DOB: Winter 2002 Securities Bulletin

Securities and Business Investments Division

Securities Bulletin

Vol. XVI  No. 4 Winter 2002

Features

Enforcement Highlights

Contributors

Ralph Lambiase, Division Director
Cynthia Antanaitis, Assistant Director and Bulletin Editor
Eric Wilder, Assistant Director
Marge Kagan, Subscription Coordinator


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A WORD FROM THE BANKING COMMISSIONER

Winter 2003 opened on an unsettling note. Approximately seven percent of the Securities and Business Investments Division's staff received lay-off notices as a result of a budgetary impasse affecting state government as a whole. In addition, communications positions state-wide were eliminated. For the Department of Banking, this meant the loss of two exceptionally hard-working and gifted employees - Gregory Futoma and David Tedeschi. Many of you know Greg and Dave from the pivotal role they played in organizing the department's annual Securities Forum, fielding calls from the press and ensuring that our web site was user-friendly and up-to-date. It is our hope that all parties involved in labor negotiations will take time to listen to different options for resolving the crisis and arrive at a solution that is sensible, fair and, most important, sensitive to public and industry needs.

In the interim, it is with great reluctance that I must tell you that new content on our web site will be drastically curtailed. We ask for your patience during these difficult times.

The staff reductions have been bittersweet. Securities and Exchange Commissioner Harvey J. Goldschmid has accepted our invitation to be keynote speaker at Securities Forum 2003 to be held on Monday, October 27, 2003 at the Radisson Conference Center in Cromwell, Connecticut. Please mark your calendars. Commissioner Goldschmid, who is on leave from Columbia University School of Law, where he serves as Dwight Professor of Law, brings with him a wealth of knowledge and experience in securities regulation. We have also received confirmation from the New York bar that Securities Forum 2002 was eligible for 6 hours of continuing legal education credit.

As reported in two previous issues of the Securities Bulletin, the day when all advisory applicants and registrants would be required to file through the Investment Adviser Registration Depository ("IARD") was fast approaching. That day is now here. Mandatory IARD participation takes effect on April 1, 2003. An advisory letter has been sent to all state-registered investment advisers on this topic, and the Order requiring IARD participation is featured in this issue of the Securities Bulletin.

As always, our staff stands ready to assist you with any questions you may have.

            John P. Burke
            Banking Commissioner


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ORDER GOVERNING REGISTRATION FILINGS
THROUGH THE INVESTMENT ADVISER REGISTRATION DEPOSITORY
FOR INVESTMENT ADVISER AGENTS AND INVESTMENT ADVISORY FIRMS

WHEREAS the Commissioner of Banking (the "Commissioner") is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act, as amended by P.A. 01-48 (the "Act"), and Sections 36b-31-2 et seq. of the Regulations of Connecticut State Agencies (the "Regulations") promulgated under the Act;

WHEREAS Section 36b-6(c) of the Act states, in part, that: "No person shall transact business as an investment adviser, within or from this state, unless registered as such by the commissioner as provided in sections 36b-2 to 36b-33, inclusive, or exempted pursuant to subsection (e) of this section. No individual shall transact business as an investment adviser agent, within or from this state, unless he is registered as an investment adviser agent of the investment adviser for whom he acts in transacting such business";

WHEREAS Section 36b-6(e) of the Act provides, in part, that:

The following investment advisers are exempted from the registration requirements under subsection (c) of this section: Any investment adviser that (1) is registered or required to be registered under Section 203 of the [federal] Investment Advisers Act of 1940; (2) is excepted from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940; or (3) has no place of business in this state and, during the preceding twelve months, has had no more than five clients who are residents of this state. Any investment adviser claiming an exemption pursuant to subdivision (1) or (2) of this subsection that is not otherwise excluded under subsection (10) of section 36b-3, shall first file with the commissioner a notice of exemption together with a consent to service of process as required by subsection (g) of section 36b-33. The notice of exemption shall contain such information as the commissioner may require and shall be accompanied by a nonrefundable fee of two hundred fifty dollars. Such notice of exemption shall be valid until December thirty-first of the calendar year in which it was first filed and may be renewed annually thereafter upon submission of such information as the commissioner may require together with a nonrefundable fee of one hundred fifty dollars;

WHEREAS Section 36b-32(a) of the Act provides that: "A document is filed when it is received by the commissioner or any other person designated in writing by the commissioner";

WHEREAS on September 12, 2000, the Securities and Exchange Commission (the "SEC") issued Release No. IA-1897 (Electronic Filing by Investment Advisers; Amendments to Form ADV; File No. S7-10-00) which, effective October 10, 2000 and among other things, mandated that SEC-registered investment advisers file Part 1 of Form ADV electronically with the SEC through the Investment Adviser Registration Depository (the "IARD") commencing January 1, 2001;

WHEREAS the IARD is an Internet-based filing depository operated by NASD Regulation, Inc. ("NASDR") under contracts with the SEC and the North American Securities Administrators Association ("NASAA"), which depository is designed to accept filings made electronically by SEC-and state registered investment advisers as well as their investment adviser agents; collect associated regulatory filing fees on behalf of affected jurisdictions; and provide the investing public with Internet-based access to background information on state and federally regulated investment advisory personnel;

WHEREAS on September 29, 2000, the Commissioner issued an Order Adopting Revisions to Part 1 of Form ADV and Governing Transition Filings Through the Investment Adviser Registration Depository by Investment Advisory Firms (the "September 29, 2000 Order"). The September 29, 2000 Order directed that, effective January 1, 2001, and for purposes of Section 36b-6(e) of the Act, investment advisers registered or applying for registration with the SEC make their Connecticut notice filings, including amendments thereto and related payments, through the IARD and make Part II of Form ADV available to the Commissioner upon the Commissioner's request;

WHEREAS the September 29, 2000 Order also stated that, for purposes of Sections 36b-7, 36b-12(a), 36b-12(b), 36b-12(d), 36b-13(a), 36b-13(b), 36b-31(c) and 36b-32(a) of the Act, the IARD was designated to receive documents and application filings as well as to collect initial and renewal filing fees on the Commissioner's behalf with respect to investment advisers and investment adviser agents;

WHEREAS Section 36b-7 of the Act provides, in part, that: "A[n] ... investment adviser or investment adviser agent may obtain an initial or renewal registration by filing with the commissioner or other depository as the commissioner may by regulation or order designate an application together with a consent to service of process pursuant to subsection (g) of section 36b-33. The application shall contain such information as the commissioner may require";

WHEREAS Section 36b-12(a) of the Act provides, in part, that: "Each person applying for registration as ... [an] investment adviser shall pay to the commissioner or to any person designated by the commissioner in writing to collect such fee on his behalf a fee of two hundred fifty dollars which shall not be refunded";

WHEREAS Section 36b-12(b) of the Act states, in part, that: "Each person applying for registration as an ... investment adviser agent shall pay to the commissioner or to any registration as an ... investment adviser agent shall pay to the commissioner or to any person designated by the commissioner to collect such fee on his behalf a fee of fifty dollars which shall not be refunded";

WHEREAS Section 36b-13(a) of the Act states, in part, that: Each person registered as ... [an] investment adviser may renew such registration for a one-year period not later than December thirty-first of each calendar year by making application in such manner as prescribed by the commissioner. The fee for renewal of registration for each ... investment adviser shall be one hundred fifty dollars per renewal application, nonrefundable, payable at the time of renewal, and shall be submitted, together with the renewal application, to the commissioner or any person designated in writing by the commissioner to collect such fee on his behalf";

WHEREAS Section 36b-13(b) of the Act adds that: "Each person registered as an ... investment adviser agent may renew such registration for a one-year period by December thirty-first of each calendar year by making application in such manner as prescribed by the commissioner. The fee for renewal of registration for each person registered as an ... investment adviser agent shall be fifty dollars, nonrefundable, payable at the time of renewal, and shall be submitted, together with the renewal application, to the commissioner or any person designated in writing by the commissioner to collect such fee on his behalf";

WHEREAS Section 36b-31-14e(a) of the Regulations provides, in part, that: "If the information contained in any application for registration as ... [an] investment adviser or investment adviser agent, or in any amendment thereto, is or becomes inaccurate or incomplete in any material respect for any reason, the applicant or registrant shall promptly file a correcting amendment with the commissioner";

WHEREAS the September 29, 2000 Order also stated that the Commissioner may re-evaluate the expanded use of the IARD to cover investment adviser agent and investment adviser registration filings and fees in light of future system enhancements allowing for the capture of additional information; the public interest in having information on both state and federally-regulated investment advisers available for public viewing through a centralized database; and the effectiveness of the IARD during its pilot phases;

WHEREAS in March 2002, the IARD system became capable of accepting investment adviser agent filings made electronically by SEC-and state registered investment advisers and collecting associated regulatory filing fees on behalf of affected jurisdictions;

WHEREAS Section 36b-31(a) of the Act states, in part, that: "The commissioner may from time to time make, amend and rescind such ... orders as are necessary to carry out the provisions of ... [the Act], including ... orders governing ... applications For the purpose of ... orders, the commissioner may classify securities, persons and matters within his jurisdiction, and prescribe different requirements for different classes";

WHEREAS Section 36b-31(b) of the Act provides that: "No ... order may be made, amended or rescinded unless the commissioner finds that the action 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];

WHEREAS Section 36b-31(c) of the Act adds that: "To encourage uniform interpretation and administration of ... [the Act] and effective securities regulation and enforcement, the commissioner may cooperate with the securities agencies or administrators of other states ... [and] the Securities and Exchange Commission ...The cooperation authorized by this subsection includes, but is not limited to, the following actions: (1) Establishing central depositories for the registration of ... securities industry personnel under ... [the Act], and for documents or records required or allowed to be filed with or maintained by the commissioner under ... [the Act]";

WHEREAS the Commissioner finds that the issuance of this Order is necessary and appropriate in the public interest and for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of the Act;

NOW THEREFORE THE COMMISSIONER ORDERS AS FOLLOWS:

1. Effective April 1, 2003, and for purposes of Sections 36b-7, 36b-12(a), 36b-12(b), 36b-13(a) and 36b-13(b) of the Act and Section 36b-31-14e(a) of the Regulations, investment adviser agents and investment advisers required to be registered under Section 36b-6(c) of the Act shall make their Connecticut registration filings, including renewals, amendments and associated regulatory filing fees, through the IARD;

2. Nothing in this Order shall relieve any IARD-filing investment adviser agent or investment advisory firm required to be registered under Section 36b-6(c) of the Act from its obligation to file supplemental information directly with the Commissioner upon the Commissioner's request in such form and manner as the Commissioner may determine; and

3. This Order shall remain in effect until modified, superseded or vacated by the Commissioner or other lawful authority.

So ordered at Hartford, Connecticut John P. Burke this 16th day of January 2003. Banking Commissioner


Enforcement Highlights


ADMINISTRATIVE ACTIONS

Discovery Capital Group, Inc. (CRD # 29355) - Notice of Intent to Revoke Registration as Broker-dealer Issued

On December 18, 2002, the Banking Commissioner issued a Notice of Intent to Revoke the broker-dealer registration of Discovery Capital Group, Inc. The firm maintains its principal office at 2768 North University Drive, Coral Springs, Florida. The action was predicated in part on the October 24, 2002 entry of a permanent injunction against the firm by the United States District Court for the Southern District of Florida (Securities and Exchange Commission v. Discovery Capital Group, Inc. et al., Case No. 02-60363 CIV-HUCK, 3/14/2002) prohibiting the firm from violating the antifraud provisions in Section 17(a) of the Securities Act of 1933 as well as Sections 10(b), 15(c) and 17(a) of the Securities Exchange Act of 1934. The respondent was afforded an opportunity to request a hearing on the Notice of Intent to Revoke Registration as Broker-dealer.

John Patrick Abresch (CRD # 2280271) - Notice of Intent to Revoke Registration as Agent Issued

On December 18, 2002, the Banking Commissioner issued a Notice of Intent to Revoke the agent registration of John Patrick Abresch of 6261 NW 125th Avenue, Coral Springs, Florida. The action was based in part on the October 24, 2002 entry of a permanent injunction against the respondent by the United States District Court for the Southern District of Florida (Securities and Exchange Commission v. Discovery Capital Group, Inc., Erik Walsh and John Abresch, Case No. 02-60363 CIV-HUCK, 3/14/2002) prohibiting the respondent from violating the antifraud provisions in Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934. The respondent was afforded an opportunity to request a hearing on the Notice of Intent to Revoke Registration as Agent.

Erik Baxter Walsh (CRD # 2589145) - Notice of Intent to Revoke Registration as Agent Issued

On December 18, 2002, the Banking Commissioner issued a Notice of Intent to Revoke the agent registration of Erik Baxter Walsh, president of Discovery Capital Group, Inc. The respondent's last known address is 4450 NW 95th Avenue, Coral Springs, Florida. The action was based in part on the October 24, 2002 entry of a permanent injunction against the respondent by the United States District Court for the Southern District of Florida (Securities and Exchange Commission v. Discovery Capital Group, Inc., Erik Walsh and John Abresch, Case No. 02-60363 CIV-HUCK, 3/14/2002) prohibiting the respondent from violating the antifraud provisions in Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934. The respondent was afforded an opportunity to request a hearing on the Notice of Intent to Revoke Registration as Agent.

Hornblower & Weeks, Inc. (CRD # 4683) - Broker-dealer Registration Revoked

On December 16, 2002, the Banking Commissioner entered an Order Revoking Registration as Broker-dealer (Docket No. NR-20-02-6581-S) against Hornblower & Weeks, Inc., a securities broker-dealer having its principal office at 110 Wall Street, New York, New York. The action had been preceded by a November 5, 2002 Notice of Intent to Revoke Registration as Broker-dealer The Commissioner's action in revoking the firm's registration was predicated on May 7, 2002 sanctions imposed by the National Association of Securities Dealers, Inc. suspending the respondent from issuing research reports for six months; fining the respondent $100,000 and censuring the respondent. The NASD sanctions had been based on findings that 1) the respondent was responsible for a research report that recommended the common stock of a securities issuer as a "strong buy" and set a target price of $55 per share, when the stock was trading at approximately $9.19 per share; 2) the research report contained material misrepresentations, unwarranted statements and exaggerations regarding the issuer's business prospects, and failed to disclose material details regarding the issuer's financial condition; 3) the research report and subsequent press release were not based on principles of fair dealing and good faith; and 4) the respondent failed to establish, maintain or enforce adequate supervisory procedures in violation of NASD rules. The respondent did not contest the revocation of its Connecticut broker-dealer registration.

John Ryan Rooney (CRD # 2511607) - Broker-dealer Agent Registration Revoked

On December 16, 2002, the Banking Commissioner issued an Order Revoking Registration as Agent (Docket No. NR-2002-6581-S) against John Ryan Rooney of New York, New York. The Order Revoking Registration as Agent had been preceded by a November 5, 2002 Notice of Intent to Revoke Registration as Agent. Respondent Rooney had been registered as a broker-dealer agent of Hornblower & Weeks, Inc. under the Connecticut Uniform Securities Act from November 1 7, 1994 to October 22, 2002. The revocation order was based on May 7, 2002 sanctions imposed by the National Association of Securities Dealers, Inc. against respondent Rooney and Hornblower & Weeks, Inc. Specifically, the NASD had 1) suspended respondent Rooney for three months from associating with any NASD member in any capacity; 2) suspended respondent Rooney for four months from acting in a principal or supervisory capacity; and 3) imposed an $85,000 fine against respondent Rooney and Hornblower & Weeks, Inc. jointly and severally. The NASD had found that 1) respondent Rooney was responsible for preparing a research report issued by Hornblower & Weeks, Inc. that recommended the common stock of a securities issuer as a "strong buy" and set a target price of $55 per share, when the stock was trading at approximately $9.19 per share; 2) the research report contained material misrepresentations, unwarranted statements and exaggerations regarding the issuer's business prospects, and failed to disclose material details regarding the issuer's financial condition; 3) the research report and subsequent press release were not based on principles of fair dealing and good faith; and 4) respondent Rooney was reckless in not knowing that the research report contained exaggerated, unwarranted and misleading statements regarding the issuer's business prospects and market value. Respondent Rooney did not contest the revocation order.

Wellesley Services, LLC Fined $120,000 in Conjunction With Unregistered Promissory Note Sales

On December 9, 2002, the Banking Commissioner entered an Order Imposing Fine (Docket No. CF-2002-6277-S) against Wellesley Services, LLC of 75 Chestnut Ridge Road, Montvale, New Jersey. The Order Imposing Fine resolved allegations in a September 25, 2002 Order to Cease and Desist and Notice of Intent to Fine against the company. The Order to Cease and Desist, being uncontested, had become permanent on October 21, 2002. In fining Wellesley Services, LLC $120,000, the Commissioner found that, from at least January 1999 forward, the respondent violated Sections 36b-16 and 36b-6(b) of the Connecticut Uniform Securities Act by offering and selling unregistered non-exempt promissory notes to eleven Connecticut investors through at least one unregistered agent of issuer.

Charles Edward Dear (CRD # 1079490) (IARD # 117759) - Investment Adviser Registration Revoked; $5,000 Fine Imposed

On December 5, 2002, the Banking Commissioner entered an Order Revoking Registration as Investment Adviser and Order Imposing Fine (Docket No. RF-2002-6436-S) against Charles Edward Dear of 35 Boston Street, #6, Guilford, Connecticut. Respondent Dear, who does business under the name "Soundview Financial Management" had been the subject of a June 3, 2002 Consent Order conditioning registration as an investment adviser (No. CO-01-6436-S). The Consent Order conditioning registration as an investment adviser included claims that respondent Dear had transacted business as an investment adviser while unregistered. Respondent Dear had also been the subject of a June 7, 1993 Stipulation and Agreement with the department (Docket No. ST-03-2390-S) based on allegations of unregistered investment advisory activity.

The December 5, 2002 revocation order stated that respondent Dear had violated the terms of the June 3, 2002 Consent Order conditioning registration as an investment adviser by altering the contents of an agency-approved notice to clients. The June 3, 2002 Consent Order had required respondent Dear to use an agreed-upon format in apprising clients of the Consent Order. In fining respondent Dear $5,000, the Commissioner took into consideration the fact that Dear had sought legal advice and incurred legal fees in an effort to prevent future violations of the Connecticut Uniform Securities Act.

Foundation Worldwide, Inc. Ordered to Cease and Desist from Regulatory Violations; Notice of Intent to Fine Issued

On November 22, 2002, the Banking Commissioner issued an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2002-6582-S) against Foundation Worldwide, Inc. of 151 New Park Avenue, Hartford, Connecticut. The action alleged that from at least April 2002 forward, Foundation Worldwide, Inc. conducted an unregistered common stock offering through its Internet web site at www.foundationworldwide.com in violation of Section 36b-16 of the Connecticut Uniform Securities Act. The action also alleged that the respondent violated the antifraud provisions in Section 36b-4 of the Act by falsely representing on the respondent's web site that: 1) the respondent's directors had major portions of their net worth invested in the respondent at a time when the respondent had no directors and only one investor; 2) the respondent had long- term shareholders at a time when it had only one shareholder; 3) the respondent had undistributed earnings, when the respondent never had any earnings; 4) the respondent's common stock had a book value of $5.47 per share and a market value of $12 per share, when, in actuality, the shares had no value; 5) the respondent had income from its businesses, when in fact those businesses had never generated income; and 6) the respondent was a holding company owning subsidiaries engaged in a number of diverse business activities, when none of those subsidiaries had clients nor had they generated income. In addition, the action claimed that the respondent, through an employee, posted on an Internet message board that the respondent had a 63% return on equity for 2001 when in actuality the respondent had no earnings during that period and its return on equity was zero. The respondent was afforded an opportunity to request a hearing on the Order to Cease and Desist. A hearing on the Notice of Intent to Fine is pending.

Germaine Ryan (CRD # 2768219) Ordered to Cease and Desist from Regulatory Violations; Notice of Intent to Fine Issued

On November 22, 2002, the Banking Commissioner issued an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2002-6582-S) against Germaine Ryan of 22 Morris Street, #302, Hartford, Connecticut. The action alleged that from at least April 2002 forward, respondent Ryan, acting on behalf of Foundation Worldwide, Inc., created and posted a multi-paged Internet website offering unregistered common stock to the public in violation of Section 36b-16 of the Connecticut Uniform Securities Act. The action also alleged that the respondent violated the antifraud provisions in Section 36b-4 of the Act by falsely representing on the web site that: 1) the Foundation Worldwide, Inc.'s directors had major portions of their net worth invested in the corporation at a time when the corporation had no directors and only one investor; 2) Foundation Worldwide, Inc. had long-term shareholders at a time when it had only one shareholder; 3) Foundation Worldwide, Inc. had undistributed earnings, when it never had any earnings; 4) Foundation Worldwide, Inc.'s common stock had a book value of $5.47 per share and a market value of $12 per share, when, in actuality, the shares had no value; 5) Foundation Worldwide, Inc. had income from its businesses, when in fact those businesses had never generated income; and 6) Foundation Worldwide, Inc. was a holding company owning subsidiaries engaged in a number of diverse business activities, when none of those subsidiaries had clients nor had they generated income. In addition, the action claimed that the respondent posted on an Internet message board that Foundation Worldwide, Inc. had a 63% return on equity for 2001 when in actuality the corporation had no earnings during that period and its return on equity was zero. Respondent Ryan was afforded an opportunity to request a hearing on the Order to Cease and Desist. A hearing on the Notice of Intent to Fine is pending.

Georges Trading Corp. Fined $30,000 in Connection With Fraudulent Note Sales

On October 15, 2002, the Banking Commissioner issued an Order Imposing Fine against Georges Trading Corp., also known as G's Trading Corp., G's Capital Investments, G's Investment Club and B & S Investment Club. The corporation maintains its principal place of business at 800 Summer Street, Suite 207, Stamford, Connecticut. Georges Trading Corp. had been the subject of an August 2, 2002 Order to Cease and Desist and Notice of Intent to Fine (Docket No. CF-2002-6387-S). The Order to Cease and Desist, being uncontested, became permanent on September 19, 2002. The Order to Cease and Desist and Notice of Intent to Fine had alleged that from at least February 2000 forward, the respondent sold $906,650 of its promissory notes to at least 63 Connecticut investors; that the notes were not registered under Section 36b-16 of the Connecticut Uniform Securities Act; and that the respondent violated Section 36b-6(b) of the Act by employing unregistered agents in selling the notes. In addition, the Order to Cease and Desist and Notice of Intent to Fine had claimed that the respondent violated the antifraud provisions of the Act by a) mailing inaccurate account statements to Connecticut investors; b) presenting subsequently dishonored checks to Connecticut investors as refunds; and c) falsely representing that the note proceeds would be invested in the stock market, that the investments were safe, secure and insured; that investors would receive up to 70% in interest per month; that the respondent had 3,000 members in over 5 countries; that respondent had over $2,500,000 in total assets; and that the respondent would pay taxes on the investment returns of certain Connecticut investors. The Order to Cease and Desist and Notice of Intent to Fine had also alleged that no investor monies were invested as promised by the respondent, and that, while the respondent had returned approximately $78,939 to investors, the remaining $827,711 had been used to pay the personal expenses of the respondent's president and vice president as well as payroll and office expenses.

In fining the respondent $30,000, the Commissioner found that the respondent committed one violation of the antifraud provisions of the Act; one violation of Section 36b-6(b) of the Act; and one violation of Section 36b-16 of the Act. The respondent did not contest the imposition of the fine.

Gerald Georges Fined $30,000 in Connection With Fraudulent Note Sales

On October 15, 2002, the Banking Commissioner issued an Order Imposing Fine (Docket No. CF-2002-6387-S) against Gerald Georges, president of Georges Trading Corp. Gerald Georges' last known address is 1431 Iranistan Avenue, 1st Floor, Bridgeport, Connecticut. Gerald Georges had also been the subject of an August 2, 2002 Order to Cease and Desist and Notice of Intent to Fine. The Order to Cease and Desist and Notice of Intent to Fine had alleged that, from at least February 2000 forward, the respondent effected at least 68 transactions in securities consisting of notes issued by Georges Trading Corp. to at least 45 Connecticut investors, and, in so doing, transacted business as an unregistered agent of issuer in violation of Section 36b-6(a) of the Connecticut Uniform Securities Act. In addition, the Order to Cease and Desist and Notice of Intent to Fine had alleged that the notes were not registered under Section 36b-16 of the Connecticut Uniform Securities Act, and that Gerald Georges violated the antifraud provisions of the Act by a) failing to honor a personal guarantee he had made to a Connecticut investor that the investor's funds would be returned; b) presenting subsequently dishonored checks to Connecticut investors as refunds; c) mailing an inaccurate statement of account to a Connecticut investor; and d) falsely representing that the note proceeds would be invested in the stock market, that the investments were safe, secure and insured; that investors would receive up to 70% in interest per month; and that Georges Trading Corp. would generate income to cover the cost of taxes on the investments over and above the promised monthly returns when no such taxes were paid. The Order to Cease and Desist and Notice of Intent to Fine had further alleged that, while Georges Trading Corp. had returned a fraction of investment monies to Connecticut investors, Connecticut investors never realized the promised returns, and that the bulk of investor money was spent on Gerald Georges' personal expenses, the personal expenses of Georges Trading Corp.'s vice president and on payroll and office costs.

In fining Gerald Georges $30,000, the Commissioner found that Gerald Georges committed one violation of the antifraud provisions of the Connecticut Uniform Securities Act; one violation of Section 36b-6(a) of the Act; and one violation of Section 36b-16 of the Act. Gerald Georges did not contest the imposition of the fine.


SETTLEMENTS

CONSENT ORDERS

Etienne Decembre - Allegedly Fraudulent Note Sales Result in Permanent Bar from Securities Business in Connecticut

On October 31, 2002, the Banking Commissioner entered a Consent Order (Docket No. CF-2002-6387-S) with respect to Etienne Decembre, vice president of Georges Trading Corp. Etienne Decembre's last known address is 43 Dora Street, #1, Stamford, Connecticut. Respondent Decembre had been the subject of an August 2, 2002 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2002-6387-S) alleging that, from at least July 2000 forward, the respondent effected at least 23 transactions in securities consisting of notes issued by Georges Trading Corp. to at least 15 Connecticut investors, and, in so doing, transacted business as an unregistered agent of issuer in violation of Section 36b-6(a) of the Connecticut Uniform Securities Act. Georges Trading Corp. also does business under the names G's Trading Corp., G's Capital Investments, G's Investment Club and B & S Investment Club. The Order to Cease and Desist and Notice of Intent to Fine had also claimed that 1) the notes were not registered under Section 36b-16 of the Connecticut Uniform Securities Act; and 2) that the respondent violated the antifraud provisions of the Act by falsely representing that the note proceeds would be invested in the stock market, that the investments were safe, secure and insured; that investors would receive up to 70% in interest per month; and that Georges Trading Corp. would pay taxes on a Connecticut investor's returns, in addition to the promised monthly returns, when no such taxes were ever paid. The Order to Cease and Desist and Notice of Intent to Fine had further alleged that, while Georges Trading Corp. had returned a fraction of investment monies to Connecticut investors, Connecticut investors never realized the promised returns, and that the bulk of investor money was spent on Etienne Decembre's personal expenses, the personal expenses of Georges Trading Corp.'s president and on payroll and office costs. Since the respondent failed to contest the August 2, 2002 Order to Cease and Desist, the Order to Cease and Desist became permanent on August 22, 2002.

The Consent Order permanently barred the respondent from transacting business in Connecticut as a broker-dealer, agent, investment adviser or investment adviser agent. Acknowledging the respondent's documented inability to pay the $30,000 fine sought by the August 2, 2002 Notice of Intent to Fine, the Consent Order provided that the Notice of Intent to Fine was withdrawn.

Gregory Katsaros Permanently Barred From Securities-Related Activity in Connecticut; Order to Cease and Desist Made Permanent

On October 1, 2002, the Banking Commissioner entered a Consent Order (Docket No. CF-2002-6210-S) with respect to Gregory Katsaros of 29 Hanover Street, Stamford, Connecticut. Respondent Katsaros had been the subject of a May 22, 2002 Order to Cease and Desist and Notice of Intent to Fine alleging that, from at least November 2000 forward, the respondent represented International Market Consultants, LLC, a broker-dealer, in effecting at least five transactions in securities involving contracts on foreign currencies ("FOREX investments") and that, in so doing, the respondent acted as an unregistered broker-dealer agent in violation of Section 36b-6(a) of the Connecticut Uniform Securities Act. The Order to Cease and Desist and Notice of Intent to Fine had also claimed that the FOREX investments were not registered as required by Section 36b-16 of the Act, and that the respondent violated statutory antifraud provisions by misrepresenting to one or more customers that he would purchase FOREX investments on their behalf through InterTrade Forex of Kissimmee, Florida when, in actuality, International Market Consultants LLC, used investor monies to pay office expenses, personal expenses of respondent Katsaros' manager and agents and fees to an international global events planner.

The respondent agreed to the entry of the Consent Order in lieu of an administrative hearing on the Order to Cease and Desist and Notice of Intent to Fine, and demonstrated to the Commissioner that he was financially incapable of paying the maximum fine of $30,000 sought by the Notice of Intent to Fine. The Consent Order rendered the May 22, 2002 Order to Cease and Desist permanent as of October 1, 2002, and permanently barred respondent Katsaros from transacting business in Connecticut as a broker-dealer, agent, investment adviser or investment adviser agent.


STIPULATION AND AGREEMENTS

H&R Block Financial Advisors, Inc. (CRD # 5979) Fined $1,000 for Unregistered Branch Office Activity

On December 17, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6664-S) with H&R Block Financial Advisors, Inc., a Connecticut-registered broker-dealer having its principal office at 719 Griswold Street, Detroit, Michigan. The Stipulation and Agreement alleged that, from approximately November 2001 until June 7, 2002, when the firm applied for branch office registration under the Connecticut Uniform Securities Act, the firm transacted business from 90 Providence Street, Putnam, Connecticut and 30 Bank Street, New Milford, Connecticut prior to those locations being registered as branch offices under the Act.

Pursuant to the Stipulation and Agreement, the firm agreed to pay a $1,000 fine to the agency and to implement revised supervisory and compliance procedures designed to prevent and detect violations of Connecticut branch office registration require- ments.

Commonwealth Equity Services, Inc. d/b/a Commonwealth Financial Network (CRD # 8032) Fined $3,000 for Unregistered Branch Office Activity

On December 4, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6678-S) with Commonwealth Equity Services, Inc., a Connecticut-registered broker-dealer having its principal office at 29 Sawyer Road, Waltham, Massachusetts. The Stipulation and Agreement alleged that, at various times between August 2000 and October 2002, the firm transacted business from three unregistered branch offices in contravention of Section 36b-6(d) of the Connecticut Uniform Securities Act. The offices were located at 310 Hartford Turnpike, Vernon, Connecticut; 35 Woodside Terrace, Stratford, Connecticut; and 33 High Street, Bristol, Connecticut. The firm applied to register the sites on September 12, 2002 and October 22, 2002.

Pursuant to the Stipulation and Agreement, the firm agreed to pay a $3,000 fine to the department and to implement revised supervisory and compliance procedures designed to prevent and detect violations of Connecticut branch office registration requirements.

Triad Advisors, Inc. (CRD # 25803) Fined $1,000 for Unregistered Branch Office Activity

On November 5, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6618-S) with Triad Advisors, Inc., a Connecticut-registered broker-dealer having its principal office at 3500 Parkway Lane, Suite 220, Norcross, Georgia. The Stipulation and Agreement claimed that, from approximately August 2001 forward, the firm transacted business from One Bradley Road, Suite 902, Woodbridge, Connecticut prior to that location being registered as a branch office under the Connecticut Uniform Securities Act.

Pursuant to the Stipulation and Agreement, the firm agreed to pay a $1,000 fine to the agency and to implement revised supervisory and compliance procedures designed to prevent and detect violations of Connecticut branch office registration require- ments.

Moors & Cabot, Inc. (CRD # 594) Fined $500 for Unregistered Branch Office Activity

On October 30, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6623-S) with Moors & Cabot, Inc., a Connecticut-registered broker-dealer having its principal office at 111 Devonshire Street, Boston, Massachusetts. The Stipulation and Agreement alleged that, from approximately October, 2001 forward, the firm transacted business from 800 Summer Street, Suite 340, Stamford, Connecticut prior to that location being registered as a branch office under the Connecticut Uniform Securities Act.

Pursuant to the Stipulation and Agreement, the firm agreed to pay a $500 fine to the department and to revise and implement supervisory and compliance procedures designed to detect violations of Connecticut branch office registration requirements.

New England Securities Corporation (CRD # 615) Fined $7,500 for Unregistered Investment Adviser Agent Activity

On October 4, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6508-S) with New England Securities Corporation, an SEC-registered investment adviser located at 399 Boylston Street, Boston, Massachusetts. The Stipulation and Agreement alleged that, since September 1997, the firm engaged unregistered investment adviser agents in contravention of Section 36b-6(c) of the Connecticut Uniform Securities Act. In addition to fining the firm $7,500, the Stipulation and Agreement required that New England Securities Corporation review and modify its supervisory and compliance procedures relating to investment adviser agent registration and renewals.


CONDITIONAL REGISTRATIONS

MIT Associates, LLC (CRD # 121171) - Consent Order Conditioning Registration as a Broker-dealer Issued

On December 19, 2002, the Banking Commissioner issued a Consent Order (No. CO-02-6700-S) under the Connecticut Uniform Securities Act conditioning the registration of MIT Associates, LLC as a broker-dealer. MIT Associates, LLC, a newly formed entity, maintains its business address at 1171 East Putnam Avenue, Riverside, Connecticut. The Consent Order alleged that certain principals of the brokerage firm were previously associated in a managerial capacity with MIT Asset Management, Inc., an investment advisory firm; and that the principals' failure to ensure that MIT Asset Management, Inc. complied with state investment adviser registration provisions called into question whether the broker-dealer applicant possessed sufficient knowledge and experience in the regulatory compliance aspects of the securities business.

The Consent Order Conditioning Registration as a Broker-dealer limited the broker-dealer applicant's securities business to the offer and sale of private placements for a period of two years. The Consent Order also prohibited the firm from transacting securities business with Connecticut customers who did not qualify as "accredited investors" as that term is defined in Rule 501(a) of federal Regulation D. In addition, the Consent Order Conditioning Registration as a Broker-dealer 1) required the applicant to file quarterly reports regarding any securities-related complaints, actions or proceedings for two years; 2) directed the applicant to notify the agency within five business days following any change in the applicant's officers, control persons or individuals identified in the applicant's supervisory procedures manual as having responsibility for regulatory compliance; and 3) directed the applicant to keep its books and records open to inspection by the Commissioner in accordance with state law. MIT Associates, LLC became registered as a broker-dealer under the Connecticut Uniform Securities Act on December 19, 2002.


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STATISTICAL SUMMARY

Licensing At A Glance
December 31, 2002
Broker-dealers Registered 2,529
Broker-dealer Agents Registered 105,575
Broker-dealer Branch Offices Registered 1,840
Investment Advisers Registered 388
SEC Registered Advisers Filing Notice 1,165
Investment Adviser Agents Registered 5,303
Investment Advisory Branch Offices Registered 143
Agents of Issuer Registered 103

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  1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Securities Investigations
Opened 91 75 61 60 287
Closed 78 90 55 63 286
Ongoing as End of Quarter 106 92 91 88 0
Subpoenas issued 15 9 17 5 46
Cases referred from Attorney General 2 6 5 4 17
Cases referred from Other Agencies 4 1 3 4 12
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Securities Enforcement: Remedies and Sanctions
Notices of Intent to Deny (Licensing) 0 0 0 0 0
Notices of Intent to Suspend (Licensing) 0 0 0 0 0
Notices of Intent to Revoke (Licensing) 1 1 0 5 7
Denial Orders (Licensing) 0 0 0 0 0
Suspension Orders (Licensing) 0 0 0 0 0
Revocation Orders (Licensing) 0 0 0 3 3
Notices of Intent to Fine 1 8 5 2 16
Orders Imposing Fine 4 0 6 4 14
Cease and Desist Orders 4 9 7 2 22
Notices of Intent to Issue Stop Order 0 0 0 0 0
Activity Restrictions/Bars 3 1 5 2 11
Stop Orders 0 0 0 0 0
Vacating/Withdrawal Orders 0 0 0 1 1
Censures 0 0 0 0 0
Formal Orders of Restitution 0 0 0 0 0
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Proceedings and Settlements
Administrative Actions 6 19 13 11 49
Consent Orders 5 2 6 2 15
Stipulation and Agreements 8 19 8 5 40
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Monetary Relief
Monetary Sanctions Imposed $153,700 $80,900 $267,000 $198,000 $699,600
Restitution or Other Monetary Relief $200,226 10,097 310,445 62,410 $583,178
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Securities Referrals
Criminal (Chief State's Attorney) 2 2 2 3 9
Criminal (Other) 0 0 0 0 0
Civil (Attorney General) 0 0 0 1 1
Other Agency Referrals 2 5 0 4 11
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Examinations
Broker-dealers 23 23 34 6 86
Investment Advisers 12 14 18 4 48

The Securities and Business Investments Division is also charged with
administering the Connecticut Business Opportunity Investment Act.

  1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Business Opportunities
Investigations Opened 1 1 5 1 8
Investigations Closed 0 3 0 5 8
Investigations ongoing at End of Quarter 3 1 1 6 0

Securities Division