section 36-472 of the Act. In addition, the Division's investigation suggested that, from June 1990 through February 1992, while employed by Robert Todd Financial Corporation, and from February 1992 through March 1993, while employed by Gilford Securities, Incorporated, Holeva executed unauthorized securities transactions on behalf of Connecticut residents.

The Consent Order barred Holeva, for a ten year period, from 1) applying for registration as an agent or investment adviser agent under the Act; 2) acting as a control person of a Connecticut registered broker-dealer or investment adviser; 3) affiliating as a principal in Connecticut with a Connecticut registered broker-dealer or investment adviser; and 4) exercising any supervisory authority with a Connecticut registered broker-dealer or investment adviser.

Robert Van Securities, Inc. (CRD # 29581)

On December 15, 1994, the Banking Commissioner entered a Consent Order with respect to Robert Van Securities, Inc. ("RVS") (No. CO-94-2670-S) of 1980 Mountain Boulevard, Suite 214, Oakland, California. The Consent Order followed an investigation by the Securities and Business Investments Division pursuant to Sections 36-476 and 36-495 of The Connecticut Uniform Securities Act in connection with the firm's application for broker-dealer registration. That investigation revealed indications that in June 1994, the firm effected securities transactions on behalf of Connecticut customers absent registration under Section 36-474(a) of the Act. As a condition to resolving the matter informally with the Division, the firm offered affected Connecticut customers the opportunity to rescind their securities transactions.

The Consent Order required that RVS cease and desist from regulatory violations and that the firm review, revise and implement supervisory and compliance procedures designed to prevent and detect violations of the Act and the Regulations thereunder. In addition, the Consent Order required that the firm pay $4,250 to the agency; $4,000 of that amount represented a civil penalty and the remaining $250 represented reimbursement for the Division's investigative costs.

STIPULATION AND AGREEMENTS

Securities Management & Research, Inc. (CRD # 759)

On December 14, 1994, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-94-2691-S) with respect to Securities Management & Research, Inc.("SMR") of One Moody Plaza, Galveston, Texas. The Stipulation and Agreement followed an investigation by the Securities and Business Investments Division under The Connecticut Uniform Securities Act. That investigation revealed indications that from approximately 1989 through 1994, SMR transacted business from one or more places of business in Connecticut without registering those locations as branch offices in alleged contravention of Section 36-474(d) of the Act.

The Stipulation and Agreement directed SMR to review, revise and implement supervisory and compliance procedures designed to prevent and detect violations of the Act and its Regulations. In addition, the Stipulation and Agreement required that the firm pay $600 to the department, $500 of which represented a civil penalty and $100 of which constituted reimbursement for uncollected registration fees during the period of unregistered activity.

Walnut Street Securities (CRD # 15840)

On December 30, 1994, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-94-2697-S) with respect to Walnut Street Securities ("WSS") of 1801 Park 270 Drive, Suite 200, St. Louis, Missouri. The Stipulation and Agreement followed an investigation by the Securities and Business Investments Division under The Connecticut Uniform Securities Act. That investigation suggested that from approximately 1989 through 1994, WSS transacted business from several places of business in Connecticut without registering those locations as branch offices in alleged contravention of Section 36-474(d) of the Act.

The Stipulation and Agreement directed WSS to review, revise and implement supervisory and compliance procedures designed to prevent and detect violations of the Act and its Regulations. In addition, the Stipulation and Agreement required that the firm pay $2,000 to the department as a civil penalty.

LICENSING ACTIONS

Stanley P. Kerry d/b/a Kerry Retirement Planning, Inc. (CRD # 268522) - Notice of Intent to Revoke Registration Issued; Cease and Desist Order Entered

On December 15, 1994, the Banking Commissioner issued a Notice of Intent to Revoke the Investment Adviser Registration of Stanley P. Kerry d/b/a Kerry Retirement Planning, Inc. (Docket No. NR/CD-94-2309-S) of 170 Little Brook Drive, Newington, Connecticut. On the same day, the Commissioner issued an Order to Cease and Desist against Kerry.

The Commissioner's action was based on allegations that from October 23, 1989 to May 22, 1991, while registered as an agent of Securities America, Inc. under The Connecticut Uniform Securities Act, the respondent executed securities transactions for customers who were introduced to him by one Roman Sybal of New Britain, an unregistered agent, and split commissions with Mr. Sybal. According to the Notice of Intent to Revoke and the cease and desist order, such conduct constituted a dishonest or unethical business practice under the state's securities laws. The Notice of Intent to Revoke and the cease and desist order also alleged that from at least February 1993 to March 1993, the respondent paid fees to unregistered persons who referred investment advisory clients to him in purported violation of former Section 36-474(c) of the Act. The Commissioner also claimed that the respondent failed to observe regulatory record keeping requirements and transacted business as an unregistered agent of EDI Financial, Inc. in alleged violation of Section 36-474(a) of the Act. In addition, the Commissioner maintained that the respondent violated the antifraud provisions in former Sections 36-472 and 36-473 of the Act by depositing client funds from a liquidated investment into a personal account and using those funds for personal expenses. Finally, the department claimed that the respondent failed to property maintain custody and possession of client funds in purported violation of Section 36-500-15(a)(2)(H)(iii)(aa) of the Regulations. The matter is currently pending.


QUARTERLY STATISTICAL SUMMARY

October 1, 1994 through December 31, 1994

Registration

Securities

Business
Opportunities

YTD

Total Coordination (Initial & Renewal) 1,896 n/a 6,623
-- (Investment Co. Renewals 1,294)
-- (All Other Coordinations 602)
Qualification (Initial) 1 n/a 15
Qualification (Renewal) 0 n/a 1
Regulation D Filings 468 n/a 1,705
Other Exemption or Exclusion Notices 80 7 311 (SE)
46 (BO)
Business Opportunity (Initial) n/a 16 51
Business Opportunity (Renewal) n/a 4 31
 
 
Licensing & Branch Office Registration

Broker-Dealers

Investment Advisers

Issuers

YTD

Firm Initial Registrations Processed 77 21 n/a 280 (BD)
176 (IA)
Firms Registered as of 12/31/94 1,805 982 n/a n/a
Agent Initial Registrations Processed 5,921 595 12 28,661 (BD)
2,979 (IA)
46 (IS)
Agents Registered as of  12/31/94 68,654 8,570 177 n/a
Branch Offices Registered
as of 12/31/94
914 273 n/a n/a
Examinations Conducted 14 15 0 34 BD)
33 (IA)
0 (IS)
 
 
Investigations

Securities

Business
Opportunities

YTD

Investigations Opened 30 0 178 (SE)
50 (BO)
Referrals from Attorney General 0 0 1 (SE)
0 BO)
Referrals from Other Agencies 1 0 11 (SE)
0 BO)
Investigations Closed 29 4 172 (SE)
63 (BO)
Investigations in Progress
as of 12/31/94
76 6 n/a
Subpoenas Issued 5 0 20 (SE)
0 (BO)
 
 
Administrative Enforcement
Actions

Number

Parties

YTD
(#/Parties)

Securities
Consent Orders 5 5 27/29
Stipulation and Agreements 2 2 5/6
Cease and Desist Orders 3 3 7/10
Denial, Suspension & Revocation Orders 2 2 3/3
Other Notices and Orders 1 1 6/7
Referrals (Civil) 0 0 1/1
Referrals (Criminal) 0 0 4/7
 
 
Monetary Sanctions

$ Assessed

YTD

Consent Orders and Stipulation and
Agreements (Securities)
$ 44,850 $ 44,850
 
 
Public Reimbursement Following Division Intervention

Voluntary Restitution Offers; Other Monetary Relief

YTD

Securities $ 266,441 $ 792,386
Business Opportunities 10,990 18,510
_____ _____
Totals $ 277,431 $ 810,896

Securities Division